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Summary
In this interview Kevin Young (Club Chairman) discusses interest rates, the Reserve Bank and The Investors Club.
TS: We do have a special guest that many of Howard Satlers great listeners would already know, Kevin Young. Kevin good afternoon first of all mate, how are you?
KY: Good afternoon mate. Very good, thank you and good afternoon to your listeners.
TS: Now it is a big news day, not only in terms of the Marlborough and Burke tapes but also the decision made yesterday was released very early this morning. Oh, I should remind people that haven’t been listening in. Kevin Young is the Director of The Investors Club. And Kevin, before we start talking rates, The Investors Club isn’t one of these high powered white shoe brigade “we are going to look after your millions mate” um, you’re actually a free service. Is that how it works?
KY: That’s exactly right. We started at.
TS: Let me have a look, no your shoes are no white.
KY: No totally a free service. On our website we warn people of the sharks in the industry and the traps in property. We have a very simple education system that slots people in, they can follow it if they wish to or not. There is never a fee and never a charge at any time.
TS: So anyone can ring you up and ask you for advice if they get close to settlement and there is a hitch and they are going “what can I do?”
KY: Yep. The big question usually comes up front, which area should we be buying in. At the moment that is the big question here and I have to say that we are not recommending Perth at the moment, though we did and we got a lot of people into Perth properties over the last, well really 12 years there has been great buying over here. But, we have moved now to the east coast and particularly to Sydney, I think, is a great buy, which might surprise your listeners but we have a lot of people from Perth buying in Sydney and South East Queensland.
TS: There are only about 10 or 20 thousand dollars in the median prices of Perth and Sydney now.
KY: Yes that is incredible. History is going to look back and go “well why did I buy in Perth when that was happening?” when you have the bigger population drive in Sydney. I think the thing is that people in Perth don’t have anywhere to go and that is the power of The Investors Club, because they can look at all the stock, all over the place and know that it is the cream not the milk.
TS: Now listen, I know you are a nice man, ‘cause your wife told me and she is in the studio…
KY: She is never wrong.
TS: Exactly. I have one just like that, and mate the whole thing is, like I know you are a nice bloke, but why would you be doing this for free? What do you get out of it? And how does the system sustain itself?
KY: Tony good question. We get paid exactly like a real estate agent. If you buy through the Club, and we have selected it very carefully, we are clearly going to get paid by the vendor as a real estate agent would. Unlike a real estate agent the difference with us is that we will look after you forever. So we have had to choose the property carefully because we are going to find the tenant over and over again, we are going to have to help you do your tax return (with depreciation), make sure it is the right sort of property for you.
TS: So you couldn’t hit and run if you wanted to?
KY: Couldn’t hit and run. We give out or own phone numbers, our personal numbers. We don’t have any salespeople so the mum and dad’s that we have helped in the Club give advice and say “here is my card, here is my home number, this is my address and I will help you forever”.
TS: Now another thing that a lot of people that I know, coming from probably the wrong side of the tracks, to think all these people with property investment, lucky doers. Two things, first of all, they have had to work to get the property that they have in almost all cases, but secondly, if we didn’t have investors in our real estate property, the even low margins, which I think is only about now 1.6% of rental availability, would drop even further. So without investors, the people at the bottom of the income spectrum would be looking for more places to live too.
KY: You’re right Tony. Right across Australia, 32% of the population rent. The only reason that they can rent is because investors put a property out there for them and that is the power of the Club actually. We can actually find the areas where the tenants have very little availability so we come into that market and find the availability. As a result we are getting probably about 50% better rent return than the ABS statistics or REAI statistics show. Careful selection.
TS: Alright. Now listen we are going to put a caller up in just a moment. Claire has been good enough to field that for us. I will get a question in before our caller. Um, and if you have got a question for Kevin, all you have to do is give us a call, 9221 1882. I am going to kick off with the internal question that you get on those Wednesday’s where a certain Reserve Bank group tells you what they meant about on Tuesday, and they reckon that hey, inflation is going up, so lets boost rates up and that’s going to boost inflation again. Or am I wrong?
KY: Mate I am white hot. I am quite mad and cranky. The Club started to help people in trouble and help people generally, and to me the Reserve Bank has gone out of its way, with these last 8 increases, to really hurt the average person. There is really no reason for it. If raising rates reduced inflation, why haven’t they been successful? Now this is the 8th rise in a row, where is the falling inflation? So by their own measure, they have failed.
TS: The other thing is, they are talking about the cost of wages in the business sector. Now of course business loans go up the same as real estate and now everyone is hurting.
KY: It goes right through the system and I think your listeners out there should go out tomorrow and say “we want a Reserve Bank inspired pay rise to pay my bigger mortgage or pay my bigger rent”. Now one person’s income, if there are two people working, goes to keeping a roof over your head. Now that is bizarre. Absolutely bizarre. People are accepting it. The Reserve Bank should be investigated.
TS: I think so, especially when before there was an official announcement, we had the Prime Minister making pronouncements on interest rates, saying “oh, sometimes these things have to go up”. I mean there has been so many times I have seen him at Media conferences over the last 12 or so years, or however long it has been, where he says “no it is not my policy to comment on The Reserve Bank decisions, they are an independent body”, and yet this time, he commented before to try and break the bad news. Or am I just being cynical?
KY: Um, I think you have a right to be cynical because, it is amazing at a non-elected body, like The Reserve Bank, can really ruin our lives, which it is doing.
I mean, getting one partner out of two to devote all of a week’s work to go to, really a rate increase is simply a transfer of money to the bank’s net profit. The banks don’t have to employ one more person but they take that money. Where is the logic in all of that and why should someone be allowed to do that who is not accountable?
TS: Indeed. We are talking to Kevin Young from The Investors Club and it is 18 after 5 and if they do want to find out more, I think we have sort of explained how you can get this advice and it is not like a real estate agent, it really is sort of like a co-op sort of theme isn’t it?
KY: It is. It is a free educator and people don’t have go ahead and buy the properties we recommend, they can go out and buy where ever they want. There is no problem with that. The advice we have is freely available on our website which is www.tic.com.au and we will have that up and running at an even more professional style shortly. Believe it or not the guy that donated his time to look after our website last time, we did such a good job in making him wealthy he retired at 52.
TS: I have got 2 more years work to do if I stick with you…
KY: Stay with The Investors Club. Well now we have three West Australian’s who have volunteered their time to upgrade our website. So progressively over the next few weeks you will see some exiting changes and a lot of educational information will go there.
TS: That’s great. Now we are going to go somewhere too. We are going to pay a couple of our own bills and we will be back. If you would like to put in a question, first of all on how The Investors Club works, or how you can recover from the rates, don’t hesitate to give us a call on 9221 1882 on 6PR. It is 19 after 5, back with your questions in just a moment. 23 minutes past 5 and thanks for sharing your afternoon if you are driving home, getting ready for an evening shift of looking after the kids or what ever you are doing. You are in a good place because with an interest rates rise as we discussed Channel 7’s lovely lady, Susannah Carr.
With the rates going up, it is going to cause a lot of grief. We have Kevin Young, the Director of The Investors Club, in here with us. And Kevin you have done some figures on the real effect of rates and we get told different stories by The Reserve Bank Governor when he makes the announcement and by the ruling government at the time as I have seen over the last 30years. What are some of the things that they don’t tell us that you have found out?
KY: Well I think our interest rates should be at about 3.4% and there are all logical reasons as to why that should happen, it’s the rate around the world with our trading partners. What they are not saying is if we have high rates versus them, how can we possibly export into the same markets? We can’t. We are going to lose employment here. How can we keep with ever growing cheaper imports coming in from those markets? We can’t. So all of this is coming home to us now. The Reserve Bank have three areas to work with, they have to create full employment, they have failed that, they have to improve our life styles, they have failed that and they are supposed to keep down inflation and clearly they have failed that because after 8 increases they are saying CPI is going up. What they are really saying is “whoops we made a mistake”. When in fact they have made 8 mistakes and should be saying “woops” 8 times.
TS: It doesn’t seem that a bloke that is a bit sad about saying “sorry” is going to come out and say “mea-culpa” on this either.
KY: Well we pass responsibility over to The Reserve Bank, but the Reserve Bank is not accountable to anyone. We were chatting before but the parliamentary committee that interviews the RBA twice a year. After the last 2 increases they had a meeting and they didn’t even ask one question on interest rates. They didn’t try and get the Reserve Bank to justify.
TS: No pressure. Weird things happen and the poor people pay.
KY: Well we are all paying and it is a huge amount that we are paying, and I think that the Reserve Bank has been the benefactor of the banks. The banks in my opinion are parasites. Over the last 2 years their profit has increased by 38% but your and my actual cash has gone up 1.6%.
TS: Wow. Here is another dumb question. I get paid for these Kevin. Kevin Young is our guest by the way, it is 26 after 5 on 882 6PR. Now when interest rates go up, business and home loan owners, or people who have got those loans, pay more money to the banks. Do the banks get that money free and clear or does that go onto general revenue or who gets that money that we have to pay more?
KY: Mate I wish it went into yours and my pocket but it doesn’t. It goes straight into the banks bottom line, their net profit, and they don’t employ one more person to get that money from you. The Reserve Bank just says “ok just take more money off everyone, business people, home owners...” and it is just crazy.
TS: And of course the Reserve Bank and all the other independent hugely powerful well lobbied banks would never have anything to do with each other for their mutual benefit. I know that because this is a corruption for free society.
KY: Well that’s the big thing isn’t it? This is the only Reserve Bank in the world that makes a decision one time and doesn’t release it for 24 hours after that time. It is.
TS: We have always wondered as journalists why the heck you can’t do that.
KY: It is the only bank in the world that has secrecy.
TS: It is not great secrecy. We know these days that how quickly, especially things that are stored electronically, can be accessed. Why provide such a window of opportunity for potential insider traders or what ever?
KY: Well exactly. There are 600 employees inside The Reserve Bank that know for 24 hours.
TS: They are retired now are they?
KY: That’s probably what has happened. The Ozzie dollar jumped yesterday, and the only reason that jumped is because people knew that the rates were going to go up. Perhaps it was an educated guess but perhaps, we don’t know.
TS: Indeed. I think that quite often these days the market leads the bank and factors these things in some times up to a month or two ahead of it. Now I guess as a final question, probably we have given rates a good old flogging, I want to come back to this being an Investors Club. And, I want to think the coup idea, it appeals to me as a social justice junkie, that you have got people helping each other and it is like a mutual thing where no one is, I mean you weren’t dropped here on a golden roller and you are not dripping in diamonds, so it really is something that you obviously get a buzz out of but it sustains you enough and the other people involved in it, so everyone makes something out of it without making too much cream.
KY: Well that’s it. We are just simply saying to people “this is how we got wealthy through property. We didn’t pay a cent out of our own pocket for it…” It is a very good and simple system and we only have mum and dad’s that we have helped saying “this is what I did, this is why we are wealthy”. Kathy and I have put our reputation on the line and our history on the line. We have 130 properties, we make $2.5million each year out of those properties so I say to people “this is what I have done, here are the addresses of the properties, lets see how it goes up, this is how you can simply buy properties.” But if you buy the right sort of properties you don’t have to put your hand in your pocket. And the bottom line of that is we have got $3billion+ worth of mortgages out there with Club members and zero vacancies. That is a world record. Normally the banks calculate between 1-2% failures so that would be calculated between $200-450million right off.
TS: You are a lean mean buying machine…
KY: That’s it. We are. It is a great time for us actually because the vendors are very vulnerable, particularly the builders, we come along and say “look we have got $750million worth of finance approved by Club Loans today, you reduce the price, they will buy”. So people are buying on their own, collectively with others, and they are the ones getting the big discount.
TS: Mate this is a terrific thing. I have learnt a great deal from Kevin and your lovely wife. Thank you so much for coming in, I am sure listeners would be looking forward to more of you sharing your knowledge and your way to a little more wealth with Howard on this programme soon. Good to meet you.
KY: Thanks Tony. If anyone is in financial trouble because of these rotten rates, get onto us on www.tic.com.au and we will personally be happy to help you out of that problem. I can guarantee that we can get you out of any financial problems.
TS: www.tic.com.au
KY: That’s it. Thanks Tony.
End transcript
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