David Hall Transcript

Note: Property Investory Podcast is produced for the ear and designed to be heard, not read. We strongly encourage you to listen to the audio, which includes emotion and emphasis that’s not on the page. Transcripts are generated using a combination of speech recognition software and human transcribers, and may contain errors. Please check the corresponding audio before quoting in print.

© 2018 Property Investory

David Hall:
I was uneducated I didn’t know what I was doing. And look I’ve had a few fantastic wins through ignorance and I’ve had a couple of big losses through ignorance, but I was able to purchase a property

Tyrone Shum:
This is Property Investory where we talk to successful property investors to find out more about their stories, mindset and strategies.

I’m Tyrone Shum and in this episode we’re speaking with successful Western Australia buyer’s agent David Hall, to find out more about the sudden way he fell into property, the collaborations he’s been part of, what he foresees in certain property markets and the tips and tricks he’s learnt along the way.

Tyrone Shum:
Working as a buyer’s agent with Momentum Wealth, and having been in the property field for nearly 30 years, much of Hall’s daily life revolves around property…

David Hall:
My day is broken up into a few parts so the first thing is every morning generally before I get out of bed I’m on real estate dot com and I’m looking to see what’s being listed. The next part of my day is talking to clients solving their problems. I would get 15 calls a day from clients who have issues, have problems, have questions, answering those and then the bulk of the rest of the day is either getting new clients or negotiating properties and looking at properties for clients.

Tyrone Shum:
Never really staying in any one place for a long time, due to his father’s profession, Hall shares that his childhood certainly influenced who he is today…

David Hall:
My father was military in New Zealand so every two to three years we would pack up and we would move somewhere within the country and sometimes overseas so the advantage of that was I really developed social skills and I think as you know we share the same coach. It really helped me get over the fear of talking to people and getting over the fear of change. A lot of people struggle with.

So yeah that’s what I did, and you know I have lived in pretty much all of New Zealand.

Tyrone Shum:
Moving around New Zealand, Hall spent his education in a number of suburbs, the weather conditions and housing conditions in one suburb in particular, causing him to buy his first home…

David Hall:
Various schools as every two three years you’re moving around so mainly Hawke’s Bay, Palmerston North and a few other spots as well but I think the defining moment that really got me into property was I was living in a town called Palmerston North which is famous for just epic amounts of rain. And I had a girlfriend who was studying at the university there and we had an issue where our flatmate walked out on the deck the deck was rotten. She broke her ankle when she fell through it went to the landlord and said hey Mr. Landlord can you fix the deck. And his response was something starting with F and ending with F. In time and New Zealand the laws were very, very pro landlord. They’re not now. And that basically motivated us to go well we’re not doing this ,why should we take this and we purchased our first house.

Tyrone Shum:
Following his university life, Hall ended up working in the banking sector, an area which he admits definitely opened his eyes to the business and finance world…

David Hall:
I ended up working for a bank which was very much an eye opener in terms of wealth, people and how big businesses operate and I think one of the things I got out of that was banks don’t actually necessarily operate of logic. They operate on rules and procedures rather than logic and I’m seeing this now as a Professional Property Buyer and investor myself how banks are currently operating, isn’t necessarily following logic.

Tyrone Shum:
While Hall continued to work in the banking industry for a number of years, he eventually moved on to another unrelated but interesting field…

David Hall:
I stayed in the banking industry for about 4-5 years. I didn’t really enjoy it. I grew up in a town, so when I left university youth unemployment was [at] 23 percent. So you took a job, because it was a job not because you liked the job. So what I ended up doing was actually getting into the engineering field. I love making things, I love building things. And I ended up leaving that job and getting into engineering and that was basically brought about, I decided I’ve had enough of New Zealand. My girlfriend moved over to Perth and as a love drunk man I moved over to move in with her and it was just I really got to think Australia. I basically left New Zealand on a Thursday, job interview on Friday, started Monday on double the pay scale.

Tyrone Shum:
It was while working in the engineering space that he gained tertiary qualifications through TAFE and became a project manager…

David Hall:
I started off on the tolls. I had an instance one day where I was looking at a drawing that I was fabricating for something I was fabricating. I went to the boss and said I’m missing this critical dimension and he typed it up on AutoCAD and he said it’s whatever it was. I asked him how did you learn to do that. He said, oh you go to Tafe, it’s ninety nine dollars a paper and you know you can claim the mileage for going from work to and from takeoff. So I went and I graduated at night school as a draftsman. Did very well at doing that. And one of the projects I was on was designing something called a lime slaking plant, very uninteresting. But the site manager on that project ended up having a mental breakdown because of the stress that was involved. My boss said to me, ‘Well you’re the only other person that knows it, congratulations on the promotion you’re in, grab the Ute and drive into site tomorrow.’ And I turned to a project that was losing a considerable amount of money into a highly profitable venture. He said, ‘Congratulations, you’re never drafting again. Welcome to project management and site construction.’

Tyrone Shum:
Moving between companies but remaining within the engineering industry, Hall shares the demanding aspects of his job that led to his resignation, and furthermore, the sudden job loss he had to later face…

David Hall:
I moved between companies, chasing money, opportunity, career advancement. The company that I really did well in was a small mining equipment manufacturer, but I was always traveling. And I said to the boss one day look I’m trying to have children, I’ve literally been home for the magic week, once in six months, can we you know can you find another position for me where in the office far more often? And he said yep yep yep. But you’ve got these three months of commitments, do those three months and we’ll rework it. So basically did those three months tipped off a plane from Indonesia, put the bag on the ground and he said Mate can you pick it up you’re off to Japan tomorrow and I resigned on the spot. So basically from there just changed engineering companies stepped up in role. But as an engineering as you step up and roles and salaries. Perth is a very cyclical town based on mining. So we’ve seen a property depression because mining and oil and gas have been depressed. And when you’re earning good money you’re heads first for the chop. So I was, my company went from 1200 people to approximately 60 people in three months and I was one of the unlucky mass.

The company used to be across two floors and then they were across a quarter of a floor. [00:09:52] After all the changes.

Tyrone Shum:
With a sudden drop in mining related positions across multiple companies and not just Hall’s, he explains how a change in the industry could occur so quickly…

David Hall:
It was basically all hands off and we built all the mines we got all the supply going and then at the same time the Rio Tinto and BHP went through an exercise where they shed a lot of staff as well.

It was really interesting. So my company we used to employ five full time estimators. So to estimate a mining project it’s a six month exercise, it’s not a short term. And it was actually really noticeable because two years before the wind down we went from five estimates to one and a half. So it was really obvious that there was no work coming up and I think it was just a combination of the cost, demands meeting supply and just that ongoing cycle of the commodity price up and down.

Tyrone Shum:
While this was certainly a hindrance to Hall’s career in the mining field, Hall shares that it was actually the collapse of  the mining boom that propelled Hall into property…

David Hall:
That’s why I got into property. So when I saw that coming, I actually started buying property. So I was uneducated I didn’t know what I was doing. And look I’ve had a few fantastic wins through ignorance and I’ve had a couple of big losses through ignorance, but I was able to purchase a property in a very nice suburb.

Looked at it and thought, told the agent he was overpriced when he wanted six hundred thousand for it. He basically said well no the owner is not keen. Three months later it started dropping 20000 dollars a week price.

Tyrone Shum:
Wow.

David Hall:
I picked it up I think it was 460 2000 thousand. Found out that it is completely ignorance on my part. We found out once they had it under contract it was obvious that the tenant was sabotaging the sale. So at every open home the tenant was leaving a really interesting sex toy on the kitchen table.

He had a vicious dog in the backyard so you couldn’t walk around the back door because the thing would just saw your legs off and the lawns were nearly six foot and the lawns were taller than me. So I found out once I had it under contract that the seller had terminal cancer and that he’d put his son into the house to rent it, rent free. And what was happening was the son didn’t want to move out and have to pay rent so the son was sabotaging his father’s final days in order to not pay rent. And look at that property I purchased it purchased it, I was made redundant and that was always part of the plan. So I sold that property for 400, sorry $680 2000. I spent twenty thousand dollars renovating it from when I purchased it because there was some damage to the home. And that left me $200 000 sitting in the bank.

Tyrone Shum:
Thinking back to the first property purchase he made when he was 19, Hall explains how he got the funds to buy that first home…

David Hall:
Had a little bit of savings went to any friend or family that we could think of to scrape together a deposit. I was working for a bank at that stage so I got a very good interest rate and didn’t need it.

I needed a 10 percent deposit and then we went hunting. We were able, typical real estate so this is in the days when houses were in the newspaper. Real estate agent showed us for four dud houses and then this one last. Very naive, no idea of what we were doing but basically got what’s called a railway workers cottage. So the whole thing was designed the house is a long skinny house designed to fit on a railway wagon so it was built by the New Zealand Railways corporation or whatever it was called back in 1920, literally dropped on site for there is a worker’s cottage very rundown, very tired and I started renovating it.

Interestingly two days after settlement the previous owner turned up poured a concrete slab and dropped a garage on it for us. It wasn’t even in the contract, he said. Yeah mate this is leftover, he was a developer thought it wanted to stick up double garage. Beautiful asbestos timber framed but I’ve got to say you know that was just such an add value for free for us.

So yeah yeah basically I paid $62 000 for that and I think I sold it for eighty seven thousand dollars 18 months later with the renovation.

Tyrone Shum:
Coming up after the break we will delve further into David Hall’s property investing journey to find out more about another property he bought and the issues that came with that purchase…

David Hall:
I purchased what I lovingly refer to as my turd, no idea. I bought the property because it looked nice, and the house literally next door was on the market at the same time for the same price and this was a much much nicer home.

Tyrone Shum:
The moment that prompted him to further educate himself in property…

David Hall:
I was buying houses, losing money on some, making money on others and I didn’t understand what I was doing. I really, really didn’t. So I started doing what a lot of people do reading listening to podcasts, getting magazines, going to events and learning and then basically I approached Damian.

Tyrone Shum:
The interesting method he’s been using when it comes to investing…

David Hall:
That introduced me to joint ventures. We paid I think $500 000 for it, a bit less $480 000. We worked day and night for two weeks renovating it… And we had it appraised afterwards at $680 000.

Tyrone Shum:
And that’s next. I’m Tyrone Shum and you’re listening to Property Investory.

TWith this first purchase pushed to the back of his mind, Hall explains that it was the property purchase he made during the mining boom collapse that really triggered his interest in property investing…

David Hall:
That wasn’t my first but that was the one that sort of set me up so I saw the time I saw the change coming and I put the money into the bank. I spent three months at home not working and my wife said Please go get a job you’re doing my head in. And I basically went to work for Damian Momentum Wealth. So but I was buying houses, losing money on some, making money on others and I didn’t understand what I was doing. I really, really didn’t. So I started doing what a lot of people do reading listening to podcasts, getting magazines, going to events and learning and then basically I approached Damian. He put me in training for nine months and over that time I learnt a phenomenal amount more.

Tyrone Shum:
Adding to this, Hall also explains why else he became more active in buying property and doing property deals…

David Hall:
So I had a very messy divorce.

As some people do. And my first wife was very anti property. So the first time that we purchased she didn’t want me to buy it but I’d been working on site I’d made a lot of money it was just before GST was coming in. So I ended up purchasing it against her wishes but I could just see the value in it. Purchased it. I think we paid 127 000 for it which was a lot of money. When was that mid, no 2000s. And we ended up selling it for $460 000 six years later when we separated.

She actually said to me why didn’t you buy a more expensive house?

Tyrone Shum:
Following this separation, Hall met a lady who shared his love for property, this meeting leading to him expanding and building his portfolio…

David Hall:
I met another lady and she was very pro-property. She’d been in a situation where she’d always wanted to buy investment properties but couldn’t because her husband had terminal cancer and his health.

I mean he took 20 years to die a horrible, horrible thing. And just the instability around his income they just could never do it.

I purchased what I lovingly refer to as my turd, no idea. I bought the property because it looked nice, and the house literally next door was on the market at the same time for the same price and this was a much much nicer home. So I paid 380 000 for it. Ten years later it’s worth 340000. Ouch. Yeah I didn’t know what I was doing and then I purchased that one in Edgewater, that we discussed and did really well out of that. And then I did a joint venture with a friend where I found literally down the road from my own home a house that was abandoned. It was owned by a doctor and we took 34 loads of trees to the dump. It was just completely overgrown. So he had a works order on them from the council to clean up the site. Being a surgeon he didn’t really want to do that.

And he ended up selling it and it was interesting as we were clearing the trees away, we found a shed we didn’t even know was on the property.

Tyrone:
It was through this collaborative process that Hall was introduced to joint ventures, a business arrangement he would continue to use well into the future…

David Hall:
That’s how overgrown [it was] – so that introduced me to joint ventures.

We paid I think $500 000 for it, a bit less $480 000. We worked day and night for two weeks renovating it, new paint, new carpets, new floors, new kitchen, we kept the bathroom. And we had it appraised afterwards at $680 000. And we spent about twenty thousand dollars on that renovation. It was a great deal, tenanted first week and it’s always been able to tenant and the advantage of that property is it’s a very high zoning for apartments and I found out through momentum wealth that there’s a policy in place for that particular house to go to 10 stories. It’s 10 years away. My joint venture partner owns the house next door and I’ve got my eyes on the house next door to him because I would like to buy that if I can if it ever comes on the market so that once we’ve got the three sites we can go 10 stories.

Tyrone Shum:
While that is certainly a project to look forward to, Hall shares that there definitely were some trying moments in his investing career…

David Hall:
I did a joint venture with a personal friend and we purchased a site that was about to be resold from a single dwelling to a quadplex. So the town planning scheme was in. It was a very ordinary home, it smelt pretty unnice, a retiree who was going into care. Market value was $440 000. I was able to secure it for $405 000 and at that stage the rent on the property was $420 a week. A fantastic deal neutral hold got the upside. And what happened was the Perth market started falling. So that properties today is rented for 280 dollars a week and the council changed the town planning scheme at the final community consultation. We thought that when we purchased it we had an upside. So we did an analysis [and thought] what’s the worst we can do. So under the zoning at the time we could keep the existing house subdivide off the back block sell that back block to $250 000. So that was our worst case analysis. So we did a risk analysis and thought okay so if the town’s zoning doesn’t come in we can keep the house and we can sell the block at the back. And what ended up happening is the decline happened and look whilst you will hear that the Perth market’s fallen 12 percent that’s an average. So this suburb has fallen 25 percent in value.

Tyrone Shum:
With such a drastic outcome received from that property purchase, Hall shares what his plans are for the future regarding that particular property…

David Hall:
Today it’s not worth selling the block. That house is hemorrhaging money and whilst we definitely have a plan to turn that cash flow positive we can’t because of the serviceability rules. So what we’re looking at doing with that side is we’re going to construct a five bedroom. We’re going to subdivided into two. On one side. We’re going to construct a five bedroom so a five bed, three bath home and rent that by the room. And we believe today that that will return just under a thousand dollars a week in rent. And on the other side we’re going through the process and the understanding of constructing what’s called Nid’s home. So it’s a specialist housing for disabled people. We’re going through that process at the moment, still don’t have enough understanding but we’re hamstrung by capital.

So that’s one. We thought we went in under market buy, had a plan B if the market fell the zoning didn’t work, but we were caught by a heavily falling suburb.

Tyrone Shum:
Not wanting to make the same purchasing mistakes again, Hall shares the indicators he now looks out for in regards to a falling market…

David Hall:
There’s a really good indicator a rental market precedes a housing market. There’s typically a six month lag. So what we saw in Perth going back to 2014, was the rental market started to soften. Suddenly there was more stock available and there were less people taking it. So you’re having to discount rental properties to get tenants. You went from being in a situation where you could pick and choose quality tenants to taking a tenant [even though] you don’t really want them. And what we’ve now seen in Perth is a rapid change. So the market, the rental market in Perth turned in November 2018 and it went from oversupply, oversupply, oversupply to undersupply all really undersupply and now at the end of January our rental market is turned with a vengeance. So there’s signs that you’re looking at. So we’re still seeing the sales market where there’s more stock coming on than there is buyers and that’s credit. But on the converse we’re seeing a rapidly turning rental market. My personal belief is that our rental market, our median price would jump from $350 to $450 a week by the end of this year which is 2019. And that’s a big jump because we’ve seen a lot of landlords permanently leave the market because of the falling house price and pain. And because of what banks are doing to investors, where if you’ve got more than two properties they’re really making your life uncomfortable. So I’m sitting out there I’m still seeing investors being forced to sell up in the market, which is putting pressure on rentals, which will put pressure on prices which is going to do two things. An increasing yield is going to bring investors into the market at the same time those tenants that can afford to buy will start doing the maths and go and it’s cheaper to own than to buy. I’m going to move.

It’s a cycle. Shortage of rental properties leads to increasing prices. And that’s what’s happening.

Tyrone Shum:
Opposing this worst investing moment, Hall thinks to a time where purchasing property just made sense and opened up doors to a multitude of opportunities….

David Hall:
I’ll give you an example of one, so my portfolio has  got if you were to use the most optimistic count I’ve got 20 front doors. I was chasing a cash flow deal for it and signed myself managed super fund, just because cash flow enables me to buy more properties. So did a bit of market analysis and everyone’s going to think I’m a bit insane but I decided that Coober Pedy represented a great opportunity to buy property that would cash flow. I jumped on a plane, went to town and while I was there I met another investor who was also sniffing around. There was only one clear buy in town which is a duplex pair. I thought you guys I think call them maisonettes. One of the units was tenanted and the dug out because you live underground in caves and Coober Pedy had had a fire in it and was burnt out. So you needed a new kitchen, new bathroom, new flooring, new paint, new wiring, new everything while pretty much almost knocked down is if you go through it. It was definitely a start again and I basically set down because we ended up the same agency.

Look I’ve got this other but we ended up sitting in the same car with the agents as they were driving us around and I sat down with them over dinner because oddly were actually staying in the same accommodation and I said look there’s only one buy here if you and I go for it.

We’re going to drive up price, we don’t want to do that. Let’s do it together. Let’s drive down price. So it was on the market for $120 000 and we picked it up to $60 000. Great negotiation. It was a shortage of buyers and we had cash and Cooper Pedy is a town where banks don’t want to lend. So you need cash and that sort of, that lack of credit creates opportunity through a lack of buying. You know there’s just a lack of transactions there.

Tyrone Shum:
Why is that a particular town something that the banks don’t like?

David Hall:
High unemployment, there’s a drug problem and people tend to be highly transitional. So I understand as of today only Westpac and one other bank will lend there and they generally wanting 40 percent deposits.

Tyrone Shum:
Wow I can understand that.

David Hall:
Yeah. So basically we purchased it for sixty thousand dollars and we spent sixty thousand dollars doing your renovation on it. We had the real estate agent come through and she appraised it afterwards $240 000. We put it on traditional rental and because there’s only one property manager in town she’s got 240 properties. She can’t do her job. So we got despondent with that. We fired the agent and we ended up putting them on Air BNB. So Gavin runs that that’s his forte. So you go to the school so Gavin hates paperwork. I gotta admit I don’t like it either but I’m better at it than Gavin. Gavin is really good at running them. So he basically manages the cleaning the bookings all of that and nine months of the year that thing throws off $3000 dollars a month to each of us.

Tyrone Shum:
Hall adds that it was during this renovation period that Gavin and himself were actually able to land another property deal…

David Hall:
After that, because the properties in a super fund, you’re not allowed to reside in the property. So whilst we were there doing the renovation we were living in a youth hostel next door. It was just that simple walk across the road and while we were there we met a bloke whose father was a local, let’s call him identity, colourful identity – who had the only hotel side in town the only one that was left to be developed. 10000 square metres the top of the hill in Coober Pedy. And his father had died and there was 10000 square metres of scrap steel everywhere. His father had passed away. But his mother who was in his 70s was on title and on the mortgage so she’d actually divorced him but never changed the mortgage over to her husband’s name only. The house was a disaster. The council would put a works order on the property to clean up scrap still because it was a genuine eyesore. So I tried to get. together we tried to get our first vendor finance deal and it was more of an assumptive finance deal. So we engaged a professional to negotiate with the banks whereby we would assume the debt on the property. we would save her bankruptcy being a pensioner. You could just imagine what was going through her mind. So we negotiated with the bank for four months to assume, and it was only a small did it was one hundred twenty thousand dollars to assume the debt. And the banks at the end of that said no we won’t assume the debt, but you can buy it for sixty thousand dollars and once again, banks respond to a rule book. They don’t necessarily respond to logic and we were just sitting there scratching our heads going. It’s a no brainer. Well it’s a no brainer but wouldn’t you just assume the debt and take the risk? You’ve still got security over the property? But no, they wouldn’t. So sadly they actually bankrupted her which is not our goal. And we ended up picking the property for $60 000 dollars.

Tyrone Shum:
Despite their helpful intentions, both Hall and his partner ended up adding the property to their portfolio, completely transforming the once eye sore, to an interesting source of income…

David Hall:
Gavin has done the bulk of the work of this I’m just a small funder, so Gavin spent the best part of two months on site. He was able through a local contractor to arrange the removal of all the steel. And he converted that from a derelict home to a five bed, five bath home. So he’s now got that on Airbnb and he runs that as part of also doing the duplex pair and that provides about half of Gavin’s income.

Gavin gets all the money from that because he’s done the bulk of the work I’m only a small contributor to that. But the long term plan is we’re going to convert that to a caravan park because in the peak tourist season there is an accommodation crisis. There is not enough accommodation in town but at this stage we’re just lacking capital to fund and to execute that deal.

David Hall:
When you recognize that there’s so much value in just not talking, just listening  and that people don’t know how to listen. If you can just talk and you can listen. I’ve picked up gold in that.

Tyrone Shum:
This is Property Investory where we talk to successful property investors to find out more about their stories, mindset and strategies.

I’m Tyrone Shum and in this episode we’re continuing the conversation with David Hall to delve deeper into the property investing strategies he implements in a soft market, what he does to help increase his client’s cash flows, why he believes one strategy doesn’t just fit all, and the important mindset perspectives and tricks that he’s picked up along the way!

Tyrone Shum:
Thinking back to last episodes conversation where Hall describes the properties in his portfolio, Hall expands to share that in an ever changing market, his strategy is to simply add value and layer strategy over strategy.

David Hall:
If we take the Perth market at the moment, the Perth market is depressed and will be for the next six months. So if I’m in a market where if I can find a problem and I know how to solve that problem I’m not going to face competition. So when I’m buying today – and this will change as competition comes into the market – I’m actually looking to layer strategies into a purchase, I’m not just trying to buy one thing. I’m trying to buy multiple things in a deal of market under market subdivision renovation. What can I do. Because in a soft market you’ve basically got to avoid a Sydney has had a great run of capital growth which lets you in a soft market. You can’t rely on capital growth. You’ve got to rely on manufactured growth Johnson said that’s what I’ve been doing in my portfolio and that’s what I’ve been doing for my clients as the market changes. Those deals will evaporate but I’m very very passionate about what can I do to a property to take it to a higher and better use to manufacture capital.

Tyrone Shum:
He adds to this, explaining why adding value is integral to your portfolio, especially in a soft market…

David Hall:
So that’s that’s what you’ve got to do to keep your portfolio moving is you’ve got to manufacture well.

You can’t wait for capital and capital growth is easy but it’s dependent on the market manufacture growth is harder but that’s what you’ve got to do in a soft market.

Tyrone Shum:
And why he’s strategies have proven successful so far…

David Hall:
I’ll give you an example so I’ve got a client called Ben who is highly aggressive in property. He’s young, he’s high detail analytical, he’s an engineer. he’s on a good income and he came to me and said Look David this is where I want to live. I want a 1950s Californian bungalow. I don’t want to live in it today but my goal is in five years. I want to move into it and I want to do a renovation so he’s working FIFO. He’s a lot like me. He can’t sit still and his wife will murder him if he just sits on the couch because he’s an instructor. So he said this is what I want. So we looked at probably got to I think we’d written four unsuccessful offers and then a property came onto the market. It was initially listed at one point two million in a suburb called Burswood now Burswood broken into two distinct sections. The northern part is near our casino and our new stadium which is fantastic and its all modern. There is a strip of industrial and there is a strip to the south that is on one side has a railway line and on the other side has the café district. Very, very tightly held but extremely undervalued. It was initially listed for a sale at one point two million people failed to sell after four weeks and then they went to an auction campaign. Which says immediately ding ding motivated vendor because normally you would go to auction then price. We went to auction failed to get any bites. I went to because I like it in a falling market when properties stale that’s where the opportunity would generally lie. Went to the open home and I’m very good at determining why a vendor wants to sell – there’s a whole heap of skills that I’ve learned and I was able to determine that the seller was in her 90s. She had lived in the home since it was built her and her husband had built it. Her husband had passed away but she osteoporosis. The house had six metres of the block had six metres of slope front to back and she had to walk up and down a set of stairs to get to the washing lines, to get to her laundry and the family had basically said Mum you can’t live in here anymore.

We’re really really worried you’re going to have a fall you need to move. You’ve got more than enough equity. You need to downsize. Yeah and from what I could gather the year process was very bad and the family was motivated. So after some interesting negotiations and some back and forwards – and a really good selling agent I’ll give him his credit really worked hard for the vendor. We were able to get a deal across the line at nine hundred twenty five thousand dollars.

Tyrone Shum:
While lowering the purchase price is certainly one strategy he uses to save his clients money, there are also a number of other strategies he has in place to increase their cash flow…

David Hall:
In Perth you’ll find that these Californian bungalows are supposed to have a three bed two bath Californian bungalow and right next door to it was to be a modern build three beds two baths. This 250000 more for the older house. Strong demand character homes really, really loved here. So my client. So first one step one under market by the next layer was he undertook a renovation on the house. So we were able to identify that we could convert the house from a three bed one bath to a four bed to bath the master bedroom was massive it was 25 square metres so he was able to put an en suite into that, he dropped an internal wall made it open plan, did a tenant sympathetic renovation and renovation is different to what you would do for an owner occupier product. Okay so more cost effective but still created that wealth factor. So when you live now through the changes he made you’re in the dining room stunning city and river views. So the next step was the renovation that created value. The third step in the journey was converting it from a three one to a four to seven. We were also able to identify and we had to get a survey done on the property and it literally came down to 20 millimeters. We were within is the property was what we call a retainer belt. So the backyard was pretty close to jungle and bends very very hands on. So he removed an asbestos garage, a gazebo and was a lower level lounge all by himself and on there he built two townhouses four bed, two baths.

Tyrone Shum:
Despite these builds costing a fair bit of money and taking 20 months to complete, Hall explains what his client did with them and the benefits it provided…

David Hall:
Each one cost him 330000. It’s six metres of slope. So I actually don’t know how when you look at these builds I do not know how the builder made money on this but he swears to me he did. As a builder I referred him to a builder who does the bulk of my clients work not because he is cheap but because he’s honest and he does what he says he’ll do. So the next add value and this was turning it from one property into three. What we did is once the build was completed the bank value a Kaiman he valued each new build at 730000 creating 400 thousand dollars of equity in each. My client spent a hundred thousand on the renovation and the bank valued the front house at 860000. Now that valuation to me is too high but we’ll take it. Yeah of course. And then the final thing. So that’s layer four is the attainable. The final layer is we can see through a mutual acquaintance that I met through a networking group. He has now rented two new builds as rent by the room so market rent in today’s market for those new builds is 450 500 a week I believe and I’d have to check that he’s getting above 900 for each dwelling rent by the room. The front house he is renting is a traditional rental for five hundred a week so that property for him has created a lot of capital. It’s positive cash flow and I would love his mad king to go again but because of credit he no longer surfaces. He’s got leases at the banks is no no we can’t consider that we’re going to take market links of 500 we’re now going to discount that old you’re on contract or discount that all you’ve got some other and he doesn’t service that to me was a fantastic and there was four or five layers in that deal.

Tyrone Shum:
While this renovation and value adding strategy certainly proved successful, Hall shares that in the Perth market, finding similar properties to execute this strategy isn’t always easy…

David Hall:
Perth has a lot of stock on market, quality is very scarce so on the weekend I looked at a property that was giving an example was advertised as a three bed two bath line value for that property is 400000 it’s retain and build went to the open home discovered that the selling agent couldn’t count bathroom’s was only one bath, was worth a crack. But there was just too much competition on it. Like that property went first weekend. Other people saw it but it went.

Tyrone Shum:
As a result of this, Hall often changes his approach and strategies when dealing with different properties, adding value through various ways…

David Hall:
In that same suburb three months ago I got a really, really good off market deal. Corner block which I can’t say not a good corner block. Took six weeks to negotiate it because not the agent but because of the seller. Very good retain and build. So this property has a huge asbestos ship on it. That’s three bays. So the strategy to get this one neutral was basically there’s an app and I’ve forgotten the name. It’s a bit like an uber for storage shop each three bays rent each bay long term tenant and the tenants enrolled in the private school round the corner who’s starting their swimming pool. For one the suburb is mainly three ones. We put a new kitchen hand out to keep the tenant happy and to keep them sticky because the current tenant kitchen was ghastly. My co-op clients soon after we purchased that home actually lost his job. He’s now back at work. But what we will do is once he’s ready we’re going to demolish the existing garages. We’re going to build a new three to home on there that will create some capital but is strong by serviceability at the moment. What we’ll do at a later date is drop the existing house and put another through another two or three twos on it. So we’re taking a plan a cut make capital neutral income at a later date drop the existing house take another cut of income and capital.

Tyrone Shum:
Talking about the stock in the Perth Market in general, he sheds light on how to find valuable properties…

David Hall:
There’s still potential. The issues is what I’m seeing is a rising amount of stock but good stock that’s listed as goes on market is still transacting in first week. If it’s good quality stock and it’s properly priced it’s gone first week. If it’s overpriced, that’s where the opportunity lies.

Tyrone Shum:
Thinking about his portfolio now, Hall gives us insight into the types of property he’s purchased and why…

David Hall:
I’ve got I’ve just sold I was in a U.S. commercial syndicate. So I’ve just sold that down to Byner property I’ll tell you about in a second. I’ve got land in Fiji. And that’s part of my retirement plan. I’ve got properties in Coober Pedy and I’ve got a fair bit of properties within Perth. But look  I’ll give an example so I recognized an opportunity and it sadly bolted now. So momentum has its own researcher and he’s really really good. So we were able to identify early on in the market prices and Karratha had moved, so that the market had past bottom and was now moving. I jumped on a plane, spent four days in town, spoke to all the agents, went to some open homes and [it was] very very clear through the research I undertook in the field that that market was about to go gangbusters. While I was there I identified a number of things. So the market and Karratha fell because of the downturn both so Karratha is a very diverse for a mining town it has oil and gas. It has some agricultural odors a small trunk and it has iron ore. So Karratha it was hit badly because both mining and the gas market collapse simultaneously. Usually they’re countercyclical and what I identified is if you were to jump on sick today you’ll find somewhere between 11 to 13 hundred jobs going in and Karratha now. What’s the working population of Karratha.

Tyrone Shum:
I don’t know. I know the area. It’s probably less than that.

David Hall:
Six and a half thousand workers.

Tyrone Shum:
Wow. ok.

David Hall:
And there is somewhere between 11 to 13 hundred jobs going. So I went to a few open homes I spoke to every single agent in town and got a very very consistent story.

So the story is is look at all investors have disappeared. Everyone in town is buying. They’re all locals. There’s been a change in policy. So this is where change creates opportunity whereby the mining and gas companies no longer offer a rental assistance package.

Instead what they’re offering is a mortgage assistance package. So what’s happened. And that was deliberate efforts to create a sense of community to create a more vibrant town. And having been there 10 years beforehand and it was pretty ghastly town and you go there today and it’s totally different. The rental owner occupiers look after homes better than rentals through Breynton grows and the royalties to region there’s been a major investment in community infrastructure. And honestly it’s a town you’d want to live in versus a town 10 years ago. You just get in and get out. And then what has happened is so we’ve seen tenants become owner occupiers, taking advantage of homes that were selling for a million to one point two million and picking them up for $250 000. And when when you’re getting thirty thousand dollars a year in mortgage assistance it’s total no brainer. So I can pay rent or I can buy this and put money into my pocket you know from the Mortgage Assistance total no brainer. So what’s happened though and what we’re able to identify is that mortgage imposition stock was drying up and I actually underestimated the speed of the dryer so I was able to determine that the aggregator who is the person who works for the banks had basically was leaving town a month after I got there. Good indication that the bulk of his work is done but the feedback from the agents was no we’ve still got six months of mortgage and possession stock. Don’t worry, but he was actually being moved to Sydney which says a lot. Yeah. So I thought I had six months of buying. So basically we’ve now purchased four properties and that’s because once again I’m dealing with a mindset of fear from my clients so my clients have been reading articles saying it’s buggered. They’re not on the ground, ooh Karratha. I don’t want to go there.

Tyrone Shum:
Coming up after the break we will find out why he approaches each of his properties with a different strategy…

David Hall:
The intent is that we’ve established six leading indicators for that market, when five or four of those indicators go negative we’ll be exiting. So we’re not holding this property

Tyrone Shum:
How a shift in mindset changed his entire life….

David Hall:
I used to be that negative person prior to Jill. I used to look down at things that look and I think the thing that Jill has really taught me is emotional intelligence.

Tyrone Shum:
And that’s next. I’m Tyrone Shum and you’re listening to Property Investory.

Hall shares the story about a property he’s bought in Karratha and the strategy he has in place to get the most profit out of it…

David Hall:
The first property I picked up was for myself and my super fund.

The house has four beds, four baths, four kitchens, four lounges. It was specifically built as workers accommodation. It was built in 2012 and I picked that up for $321 000. I’m getting eight hundred and fifty dollars a week rent on it from what I’ve been able to determine and that’s come off up RP Data. The previous owner paid $860 000 to build it plus land cost. So building there is mind numbingly expensive. But you know that and I put that deal on my super fund that’s also a really, really nice cashflow. The intent is that we’ve established six leading indicators for that market, when five or four of those indicators go negative we’ll be exiting. So we’re not holding this property if I believe I can sell that for 900. If the agent sentiment is negative, if the speed of the increase in rental prices drops, that property will be turned over and sold.

Tyrone Shum:
Yeah okay. Well that’s phenomenal. I mean it’s something that I guess you’ve just got to you know the market really well.

David Hall:
That’s my job that’s what I do. And the scary thing is that that property took six months to settle because it was mortgage imposition. But now what we’re seeing is like one home that I went to, not an investment product, an owner occupied product first open home 40 couples through it, seven offers. The next week, a very similar home, sixty six zero couples through first open, 17 offers.  They’re all locals, they’re all owner occupiers, but now it’s gone in six months it’s gone from hey I’m the only person that you’re speaking to too. Now everything’s competitive. Or it’s a problem. You know the opportunity there is the problem properties.

Tyrone Shum:
Having been through some trying times, Hall shares that his desire to build a property portfolio stems from a shift in mindset that he experienced after tutoring with Jill

David Hall:
So my current wife lost her first husband very tragically to an awful cancer. It took him 20 years to die. My first wife has severe mental illness, and to the point now where she doesn’t, now she lost custody of our sons, she was institutionalized and it was a really really horrific time for both of us. The outcome of that and some tutoring from Jill was we can either go the world’s fucked. Life’s unfair, it’s miserable. Or we can go, this is the gift, we’re very fortunate, let’s take advantage of this and let’s do good things with it. And that’s what we have done. My wife is very motivated, I’m highly motivated. Neither of us, we’re horrible on holiday, we can’t sit still and we’ve decided to make property and we do some other things as well as part of our journey in life together. She does educational resources and I love my wife. I go, I found a property I want to buy and she doesn’t even care anymore she says, “Just buy it.”

Tyrone Shum:  
He adds that beyond a shift in perspective, a vital part of his success also comes from being more positive and working with what you have…

David Hall:
I used to be that negative person prior to Jill. I used to look down at things that look and I think the thing that Jill has really taught me is emotional intelligence. So you know an example, “Oh shit that client didn’t want that house it’s an amazing deal. I’m so angry, I’m so frustrated.” Or, “That client missed a golden opportunity, now I’ll make phone calls and I’ll get another client for that house.” And mindset is everything and I’ve now also picked up a coach through a man called Gavin Hegney who’s a well-known Perth property commentator and I think that the next thing I’ve got out of Gavin is that Change is inevitable. Change is constant. How can I profit from change?

Tyrone Shum:  
Using a current example, Hall explains one way his coaches have helped him approach negative seeming situations in different ways…

David Hall:
So we take an example is if the royal commission is instituted and that broke people now have to pay for brokers he said.

I think it’s a very, very retrograde steps. My broker last month saved me fifteen hundred dollars a month on mortgage repayments. I love her too bits she’s amazing. Removing that to me is going to be a huge negative to investors and homeowners it’s a really negative step.

And I found it really infuriating that the head of the CBA was quoted in the media saying removal of brokers is going to be a great thing for you know for clients. It’s not.

People are going to pay so much more.

I mean I look across collatorization. I mean I have a client with 10 properties who is dealing with a bank every single property has crossed collateralized with the other. That’s not his best interests. That’s the banks interest. And it took us four months to uncross five of them a chance and move on to other lenders and we saved him a fortune. Um you know it’s it’s just a negative step but Gavin says to me, here’s a change coming. If it comes, the banks are no longer going to have enough internal brokers. The opportunity is to take, to set up an employment agency, take those brokers and convert them into bank workers. So you know that’s the way that Gavin thinks and that’s what he’s given me. So there’s every reason, if I take my first wife very, very averse to change. My current wife is not affected by change. We’ll look at it will analyse it and we’ll spot the opportunity that change presents and then try and turn it to our advantage and it’s mindset and adapting to change that I’ve got out of coaching and I couldn’t be what I’m doing without it.

Tyrone Shum:
He adds why mindset can be so pivotal to one’s success in life…

David Hall:
The funny thing is, I could lose everything tomorrow.

If I had the property but the poor mindset I’d be destitute I wouldn’t know what to do. And I’m really really thankful that through my knowledge through my pleasure, if I lost everything tomorrow I could get up and going inside six – eight months again because that’s what you’ve got, the mindset and the knowledge.

Tyrone Shum:
Aside from coaches however, Hall shares with us the life changing books that have also impacted his journey so far…

David Hall:
Two life changing books.

And it’s interesting sometimes fate throws things in your way at specific times. You know if they come earlier you wouldn’t have got it.

So you’ve heard this a lot of times Rich Dad Poor Dad. Just got me going. And then the other one, The Richest Man in Babylon. Great books classics books absolute classics but guess what they all lead to mindset. Yes it’s that ability to think. What is an asset. You know I’m trying really hard to educate my children and the Formula For Wealth is actually really easy. But no one does it, no one educates people. And the Formula For Wealth is spend less than you earn, invest the rest. But everyone spends more than they earn and gets into trouble. You know and that’s one book. It’s short. It’s probably 40 to 60 pages. It’s a great story but you know I’ve got 12 year olds reading that. And you know our education system doesn’t have that book, doesn’t teach 20 year olds that.

Tyrone Shum:
Reflecting on his past, Hall also shares what he thinks is the best advice he’s ever received…

David Hall:
Go forth and buy land my son for they aren’t making it no more. So it was my dad when I was six.

It still rings sure. Look that’s the reason part of the reason why it might. Bought my first house at 19.

Tyrone Shum:
And why mentoring is the personal habit he believes has contributed to his success…

David Hall:
I think that the single biggest personal habit is mentoring. That is it’s a ritual it’s a habit and I’m very fortunate when I’ve got a problem and I don’t know how to solve it. It’s a phone call to one of three or four people. And that to me is here’s a road-block and I found sometimes you’re so close to the problem you can’t see through it was someone external ghost heavy thought of a smack head on.

Well you’re so right here. So for me it’s the habit of mentoring and staying in touch with people who have that you know. I like being the dumbest person in the room. And that’s where you learn the most because yeah yeah yeah but it’s taken a long time to develop that network and those people that I can talk to it’s not easy. It’s something a lot of people talk about. But to be the dumbest person in the room it’s not easy it’s been very probably the hardest challenge I face.

When you recognize that there’s so much value in just not talking, just listening  and that people don’t know how to listen. If you can just talk and you can listen. I’ve picked up gold in that.

Tyrone Shum:
While listening to others has played an important role in his life, Hall shares that there is advice he would’ve liked his younger self to listen to…

David Hall:
Don’t be an asshole. And once again the person I am today to the person I am 10 years ago was very different. My mindset was highly negative, highly critical of both myself and others. And I’m now very thankful that I’m not that person. But I would if I had learnt that lesson when I was 15, which is when it started I would be my world today would be exponentially better. My attitude held me back from so much in life.

Tyrone Shum:
Thinking to the future, Hall shares what he’s most excited about in his future property journey…

David Hall:
The Perth market. We’ve still got six full in months as I’m with but however we’ve got it rapidly and it’s just the speed of the change at the rental market is just jaw dropping. We’ve got a rapidly recovering rental market we’ve got and we’re going to have a chronic shortage of jobs. And at the same time credit is going to get released sometime in the next 12 months. If they were to re reduce the servicing criteria from seven a five to seven point eight percent to six and a half percent. And I believe that will happen. The Perth market is going to go we have under built properties. We have a chronic shortage of rentals. We have had builders. Last year we had over 250 builders go bankrupt. We’ve not been training trades for the building industry. We have the prospect of negative gearing holding back a lot of housing stock for owner occupiers. I think the next the next 12 months 2019 is going to be a quiet year 2020. This market is going to explode. I could be insanely busy.

Tyrone Shum:
On a more reflective note, Hall explains whether he believes his success has occured due to skill, intelligence and hard work, or rather luck.

David Hall:
I would say 80 percent of it is hard work and bloody mindedness. And 20 percent of it is being in the right place at the right time and having the right connections. I know I’ll be honest with you we’ve had four years of falling housing market and we’ve seen a lot of the unskilled the unsophisticated and quite honestly the shonky depart the market and I’m holding back. So there’s nothing like adversity to test your mettle.

Tyrone Shum:
Thank you so much to David Hall, our guest on this episode of Property Investory.If you want to hear more about his journey, then visit our website at www.propertyinvestory.com.

You May Also Like

Mar 11
Duncan Yelds Transcript

Note: Property Investory Podcast is produced for the ear and designed to be heard, not…

read more

Nov 30
Driving On The Road To Success With Jonathan Preston

Delving deeper into the life of Jonathan Preston, in today’s podcast we’ll be talking…

read more

Ready to receive
15% p.a. on your money?

It all starts with a timeframe. When are you looking to start?