0:00:00 - (Tyron Hyde): He's the money magnet with the Midas touch.

0:00:02 - (Steve McKnight): We went in and bought nearly a whole town in an afternoon and sold it 18 months later and made seven figures.

0:00:10 - (Tyron Hyde): If you haven't heard of Steve McKnight, I bet you've seen his book. From zero to 130 properties in three and a half years.

0:00:18 - (Steve McKnight): So long as people live in houses, you can make money out of real estate. The nature of the opportunity, where it is, how it is, why it is, has changed and will continue to change over time. But if you can buy problems and sell solutions by adding more and perceived value than actual cost, that is the ultimate recipe to make consistent profits in all markets.

0:00:39 - (Tyron Hyde): Buy problems, sell solutions. I love that. Thanks for that, Steve. Don't miss this episode of Ten with Ty. 

Hi, I'm Tyrone Hyde, the CEO of Washington Brown, the property depreciation experts. Now, I'm a qualified quantity surveyor and also a best-selling author who's helped hundreds of thousands of property investors over the years pay less tax through depreciation. I'm also an avid investor, which is why I created the podcast series ten with Ty, where I ask the smartest people I know the same ten questions to unlock the keys to their success and hopefully leave a playbook for my family and your family too. About investing.

0:01:20 - (Tyron Hyde): Now, this podcast is general in nature and not specific to your financial circumstances. We always recommend you sit down with an accountant or financial planner before making any investment decisions. Now let's get on with the show. Hello and welcome to ten with Tye. My next guest is Steve McKnight. He's one of the original property educators. He's a best-selling author of multiple books, was an accountant to professional investor who's purchased over 500 properties. He's released a strategic opportunities fund, but more on that later. But what I like about Steve also he's on a mission. He's purchased over 1500 acres, has planted 300,000 trees with the goal of planting another 50 to 100,000. Steve, welcome to Ten with Ty.

0:02:08 - (Steve McKnight): Great to be here. Thank you. What a great introduction. Let's write that down and that can be my eulogy. Love it.

0:02:14 - (Tyron Hyde): Steve, you've just released another book, Money Magnet, how to attract and keep a fortune. That counts. Now, did you write this book just so you could be on this podcast?

0:02:23 - (Steve McKnight): Exactly. I don't know how that secret got out, but that is the reason why I wrote the book. Absolutely.

0:02:29 - (Tyron Hyde): Thanks for. Thanks for doing that.

0:02:30 - (Steve McKnight): I wrote the book really to try and share with people a little bit about the insights and thoughts, feelings, financial IQ and financial EQ as I call it, to make up your financial intelligence so you can attract and keep money and then use your money in a way that adds meaning to your life beyond materialism. And the other books I've written tend to be more real estate related. And so what they related to is how to multiply your money.

0:02:56 - (Steve McKnight): But what I found is that people still don't know how to make it in the first instance or manage it, and so they're trying to multiply their way out of a financial problem, so they're trying to fix a making and managing problem by multiplying. And so they were never really getting the fact that there are four parts to it, and they were missing parts one and two, and the making, managing, multiplying, and then adding meeting part, potentially. And that's why I wrote the book, to say there's actually four things you need to do. Don't just concentrate on the third thing. And so the mantra that I say to people is, if you're thinking about your money, there's four things you need to ask yourself, how can I make more?

0:03:34 - (Steve McKnight): How can I manage better? How can I multiply faster? And how can I, using these words deliberately, give meaning to my money, make more, manage better, multiply faster, give meaning.

0:03:50 - (Tyron Hyde): And how do you give meaning to your money?

0:03:52 - (Steve McKnight): Well, that's what the book's about. You need to find a compelling reason that motivates you to go beyond survival and venture into significance, which is the question of how can you use your money to touch, move and inspire other people and leave a legacy? And there's a beautiful Greek proverb. Wise men plant trees under whose shade others will sit. So what are you going to do for generations to come in order to bless them when you're no longer around to see the benefit of it?

0:04:23 - (Tyron Hyde): And was that the motivation for planting all those trees?

0:04:27 - (Steve McKnight): Perhaps in hindsight, maybe I took that proverb a bit too literally. But no, it is a legacy project, though. I'm taking moonscape, weed-infested, eroded, unfarmable land and turning it back into a native forest, which the maturity of this project will be well beyond my lifetime.

0:04:46 - (Tyron Hyde): And the website's treechange.com isn't it? That's the one. When people normally have a tree change. They just buy a house in the hinterland. They don't go and live there happily ever after. They don't buy 1500 acres and plant 300,000 trees. Steve, did you know that?

0:05:00 - (Steve McKnight): Well, one of the things that I talk about is how do you leave a legacy in Money Magnet. And people don't know how to leave a legacy. And it's very hard to leave a legacy if you're stuck in survival. But if you can make, manage and multiply your money successfully, you'll get to the point where you've got more than enough. Then the question becomes, how do I want to use my money to add meaning to life?

0:05:22 - (Steve McKnight): Because I've got survival sorted. What do I need to do about significance and the people that I know who get out of just a comfortable life and a good life into a meaningful, inspired life? Start working on that significance piece.

0:05:37 - (Tyron Hyde): Fantastic. Fantastic. Now let's move a bit into the property space. Now, I know you had 500 plus properties, which you've divested a lot of them and moved more into a commercial field. What happened? Did you have a midlife crisis? Was it all the pesky tenants? What was the strategy there?

0:05:52 - (Steve McKnight): Yeah, that's a tricky one to explain, because how do you boil 20 years of investing down into two sentences? So in the beginning, Dave Bradley, my business partner at the time, and I wanted to get out of accounting and we sat down and we figured out we had to own about 130 properties. We didn't know how to buy them, but we knew how many we needed positive cash flow. So we leveraged off the money we made in our accounting practice and the money we made by running seminars and the profits we made by investing and did this concept of what I call generations of wealth.

0:06:26 - (Steve McKnight): We swap our time for money. We buy assets. Those assets throw off positive cash flow and rather than consuming that positive cash flow, we reinvested it. We reinvested that out of the vendor finance model we pioneered into buying blocks of units, into buying property in Tassie, and that's buying property in New Zealand as well as Tassie. And then that's when Dave and I went our separate ways. I went over to the United States after the GFC and went a bit Madden and bought single-family, multifamily mobile home parks and then set up a us fund to buy commercial property, which is about $150 million of funds under management.

0:07:04 - (Steve McKnight): But all of this is around this notion of multiplying. We've got making, we've got managing. How do we multiply faster to drive our returns towards achieving a survival outcome, enough money for us to live the lifestyle we want, and then a significance outcome. How do we get the money to fund the causes that we're passionate about to add meaning into our life? So I don't think I ever owned 500 properties at one point in time. The time to sell a property is when you can make more money sooner with less risk and lower aggravation. So I constantly look at my portfolio and say, is this the best return I can get with that resource?

0:07:46 - (Steve McKnight): And we turn the properties over when it's time to do something different.

0:07:49 - (Tyron Hyde): Right, right. And now you have to release a strategic opportunities fund, which I'm very interested in, and I have mentioned I might be investing in that. So disclaimer there. So do you want to tell the audience what it is and more importantly, what strategic opportunities are you looking for?

0:08:03 - (Steve McKnight): All right, so I just need to say, this is general advice only, no comments about people's personal circumstances. So we set up this US fund and it did really well. Past performance is not a guarantee, future performance. But looking at the US fund, which is a different asset with a different risk profile, we did 16% per annum for ten years, which would have made one of the best-performing managed funds in Australia consistently over that period.

0:08:30 - (Steve McKnight): And we did that on the back of property prices going up, positive cash flow and the exchange rate, the Aussie dollar falling against the US dollar. And it was God-inspired timing to get in to buy the assets and even to get out when we did because were winding up that fund. And then people said oh, this has worked out well for us Steve, what are you going to do next? And I said look you got me for ten years, I said I'd do it for ten years but I don't want a job. I bought real estate to become financially free, I don't want to trade that in for a job, even if it's a well-paying job.

0:09:00 - (Steve McKnight): But what I'm happy to do is start up another fund which will be run by a co-director of the US fund and I'll manage the investing side of it, I'll manage the finding the funding and the farming of the what we call the inefficient assets base, which is the commercial property space. So this strategic opportunities fund is looking to acquire efficient and inefficient assets that have a strategic opportunity in the medium to long term.

0:09:25 - (Steve McKnight): And because I'm the biggest investor in that fund, obviously I have a big vested interest in making that fund successful. And if people want to find out more about the strategic opportunities fund, the best place to go is the website, which is sogaf.au

0:09:43 - (Tyron Hyde): Seems to me like you might have the Midas touch again going into commercial property at the moment when you know people are buying properties on 2% borrowing and a 4% yield and now the rates have gone up to 7%, those prices seem to have come back significantly. So you might be timing it again well again, Steve. 

0:09:59 - (Steve McKnight): Only God will know. And I'm not that smart. I just follow the prompting of the opportunity. But what I would say is, is that there's a disconnect in the commercial space still, that some of these projects that got green-lighted when interest rates were lower and therefore commercial cap rates were also lower. Developers are wanting that low cap rate, even though the market has moved on, because interest rates have gone up.

0:10:20 - (Steve McKnight): So for those people who aren't familiar with the concept, if I do a feasibility, and I expect to get a 5% cap rate, that means the rent, the likely rent divided by 5% gives me my value prop. But if yields go up to, say, we'll keep the math simple, 10% and the rent stays the same, then my property is only worth half as much. So as yields go up, value goes down. As yields go down, value goes up. And so at the moment we've got these people who have got property projects that they've got out of the ground, or they've done their feasibility on lower yields, so they want higher sale prices, but those sale prices don't justify in the market. So what I say to that is you've got to kiss a lot of frogs to find a trench in the market at the moment.

0:11:06 - (Steve McKnight): But luckily, I don't mind kissing frogs.

0:11:08 - (Tyron Hyde): Yeah, fair enough.

0:11:09 - (Steve McKnight): That's my role in this. I'm a frog kisser.

0:11:11 - (Tyron Hyde): Good. I think Greg Goodman from Goodman Group, they're a $50 billion property company, as you probably know. He said at the AGM last week, now is the time for him. They've been sitting back, lowly geared. They got 9% gearing. He's going out there looking to buy buildings below replacement cost and get the land for free. That would be a strategic opportunity, I would have thought.

0:11:30 - (Steve McKnight): Yeah, there's lots of different opportunities out there. We've got one deal down in Hobart where it's five years of rent, brand new lease. But the real kicker here in the strategic opportunity is the council's about to rezone that land so that you can have high res, up to nine storeys. So you're buying it as it is. But when it comes time to sell, and I say this, when you don't get capital appreciation out of property and people are like, what do you mean? Of course you get. Have a look. No, you only get capital appreciation if the person who you're going to sell it to wants to pay more for it than you did.

0:12:02 - (Steve McKnight): So it's not the property, it's the person that drives the gain. So if you can sit there before you buy and say, how is someone going to pay more for this property than me? And you direct your strategy towards that, then instead of just relying on what I call generic market movements, you can actually fast-track the rate at which you build capital growth. And while the strategic opportunities fund is mainly an income fund, of course, we've got our eyes on trying to deliver value for investors over the medium to long term.

0:12:31 - (Steve McKnight): So there are good deals out there, but you need to know how to identify risk, price risk, and manage and mitigate risk as well.

0:12:38 - (Tyron Hyde): Fantastic. All right, are you ready to play Ten with Ty? Steve?

0:12:41 - (Steve McKnight): Am I ready to play? All right, pass me the dice.

0:12:43 - (Tyron Hyde): I've got a buzzer here that starts off each one. Ready. All right, Steve, question number one. What has been your best investment?

0:12:53 - (Steve McKnight): Without thinking too much about it, those New Zealand properties that Dave and I bought, we went in and bought nearly a whole town in an afternoon and sold it 18 months later and made seven figures. That was. That was a fun time and high fives all around, so that, that worked out well. But then again, there's been properties in the United States that I bought for cents in the dollar. And I turned around and.

0:13:17 - (Steve McKnight): And made really good money on it. Can I tell you a story? I like telling this story. It was a five-plex, so five units. And I bought it for $40,000, $80,000 a door in Florida.

0:13:32 - (Tyron Hyde): Yep.

0:13:32 - (Steve McKnight): And I went to inspect this property prior to buying it. And the numbers stacked up, as you would expect, positive cash flow through its. Through its eyeballs. But when I went to inspect it, I knocked on the door and the tenant opened the door and there was this horrible smell. Horrible smell. And I was trying to identify where the smell was coming from. And as I look around, the walls and the floor and the ceiling are all moving.

0:13:57 - (Steve McKnight): And I thought I was getting a migraine because my vision was going funny and I was trying to figure it out. And then I'll fast track the story. I noticed that there were cats everywhere.

0:14:07 - (Tyron Hyde): I.

0:14:07 - (Steve McKnight): And that the kitty litter in the lounge room was overflowing and there was cat poo all over the place. And that's where the smell was coming from. And as I. As I was trying to figure out why everything was moving, I felt something crawling up my leg. And the place was infested with hundreds of thousands of tiny little German cockroaches. And they ended up crawling all over me. So that was. That was a property I made a lot of money out of. But in order to get rid of the cockroaches, we had to get rid of the tenants out and put a giant tent over the whole complex and literally bomb it with cockroach gas to kill everything that was in it. So there have been some interesting stories along the way. Tenants driving into properties. Obama was a tenant of mine for a little while.

0:14:55 - (Steve McKnight): I've had famous people. I've had meth labs breaking bad style. I've had drug busts. I've had. I've had drunk people drive through the car park of a retail plaza we owned in the fund, stack into a police car, get booked for driving under the influence, and sue us because they had an accident in our car park.

0:15:18 - (Tyron Hyde): Only in America, huh?

0:15:20 - (Steve McKnight): And they got a payout. She said, well, we'll just pay them out rather than fight it, because it's not worth fighting it. So you name it, I've seen it.

0:15:27 - (Tyron Hyde): Well, I thought one of those would have led into my next question, which is, what has been your worst investment?

0:15:32 - (Steve McKnight): That's easier to answer, because hands down, I think the worst investment that I've ever done in a real estate space has been one where I tried to renovate it myself in north Ballarat.

0:15:44 - (Tyron Hyde): It's burned in your head, is it?

0:15:46 - (Steve McKnight): Well, Dave and I bought it, and it was the right property with the wrong strategy. All we had to do was subdivide off the giant backyard, have a block of land, and put the house back on the market for what we bought it for, or even a little loss, and we would have picked up the value in the land. But we renovated it, and worse, we renovated it ourselves. We tried to do a labour saving, and I got my dad involved. He'd recently retired.

0:16:10 - (Steve McKnight): It's the only project where we made a little bit of money. We didn't end up losing money, but if you look at how much it cost us per hour, and even worse, what it cost us in good deals that we didn't find because we weren't looking, because we were too busy trying to save money on painting and that kind of stuff, then hands down, that was the worst deal I've ever done.

0:16:28 - (Tyron Hyde): I don't think people factor in enough opportunity cost when it comes to investing. Right.

0:16:33 - (Steve McKnight): Throw in the economic term there, the opportunity costs.

0:16:36 - (Tyron Hyde): There you go. There you go. All right, Steve, question number three. What has been your most invaluable investment advice? 

0:16:44 - (Steve McKnight): Six figures on my own education, going to courses around the world and buying programs and reading books and making mistakes. Of course, the money you lose by making, what does Keith Cunningham call it? The dumb tax? Doing a mistake. And you should have known better, but you don't, so you pay the dumb tax. Well, I've been dumb many times and I've paid that tax often. I would say the best advice that I've ever been given is what I read in a Robert Allen book.

0:17:13 - (Steve McKnight): The more you do of what you've done, the more you'll get of what you've got. So if you want to project an outcome, just look at where you are at the moment. And as I like to say to that saying, you know, the old life's lessons keep repeating until you learn them. So if you want change, you have to change. You can't change and be the same. And this notion of things are just going to magically get better by themselves without me having to change is a bit like sitting there saying, I want to lose weight, but I don't want to change my diet and I don't want to change my exercise regime.

0:17:45 - (Steve McKnight): Well, what the behaviours, what I call your financial programming, your financial IQ, your financial EQ, got you into the position that you're in now. And if that's not where you want to be, you have to change either your financial IQ, the way you think and act around money, or your financial EQ, which is the way you feel about money, or possibly both, in order to change your financial outcome. And you can't get a change on the outside until you change on the inside.

0:18:12 - (Steve McKnight): Otherwise, progress that you might take, progress that you might make, pardon me, was probably only going to be temporary, and you'll undo it when you revert back to the way you were. I mean, why do people want to go on a diet? So they can eat whatever they want. That's, that's why you need to be on the diet, right?

0:18:28 - (Tyron Hyde): Yeah. So for someone listening to this, what would be the first step they could make to do that.

0:18:34 - (Steve McKnight): I would say have a look at your situation. I talk about this concept of before now and then before now is where you've come from, and that's all your thoughts and your programming around money. You've got where you are now and that the before and the now sets a trajectory of where you're going. And if you then look at your then and say, well, based on this trajectory, where am I going to get to? And say, well, I don't want to get there, you then have a choice. Do you want to do better? What do you want to do worse?

0:19:01 - (Steve McKnight): And most people are saying, I want to do better. Then you have to say, where are you actually going to? What does better actually look like? Can we set a goal? Can we move it out of subjective and turn it objective? And then can we chart a direction or a pathway that's going to get us there, rather than sitting here and crossing our fingers and singing Kumbaya or whatever it might be and just hoping, because hope's not really a reliable plan.

0:19:27 - (Tyron Hyde): All right, question number four. What is your ideal portfolio mix? And I guess that would change depending upon your age.

0:19:34 - (Steve McKnight): The right portfolio mix for you is dependent on what you're trying to achieve. There's no, as Keith Cunningham would say, there's no bathrobe solution. There's not a one-size-fits-all to this, to this answer, there's not the perfect portfolio. There's the portfolio that delivers the outcome you want most money, quickest time, least risk, lowest aggravation. And depending on your time, money skill, risk dynamic is the portfolio for you. And of course, look at age, the older you get, the harder it is to take a risk, because if it doesn't pay off and you end up losing, you have less time to make that back.

0:20:16 - (Steve McKnight): So as a younger investor, the sorts of properties and strategies that I would pursue would have been much riskier than the strategies and investments I'd be happy to take now as a 51-year-old. And that's why the longer you leave it to get going, the harder it is to multiply your money, because risk and return are related. And if you want the higher returns, you have to be able to take the higher risk.

0:20:41 - (Steve McKnight): And if you don't have strategies to mitigate and manage that risk, you have to take what I call naked risk, which is dangerous, because sooner or later, if you're always trying to make a financial killing, you run the risk of being financially killed. And you can't be financially killed in your fifties or older, because then why?

0:20:57 - (Tyron Hyde): I saw you on stage the other week, as you know, you said something along the lines of, whatever your age is, say, you're 100, you're minus your actual age now, and that should be you're at risk capital. You're at risk capital. Right. You run through it. It was your talk.

0:21:13 - (Steve McKnight): Well, it's not my methodology. It's a sort of standard rule in financial planning. You take 100 minus your age, and that's the percentage of your capital should be at risk. At how much risk? And then the next question was, well, do you do that? And what was my answer? No, I don't do that because I am a different person than the main person. And I don't have to rely on broad rules because I've got the skill and expertise to be able to unlock higher returns and manage and mitigate that higher risk.

0:21:44 - (Steve McKnight): But if you don't have that skill and expertise and you're looking for broad rules on which to drive safely your investments, then they're out there if you care to look at them.

0:21:54 - (Tyron Hyde): I think it's a pretty good analogy.

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0:22:04 - (Tyron Hyde): All right. Question number five. You've got a 20-year-old daughter. From memory, if she came to you and said, I've got $20,000, how do I, how should I invest it? What would you tell her?

0:22:23 - (Steve McKnight): My daughter asked me this exact question. She said, I've got money. What do you recommend I should do with it? And I said, honey, you can either be your own boat or you can get in my slipstream. What do you want to do? And she said, well, I don't know as much as you, and I'd like to learn over time what, you know, why would I try and do this on my own when I can just invest with you? And I said, well, that's your decision.

0:22:53 - (Steve McKnight): But why wouldn't you just put the money to work in the fund that I'm setting up and learn as an investor with some money in the game, as it were, and watch what happens and build the muscle. I often say you can't lift the weight and expect your kids to put on the muscle, right? So like any family, my kids look at me and think, well, what does dad know? He's dad, right? So they're happy to learn from other people, but they take me for granted.

0:23:25 - (Tyron Hyde): Don't you just give them your book?

0:23:28 - (Steve McKnight): Again. Dad wrote it. I have other people who are in the same boat who, they give my book to their kids and say, look, yeah, read this. But when it comes to my family, because they're so close, they, they don't necessarily see it. But what I said is, if you come on as an investor, it's not me telling you what to do, it's me showing you what to do. Because one of the benefits out of the strategic opportunities fund is it's not only a park your money, it's park your money and potentially learn and watch as we show you what we've done and why.

0:23:57 - (Steve McKnight): So it's learn while you earn, which I really like as the education piece. But look, $20,000 isn't a great sum of money. If you want to put it in share portfolio, I would go and get some advice around that. I would suggest investing in things that you're interested in. Don't let return alone be the judge. If you can invest in things that you have an interest in and learn what drives value, then I would take that $20,000 and be more interested in what I can learn from investing it than the return that I could get from investing it.

0:24:34 - (Steve McKnight): Because you're going to make a lot more money over your lifetime, and your ability to make and manage is more important at a younger age than your ability to multiply. If you've got time on your side, things will look after themselves. And if you can learn to maximize your income-earning ability and learn to manage your money so that you live within your means and have surplus to invest, then time will look after itself.

0:25:01 - (Steve McKnight): You've got a real blessing at 20 with a lot of time in front of you.

0:25:04 - (Tyron Hyde): A lot of people on this podcast have said they should invest it in education, not just shares.

0:25:10 - (Steve McKnight): What's the best education? The best course you can do is one that you're invested in. And I can sit here all day long and tell you how to ride the bike, but get on the bike and learn to ride it. And don't just get on the bike as a passenger being what do we used to say when we were kids? Do you want me to dink you? We don't use that word anymore. Do you want to dink?

0:25:29 - (Tyron Hyde): Dink?

0:25:29 - (Steve McKnight): That's what we used to say. Get on, we'll dink you around. Well, don't get dinked on the bike. Learn to ride the bike. If you do what everyone else has done, you'll get what everyone else has got. This is the premise of Money Magnet, right? That most people end up on a pension. Why do most people end up on a pension? Because they buy lifestyle assets before they buy income-producing assets, LPAs before IPAs and therefore they end up with a big LPA, their house that they've paid off.

0:25:56 - (Steve McKnight): But they don't have the income-producing assets later in life, so they have to rely on the pension for financial survival. So what I'm saying to my kids is, don't make the mistake of focusing on LPAs before IPAs. Focus on your IPA and then let the LPA look after itself, not the LPA. And trying to hope the IPAs look after themselves because they don't. That's the road to eventual reliance on welfare.

0:26:24 - (Tyron Hyde): So, in essence, rent vest?

0:26:27 - (Steve McKnight): I don't really know what rent vest means. Rent and invest. Well, if that's what rent vest means, that's what I did, and it works for me.

0:26:34 - (Tyron Hyde): Yeah, I did that too, actually. Cool. All right, number six. We're obviously about to go through the biggest transformation of wealth from the baby boomers to people our age, I guess. I went to a funeral recently and I was looking around and six of my friends were there, and they haven't had much money management in their lives, and they're about to inherit a fair amount of money. So how would you tell someone who's 50 they've just inherited 500 grand? How would you tell them to invest it?

0:27:00 - (Steve McKnight): Same answer. What do you want? What are you looking for? What do you hope to get out of the 500? Do you want to preserve it? Do you want to invest it aggressively? There's no right answer because it all depends on how much time, how much risk, how much money, how much skill. Passive, active. There's so many variables. You can't let the outcome be predicated by the sum. You have to say, this is the outcome I'm working towards, and here's the money I've got to achieve that outcome.

0:27:37 - (Steve McKnight): Otherwise, you get what you get and you don't get upset. What I call the difference between an asset outcome or an asset portfolio and an outcome portfolio. So I would say if someone came to me with that question, I'd say, first thing is, I'm not licensed to give you advice. And the second thing I'd say is, speaking generally, from an education point of view, what outcome are you trying to achieve?

0:27:58 - (Steve McKnight): When and how? Don't do nothing. I keep making this point. Our parents tell us it's important to save, but who do you know who got rich by saving? Saving's not the answer. Saving is a consumption control. You need to save up to spend down. But really, where you get rich from saving is deploying the capital. So I would say, how are you going to, as I've said before, make the most money in the quickest time for the least risk and lowest aggravation for you?

0:28:28 - (Tyron Hyde): Hmm, very good. Question number seven. Steve, what would you tell your 20-year-old self about investing if you could fly back in time?

0:28:35 - (Steve McKnight): I probably would say to myself, get started as soon as you can and don't follow what everyone else has done and get that car loan. Because I had a car loan when I was 20 to buy the car I couldn't afford on my own. Live below your means and know that the money you invest today will set you up handsomely for tomorrow.

0:29:00 - (Tyron Hyde): Power of compound interest. Start early. Right.

0:29:02 - (Steve McKnight): And probably I would have said, now run out and buy a property or two while prices are cheap. If I could go back to 1992 and buy real estate, I'd probably, probably have bought more real estate. I didn't start buying real estate until 1999, which was some years later than that.

0:29:17 - (Tyron Hyde): But you bought half of Ballarat, didn't you?

0:29:20 - (Steve McKnight): Half of a part of Ballarat, but nearly all of Tokoroa. Bit different.

0:29:26 - (Tyron Hyde): All right, question number eight, what legacy do you want to leave your family or community? Steve?

0:29:32 - (Steve McKnight): Well, the way I answer that question is the way I did at the seminar that I ran recently was, imagine you get one word that you want to be remembered for. So it's not a project, it's a word. Do you want to be known as stingy? No. Do you want to be known as selfish? No. Do you want to be known as a hard worker? No. That's two words anyway. What's your word? And then whatever word you choose, loving, caring, kind, generous, tolerant, inspiring, like, whatever word is your word, you then have to ask yourself, if I died today, is that how I would be remembered? And if I died today, would the way that I have used my money be congruent with how I want to be remembered?

0:30:17 - (Steve McKnight): Because if you're using your money one way and you want to be remembered another way, well, that's the lesson from Alfred Nobel, that you need to align the way you use your money with how you want to be remembered. And that's a challenge because a lot of people say, well, I'll get around to giving once I've got x million dollars, or I'll get around to finally spending time with the kids when I'm retired, or I'll get around to this when that. And you may not be that lucky.

0:30:45 - (Tyron Hyde): What is your one word?

0:30:46 - (Steve McKnight): I have two one words because I'm greedy. And that's not the word. The word I would ultimately like to be remembered for is generous. And I've got some work to do on this other work. You're always working on these things. But I also want to be known as being faithful. Not because I'm unfaithful, more faithful, like it's something that I really respect, like, more faithful to my faith, more faithful to the things that I hold dear.

0:31:18 - (Steve McKnight): And I think if. If I could be known as being generous and faithful, then I would have lived a life worth living.

0:31:28 - (Tyron Hyde): If you like this podcast, don't forget to subscribe. And if you do, and you leave a comment, send me an email to tyron@washingtonbrown.com.au and I'll send you a couple of my books for free.

0:31: 35 - (Tyron Hyde) All right, question number nine. To the outside world, you look pretty successful, Steve. But what does success look like to you?

0:31:45 - (Steve McKnight): It's the man in the mirror story, isn't it? It doesn't really matter what people think about you. They're judging you from afar. How do you judge yourself? Integrity, as a definition, is. What do you do when no one's watching? Now, none of us are perfect, but I've had a couple of occasions in my life where I've had to choose between money and integrity. And do you want me to give you an example?

0:32:09 - (Tyron Hyde): Yes, please. Yep.

0:32:11 - (Steve McKnight): So, recently, with the tree change project, I had two options. Make an extra $1.2 million and hide the truth, or suffer a $1.2 million loss in revenue but tell the truth.

0:32:25 - (Tyron Hyde): Explain.

0:32:26 - (Steve McKnight): But it was basically either confess to the government that something had gone wrong or not tell the government, and they'd probably never know and have $1.2 million in my pocket. And just about everyone that I spoke to about this said, don't tell the government. They'll never know. But I said, I need to know that I've done the right thing. And I'd rather. I'd rather have less done right than have more done wrong.

0:32:53 - (Steve McKnight): So I went to the government and I said, this has happened, and is there any way that you can offer dispensation? No. Thank you for letting us know, but the rules are the rules. It is what it is. Too bad. All right, well, that was $1.2 million less in my pocket, but at least I feel good about being able to look at myself in the mirror and knowing that I didn't deceive or hide or do the wrong thing. And it's amazing how things work.

0:33:23 - (Steve McKnight): I then kept asking the government about, well, this doesn't seem fair because of x, y and z. And then last week, the government rang me up and said, well, we're just letting you know that we're taking another look at it. So that's good. I say that you can sell your integrity, but you can't buy it back. So if you're going to sell your integrity, make sure you get a good price for it, because it's gone.

0:33:48 - (Steve McKnight): And it's not how other people judge you that's important. At the end of the day, it's the. The person in the mirror. And according to my faith, looking Jesus in the eye and hopefully hearing, well done, good and faithful servant.

0:34:01 - (Tyron Hyde): I like that. Very good. All right, question number ten. And this is what this podcast is about. Steve, I don't know if you saw the intro, but my father lost all his money when I was young. He was in a company called Estate Mortgage. Do you remember them?

0:34:13 - (Steve McKnight): My grandmother lost a lot of money to Estate Mortgage as well.

0:34:17 - (Tyron Hyde): You know, they advertised themselves as safe as houses, but they were really investing in third mortgages into development sites, etcetera. So Warren Buffett said, rule number one, never lose money. And rule number two, never forget rule number one. How, as investors, can we not lose money, Steve?

0:34:36 - (Steve McKnight): I think you need to protect against yourself.

0:34:39 - (Tyron Hyde): In what way?

0:34:40 - (Steve McKnight): Well, we're hardwired to be greedy, and what we do is we make decisions that we otherwise shouldn't make, because we either don't look for the truth, or if the truth is staring us in the eye, we turn to ignore it. Or tend to ignore it. It's just remarkable how many people invest hundreds of thousands of dollars buying investment property with little to no due diligence. But when they go and buy a $10,000 used car, they'll crawl over it with a fine tooth comb.

0:35:05 - (Steve McKnight): How many people have bought a house for hundreds of thousands of dollars without a building inspection? Yet they'll want a car inspection on a $10,000 used car. It's. There's a disconnect in the way people think about money. So I would say the first thing in order to avoid losing money is great accountability and rules around protecting yourself from yourself. And it's unusual. If I look at your dad's situation, why did he invest in a state mortgage?

0:35:37 - (Steve McKnight): Was it for the extra one or 2% they were offering above?

0:35:40 - (Tyron Hyde): It was only one or 2% above the normal banks. That's right.

0:35:43 - (Steve McKnight): So you have to. You have to look at. Yes, the wrong thing was done with that money. The people who should have been better managers were not better managers. And so he took a risk. I often say money follows management. So you need to invest in the management and do your due diligence on the management. But what I would have said is there was something, perhaps a better plan that your dad needed than trying to get an extra 100 or 200 basis points out of fixed interest returns.

0:36:08 - (Steve McKnight): He was taking a risk and wasn't really being paid for it. And perhaps he should have invested some of that money in his education to be able to be better, able to protect himself from himself and from others. But it's also hard because you're trusting people and paying the money to do the right thing. But when it comes to most people, money corrupts their moral compass and therefore it doesn't point north anymore. And people will justify all sorts of things on the basis of having more money.

0:36:44 - (Tyron Hyde): They also were misleading though, as well, in that their advertising was very much advertising that it was safe as houses. And from what you saw, you wouldn't have known that it was into development sites. And someone like my father would have flicked through the PDF's like a lot of people do and not understand it. So I don't really think that.

0:37:00 - (Steve McKnight): Well, in those days, offer documents were probably more simple and there wasn't the same level of consumer protection around corporations law and what you have to put in offer documents. I mean, the reason why we have increased compliance today is because people keep doing the wrong things. So the government has to keep inventing new laws to try and get people's moral compass to point north, because it doesn't naturally point north on its own.

0:37:22 - (Steve McKnight): And while it's a frustration to me, the amount of compliance that we have to do and how much it costs the investors to meet that compliance burden, it's necessary because it forces us into accountability to ensure that we continue to do the right thing.

0:37:40 - (Tyron Hyde): Yeah. Which is comforting. Okay, there is a bonus question, Steve, that I ask everybody, which isn't on the website. Okay. You seem to have the Midas touch when it comes to investing and going into the right markets at the right times. What are some of the key drivers that you look for to determine the right timing of a market?

0:38:01 - (Steve McKnight): If you're trying to rely on timing, is only a matter of time till you're wrong, don't try and time the market.

0:38:09 - (Tyron Hyde): Really? I would have thought you were the opposite.

0:38:11 - (Steve McKnight): No, I've never tried to time the market. What I do is, and again, if I seem to have the Midas touch, just put it down to me, praying about things, having knowledge and experience over 20 years, 20 years of riding the bike in different terrain, in different weather. If you like it, you become quite good at riding the bike. You get an intuition after doing it for that length of time. That doesn't mean that you're perfect and you're going to be right all the time.

0:38:40 - (Steve McKnight): But what I like to say is so long as people live in houses, you can make money out of real estate. The nature of the opportunity, where it is, how it is, why it is, has changed and will continue to change over time. But if you can buy problems and sell solutions by adding more and perceived value than actual cost, that is the ultimate recipe to make consistent profits in all markets.

0:39:03 - (Tyron Hyde): Buy problems, sell solutions. I love that. Thanks for that, Steve. All right, well, that's it with Ten, with Ty. How do we, how does someone out there invest in that fund? What was the website again, the opportunities fund?

0:39:14 - (Steve McKnight): sogif.au is where people can go to find out more or first step, what I would recommend to people is to go and grab a copy of Money Magnet and start listening to it. And much like your Ten with Ty, I also run a podcast that people can find if they're interested called Money Magnet, and they can listen along. And two mates talking about money. If podcasts are your thing, then, yeah, have a listen if you're interested.

0:39:44 - (Tyron Hyde): Who are you talking to on that?

0:39:46 - (Steve McKnight): So, Rohan Wen, this is a funny story. I met Rowan. He was working for Today Tonight when my first book came out. And he was given the task of coming and interviewing me for the story. And he was sure that I was a real estate con-man. And what he wanted to do, he's like, I don't want to do the story. And they made him do the story. He goes like, if I have to do this story, I'm going to expose this guy as a crook.

0:40:06 - (Steve McKnight): So he came out with the sole goal of chasing me down the road with the camera. And then 20 years later, we've become really good mates. And so we just wanted to have a podcast, which was two mates talking about money. Rohan from his journalist, pessimistic, somewhat curious mindset, and me from my look, I've been successful with money, happy to share a few things that have worked and haven't worked over the time. And, yeah, just a few laughs and two mates talking money.

0:40:38 - (Tyron Hyde): Fantastic. Thanks. All right, well, thanks for being on Ten with Ty, Steve. I've really enjoyed it. I hope the audience has, too. Thanks again.

0:40:45 - (Steve McKnight): See you next time.

0:40:46 - (Tyron Hyde): Thank you. Ten with Ty is brought to you by Washington Brown, the property depreciation experts.