What to Know About Finance Services and Property with Nathan Gooley
Nathan Gooley is the co-founder of Yard, an investor, lecturer and finance expert. His company specialises in home lending services and providing simple solutions for finance, mortgages, bridging loans and home loans. Each client is assisted differently depending on their situation.
Tune in to hear about Nathan Gooley’s eventful property investing journey starting from his early days of studying to completing his doctorate to when he was appointed head of a private equity and funds management firm. We find out how he gradually made his way into the property investment world that could ultimately assist you in your own journey!
We find out what Nathan Gooley dedicates his time towards each day, and how his job is driven by his passion for property.
I am a coach and a co-founder of Yard. Yard is a specialized home loan lender and what it does is it provides Australians with fully featured home land products and some extremely competitive interest rates on a day to day basis. What you’ll find me typically doing is more or less helping people buy and refinance homes and property across all of Australia, so each state and territory. And where I get my kicks is really out of helping people into their first home and also supporting them in acquiring additional properties. Personally I absolutely love property. And I also really enjoy making the home land experience better for people. And that’s where I derive the biggest satisfaction in all of this.
Are you speaking with customers every day as well, while helping them with their loans and their mortgages?
I think it’s quite critical to really understand what it is that people want so that you can continuously sort of iterate your strategy, your product set to, you know, stay abreast of changing market dynamics. And things move really quickly, especially in the current environment. By being at the coalface and speaking with customers directly, it does help all of us to have a very solid understanding around their requirements and objectives and how we as a business can go about meeting those.
Prior to growing his company, Gooley shares details about his upbringing in New South Wales.
I’m born and raised in Sydney. I grew up between the inner West and also down in the South of Sydney at different times in my life which was absolutely fantastic. I went to school in both of those regions. I spent my primary school years in the South of Sydney and then my high school years in the inner West. And my father’s family are also from the country. So I spent a fair bit of my youth in a country town called Crookwell, which is a really pretty beautiful part of the Southern Tablelands region of New South Wales. It’s around two and a half hours sort of Southwest of Sydney, probably about 90 minutes East or Northeast of Canberra. And one little thing about it, it’s actually quite elevated above sea level. So what makes it extra special is it typically gets a bit of snow a few times each winter. So for me personally, it was a fantastic sort of little escape to have whilst growing up within a busy, big city.
That’s amazing. Just to refresh my memory, isn’t Crookwell the stopping point to get out of Pine Bluff?
Yes it is, your memory serves you very well.
It was originally a gold rush town, so it’s quite an old you know, inland Australian colonial town. But it is a very pretty part of the world. There’s a lot of sheep and cattle out there that it gets a good amount of rain, so it’s very green. It’s quite popular for people that are growing potatoes. So a lot of the potatoes that you might sort of consume in Sydney are from that part of New South Wales. And also too, it had the very first windmills. So they were quite ahead of their time in adopting renewable technology.
It seems like you know that area very well. Have you gone back there recently as well?
I was probably there eight weeks ago or so when I went there. And you know, it’s one of those places that only slowly changes. It’s not like you know, where you go between areas of Sydney and there’s remarkable sort of changes in very short periods of time. It’s sort of one of those quaint little towns that sort of only slowly evolves over the decades.
Gooley shares how he appreciates the charm of small towns in Australia.
Hopefully one day I’ll sort of find a little place like that to retire in because you know that’s probably where I’ll find my own sort of happiness.
Looking back on his past, Gooley delves into his family and his education.
My dad’s family was on the farm, so it’s more his parents and some of my grandparents. But it was good from that perspective to have the two worlds. I was born and raised in Sydney. As a kid, I was pretty into my sports. I really was only academically minded probably until year 12 and realized I needed to sort of kick into gear if I wanted to not have to get a job the following year and I could sort of continue the student lifestyle for a few more years. I sort of turned my attention towards sort of economics and finance at that point in time because I just sort of found a little bit of an interest in it when I was at school, but I always thought that I wanted to be a lawyer and when I left school and I got into university I really devoted quite a bit of time to sort of getting to understand how I could make that reality come true.
I got a job working within the court system of New South Wales, just an administrative type of role. But what it allowed me to realise is that it wasn’t for me. So after about 12 months of doing that, I pivoted my life and devoted it to learning more about economics and finance at that point in time, and investing.
That’s really fascinating. That was the first year out of school when you worked in a legal firm for 12 months?
That’s right. I had an administrative role working for a judge. It was a criminal judge in the Supreme court and it was quite eerie, some of the things that you would have to listen to. And I quite quickly realized that I didn’t have the stomach for it first of all. And also the process and the hours that they keep are significantly difficult to maintain over a full career.
Taking an interest in law in his younger years, Gooley explains why he took this direction.
My dad was a lawyer, so I had that as an example. And it was probably sort of some footsteps that I was looking to follow there. And I thought that it might’ve been a path that I wanted to try. But then I saw finance and it presented an interesting option for me to learn about a different field and essentially that was the path that I took. And I got extremely deep into it, and everything that I read sort of just led me to ask more questions. And I spent a lot of time in university just sort of looking to understand more and more about different components and parts to finance.
I finished my first undergraduate degree and I sort of more or less instantly enrolled in a master’s degree. And then I finished that and I felt as though I sort of still hadn’t scraped the surface. So then, I’m not sure what I was thinking at the time that I enrolled myself into a doctorate and spent sort of more or less six years undertaking that while I was working full time just so I could really deepen my understanding. I saw education as a way to overcome my lack of years of experience within the market and it certainly did allow me to have, you know, much deeper conversations with extremely experienced people within the industry.
He explains how he changed degrees after realising law was not right for him.
I pivoted into just a straight commerce degree at Sydney University, which was extremely enjoyable at the time.
During that period you continued to go from your undergraduate, to your postgraduate and then your doctorate, that lasted for how long roughly?
The entire period probably went for around 15 years sort of on and off. There’s obviously life events, especially when it comes to doing a doctorate. You have significant ups and downs and it’s probably one of the most mentally challenging things that you can ever do because it’s quite a lonely project, you’re on your own the entire time. There’s moments where you just take a break from it and you might not touch it for three or four months. And then there’s other moments where you’re devoting almost every waking hour into whatever it is your project is. And it’s a very lonely process doing research like that because you’re often tackling a field or you have to tackle a field that no one else has explored at that point in time.
There’s no sort of gap in people’s understanding, so you’ve got to find something new. That is a challenge in itself. Then also understanding the process that you need to take in order to answer one because there’s a methodology that you need to follow in order to I guess articulate one or finish one, so that was a very long drawn out process. What was quite critical to me was to continue to work at the same time. I was very skeptical of whether or not I’d realize any value from the number of hours that I was devoting to it. So I wanted to make sure that I still kept in the game in terms of the workforce and it was just something outside of work that I was devoting time to broaden my understanding of the field of finance.
As there are many aspects within finance, Gooley shares what he chose to focus on for his doctorate.
I started my doctorate right in the middle of the GFC and I picked an area that was going through significant regulatory change at that point in time. So what I looked at was a space where people were sort of unsure of the ramifications of certain rules and regulations that would come in and how that would translate into norms and practices going forward. So what I did is I devoted a significant amount of time in looking at understanding what those rules were first of all, and then how they would impact people in both Australia and Canada. And I looked at those two countries because they’re extremely similar in population, they’re both Commonwealth, in the case of Canada an ex Commonwealth country.
They’ve got a similar legal system and banking system. They’ve got five banks, we’ve got four big banks. So their property market is very similar to ours and their population desire to buy and hold property is very sort of akin to what you find in Australia. So it’s quite a good case study to look at when you’re looking to understand the consequences of, say, some new rules and laws that were coming in. And what I did was I sort of came up with what I felt was the outcome and then I turned that into a new way of doing things for people. And what I did was I built a new product off the back of that for a bank that I was working for at the time. And I actually won the Australian business award for product innovation off the back of it. And the best thing was all of the other banks actually copied what I did. It was quite a shot in the arm, I felt privileged to have come up with something that others obviously saw value in.
Are you able to delve into a little bit more about this type of product?
The product is a way of readdressing your balance sheet to me. If you’re a bank, or a fund manager it’s a way you can utilize my product or my methodology in order to achieve a better result for your portfolio. So it might be an outcome where you would like to generate a higher rate. And because my product works within the current rules framework, it allows an investor to essentially buy the product or for a bank to sell the product. And for the bank it sort of ticks a whole lot of boxes. And as a consequence, they can offer a higher interest rate to an investor. It’s almost like a way of repositioning or restructuring your balance sheet in order to get around or meet the regulations that came in as a consequence of the global financial crisis.
It solved a big problem there by the sounds of it.
It’s one of those things where it’s quite time dependent and you know, it’s there, it’s now embedded within the system. Where it has the most application is in the institutional space where large financial institutions are often sort of either investing with one another or in trading with one another. That’s where it has the full value. It doesn’t sort of make as much sense in the retail or small business category.
Gooley talks more about his employment journey that ultimately led him into the financial markets space.
Whilst I was doing my undergraduate degree, I was working for a sort of a small merchant bank at the time. And that was quite good because I spent a good few years working for that organization and I graduated from university and I thought, you know, I had been offered a new role there. And I spent six months following graduation in that new role and I was actually planning on going traveling and I wanted to sort of pick up and move overseas, it was sort of a path that many of my friends were following. And I didn’t want to miss out on that. And I had a friend one day call me up as I’m sort of getting ready to relocate and book flights.
I was already looking into different sorts of trips I could sort of take on my way to an ultimate destination. And my friend from university told me about a role that was going within an area of the company that he was working for. And it had been some time since I’d gone through a job application process. And I spoke to my dad at the time who sort of said, ‘look, you know, your heart is set on moving overseas, that’s all good, but why don’t you go and speak with them and just get a little bit of interview experience because it might prep you for when you get to wherever you’re looking to go’. So I went along and I had an interview.
I’ve got invited back for more. And then I ended up sort of being offered the job and I actually took the job and it changed my path at that point. So I ended up sort of pivoting from working for that sort of equities, so fund manager and merchant bank into banking at that point in time. And that’s probably the biggest pivot for me because it sort of changed my focus from one area to another.
What’s the difference between the initial role that you were working in compared to the new role? What were the biggest differences?
I was working with equities in the first role and then the second role was working with interest rate products, bonds, other sort of fixed income investments and also debt products. That was the big critical factor. So rather than looking at, you know, different companies on a day to day basis, I was now looking at essentially fixed income securities.
After changing roles, Gooley explains what fixed income securities entails.
Fixed income securities are very basic sense loans and deposits where people sort of either borrow money or lend money to one another. And a really good example, like a loan for example is a bilateral deal. So it’s a deal that you strike with as a property investor, you go to your bank and you borrow some money. What big organizations do is instead of borrowing money from other banks, they issue bonds. And so they effectively sell a promise to repay that sum of money at a point in time, in the future. And in return they receive interest payments or coupons from that investor. So effectively I moved from a world which was analyzing sort of companies and investing in companies and trading, say stocks to trading bonds and bank bills.
That is quite a big move and big change. How long were you there for and what kind of things did you do?
Before studying Yard, I’d spent more than 16 years in banking. And I think what the period allowed me to really understand was what traditional lenders did really well and where they fell short. I got to work with some really exceptional people with great minds who ignited my passion for property and finance and probably motivated me to continue my education in my spare time. The fact that I did all of this education, it resulted in me then wanting to teach as well, which is my second job, and my second love that I do on the time and on the side, and what that allows me to do is to work with the next generation of passionate young professionals and also helps me stay on top of the evolving trends that are out there.
And it also broke down a fear that I used to have around public speaking. I used to crippe at the knees when faced with even just a small crowd of people who I needed to present to. So with where I am now, I feel privileged to have had these two roles, which are quite different. Also sort of escape the corporate rat race in a way. And I now get to do two things with a huge degree of flexibility where I truly love what I get to do.
Gooley shares with us the details about his teaching job that brings him great happiness.
I teach finance at the University of Sydney. I’ve taught a mixture of undergraduate and postgraduate students just within the finance faculty. So anyone that’s sort of undertaking an economics or commerce or even like an MBA style program, if they’ve chosen some sort of finance at some point there’s a good chance that I’ll have worked with them throughout the course of their studies.
Do you teach there as a lecturer or on a term by term basis?
I teach twice a week. I teach one course each semester. It could be foreign exchange for example, or income or it could be capital markets. And this semester what I’m doing is I’m teaching on a Monday evening and on a Wednesday evening. And I essentially present the same thing twice. And students based upon their timetable, they can come along to either of those two sessions.
Whilst managing a company, working with clients and educating students, Gooley proves he can do it all.
There’s quite a big initial fee sort of cost or component where you need to prepare slides. You need to sort of think about your examples. You need to be able to be relevant and have things that are updated to the current environment. Once you’ve done that, the investment and time has already been done and it’s just a matter of staying current and going and presenting it. And then also doing things, administrative things like setting exams and marking assignments and so forth. It’s like anything in life, the longer you do it, I guess the easier it gets, you sort of get the hang of it and once you understand that process, it becomes easier for you to juggle with other things.
After working in banking for the last 15 years, Gooley shares his experiences prior to Yard.
Probably the biggest thing for me in starting out or prior to starting, was leading into the roles that I found myself in. I was fortunate enough that at one of the jobs that I had just before I left banking, I got to sit on all of the main product and pricing committees across that bank that I worked for. And what that meant was I got to sit on the home loan committee. So I was one of the few people that sort of got to decide the home loan strategy for that bank. And I also got to sit on the business version of that and then the institutional version and the wealth management version of that.
I had this bird’s eye view across the entire organization and it allowed me to really see what was being done well and where things were really falling short. And within any big organization, things become institutionalized and processes touch so many different people. It’s very hard to actually change anything, even when there’s things that aren’t as optimal as what they should be. And also the other big inhibitor is technology. And some of the technology that my old colleagues had to work with and I had to work with, was really archaic. And when you relied upon that, you’re quite limited in what you can actually deliver to a customer and how quickly you can turn things around. But leading up to that process I had this exposure and then at the same time, because I was getting this exposure, I had colleagues who are incredibly educated and financially literate in doing whatever it was that they would do, but they would come to me and ask me for advice around property finance.
I found that initially quite strange because these are people who I held and still hold in quite high regard because they know their areas very well. But yet they were perplexed when it came to comparing finance options. And that just made me think that the whole process was just made unnecessarily complicated. If you have extremely smart people who just don’t know the best option for them, then something effectively is going wrong. And it was probably those things as well as my own process that I went through. When buying a home for the first time, that sort of made me realize that things could be done better.
Wow. What time frame was that, when did that all happen?
All of this was probably over a period of five years where I was I guess sort of understanding the entire end to end process myself and what I found was, after going through it, you become more acutely aware to it because she’s lived through the experience and you get a better understanding for it as a customer. So when you then apply the customer lens, but also the base lens it helps you then sort of understand how things could be potentially done better.
Gooley was encouraged to start his own company and turned his back on moving overseas. He shares with us this journey.
The two options were either invest in more property or start a business and I had a bit of money saved because the objective had always been to buy more property. But then the alternative was potentially get a little bit more freedom for myself and try to tackle a problem that I saw as being a huge opportunity. So effectively when I went through that home land process myself I did find it extremely difficult. It was busy work but it wasn’t meaningful work and the entire loan application process just to me felt really inefficient, ancient and it took an eternity. I encountered millions and millions of pages of forms, terms and conditions and legal documents, and I needed to complete all of those manually.
It literally took me weeks going back and forth with the lender tracking down missing paperwork and forms. I don’t stress Tyrone, I try to stay pretty relaxed and stress free. But during this moment when you’re buying such a big asset, a property asset, it’s probably the biggest investment that you make as an individual. I was just stressed the entire time. Whilst I was waiting to know where I stood. Could I borrow them out that I needed? How long was it going to take to get the approval that I required and you know, would there be an issue that popped up at the 11th hour? So it wasn’t a pleasant experience that I had. And then when I spoke to friends and family, I realized that I wasn’t alone.
What that did was it made me think that through Yard, we could make the home loan application experience better for people. And then just speaking with colleagues, I guess over the last five years that I was in banking really made me realize that the lenders have made things incredibly and unnecessarily complicated. If you go onto a traditional lenders website, you can find 20 to 30 variations of the same thing. Each product has its own flashy brand name. There’s different interest rates, there’s different fees. It’s really not transparent and it just makes comparison almost impossible. And the other thing that I didn’t like is, with a traditional lender, everything can be up for negotiation. The fees you pay, the discounts are their standard variable interest rate. I just personally got confused. It defeated me and it can leave a feeling like you’ve been ripped off and you might not be, but it can leave that feeling that you’ve just been ripped off.
It’s just not a nice sort of taste. And I think when you strip it all back property finance is pretty basic. And when it’s not kept simple, it just becomes harder for people to make an easily informed choice about which option is best for them. So what was clear to me is that people are after both the simplicity and transparency, of course, great rates and unlimited fees too. But the most important thing is, how do you take something that, in its essence is pretty basic, but it’s become incredibly complicated for one reason or another. And just reposition that as being something extremely straightforward that just clicks immediately for anyone. And that was the challenge with Yard, and that’s probably what took us the greatest amount of time. How do we take you know, 20 to 30 variations of effectively the same thing and turn it into just four products for consumers. And how do you do that in a way where you can provide people with, you know, a really seamless experience, a really competitive interest rate and give them the ability to just add in as many features as they want.
You must be the next Steve Jobs of Apple, but of finance.
If you look at the Telecom industry, the Telecom industry had this moment too, probably about 15 years ago or so. Remember when you walked into Telstra back in the day and you would sort of walk around the edge of the shop and there’d be 15 people hovering waiting to sort of grab you and you’d sort of walk around and you’d look at handsets and it became almost impossible to understand and compare, say Telstra to Vodafone, Vodafone to Optus or any other carrier at that time. Because everything was packaged up into a 48 month plan, you’re paying a different fee for SMS to you know, your sibling or your friend. You had a different amount of calls included on a monthly basis.
It was just impossible to make a comparison. And then amaysim came out with this data only plan. It was like unlimited calls, unlimited text, really simple, really straightforward, just pay us X dollars, some dollars a month and you’ll get this amount of data and you know what, let’s just do no locking contracts. And it was just very sort of seamless and straightforward and they had this instant success. I think people appreciated that. And Apple’s probably another company that went through that sort of simplification and stripping out all of the complexity that, you know, just sort of builds up over the course of time. And that’s what all we want to do is, we just want to be able to give people like four simple choices.
They can have as many features as they want and we give them a really competitive interest rate. And the product that they end up going into is just driven entirely by their objective. You know, do they just want a home loan to buy an owner occupied home or an investment property? Or are they looking to do a knockdown rebuild of a house and land package? And in that case it needs something like a construction loan or are they someone that’s looking to, you know, they’ve seen their dream property come up for sale on the next street and they want a bid at the auction, so they want to buy before they sell their existing home. So they need a bridge. And then there also are a lot of people out there who are looking to purchase property through their superannuation.
For me in the last few years that I was in banking, I saw pretty much most players in the market pull away from SMSF lending. And I’m not sure why that was because property can be such a great asset for anyone to have within their superannuation because property really is a medium to long term play and so is superannuation and given the performance of property over the course of time, it just makes sense for some people to want to be able to put that into their super. And SMSF loans and doing SMSF loans in my view fill that void that the big banks have really stepped away from over the last few years.
PROPERTY INVESTING JOURNEY
After years of discovering what his true passions were, Gooley found himself on his property investing journey.
The reason why I love property over other asset classes is for a number of reasons. I mean to step back though I guess I personally see property as a medium to long term play. And prior to the financial crisis I was working on equities at that point in time and I guess I got caught up with a lot of the euphoria that was playing up at that time around making equity investments and so forth. Like a lot of people at the time you know I was using equities as a way to park my savings whilst I saved for a home deposit.
I got sucked up and like many other people, as I was making decent returns and once the market started selling off, I got quite scared and I liquidated my investments. And at that point in time, my savings definitely took a dent and it took me a little longer to get my home, but it sort of taught me some big learnings. It sort of made me realize that the capital growth just does not come easy. And if you’re holding an asset that has experienced significant short term price gains, like I was getting prior to the GFC’s inequities or otherwise you sort of look around and everyone seems to be a star investor. At that point in time, it made me realize that I might want to reanalyze that investment to determine whether I still think those returns are likely to be sustained.
If all things had gone to plan, I probably would have bought my first property a lot earlier than what I did. But I guess because I was sucked into the equities hype I was making equity investments. But I then realized at that point in time the benefits associated with holding property and why I like property over other asset classes is for a number of reasons. And the first is it provides you with a regular cash flow stream like an annuity. So you’ve got this weekly payment or monthly payment in the form of rants that just comes as long as your property is tenanted. The second thing is that you can take significant gearing or leverage at really cost effective interest rates for when you buy a property. The other thing with properties is that you can make improvements to your property or your land and increase its value and generate this thing called forced equity where you do something to it to make it worth more than what it was worth when you first purchased that.
There are also significant or can be significant taxation advantages through depreciation and interest deductibility as all your listeners will know. And then prices around property have historically been more stable than other asset classes. And then in Australia we’ve got really good asset protection laws as opposed to other countries. So like the government, there’s no risk that the government will come and take what you own here in Australia or another party can come and get access to what you have. And as a consequence people like it and where there is inflation and other favorable demographics as we have here in Australia, you get capital appreciation with property prices. And then down the track property is sort of one of those things that you pay off some of your loan, you can then use or you see the value of your home increase.
You can then use that asset as collateral to get further loan funding. So you can then sort of take equity out of your home or your investment property that you already have and use that as your equity contribution to your next property for something else that you might need to do in the future. It could be as a way to get access to cheap funds to secure an overdraft facility for your business. Like there’s a whole range of other things like owning a property that just enables you to have a lot of flexibility down the track. So that’s essentially why I got into property. And for me it was also about having a home to live in, that was my ultimate objective. And probably my next property objective will be to I guess as my family continues to grow, upgrade my home to something with a little bit more space. So that’s probably the next immediate goal over the next few years is get a home that’s a little bit bigger to get access to some more room.
How Co-Founder of Yard Changed the Home Lending Game
With the help of his business partner, Gooley delves into the reasons why he jumped into starting the company, Yard.
When I was in banking, I started to see the opportunity to sort of do something with a group of other people. I started to sort of think about all of the people that I’ve worked with over my career who I really valued their insights and I’d be prepared to pay them effectively with my own money. And when you sort of apply that test to an individual that you work within a large organization, it sort of can be quite a compliment and if you value their skill set so highly and you’d be prepared to pay them with your own funds.
They are obviously incredibly good people, and professionals to be able to sort of get on board. And you start to sort of think about the types of skill sets that you might need. And what I looked to do was to, I guess see if I could sell the journey to these people and get them to sort of move, take a big risk and move across to a new sort of startup business. How I met Toni, so it was in 2010. Toni was studying at the time and she was studying in the UK and I went over to the UK to undertake a program as a part of my doctorate and Toni was undertaking the same program at the time.
We got to sort of know each other and then I got to see how her career unfolded. And she found herself in a role as a management consultant working for one of the larger US American consulting firms and ended up slotting into the financial services environment. And so by being sort of in and around you know, digital business models, mortgage and lending processes, I saw her as a key skill set to really sort of come in and drive I guess a strategy towards execution. She’s an incredible doer and incredibly rational, which has just been important to have around.
The other people that we surrounded ourselves with are I guess our subject matter experts who, you know, are extremely keen to make a fundamental difference within this space so that they’re incredibly passionate about providing people with the support that they require when they go about purchasing property. They are incredibly passionate about reducing the waste that you know is within the home loan market at this point in time. And what they want to do is deliver I guess a unique new proposition to the market that fundamentally sort of helps people, you know, both get a better deal and get access to great amounts of funding, but also not stress through the whole process. Whilst they wait to understand where they stand.
As having a good relationship with your business partner is vital for success, Gooley explains how they developed their strong partnership.
Toni and I had the opportunity to work together on a project that she was undertaking at the organization that I was working for when she was working for her firm. And so we’ve got to sort of see how each other work and we also saw I guess the size and the breadth of the opportunity that was available in terms of addressing, I guess the whole end to end line application process, which you know, is incredibly inefficient and ancient. It’s something that has not evolved you know, probably since the 1950s, in all honesty with traditional lenders. And it’s right now, I guess in the last sort of 10 years we’ve had this huge leap in technological advancement.
From our perspective, we both saw that there was a massive opportunity to address the process side of the home loan application for people and property finance for people. The second thing that was quite clear was obviously the complexity that was embedded within the existing products on the market. And you know, we quite like simplicity and we also both didn’t like the fact that everything is up for negotiation and it’s not quite clear if you’re getting the best deal that you can possibly get, even if you do you still feel a bit ripped off. And then the final thing that we just both resonated with is that banks have bank branches which cost lots, millions and millions of dollars to run each year.
They have huge teams of people that are there to run these manual processes, which just adds a lot of cost to the system and consumers sort of have to bear the cost of that inefficiency within the financial services system. So we sort of think by having like a very automated back office model, we can deliver a faster and lower sort of cost product to the market, which is what we’ve been able to do.
Was it an easy shake of the hand to get this business up and running?
I think we both bring fundamentally different skill sets to the table. Obviously me with my finance and banking background and then Toni with her sort of strategy and operations background and you know, she’s a fundamentally good people manager. She’s exceptional when it comes to execution and driving towards an outcome. So the easiest thing was agreeing with strategy and then it was sort of quite natural around how we would then, sort of go about executing upon it. And because of the different skill sets that we have, the division of labor between the two of us in those sort of early days was quite clear.
It was just a matter of coming together for a greater cause, then you know, based upon our experience and skill sets, applying ourselves to doing whatever the task was that we needed to nail. This project is like eating an elephant. You just need to do it one bite at a time. And I really think that where we are and where we want to go, we’re only sort of through one of the toes at this point in time. And I personally, I would not have been able to do this without her and her skill sets, and also the other members of the team that we have.
PROPERTY INVESTING STRATEGY
Gooley goes on to explain how Yard manages to fund their loans and investors, keeping in mind the safety issues.
To address the safety issue first, first of all like with any learning business, the person that takes the risk is the lender. Because effectively it’s our party with our money to provide to an organization or an individual to buy a property. So the risk really is on us and that’s probably the first point. How we sort of get our funding…well you can only really get your funding one way because if you think about it, property in Australia is quite expensive. I mean the average home during the last sort of bull run up until 2017, the average house got above a million dollars in Sydney, which is a substantial amount of money.
Now when people need to borrow to fund that asset purchase there, they’re obviously taking out large loans. Now the question then becomes, well, that’s an awful amount of money. How do we then get access to that funding first of all, but then how do we get access to that funding at a really cheap cost effective rate. And the answer to that is through financial markets and capital markets, and it’s actually no different in a way to any other organization that does lending whether it be a bank, building society or credit union. Those companies take deposits. The deposits only make up a very small amount of their balance sheet. And what you saw sort of around 10 or 15 years ago, even the largest banks that only had 50% of their funding came from mum and dad deposits or even less than that to be honest, when it was mum and dad deposits.
And then the way that they supplemented that funding was through wholesale markets. And what we’ve done is we’ve gone straight to wholesale markets to acquire out our wholesale funding. And we in turn have very large institutional investors that provide us with our funding. So we can then lend that to our retail customers. No different to any other wholesaler in any other industry. So you could be an importer of packaging products and you import 100,000 sort of cardboard boxes for example. And then you never need to find, or you then as the wholesaler or the distributor then sell those boxes individually. So that’s no different to the funding model that all lenders take within Australia, the US, the UK, Canada and so forth.
In terms of say like this wholesale retail type of model, would you have to actually take these funds all upfront as a wholesaler first and then eventually offer them to retail customers, which would be the investors, the mums and dads and so forth over a period of time. Is that kind of how that works? Or do you access those funds only when you need them?
There’s a few different ways of doing it and the right answer when it comes to funding and balance sheet is you need a lot of different options. You can’t rely on one. If you do rely on one, that’s when things can sort of come stuck for you. Right now there’s a lot of financial market volatility caused by COVID-19 and if we didn’t have a diversified funding base in terms of who we were getting our funding from, but then also the types of funding that we were using, that’s where organizations sort of get into problems. Banks, building societies, credit unions and lenders all fall in the same boat. So the key is for you to have a breadth of options available to you, if you want to be sustainable through all parts of the business cycle. So right now, you know, we’re completely open for business. We’ve got more funding than we could possibly need and it means that we can continue to land our operations and not slow down at all. And so we’re in quite a competitive position at the moment because of the diligent and conservative approach that we take to how we find our balance sheet.
He discusses the duration it usually takes for his company to achieve what they offer to people.
There’s a few components to it and what we find that it’s really driven by the property investor. How quickly can they move or would they like to move? And it depends upon their strategy or what they’re looking to do. And usually we’ve had people come to us you know, at 4pm on a Wednesday saying I need an approval so I can bid on a property by 6pm tonight, so we can turn that stuff around. It takes about 20 minutes to go through our online application process, and that kind of gives us the bulk of the information that we need from an applicant. The next step is then to verify what the applicant has sort of put in the application and make sure that there are no errors and also legally, we need to ensure or we need to get evidence you know, to support what’s in the application.
Because what we don’t want to do is to provide the wrong type of lending product to someone. So what we then look at to understand is, I guess we do the objectives, the requirements and needs around the home buyer or the home purchaser. And once we’ve sort of found out and we’ve got our information together, we then have a credit team that will look through that application and then sort of sign off that, and that’s good to go. Then once that application has been approved, the individual can then proceed either to settlement if it’s a conditional approval. They then get the comfort that they can go and get in an auction or you know, make an offer on a property or whatever it might be.
For different people it can take different times like for someone that might come to us and say, ‘look, I am looking at buying a property sometime this year and I really want to get a good idea from you guys on how much I can borrow so I can refine my search and narrow down, you know, the areas and the type of property that I can afford to purchase’. So we provide a pre approval. That person goes away, attends the open homes and it could be a few weeks or even months before we hear back from them. And then they re-engage with us and they say, ‘I’m ready to bid on a property, I found a two bedroom unit that I really like. It sort of ticks all my boxes, can I firm up my application?’. And then we then go through that process with them so that they can get the confidence to make an offer. So it just depends. It’s really ties to the applicant. We can move as quickly or as slow as anyone would like. And it just comes back to the strategy and the needs of the objectives of the investor.
Gooley strongly believes Yard is more beneficial online, not only for him and his company, but also for the clients.
The reason why we have the online process is that we want to avoid people having to use paper-based forms because that’s frustrating, right? We want people to be able to submit an application for a loan from anywhere in the world on any device, right? They could be sitting in a park in Europe on their mobile, and they could submit an application, right? They could be sitting in front of a desktop computer in their office and they can submit an application, and they can do that in around 20 minutes. But what’s key though is that you need to recognize that every single property investor has their own story. And the property investing journey is unique to them. Their property preferences are different. Their investment strategies are their own, their cash-flows, their income types and their spending patterns are unique to them.
And there is not one case that looks identical to another. Every individual is different. And as a lender, it’s important to really nail what a customer needs and wants today and also in the future. And if we, as a lender, were to send people through a broker or through some sort of offshore call center, we would not get that understanding. So what we have to do is we supplement a digital experience with a really highly skilled team of personal loan consultants and we make that loan consultant the sole point of contact for every single investor all the way through their journey with Yard from the initial touch point to all the way through to like, ‘Hey, my conveyancer is Joe, here’s their phone number. Can you please help me deal with them?’. You know the whole process, it’s just one person. And we find that’s sort of quite critical in really getting to know the individual and what their objectives are and how we can best sort of help them.
If you didn’t do that, you wouldn’t know your customer that well. And it sounds like you have had so many conversations and that’s fantastic because then you can tailor the best product for the market, which is your customers as well.
Exactly. And also just turn stuff around so much faster, which is what people want.
After settlement, is it just pretty much business as usual if they just start paying the loan and all that? It’s not much different, is it?
Once that customer has got their loan, they become a customer of Yard. They still maintain their initial touch points so that person that they’ve been speaking to all the way along is still there to help them with anything. It could be you know ‘Hey, I got locked out of my internet banking. Can you just sort me out?’, and that person can help them. A whole range of activities. It could be re-issuing with a new statement or it could be hey I’ve purchased that place from you, for example. I had a customer who had bought an investment property down in Hobart.
I continued to sort of communicate with them and then following the settlement a few months later they sort of started exploring options of consolidating their superannuation. And went down the path of establishing an SMSF trust. And then that resulted in, I guess, you know, helping that person acquire a residential property for their SMSF. So it’s important to not just be aware of what the strategy is behind that person today. You can’t just then say goodbye and leave everything to them. Otherwise you’re truly not helping them for their next objective or their next purchase down the track or, you know, upgrading a home. Or it could be even taking cash out to do some renovations or to buy a car. So like the post settlement, the contact doesn’t stop. Like it’s sort of quite active through the application process and then sort of post settlement, it’s as per the customer really requires.
He goes on to share how important it is to build up long term customer relationships.
You also want to be able to keep confidence in someone. And this is why we want people to have their own sort of personal point of contact. You might really want to move quickly with property and you might see something, and like a lot of savvy investors, they know the value of that asset and they don’t want to have to wait as an existing customer, sort of six, seven, eight weeks just to approval. They want to be able to pick up the phone, call their contact and get an understanding of where they stand pretty quickly so they can confidently go and make an approach for that next investment. And so that’s what we feel is quite key is, is having that personal individual and that personal touch point that people or our customers can sort of just draw on and use so that if something does change with what they’re doing, they can just sort of pick up the phone and have that chat.
After successfully implementing Yard online, Gooley delves into how it all came together.
We have a very experienced chief technology officer who has sort of like a global technology experience with financial services companies and in different markets. And he was sort of quite keen leading the architectural design for our business. Then once we sort of had designed our architecture and all of our security layers which is a huge part of it, we then sort of set about getting that then built. So there’s a variety of different components that goes into our technology. You know, it’s a combination of both systems that we’ve constructed ourselves, but also to you know, third party systems.
We sort of buy or license and integrate into what we’re doing. Like there’s a lot of stuff that, you know it works and it works quite well and it’s new and it’s nimble. So it’s like, well why waste the time and the effort trying to reinvent the wheel you know, license it and integrate it into what we have. So technology is obviously a really big part of our business and will always continue to be one. And I think the approach that you need to take with technology is, what is the problem that you’re attempting to solve? And will you as a business, will the feature that you’re looking to add create value for your customers and as well for your business? And then the next question becomes, all right, well based on those answers, I want to go down this path. Should I build this technology myself or should I license it or purchase it from a specialist provider?
We take a look at what resources and mentors the investor encountered throughout his property journey.
I get the opportunity now to speak with people from all over Australia day in, day out who are investing in property. And what I can share is that there are so many different ways to make money in property and we see this through what our customers are doing, and different property investors have achieved different things. And in my experience, there’s probably no silver bullet and it comes down to your goals and who you are. As you know, one way or one method might be better than another for you. And I think if you want to find a mentor, you probably should’ve already decided on what it is exactly that you want to achieve through investing in property and you need to work what it is, are you looking at property as a passive investment where you’re buying and holding property and if so, you’re not needing to do much for that property.
It’s easy for you to maintain a lifestyle away from your property. It’s quite passive. Alternatively, are you looking to generate some sort of forced equity through a property development? And this can be a really great way to make money through property. But it often takes a lot of work that anyone that’s been through that process will appreciate. And you need to draft plans, you need to deal with the council, be regularly onsite and that’s much more active. So whichever way you want to go, you should look for a mentor in my opinion, who has either worked on a similar strategy to you or at least on their way to achieving what it is you’re setting out to achieve. And honestly this mentor is more likely to be experienced.
Many of the trials and tribulations that you’re going to encounter, and what a really good mentor can do, is they can guide you through that, and that does not just apply to property investing, but anything in your life. So you need to sort of work out, where it is that you want to go, and then you solve that and find someone who has gone through it in the past, and can share their experience on what they did, what worked and what didn’t, and that will then prepare you for essentially what’s to come.
Gooley also shares with us the kinds of things he has read that have inspired him along his journey.
There’s some stuff that I’m pretty frequently reading, and these days I kind of really like you know, sort of different series of short podcasts, articles and commentaries. And probably one comes to mind because I was having a read of it this morning, and it’s something that I’ve been reading on and off now for, for probably around two decades, like right from my school days all the way through all of my education or networking life. And it’s a website called Mauldin Economics. And it started out as just one guy, John Mauldin. And he started just sort of publishing his thoughts and insights. But he now has around, in my view, really excellent commentators and they are publishing some pretty regular stuff and they write on a variety of investing topics including property economics and other things.
But you know there’s a lot of stuff there, they are very quick reads and quick listens. And what it’s done is, it just gives me a clear idea of I guess some of the forces that are driving investment markets and also the global economy. And I just find you know, if you are time poor, sometimes shorter reads can provide you with very good degrees of understanding of where things are happening, but also inform your opinion of what will help guide you around what you should or should not do.
Is this some kind of publication that goes up regularly or is it just published on the website?
You can go on the website and you can sign up to the subscription, some sort of distribution list and you can sort of select the topics or the authors that you might like, or they might be writing on stuff that interests you. And it’s not everything because there’s quite a bit there now. So not everything that’s on there is for me and I read this stuff and that sort of is of interest to me and if I don’t get time for it then that’s fine. But you know, they often also reference other podcasts and other articles and sometimes that’s quite cool to get on there and see those other articles, and then that takes you down sort of another path of some pretty cool stuff that you can also tune into.
The intelligent investor looks back on the best advice he has received that has helped him reach his goals.
The best advice that’s come to me is probably sort of two fold with the way that I’ve seen things across, you know, sort of financial markets across different asset markets today. It is that wealth really transitions from the impatient to the patient. If you can be patient in your purchasing, you set yourself up to buy well. If your go ahead decision is clouded, you know, by the motive factors or you do something that’s quite hurried. Typically you end up meeting the price of the seller. So if you’re patient throughout the course of time, typically you are the beneficiary of I guess wealth moving to you from someone that is perhaps less patient than you.
I love that. That is very unique. It’s sort of simple, like Warren Buffett, patience.
I think I borrowed that from him. But then the other thing is, know your experience, your knowledge and your education. You know, and this is a quote, right? It sort of sets you up for what’s ahead in the future and the more that you do today will ultimately deliver you with benefits down the track.
Going back 10 years, Gooley shares what he would have said to his past self.
Probably get organized and become more rational.
Oh, that’s a good one. And looking forward to the next five years in your journey, whether it be for Yard and also the property journey side of things, what are you most excited about?
I’m excited for Yard because we’ve got some huge objectives. And we’re obviously looking forward to becoming more of a household name, but just personally, I’m really looking forward to seeing what opportunities make themselves available over the next year or so. Because as I mentioned, as my family grows, I’m going to need to upgrade the family home at some point and then get more space and it’s sort of not inconceivable given what’s sort of happening around the world for property prices or for there to be some value for patient investors in the property space. And so you know, I’m looking forward to keeping an eye on the market to ultimately make a property play and you know, it’s further over the medium term. It’s a longer term.
I totally agree. And there’s going to be some opportunities just waiting for the next three to six months, it’s just too early to say anything on what’s going to happen.
After the GFC hit, Australia spent some time shoring up their own balance sheets and then once they became more comfortable, where they ended up going was channeling their wealth into property and away from equities. And that’s kind of what we then saw over the five years to sort of late 2017 where you had nationwide housing prices going up by 50%. And you know, we saw house prices fall by around 10% between late 2017 and mid 2019. But right now we’re not that far away from the peak when they hit, that with everything that’s happening, it’s not inconceivable for pay prices to retrace again. And for pockets of value to obviously pop up and for any savvy property investor, that’s pretty appealing. And if they’ve got a medium to long term sort of holding period, you know, the ability to take advantage of any sort of pullback in prices that might happen is an ideal time to actually sort of, you know go and purchase something. And personally I probably fall within that category.
How much of your success is due to your skill, intelligence and hard work? And how much of it do you think is because of luck?
I think I think everyone sort of always has a fair amount of luck and I’ll say I think that there’s a lot of hard work that goes into this and it’s probably more hard work than anything else. And you’d need to have a base level of intelligence. And for me personally, I just surround myself with really smart people and then just work really hard.