New-to-industry mortgage broker Kevin Sum of Let’s Do Mortgages speaks to The Adviser about how his love for property investment kick-started a career change into broking, the excitement and challenges of finding the perfect loan, how he chose his aggregator and the next property hot spots.
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James Mitchell: Hello and welcome to Elite Broker. I'm your host James Mitchell, editor of The Adviser and we're joined by our regular co-host Annie Kane, deputy editor of The Adviser. How you doing?
Annie Kane: Good thanks James, how you doing?
James Mitchell: Very good. We're also joined today by Kevin Sum, a Sydney-based broker and an avid property investor. He's got seven properties at the moment in his portfolio and he actually just broke into the mortgage broking industry last year. April 2016 I believe and we've got him in the studio with us. Kevin how you doing?
Kevin Sum: Yeah, good good. How you going James and Annie?
James Mitchell: Not too bad.
Annie Kane: Yeah, good!
James Mitchell: Not too bad. So tell us a little bit about your journey into mortgage broking. It's sort of like becoming a bit of a common path, I know some people who are interested in property investment and they see the opportunity. Tell us a little bit about what you were doing before and how you became a mortgage broker?
Kevin Sum: Before in my previous life I was working in funds management. I've been working at various fund managers for the past seven, eight years. But at the same time I invest in properties. Started investing in my first property back in 2009 and yeah just basically kept on going. So I got to a stage where I was thinking you know what, I've got all these properties, all this knowledge behind me. Why don't I do something which is related to property, something that I know I like, I live and breathe every day. So that's when I made a jump, I basically quit my job in April last year and became a mortgage broker.
James Mitchell: Fantastic.
Annie Kane: Cool!
James Mitchell: How was this sort of process in terms of once you quit your job and you decided you were going to be a broker? I mean, we write a lot of features in a magazine and in the news as well about that transition period, new entrants coming into the industry and there's so many options in terms of choosing an aggregator. Whether to go with a branded group or set up your own company. Tell us a little bit about your thought process when it came to that sort of thing.
Kevin Sum: Yeah, it's interesting that you ask because I actually started researching into mortgage broking six months before so back around September, October 2015. So obviously the first thing I did was to get my certificate for out of the way first. Did that, and then started talking to different aggregators, even different companies because I guess my main concern and my main challenge as with a lot of new mortgage brokers I believe, is leads.
I had no experience in the mortgage industry before. I had no connections. I don't even have a pipeline so I was basically thinking of going to those franchises or even joining a mortgage broking company to work for them. Also at the same time looking at options or should I actually give it a go and yeah, start my own thing and try to look for leads myself, try to build up my own circle of network.
It took me like a good four, five months before I decided to actually, you know what, let’s just give it a go, set up my own company and build my own networks. So that's when I actually decided to do that. And I guess the reason being is because I wanted to build my own business. Back when I was working I just thought that I had no confidence at all of building my leads, building networks and stuff. After I decided to give it a go, start my own company, start from scratch. It's just about going out there, getting business referrals and getting leads...
James Mitchell: Hustling.
Kevin Sum: That's it! That's it! Exactly. Hustling every single day.
Annie Kane: So you got Let’s Do Mortgages now...
Kevin Sum: Correct.
Annie Kane: And it's been up and running in Carlingford for over a year.
Kevin Sum: Correct.
Annie Kane: How have you found that process now that you're sort of a bit more established? You've kind of got your first year under your belt. Not even yet actually, coming up to a year. Do you feel like you sort of got that down pat, are you still learning? How do you actually go around…
Kevin Sum: Oh I'm still learning every single day. Yeah. Especially with the regulation changes and stuff. My process was first three months. So after I quit job in April, first three months I didn't even go out to look for any leads or write any loans. In fact my first deal I turned away because first three months I was just reading bank policies, I wanted to make sure that I'm familiar with everything. Last thing you want is you get an opportunity or you get a lead, someone trusts you, and then you stuff it up.
I was creating these fake scenarios and trying different calculators just to see what bank would service which ones. Reading all the different policies, LMI's, all this kind of jazz.
James Mitchell: So just education, just getting yourself...
Kevin Sum: That's it!
James Mitchell: Educated across all the different policies.
Kevin Sum: That's right. That's right. Yeah. Yeah.
Annie Kane: So when did you feel comfortable enough to actually write the first loan? You were saying you turned someone away after three months. When did you actually sort of write that loan and how did you feel when you did it?
Kevin Sum: Well basically I launched my first loan in actually August.
Annie Kane: Okay.
Kevin Sum: I remember the first loan I probably spent like eight hours, ten hours just studying it. Making sure, triple checking, quadruple checking that I've done everything right. Basically I even sent all the documents to the BDM, I filled out the calculator and I asked my BDM: "Hey, did I do everything correctly? Did I stuff anything up?"
Annie Kane: Yeah.
Kevin Sum: Yeah I was like pretty nervous because obviously you want it to work because it's a boost of confidence as well as obviously you want to grow the business. Basically August, first loan. I think all in all that loan I probably spent close to twenty hours on it.
James Mitchell: Wow.
Kevin Sum: Yeah.
Annie Kane: And was it a residential loan? Or investment sort of unoccupied, first time buyer?
Kevin Sum: Oh, it's investments.
Annie Kane: Okay.
Kevin Sum: Yeah. Yeah. Yeah.
Annie Kane: That makes sense.
James Mitchell: With your, I guess story, as a property investor and someone who obviously regularly needs financing to keep growing their portfolio. Have you always used a mortgage broker for that? Or have you gone to the bank or what was that process?
Kevin Sum: I started off using a mortgage broker but then I switched to a bank. The reason being was I felt that the bank gave me a better customer service.
Annie Kane: Oh really?
Kevin Sum: Yeah. But then I felt that it's just because of individual brokers. Then in the end I actually met a really good mortgage broker that I stuck with obviously until I became one myself.
James Mitchell: Yeah. Through that experience, I mean because you've sort of had the opportunity and the benefit to come from a customer’s perspective, you know what I mean? Seeing a broker, going to the bank, getting good customer service, then meeting an even better broker to sort of shop around I guess. How's that informed your journey over the last twelve months in mortgage broking?
Kevin Sum: Back when I was still working, I was actually thinking of a few options in terms of property related industries. So I was thinking of being a real estate agent, a buyer’s agent, or a mortgage broker. I feel that being a mortgage broker is very interesting and one of the reasons is because of my own experience. I feel that if one person says no, doesn't mean that it's the end of the world.
I guess that's the interesting part and that's what challenges me in mortgage broking it's like okay, if customers go to bank 'A' and they say: "Oh sorry, we can't lend you anymore money." That doesn't mean that bank 'B' can't. And as a mortgage broker I guess it's the challenge but at the same time it's the excitement to actually find that bank 'B', bank 'C', bank 'D' or even stretch the loan in a way that you will get the customer across the line.
Annie Kane: Yeah. And in terms of investment lending, I know we keep on hearing people saying it's still really popular demand...
Kevin Sum: Yeah.
Annie Kane: And a lot of demand for that but then obviously APRA keep on cracking down and they got the speed limit in place. How have you found actually getting loans written for investment loans? Have you been going through more non-banks or have you found the major banks are still accepting?
James Mitchell: We've heard from a few brokers that they're sort of using the non-banks a lot more because the majors are cracking down a bit or they're sort of meeting that requirement from APRA. What's the sort of mix that you're finding with the lenders that you're using?
Kevin Sum: In terms of my client base, I'm probably lucky because most of my clients borrow 80 per cent or under. At this stage it's still the big fours. I'll go to non-bank lenders or even second tier banks if the rates are good and if they can service. I guess it's just about reading policy, making sure that you've actually got the last cent out of the big banks. Yeah for me, big fours are still good.
James Mitchell: Still open for business.
Kevin Sum: Still open for business. Yeah.
James Mitchell: One thing I did want to ask, and I guess it sort of goes back to this idea of your experience using mortgage brokers and then becoming one yourself. You said at first you worked on it for 10, 20 hours, a long time studying this deal.
Kevin Sum: Yeah.
James Mitchell: I guess given that, have you had a change in attitude in terms of the value that a broker provides and the work that goes into getting a deal for a client? 'Cause I can imagine as a customer you go and see a broker, you give them your details, and they do their fact finding and then you think that they just punch in a few keys and there you go, you know what I mean? In terms of the actual value that you get, like I said that a broker provides, has that changed? Now that you've actually become a broker?
Kevin Sum: Oh yeah, 100 per cent. 100 per cent. After I became a broker I understood that there's actually a lot of stuff that happens at the background that customers don't see.
James Mitchell: That's right.
Kevin Sum: Yeah. Yeah. From a broker's perspective, because I've been an investor myself, I've gone through all the loan process, I've been through the process where you apply for a loan and you can't sleep because you know, cooling off is finishing the next day. As a broker it's more important to basically be as transparent as possible to the client. And basically give the client realistic expectations but at the same time giving them updates, even if it's like okay valuation is getting done tomorrow. Okay the evaluator just went out to the property. Okay the bank is... They've conditionally approved the loan. Paperwork will take four days. Just giving them the comfort because I've been through what investors or even property buyers have gone through.
I'll always pick up my phone because I know the stress they're going through. At the same time I guess it's the after sell service. Well I see good fixed rates I'll let my investors know or I'll let my clients know. Sometimes if I know that banks are doing campaigns or if I know that they're doing good pricing I'll just lodge a pricing request, you know, why not? Tell them, hey clients, I just got your extra 20 basis points off your loan out of nothing. So it's about those kind of extra services.
James Mitchell: So you don't just set and forget the loan like someone comes and you get them financing, secured, done. You don't sort of just never contact them again. You're following up with those...
Kevin Sum: That's right. That's right. Because what happens if you don't contact them, is next time they'll just go straight to the bank or just go to another person.
James Mitchell: That's true.
Annie Kane: And in terms of your actual client base now, is it majority investors or do you have a mix and what is the sort of percentage difference in your clients?
Kevin Sum: I would say 80 per cent investors.
Annie Kane: Yeah, okay. And how did you find them? Is it all through people you already knew and you were an investor, well you still are but from investing or is it something that you've made leads from advertising? How did you find those clients?
Kevin Sum: Oh, actually interestingly I would say only 10 percent of my client base are from my networks. The other 90 per cent is through referral partners like real estate agents, financial planners, solicitors. Basically external business referrals.
James Mitchell: How did you develop that network of referral partners? 'Cause I know it can take some brokers years to sort of develop a decent network of good agents, a solicitor, a financial planner, accountant. Did you already know those people or did you consciously make an effort to go out, start pounding the pavement, and meeting them in your first year?
Kevin Sum: I didn't know any of them. Yeah so I only met them in the past year basically.
James Mitchell: Wow.
Kevin Sum: Yeah so just going out there, going to networking events. I think my first two, three months that I started lodging loans I was basically out maybe three, four nights a week just going to events, going to networking functions, meeting people. Whenever I knew that people would buy a house I would actually go with them to sign the contracts so I could meet the real estate agents.
James Mitchell: Fantastic.
Annie Kane: That's a good idea. Yeah. And how many loans did you settle in the last ... Sort of since the business has been open, do you know? Put you on the spot line.
Kevin Sum: I would say around...
James Mitchell: Or a value of loans.
Kevin Sum: Around six to seven million.
Annie Kane: Okay.
Kevin Sum: Since August, which was when I first lodged my loan.
Annie Kane: Yeah. Pretty good! And is that all in sort of New South Wales property? Or I'm sorry, investment property? Or is it also the residential as well?
Kevin Sum: A mix, but mainly investment properties in New South Wales. There was a few in Brisbane.
James Mitchell: Okay.
Kevin Sum: Because I think Brisbane is the next hot spot.
James Mitchell: Yeah, yeah.
Annie Kane: Good tip.
James Mitchell: And do you work with buyer's agents as well?
Kevin Sum: Yes I do work with buyer's agents on a referral basis.
James Mitchell: Okay. Now that you've broken into the industry, you're getting close to that $10 million mark in terms of volumes since you've been a broker. What's the next few years look like for you? Are you going to carve out your niche and focus on investment lending or do you want to sort of like diversify? We talk about small business lending and asset finance and sort of having this more holistic offering that some brokers do. What's going to be your game plan?
Kevin Sum: In the short term obviously it's to keep growing my mortgage broking business in terms of residential lending, probably most of my clients will still be investors. But in the medium to long term probably diversify my business into, say, for example, I'm offering good investment properties to clients. Basically looking to build a whole ecosystem in terms of the property...
James Mitchell: For property investment.
Kevin Sum: Yeah, that's right.
James Mitchell: One question I did want to ask was where did this sort of love of real estate come from? 'Cause you said, you were looking to get out of funds management and do something to do with property whether it was being an agent or being a broker, being involved in the process to some degree. Why have you always had this sort of love of property?
Kevin Sum: Back in 2009 the government had those first time buyers’ grants.
James Mitchell: That's right.
Kevin Sum: Yup. I did what everyone did. Bought a property, lived in it for a year, moved out.
James Mitchell: That was when they had that boost grant where you could get like ... Was that the booster grant? Where you got like 20 grand or something like that?
Kevin Sum: $14,000 or something like that.
James Mitchell: That's right.
Kevin Sum: Yeah. Yeah. Yeah. When I bought my first home I was thinking about, okay I'll live in it then hopefully one day I'll pay it off. So worst comes to worst if I lose my job or anything I still have a property to live in, I don't have to pay rent. But yeah I mean after living in it for one year I got it rental appraised, I got pretty good rent. At the same time my bank that I had my loan with started increasing rates so I was basically shopping around for different loans and obviously when I found the bank that I liked I got it revalued and okay it's gone up a little bit so what should I do with the extra money?
My conscious decision was let’s buy a second one. After the second one, do the same thing.
James Mitchell: Release the equity...
Kevin Sum: Exactly.
James Mitchell: And invest it again. What was the first property that you bought?
Kevin Sum: It was a unit in Granville.
James Mitchell: That would have gone up quite a bit since 2009.
Kevin Sum: Yeah. Yeah. Yeah. Yeah. Yeah.
Annie Kane: Do you still have it?
Kevin Sum: No I sold it. I sold it last year. I bought it for just under $260,000 and I sold it for just over $470,000.
Annie Kane: Oh, great.
Kevin Sum: Yeah. I mean, I think the rent back in 2010 when I first rented it out was already like what $350,000 or $360,000 already. It paid for itself, gave me a little bit of rental income every year after everything.
James Mitchell: Good year-
Kevin Sum: Yes, exactly. Yeah. Yeah.
James Mitchell: Obviously this is Elite Broker, it's not a property investment podcast but it's still very interesting to hear about that side of your life being a property investor. Have you stuck to New South Wales or have you bought in Brisbane and other areas of Australia?
Kevin Sum: Yeah, I have bought in Brisbane. So I've got three in Brisbane now. I'll keep buying in Brisbane basically.
James Mitchell: That seems to be the flavour of the month I think.
Kevin Sum: Exactly, exactly. Yeah.
Annie Kane: I just gotta ask actually just moving on slightly. In terms of picking your aggregation and stuff we touched briefly on it but I just wondered what your decision was when you were choosing your aggregator and who you're with now?
Kevin Sum: Currently I'm with Vow. So in terms of choosing aggregator it's basically feeling comfortable with them, looking at their system like the CRM system, obviously fees are important, but fees are pretty standard anyway across a few aggregators. What support they give you, like do they give you tips for all the compliance documents. Yeah.
James Mitchell: Did you meet with quite a few?
Kevin Sum: Yes. I think I met with maybe five or six before I made my decision.
Annie Kane: And what was the sort of swinging point for you to go with Vow?
Kevin Sum: I guess you just get along with the BDM. I feel that the BDM is helpful.
James Mitchell: Just felt comfortable with them.
Kevin Sum: Exactly. Yeah. Yeah. Yeah. Because at the end of the day your BDM will help you the most when you've got issues or even if you've got questions. Yeah, you just want a BDM who knows their stuff, who actually will return e-mails or return calls. That's the important thing for me.
James Mitchell: Good stuff. Well I think we're just about out of time. Was there any other questions you had Annie?
Annie Kane: No, we covered pretty much all of the questions that we had lined out for you but yeah thanks so much for coming in and sharing your insights!
James Mitchell: Yeah, I appreciate your time Kevin.
Kevin Sum: Cool, thank you.
James Mitchell: That's all we got time for this week. I've been your host, James Mitchell. And join us next time on Elite Broker and of course do log on to theadviser.com.au for the latest news, insight, and analysis. See you next time.
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