James Paver is a very successful property developer and managing director of development, investment and services firm in the Sydney real estate market, Avenor. He established his company in 2016 and has been gradually growing his business and helping deliver projects in partnership with their investors.
Join us in this episode of Property Investory to hear about his experiences traveling across Europe, the incredible story of how he juggled serving in the army and also university, how he was able to land a highly sought after job straight after university, a current project that he is working on with a client, how he started his own business, and much much more!
When They Started
2016
Properties in Portfolio
Over 10 Projects
Main Strategy
Property Development
How To Gain More Experience In Property Developing
James Paver has quickly built his company over the past 4 years and is a leader in helping investors find the best deals available and delivering projects in partnership with them Sydney real estate.
In this episode of Property Investory we are continuing our chat with James Paver and delving into how he minimises risk when working on large projects, how he was able to kickstart his company in landing big projects, what the next 12 months can mean for his firm, and much much more!
Video Interview
Resources and Links Mentioned
Note: Some of the resources may be affiliate links meaning I receive a commission (at no extra cost to you) if you use that link to make a purchase.
Avenor is an Australian property development, investment and services firm with expertise in the initiation and delivery of commercial, residential and major mixed-use projects.
"It's definitely a lot of hard work but I think it’s being able to find the right balance in that work."
JAMES PAVER
Lloyd Edge is the director and founder of Aus Property Professionals in NSW real estate. He is a driven property investor, licensed buyer’s agent and is the author of Positively Geared where he delves into his journey from being a music teacher to then building his impressive property portfolio, where he currently holds 16 properties.
Join us in this episode of Property Investory to hear how Edge achieved financial independence while still on a teacher’s salary, how he changed career paths and how he educated himself on property and the market that has impacted his journey that could ultimately inspire you along yours!
When He Started
2000
Properties in Portfolio
16
Main Strategy
Buy and hold
How to Achieve Financial Independence with Lloyd Edge
After losing his passion for music, he kick started his property investment journey where he soon fell in love with teaching others about property and helping them achieve their own property goals.
We will learn exactly how the multitasking director and founder managed to accumulate 16 properties. You’ll also be able to hear the kind of mindset he has adopted to continue to increase his wealth and the kinds of strategies he uses to deal with the changing markets and much much more!
"You make your money when you buy, not when you sell."
Lloyd Edge
Sam Gordon is a very successful property investor and buyer’s agent. He is also the founder of property buyer’s agency, Australian Property Scout, who owns 20 rental properties.. His business helps clients get the best possible deals available whether on or off the market. Gordon is one of the most successful property investors in Australia and he wants to impart some of the wisdom he has learnt along his journey.
Join us as we reconnect with Gordon and find out more about some of the projects he has been working on since the last time we spoke with him, he talks to us about a special goal that he achieve recently, we delve into the mindset that he needed to have to achieve everything he has so far in his career, what he predicts is going to happen in the next 12 months, and much much more!
'I've made a lot of mistakes on the way through and I can hold these people's hands on the way through and avoid all those mistakes.'
To start off this episode, Gordon reminds us of his background and fills us in on his property investing journey.
Sam Gordon: I've been investing now for a little over 10 years. I bought my first property back in November 2009, which was a little two-bedroom unit in Wollongong real estate and essentially renovated that one, and lived in it for about a year, and then turned it into an investment. When I realised I could pull equity out of that deal and recycle that into another one, that’s where I started learning more and more about investing and got a little bit more serious about it.
And from there it pretty much grew. And within about two years of that first one, I bought again. I did a small development for my next deal, and then I kept that deal, but then rolled those profits through equity into more high cash flow deals.
Because that's what I essentially really needed in my portfolio. I was a very low-income owner. I was only on probably about $40,000 a year. So, the high cash flow was really, really important to me. And I went out, and I purchased. And there were another 4 investments in a 12-month period. And I really boosted up my cash flows. And then, pretty much it was a journey from there, from being between about 25 to 28.
I went really aggressively and grew my portfolio from, I think it was about 7 properties to, what was it? It was 18 by the time I was 28, and it was a pretty aggressive kind of expansion there. Had a lot of growth on the back of one, buying really well with what I was purchasing, but also in good growth corridors.
I think the portfolio equity, and even at that point, got up to about—I think it was up about just over $2 million. The passive income was about $68,000 at a time when I decided to walk away from work which was—I think I just turned 29 when I decided to do that.
An Amazing Property Journey So Far
Tyrone Shum: Basically you're financially free because your portfolio is paying for you, you know, without you having to work. That's amazing.
Sam Gordon: It was awesome. So, I've kind of walked away from work on the back of that passive income. I traveled for about 6 months. And then, kind of, off the back of that, that's when I decided to become a buyer's agent. It really is my passion: going out and buying property and buying property for other people and helping them along similar sorts of journeys to mine, and kind of helping people create financial freedom the way I did.
And probably I guess the really big thing with my journey was I had a goal of 10 properties before I turned 30. And then when I hit that, I think I was about 26 or 27, and it shifted, right. Like I changed the goal, and so the goalposts moved to 20 properties before 30. And so, I turned 30 in January this year. And in December I purchased myself a site that I'm developing into a duplex. So, I kind of essentially, in my opinion, I got around the 20 out of that one. I was pretty pumped with that.
Sam’s Mindset Behind His Achievement in 20 Rental Properties
To be able to build a property portfolio with over 20 properties before the age of 30 is seriously impressive, and we find out about the mindset that allowed him to achieve that.
Sam Gordon: I think what it was, I was around that 25, 26 years of age—I had a few things that happened in my life that kind of completely flipped. What I was looking to do as a career that I wanted to go down that kind of got shut off from me. So pretty much what was left was my passion for property.
And so, what I decided to do was stick with the job that I wasn't happy in but was providing an okay salary and leverage that to go as hard as I could with property. So, I had done a huge amount of research over those. Pretty much since I bought the first one, I got bitten by the bug of the renovation and the pulling out the equity.
And I did a huge amount of research in those ensuing years. And it was essentially in that time that I kind of formulated—I pulled everyone's different strategies together to create my own. And it was pretty much from that, that really, when I made the mindset shift that: ’You know what? I'm going to go for this. I'm going to go as hard as I can to hit these goals, create the passive income to do what I want, and essentially live life on my own terms.’
That was pretty much what it was for me making that decision that I was just going to go for it. And I knew I'd already up-skilled with everything—I guess, with personal development, with how I was going to do it. And I had the time with what I did. I never took holidays, in the sense of I never traveled overseas or anything during those years.
What I did was if I had four weeks or a year of leave, I would go and renovate properties. And so I'd force substantial value on those properties, or I'd go out and do a scouting trip as well. And I'd just focus all my time into trying to find these deals and renovate those deals. And that's essentially where I was kind of creating the equity and essentially then recycling it out into more deals.
And the matter went through a lot of different things. I've done strata titling and subdivisions and granny flats. And, you know, these different things, we've created good equity and good cash flow. And essentially that's what it was: continually formulating and reinventing and just doing everything I could to do it.
We learn about an incredible moment that happened recently that was years in the making for Gordon.
Sam Gordon: When I first started reading, I started way back when reading all the property mags back when I first bought that Wollongong real estate investment at 19. I got my hands on as much content as I could get. And in Your Investment Property every year coming into the New Year, they'd award ‘Investor of the Year’.
And I remember when I turned 20—that was a year like when I first read probably that edition winning that award back then—and I remember just being like, you know what, that was one of my goals as well. I'm like, ‘That's what I'm going to win, and I'm going to win it before I turned 30’. That was all part of this big plan of what I wanted to do. So, that was essentially it.
So, it was this year. It was a funny story because I had a couple of mates that kind of wrote in for me and said, ‘Look, you should get in touch with this guy’. Because I knew I was running my businesses well. And they go, ’Man it’s going to be mad if you win this thing. That's going to be awesome’. And I didn't really like people knowing my portfolio though. Like most of my mates didn't know. They thought I had a couple of properties, [and owned] my own home. That was it.
And then when they contacted me, I sent all my info in. And then I had to verify it with all the land rates and then the rental incomes, you know, ledgers, and show everything. I didn't hear from them for like two months, and I didn't even think about it. For the first couple of weeks, like I was really excited, ‘I hope I get the call and then I forgot about it’. I got busy with work, and then, all of a sudden, I got this private number call me. And I was just like, ‘Hey, it’s Sam from Australian Property Scout’, and they were like, ‘You’ve won investor of the year.’
I just wasn't expecting it. And I don't know, maybe that was cool, you know, even better that I wasn't expecting it. It was awesome, and I was pretty pumped to win it.
Beyond Sam’s ‘Investor of the Year’ Award
We find out just how much has changed since he won that investor of the year award.
Sam Gordon: It was definitely an influx to the business. There were definitely a lot of people that wanted to work with me and, I guess, leverage the same things that I'd done in my portfolio, and help do the same things. So, that was great. Honestly, it's my passion. I literally do it when I wake up in the morning ‘til I go to bed at night—like I just do it at all hours.
It's been awesome that people can kind of… I guess, it's the credibility that comes with that. The fact that I won that award and then I think it makes people feel more comfortable working with me because they know I'm someone that's done essentially what they want to achieve. So, that was a big one that came with it. And I think just a little bit of, I think I finally stopped at that point and thought, ‘You know what? Maybe you did all right’. I did it all right out of it.
He shares with us the two properties he needed to achieve his goal of 20 properties under the age of 30.
Sam Gordon: Essentially what it was, I have a lot of different avenues in my business that I'd go down and help other people with. And essentially we were looking for a few development sites for my clients. I kind of signed on a bit of a bunch to cover through at once to acquire a site or multiple sites. And that was essentially how it came about.
We got a massive discount on a fair few pieces of land for different clients and myself. And I essentially just bought a couple of them for the same price as the clients. And it was just like the deal was stacked up, and there was actually a couple of left over. And it was more than I was planning to put into the last couple of properties, you know. Obviously, development sites aren't cheap, and obviously, the construction on it as well, but they were there.
I got offered them at the same money, which was a great price. And I just decided to pull the trigger on those as well. Because it was a funny thing. When I started the business I was doing so much research, but I didn't have all that many clients on my books—and I still don't. I'm not a huge organisation. I kind of like the term ‘boutique’. I don't have a huge load of clients, pipeline clients. It's manageable and I love that. But what it means is that quite often is that deals will come through, and I don't have anyone for them. Sometimes I just have to buy it.
That's essentially what it was like. It was just the opportunity there. I'd almost like half, not half-forgotten about the goal. But I just, like, I was more focused on my clients and trying to get them the best deals that I could. And then it just almost fell into my lap at the same time I was doing these deals. It was for other clients going through at the same time. And it just made sense. So, I pulled the trigger on it.
Tyrone Shum: Tell us a little bit about the sites that you purchased. You said they are development sites. What can you do on them?
Sam Gordon: What I do—and I've done this for probably close to 10 years almost. The second investment was the same one as these. So, the block's got to be significantly below market. And typically the way I do it is I will source it off market through a developer—and I've got developer relationships in certain areas.
Essentially, what they do is when they’re releasing a stage, the easiest thing they can do is pre-sell a bunch to me just to clear their books. And then they'll put the other ones on market at a higher amount and then they don't care. They can let them sit there for a while because they've cleared out what they needed to complete that stage. And so, essentially, a lot of the time, it's those that we pick up. And sometimes they can be like, we're talking $250,000 to $350,000 is the block price. And then we're developing either single homes or duplexes on them. And the upsides on them are quite significant.
This is my fifth one that I'm going through now. So, it’s definitely not my first rodeo, and we're definitely, you know, getting some really good margins off these as well.
On Development Sites and Rental Income
Gordon goes into more detail about his developments and tells us the kind of margins he expects to get out of it.
Sam Gordon: Typically, if we're doing the full, just a specky build. Like a standard, sort of, you know, 200, 250 square metre home. And we're typically either keeping them and renting them or flipping them back to the market, depending on the client's brief. We're typically doing them for, say, sub $600,000, and they're pulling over $700,000 on a sale price or a reval.
And then sometimes, if we go down the duplex version, you're looking more towards $700,000 or over. But we're pulling revals or end sale prices over $900,000. So, we're making quite good margins on these deals. I don't do heaps of them, you know, if I'm being completely transparent. I don't do heaps of them. I normally take on a bit.
A couple of clients will sign on in a row. And when I have a certain amount, that's when I'll hit up my contacts. It is one form of the business and one form of my personal portfolio that I've done really well with.
I remember last time we spoke about my trident formula and half of them are really strong below-market buyers with good cash flows in capital growth locations. That's one form of it. And then there's the positive cash flow ideas, which are essentially what you need to retire, the big cash flow deals. But then on the back end or if you need chunk deals, then we'll go down that development arm. They're not for everyone. They're not for when you first start out. But when you need those chunk deals to essentially pump some funds back into the portfolio, that's when we'll go down that avenue and throw those in as well.
Gordon explains about the typical time frame between settling on a development site to when you can expect to get rental income.
Sam Gordon: Typical turnaround time, like turnaround timeframe, is typically up to about 12 months. So, typically, we will purchase them just before they register. If you're taking everything into the equation, if you're not selling and you're holding, we typically get them down to about 8 to 9 months.
If you do look to sell them, typically it is over 12 months to go through that whole process. But it's, as you say, it's not for everyone. Most of my clients when they come through are starting their portfolios, or they've only got a couple of portfolio properties and they're trying to build it out. I will always say, ‘Let's build the foundations first’. Let's get the foundations exactly right. Let's then put some high cash flow ideas in there. And then let's look at some chunk deals to either accelerate, pay down—or what I love to do is I'll do them and then I'll keep rolling that development money that I put in, keep putting that into more deals.
But the profits that get spit off—I'll go and put that into high cash flow deals or into the foundation properties. But that's once you're a few deals in; you definitely start with that. But that's honestly how you can just keep rolling when you get to that point. You can honestly just keep it moving, especially if you're using those cash profits and putting it straight into a high cash flow deal.
You're going into a 7-year and 80% lend on a unit block or a house and granny pulling 9%. You know, some of my unit blocks are at 10%, 11%. A lot of my granny flat deals are 9% yields, that is $15,000 to $20,000 a year positive, all day long.
Strategies to Getting a Good Property Deal
A lot of beginner investors might be wondering how they can find a good deal. Gordon delves into some of the strategies that will help.
Sam Gordon: The majority of our staff, especially at the moment with COVID and whatnot, I reckon, at the moment, we'd be doing 70% to 80% of our deals off-market. So, it's agents coming to us. I've got a huge amount of connections all over the country where I've invested personally for myself and for clients as well.
And essentially a volume of that is coming through off-markets. And essentially what it is is an owner is much more willing, especially, you know, with COVID and all the rest of it. And if the tenant doesn't want to go to the market, like they don't want to do opens and all the rest of it. Sometimes, the agent will condition them and say, ‘Well, there's nothing wrong with it. It makes it quick, easy, and transparent for everyone’. And they're like, ‘Look, if you don't want to take it to market, we have this buyer’; they literally will do one inspection.
We'll suss out the numbers first. If the numbers work, it will be one inspection, and then the deal is done. And essentially like the perfect thing. The thing that works really well for us is a simple fact that there's no competition in that sale.
And a lot of the time, the sellers, like, you know, for the ease of a transaction that's done, it doesn't have to go to market, we don’t have to pay for advertising. We don't need to upset the tenant. We potentially then walk out and then a 3-month campaign with no rent. All these different factors that typically a vendor or a seller has to deal with. We essentially will take that out of the equation—but, I guess, in exchange for maybe 10% plus off the purchase or, you know, off of what is fair market value.
So, that's where we're getting ridiculous value for clients at the moment. And some of those are up towards like we're settling. And, quite literally, I'm talking very close to capital cities, we're settling and getting 15%—like getting a reval and we've made 15% in 90 days from what we settled the property for. And then they're pulling that money back out and we're rolling it in with a 10% deposit on the next one.
And I've got clients that have honestly come in and came to me with one deposit. And within 12 months we've purchased three properties off that one deposit. And there's you know, I've got other clients who've come to me with two deposits—like $100,000—and we've purchased six properties in about eight or nine months. Literally, just rinsing and repeating that strategy.
It all comes down to purchasing the property for a really, really good price. And essentially, that goes back to me being a small boutique agency again. Like, I'm not huge, so I can focus on making sure each deal fits that criteria for each client. And that is a repeatable process—the same way I did it with mine. So, it's working really well.
Gordon reiterates the importance of making money as you come in rather than waiting for your property to grow in value.
Sam Gordon: Especially in a market like now, like if you were waiting for growth before you went to your next one and you bought at the end of last year at earliest, you're probably waiting to the start of next year. Because we're not going to see any. There’s a very slim chance of any huge gains or 10% gains where you can pull that money out and go again.
So, if we're still buying into those growth locations, but making that margin, you know, anyone that tells you, you know, ‘You pay market value in a strong growth location’, I honestly think that they've probably just got too many clients on their books, and they're not willing to work hard enough to do it.
I'm telling you, we're doing it every week. We're doing it for clients. And it's definitely possible. It's just putting in the hard work and getting those deals to come through.
We hear more about one of Gordon’s very successful clients and how he has been able to help this client build their portfolio.
Sam Gordon: I've got a lot of clients with similar stories. But he came to me right at the very start of when I started the business, and he wanted to kind of ramp up his journey. He'd come from another buyer's agent, who'd paid market value for a similar property. And he said, ‘If you can beat this, I'll buy as many properties as you can bring me’.
And essentially, this other buyer's agent literally had paid $317,000 for a property—and the street behind it, three doors down, we bought the same one for $280,000. So, $317,000 to $280,000—it was a $38,000 difference. And I found it, I think in, in three weeks. And he said, ’Man, I'm a client for life’. And I was like, ‘All right. Well, let's do it’.
He came to me with two deposits. So, he had about $100,000. He was happy to go at 10% deposits to 90% lends. He had decent servicing, and he essentially said, ‘Look, how do we scale this? How do we take it?’ And I said, ‘Look, what we'll do is we'll find this first property. And then while that's going through settlement, we'll find you another one’. And then essentially what happened: As the second one settled, the first one was coming very close to being 90 days since we settled it. So, in that, after the 90 days, we were able to get another bank valuation. We got it valued at $335,000. We'd paid $280,000. So, it's $55,000 equity sitting in that deal.
He was able to refinance that back out and fund another purchase. Now, the second one we bought, by the time we funded the third purchase here, we tapped into that equity. That was a very similar number. And he's funded that into the next one. We literally just kept repeating it and I think in about nine months, he's onto his sixth purchase now.
And I convinced him to maybe look down the avenue of looking towards some cash flow. So, we're paying $280,000 to $290,000 per property for these. Some were in Brisbane; some are in Adelaide. And he was making anywhere between about $35,000 to $55,000 on each of these deals. Actually, I think it was about $40,000 to $45,000 to $50,000 for each of these deals.
But the cash flow was sitting at about between $350, $360 a week. So, it's still decent, like 6.5% plus yields. But after he bought six of them, I said to him, ‘Look, it might be time to maybe look for a high cash flow deal. Let's go out. Let's do a house and granny’, and we've got that going through at the moment. And I think he was running the numbers on it last night. We did some updated numbers because the house is settled.
So, the house was rented for more than what we thought, which is excellent. And the granny flat is about to be rented. We just signed a lease on that as well. So, I think it came out about $15,500 a year positive on that. And that's at a 90% lend, like that's not putting $100,000 into the deal. He literally put like $50,000 into the deal, and he's getting that sort of return. So, he's stoked, and he's ready to keep going.
Start Property Investing With $50,000
To gain a better perspective on how he was able to build this portfolio, we hear about how he funded all of his investments.
Sam Gordon: He's married—and he and his wife, I think he earns about $150,000. I don't think the wife earns crazy figures. I can't remember exactly what the wife earns. But it's not crazy figures. Like they came to me with $100,000, which you think about, most people would have $200,000, $300,000 equity sitting in their home.
So, to pull out $100,0000 of equity—or start it however you want, but say $100,000 in equity—, you'd probably only need really to start it.You only need $50,000 to $60,000—probably, not even. I started my portfolio on $30,000 a year. Like, it's usually possible. Like, even when I was working my job and hit 18 properties, the most I ever made was $85,000 a year.
I never made any more than that. And I still hit that many. It's managing each thing as we go. And for him, I knew his servicing was strong enough to sustain building that portfolio around growth and below-market buying. And we could leverage it and keep building it. But then, I knew we'd get to a point where ‘Let's throw a high cash flow deal in there to make sure the servicing stays strong’. But essentially, that portfolio, I mean, interest rates here at record lows.
But each of those deals, even those normal bread-and-butter, they're low maintenance houses, most of those properties—and they're all running at about $3,000 to $4,000 a year positive. But the granny flat deal obviously was a huge amount on top. So, even if I think we worked it out, even if rates went back up to, I think they had to get to 6% before he ran neutral. And then when he ran neutral, he had all that appreciation of all the properties. So, he'd probably still be $20,000 a year positive on that.
So, it's possible. It's just creating a strategy and then executing with the correct deals.
With everything that is happening in the world at the moment, it’s hard to predict what’s going to happen in the near future. But we learn what Gordon is hoping to achieve within the next 12 months.
Sam Gordon: Personally, I've got my little duplex going through. I'm just personally—I'm just going to focus on that with my own portfolio. I don't think I'll ramp it up unless some crazy deals come across my desk, and I don't have anyone lined up at the time. Unless something happens, I don't think I'm going to be picking anything up for myself. But it's honestly just going to be focusing on clients.
I want more people like this client of mine now. I want more people like that and build portfolios like that. My client base is so varied. I'll have guys and girls in their young 20s through to you know, 50, 60-year-old men and women and couples coming to me, and I'm helping everyone. But I love being able to do what I can do.
I just love it, man. I really resonate with it. It's a passion. It honestly is such a passion. And I kind of thought maybe I'll do this for, I don't know how long I thought. Because obviously, I got the portfolio. I have an income there, and I thought maybe I'll just do this for 5 years and help people and see how it goes. But I don't see myself ever getting sick of it, man. I just absolutely love it. Being able to pull those results.
And I think what I love about the boutique side as well is so many of these guys can just pick up a phone and call me. And I think they get blown away when I answer the phone or they text me late at night—and it's like 10 o'clock at night—and I write back to them and they're like, ‘Man, I just wasn't expecting it. Like I was thinking like two days later to get a reply or something’, or like, you know, ‘maybe a subordinate to kind of jump on and he wrote back to me or whatever’.
I'm just going to keep running this. I just absolutely love this side of things and focusing on building other people's portfolios. It's a funny feeling, because it almost feels like you might have played video games back in the day. When you've played a game and you went through it, right—and you made all the mistakes but you finished the level, and then you go back like six months later and play that game again. And, you know, all the things, all the mistakes and all the little pitfalls—that's kind of like what it is now with property.
I've made a lot of mistakes on the way through, and I can hold these people's hands on the way through and avoid all those mistakes. That's honestly like how I think I got it. Like, it's kind of cool like that. Like, again, ‘No, you don't want to do that. You don't do that’. Like, ‘This is the path. This is this strategy forward’. And it's awesome, and I love it.
Thoughts On the Property Market’s Future
We get Gordon’s prediction on what could possibly happen within the property market in the near future.
Sam Gordon: I can't 100% see what's going to happen at the back end of these holiday periods on people's loans coming off, JobKeeper ending—all those sorts of things. That is a thing that obviously people have to take into consideration: that we don't actually know what's going to happen with it. But I can tell you right now on the ground: All the places that I invest, the stock levels on market are ridiculously tight.
Now, if the stock levels on the market are ridiculously tight and there's still plenty of people looking to buy, prices are not going to fall. Like, if anything, that's a precursor to them rising. There's no precursor at the moment that I'm seeing prices going down. Combine that with ridiculously low interest rates, you know, record-low interest rates.
What I hope is that if people have put loans on hold and stuff, they've saved any additional income in case, you know, the worst happens, and they don't have a tenant at the back end. But for the most part, I'm seeing the same thing on the rental side as well. We're having no problems leasing the stock that we bring to clients. What I always negotiate for clients is early access for our property managers. And 9 properties out of 10 that we will bring that we have settled, have a tenant lined up for the next day.
That's what I've always done for myself, I've always done for clients—and it hasn't changed in this environment. I just can't personally, I don't see anything catastrophic happening. You know, all these people talking, you know—I can't even understand why the banks are releasing these reports, reckoning what they think is going to happen. I just don't see it happening.
If anything, definitely in the markets we’re in, the markets are still running hot. And we're definitely working really, really hard to keep the good deals coming. So, that's just my take on it, but I guess we'll see what happens.
Tyrone Shum: You can come back in 12 months, and we’ll say, ‘Hey Sam, were you right?’
Sam Gordon: I'll tell you one thing. I can't remember who interviewed me, someone called me a few months ago when it first started, when the pandemic first kicked off and they go, ‘What do you think is going to happen with the market?’ And I said, ‘I reckon we've got like a month. We've got like, you know, maybe 4 to 6 weeks where the panic is everywhere, and people will cut stock and just the fear. The absolute fear of what's going to happen’.
That was probably the busiest I've ever been in the business of both people coming to me, finding deals. And the amount of deals that were coming to me—it was unbelievable. The absolute steals for some of these properties that we were getting, because people just panicked and was like, ‘Just want to sell it. Just want to sell it’.
And then, a lot of stock cleared, a lot of people pulled listings off the market that didn't need to sell. And then, all of a sudden, there was this massive shortage of stock. And that window, that immediate window that was there was gone. So, now, like the next window of opportunity is what I said before about finding the off-market with the agents. But that window of opportunity that I called—I got it right. So, I was really pumped with that.
I realised I was talking to one of my good mates who is a really heavy investor as well, and I kind of spoke to him about a couple of weeks ago. And he was like, ‘That did actually happen’. So, we had a little bit of a laugh about that one.
Henry Ledingham is the founder and development manager of +Ethos. His company helps their clients with residential property development in QLD real estate market. Ledingham had worked in the commercial construction industry for 10 years and is now using the skills he learned there in the property development space and helping build successful portfolios for his clients.
Come with us as we learn about the property journey of Henry Ledingham, we delve into the unique situation that he and his wife found themselves in, we discuss his time working in the commercial construction industry, we learn about why it took him some time to start his property journey, we find out about his transition from commercial into property development, and much much more!
'This development stuff is pretty closely aligned to what I do in my day job in construction. I'm just managing people and processes. That point there was like a light bulb moment.' Henry Ledingham
We find out what a typical day looks like for Ledingham.
I love to get up early. So, I'm up at 5 a.m., grab a coffee—and I live right next door to a park. So, I go and take my coffee, sit on the steps of my house and look out over the park because it's just an awesome setting to see a bit of a sunrise and, you know, get the sounds of the morning happening around me.
I've started journaling, so I sit down, do a bit of journaling—work out my goals for the day, do some gratitude work. And then I also do a bit of reading. So, it's not necessarily reading relating directly to property development, but just more sort of personal interest stuff. I then start into the day at about six o'clock. And I focus on big tasks that I can get chunked away—but, basically, tasks that I call ‘tasks that make my money needle move’.
So, I heard that phrase from someone else. And it's basically just knuckling down on those tasks and getting them sorted before the distractions of the day. Come in at nine o'clock, switch the phone off, put it on airplane mode, and then make some calls to consultants. Or, if I need to visit a project site, I'll duck out and have a look around the site, speak to the guys.
And then, I love exercising, and I'm really into weight training and a bit of powerlifting as well. So, about mid-morning, [I] try and get a weight session in, and then after that, come back a bit more administrative work, lunch, maybe try and read again for another half an hour and wind down the day with some admin items that don't really need too much creativity. And shut down by about five o'clock and catch up with my partner and find out about her day and decompress a little bit.
Ledingham fills us in on what his wife does for a career and the interesting times they find themselves in.
She works—and it's probably a very topical subject at the moment. She works and is currently still employed by Virgin. So, she's cabin crew; we're going through a really interesting time where she just does domestic fights and has had some shifts—but then, you know, maybe 10% of the amount of shifts she was getting before. And we are literally just sort of rolling through day by day with the news we found out yesterday that they've gone into administration.
With all of the troubles that Virgin have found themself in recently, we get an update on the impact it is having on his wife and himself.
It's been very interesting—like we've moved in together just this year and we've essentially been living out of each other's pockets since the start of the year. So, it's brought us closer together. It's definitely hard for her and also myself, not knowing, you know, what the next day holds in terms of her employment. So, it's one of those things where it's just you play each day as it comes and just be grateful for the things that you do have.
I think, you know, trying to predict the future and trying to, you know, work out all the scenarios—sometimes it doesn't necessarily help in that situation. So, she's studying law as well, so, you know, last year and, you know, looking to sort of branch out into that as well—which, you know, takes the pressure off the Virgin workload I guess.
From Being A Small Town Boy To Becoming A Big City Guy
We delve further into Ledingham’s background and he talks to us about what his upbringing was like.
I had a really lovely childhood, and it was kind of unique in terms of some other people's childhoods I guess. So, I grew up on farms in New South Wales, northern New South Wales, around Moree and Tamworth. And when we lived down there, they were cattle and grain farms. My family were farmers and came from a long line of farmers.
We then moved up to central Queensland near a place called Longreach. So, just to give a better idea where that is—that's about 700 kilometres inland from Rockhampton. So, it's really sort of in the centre and isolated. So, I was born in the country and then, at about age 10, moved up to central Queensland. So, that brought along some, you know, awesome opportunities, but then also some challenges as well. Our closest town was one hour away. And that was just a very small town where there was a supermarket and a post office and that's about it.
And then the city, in inverted commas, closest to us, was three hours away. And that's where you'd literally, you know, plan weeks ahead to go to the big city of Longreach to stock up on all your food and if you needed clothes to go there. So, heaps of awesome experiences. We had floods while we were up there, so we literally got flooded into our property and couldn't get any food or supplies in. And when it sort of got to the point of getting a little bit, you know, desperate we actually had a plane for us, some supplies in, so we had to get out on a big paddock of ours—it was really flat—and slash all the grass down so the plane could land.
Yes, so many things that we experienced out there, which sort of set me up and being able to, I guess, take on any challenge that came my way. Because once you go through those things, everything else generally pales in comparison. So really, really enjoyed it.
Ledingham shares with us the differences between his time schooling when he was in NSW compared to when he moved to the remote area in Queensland.
When we were in New South Wales, just going to a normal day, school—and that was awesome. But then, when we moved to central Queensland, we're obviously very isolated. And the school that was closest to us was three hours away, so we couldn't travel there and back in a day. So, all of the kids in that area did ‘School of the Air’. So, that's what I did. And essentially that was where the curriculum is given to you or given to us. And we engaged a teacher—or we used the term governess back then—and that teacher would come and live with us on the property. And Monday to Friday, they would take us through the curriculum for the distance education school. And for about one hour each day, we would dial in and chat with our teachers and fellow classmates.
But this is back when there was no internet, so it was by a UHF radio. So, it was sort of the old, you know, push-to-talk technology and only one person could talk at a time otherwise you couldn't hear the other person. We had some pretty interesting experiences with that. And you know, you could go sit down in your classroom and do four hours worth of work, and then, in your lunch break, jump on your motorbike and go for a ride and then be back in the classroom. It was awesome.
How big was the class that he was in and did he have any siblings with him?
At that time I was just doing school with my brother, so we literally had sort of a separate, I guess you'd call it an outbuilding or a cottage that was our school classroom. And me and my brother would be there and our teacher. And when we stepped inside that building, that was class time, and when we stepped out that was farm fun time. And the school that we were part of that was based three hours away. That was a school of about 300 that was made up of lots of, you know, kids from the local farming community where everyone was isolated in the same position.
After going through the education system as a child, we find out whether he took on further studies or jumped straight into the workforce.
We moved back at the end of the central Queensland experience back into northern New South Wales. And I finished my high schooling at a boarding school there from that point. I have three brothers in my family, and we all made individual decisions, but sort of the consensus among us was that we didn't really want to continue the farming lifestyle. It's a pretty hard lifestyle, and you've really got to have it in your blood to push through with it.
So, at that point, I wanted to continue my studies. And I went to the University of New South Wales in Sydney, and I started studying construction management there. And that basically, set up the next phase of my life where I was living and studying in Sydney. Coming from, you know, the rural background, that was a massive change—just being in the city and surrounded by so many people and working out how it all operated. It was definitely interesting.
From that point, I studied for my Bachelor of Construction Management and then started off on a career with a commercial builder, a tier one commercial builder.
Taking On Commercial Building Projects
Before moving back up to Brisbane, Ledingham talks about the short period after moving back to NSW.
I was there for about 10 years, and I finished study that took about four years. And then I started working for a commercial builder that was based in Sydney. As I started working for them, they had a project that was based down in Jervis Bay. And it was a project that needed people onsite to be based on-site and not in the office. So, as sort of a young contracts administrator back then, I thought that was an awesome adventure to be part of. So, I stuck my hand up and volunteered to go down.
They were based on-site and that was a fantastic experience. I essentially lived and worked down in Jervis Bay, which is about three hours south of Sydney. And my partner at the time was living in Sydney. So, on the weekends I'd drive back and stay in Sydney, or if the weather was, if it was summertime, we would spend it down in Jervis Bay. Because if anyone has been down there, it's like a lovely national park area with beaches that have got like super white sand, and it's great in the summertime.
So what, what year was that when you went down to Jarvis Bay to work?
That would have been about 2006, I think it was. So, I spent time down there, about three or four years. And then I decided to move to a different commercial builder, just to get a bit of a different experience. They had an opportunity up in Brisbane and it was just a 3-month contract up in Brisbane. And then the idea was to come back to Sydney.
And I went up to Brisbane, completed the project up up here, fell in love with the city and the lifestyle. And they had picked up more business. So, I decided to put my hand up and stay up here. And then that's what led to the next, you know, sort of 10 years of my life.
Ledingham explains some of the work and the projects he was working on for the commercial builder.
There's lots of different tiers of commercial builders. But I guess the easiest way to think of it is they generally build commercial buildings. So, it might be a big distribution centre. It might be data centres. It might be restaurants, banks, office space. And the work I was doing was essentially project management towards the middle and the back end of March.
We are with the commercial builders. So, the work involved our estimating team winning a project. And I would get past essentially a set of construction plans and a budget that we had to build it for and get introduced to the client. And then from that point on, me and Martin had to tender and procure the project—so, engage all the trades. We had to come up with a construction program that...met all of the clients milestones.
And then we had to physically coordinate and construct that project and, all the way, keeping the client up to date and, yeah, working with them. So, there's lots of things that I was able to have the pleasure to build in my time in the industry—like built data centres for TV stations, gyms, banks, office spaces, medical centres.
There's so much variety I found in that industry. It wasn't just sort of building the same product over and over. And that's what I found that my personality really locked on. Like the physical sort of the tangibility that came out at the end of it and I could, you know, I work on a project for X amount of months. And at the end, I could see and touch a product that really is satisfying to me.
He had essentially become a project manager, and we find out how this position came about for him within the business.
It's a process, and it's not necessarily quick. But essentially the common pathway is you start generally in sort of a contracts administrator—or contracts coordinator position, some companies call it. So, you're essentially on the paperwork side there. You keep track of budgets. You're engaging contractors. And while at that point you may not have the experience and the knowledge on how to physically construct things, you are laying the paperwork—the financial and the administrative.
The pathway I took was I wanted to get out on site and experience things physically. So, I worked as a site manager. So, in essence, you kind of deal with trades face-to-face. You're working with them to solve problems or questions that you come up with day to day. You focus on safety at that point as well and controlling and managing safety onsite. And then from there, you can kind of switch back into a more office-based role, in that of like a project engineer—or I went to a project manager. And that's sort of [the] way you, essentially you, right after you know, after the client has engaged some of their consultants and, and given you the concept design. That's when you take over and bring it to fruition.
So, I think that's why I have found it pretty easy to transition from commercial construction to development because all of the processes and the people that I speak to day to day in the construction world, it's the same. It's just a different subject matter in the development world. Now, you know, my chosen product is just land subdivision. But you know, I'm still coordinating designs. I'm still managing trades. I'm still focused on providing the end product, [with] the best quality and also [in] the quickest time frame.
So, it has been a relatively easy switch from that point of view. But then it's required a bit of a change in mindset because there's definitely different specialties that you need to be looking for in the two different worlds, I guess.
On Commercial Developments And Joint Ventures
We delve into the concept of joint ventures and what Ledingham is mainly looking for in a partner.
The sort of quick evolution of my development is that my first development was my funds and mate's funds. So, we joint-ventured together and one of us brought the cash. That was my mate. And I brought the serviceability. So, I purchased the property and shared our time to manage it from that point. At that point I was still working in my full-time job. And obviously, I could only borrow so much from the bank. And there was a ceiling on that.
The next evolution was discovering sort of true joint ventures, no money down projects. And that's where Matt Jones helped me out. Like he spoke about on a previous one of your episodes with his joint venture boot camps. I attended one of those and really, sort of, it opened my eyes that I didn't have to basically buy one property or do one project that reached the limit of my serviceability. If I found other profitable projects, I could approach other people, see if they wanted to joint venture with me and use more experience to manage that. And then it would benefit, you know, myself as well as the other joint venture partner. So, that really took the capital ceiling off my mindset at that point and, from then, evolved into stopping my full-time work and [going into] developing full-time.
And you're right, my approach at the moment is to essentially acquire sites, partner with investors or joint venture partners and turnkey development, and manage the whole process.
His property investing journey has been a mix of developments and a buy-and-hold strategy.
I have purchased properties to buy and hold. And, I guess, the full backstory of my property journey is that that's how I started in property. I would probably say I'm a very late bloomer because, you know, I'm 37 now, and I only bought my first property when I was 33. Before that point I was aware of property but wasn't educated in it. And I just didn't really have a drive to investigate it.
But then, I purchased a PPR that I lived in that was the first property. It was a purchase, which I thought at the time was great. It was an uneducated purchase. And the intent for that purchase was that I would live in it, renovate it, and then essentially get it revalued and see if there was any uplift—or maybe rent it out as an investment property as a long-term hold. That's because my research and education at that point was inadequate.
I had a very tough conversation with my accountant at the time. I sort of explained to him my strategy that I saw for that property. And he had done a lot of property development and investment. And after I told him the nuts and bolts of it, he said, ‘No, I don't think you've selected correctly. That property is not really going to do anything for you. You know, it may be neutrally geared, but it's not really going to grow in value too much. The cash flow is not going to be great. It's essentially just going to be a limit or a handbrake on your portfolio and your serviceability’.
And for me, hearing that, you know, after I'd gone through the effort of purchasing it—and I did a renovation on the bathroom and the kitchen and put sort of two weeks worth of blood, sweat and tears into it—, that was like a slap in the face. But I, sort of, I mulled over it for a couple of days, what the accountant said. He was essentially saying just offload and sell it and, you know, select a better property next time. So, I swallowed my pride and did that. And I'm grateful that I did take his advice because I then started getting myself educated. And it started initially as just getting educated in the buy-and-hold space.
And then, part way through that education where I was going to seminars, listening to podcasts and getting some mentoring, I stumbled on the world of development and I thought, ‘This development stuff is pretty closely aligned to what I do in my day job in construction. I'm just managing people and processes’. That point there was like a light-bulb moment. I was like, ‘This is interesting to me. It's really exciting’—but it also is me being able to leverage a skill that I have. And from that point on, I was just focused on getting educated, tooled up and skilled up for development.
So, it was two steps forward in property initially, one step back, and then onwards from there.
We discuss his first property and the details of what happened to it since he purchased it.
Sold that—and it was the right call. To give context on why it was the wrong purchase: It was a three-bedroom unit, you know, sort of a six-pack—so, the garage underneath and living area up top. And I picked an area—it was in Coorparoo in Brisbane. And at the time of purchase, there was a big development down at Coorparoo called Coorparoo Square that was in construction and about to come online. And right when I had finished my renovations and was going to either put my property back on the market or rent it out, I found out I was competing with some brand new finished apartments that were, you know, a much better location than mine.
So, that's the kind of research that I missed out on in that initial purchase and didn't sort of scope out, you know, how my product is going to compare against what else is coming online in the area.
Would he consider that to be one of his worst property investing moments?
I'd say that that's one of them. The bitter pill to swallow in that one was twofold in the sense that, you know, I had got a decision that I thought was right—I had got that wrong or it just didn't align with my strategy. And then the other point was in a monetary sense, like I spent two weeks of physical labor doing the renovation and then I also piled about $20,000 worth of materials and fixtures and fittings into it. And that was essentially for nothing. I managed to get out of that property and sell it for essentially what I went into it with. But the additional labour and cost I put into it wasn't realised because it was competing with a brand new product down the road.
So, that was a really good lesson to learn—that I essentially overcapitalised on a product that no one wanted, or if they did want it, they would just go and buy it new.
How You Can Find Property Deals Like An Expert Investor With Henry Ledingham
The global pandemic of COVID-19 had a massive impact on a lot of people, and we find out about the effect it had on Ledingham.
I had another one, and that was a sort of a more recent one, which I wouldn't say is my worst investing moment, but it was definitely a stressful one. And it occurred around this pandemic that we're experiencing of COVID-19. I essentially had a project that I was going to settle on, and it was leading up to settlement day. And at that point, I had gone unconditional on my finance because all of the signs with this lender were good. I believed that, you know, it's a profitable project and there was no reason for them to not fund the deal.
But as news of the pandemic spread and gathered momentum and the media hysteria built, that lender essentially pulled out on their finance offer. They said the market for them specifically is too uncertain and [said] ‘We won't be able to fund your purchase’.
So, at that point, that was a real shock. And I was in a position where the vendor for the property wasn't very willing to offer extensions if I got a small extension. But essentially, I had to settle on the property somehow. So, it kicked me into another gear. I overcame that and was able to settle by sort of hustling and just working day and night with other lenders to get the situation sorted.
But the lesson learned was, you know, that in terms of the risks out of left field, you know, I guess, everyone thought that a pandemic was maybe not even on anyone's radar at that point, but it was realised. In my instance, it became an issue and I had to deal with it.
So, I think, while it was super stressful at the time, it's something that I'll remember for the rest of my life. Like, I will have lots of either protections in my contracts now to deal with pandemics where we can essentially activate those conditions and ask for longer extensions. But that was a real lesson.
The Importance Of Applying The Best Strategy For Different Property Challenges
We delve into how he was able to eventually settle the property and why it was done this way.
To give a bit more explanation around that: That project, I was in a position where I was buying it with the DA, and I had been working on it for a couple of months. And I had put a significant amount of my own money into the project. So, if I wasn't able to settle on that project, what happens? With the DA, it stays with the land. So, essentially the owner of the land, if I didn't settle, would retain the benefit of the DA and my money that, you know, had assisted getting that DA would've benefited the owner. And so, all of my work would have been for nothing. And in the REIQ purchase contracts or the Queensland land purchase contracts, there's provisions for delay in the contract.
The remedy mechanism in there is for the contract to be terminated. And that's exactly what I didn't want to happen. Like I needed an extension so I could source an alternative lender. And everything in the contract was essentially saying, ‘Well, this has happened so you can terminate’. I was at a point where I was like, ‘No, I don't want to terminate’. I must continue this contract. I need to extend it because of these acts of nature being the pandemic that have occurred. So, what I was losing by that financier pulling out—that was a financier that was going to lend 70%. So, there was essentially, you know, a chunk of money. I had 30% equity and the 70% lender had pulled out.
So, I then had to scramble to find another lender. And in that environment, it's still occurring now, I guess, the lenders are ratcheting back their LVRs. So, you know, I found a lender, and they were able to do 65% LVR. So, I had to reach out to some of my investing partners and increase my equity position through the assistance of my investors.
The second issue I came up with, once I had locked down the new lender that will come in and assist, was that for this development—it’s a nine lot subdivision—, you need to get commercial valuations. And I had one done with the previous lender, but that commercial valuation was only directed to the previous lender. And when I asked for the valuation to be assigned to this new incoming lender, they wouldn't do it.
They wouldn't assign it. And that was essentially because that value is a risk position. They had valued it before the pandemic started, and they were being told by their professional indemnity insurers ‘Don't assign any valuations’ or ‘Don't do any new development valuations’. So, then the search became—I'd found a lender but they needed the commercial valuation, and I had been granted an extension of two weeks.
So, I essentially needed to get a new commercial valuation done and then loan documents, drafted and created, signed—all done in two weeks. So, the challenge then became, ‘Okay, we've got the lender, now let's find a valuer that is comfortable to visit the site, do the due diligence, do the report and reassure it, you know, within a week so that I could leave the other week for the loan documentation to be drafted and issued and executed’. So, it was sort of a challenge a minute.
But, you know, through the process of going into solicitor's offices on weekends, printing stuff, running to the bank, we got it done, and we managed to settle on the properties. And now, the project is secure and the DA's there. And it's, you know, an awesome project. But there was a big learning from what occurred with the pandemic, which I'll take for the rest of my development career.
We dive into his subdivision. And we discuss the changing market during this time and whether he can get a good return on investment.
My general approach, if I'm looking at sites that are raw sites with no DA on them and I will have to obtain the DA myself, I will only proceed on sites that have a 20% or plus profit margin. With this site, you already had a DA. So, the planning risk element had been removed. It was already approved. We knew there was nine months, and we just had to basically deal with the construction cost risk and the sales risk. So, that's a 15% profit project, and I think I wouldn't want to go lower than that if purchasing a site of that scale with a DA.
The timeframe for the project—it's a 12-month project, and at the moment, it's just starting. So, we foresee that, there's definitely, in the next couple of months, there's going to be reduced consumer-sentiment. And anything that's going to be marketed in that period will have to be competitively marketed.
But I believe that in six to eight months, things will be back to, maybe not where they were before, but people at least will know where they're sitting with their employment. They will know where their finances are heading and the routines, just the daily returns of what we can and can't do, will be well-defined. So, I think it will smooth out. And that's why I believed in that project. It wasn't a project that, you know, needed to be constructed and sold this month or next month. Like, there was a long time frame until sales and settlements needed to be bought on the market.
On Right Perspectives, Property Options And Subdivisions
We’ve heard about one of his worst investing moments and now we find out the moment where everything changed for the better...
I would say that would be it. It was more that my mindset—up until about sort of four years ago—was a PAYG employee. Like, I'd always had a boss, and I've always worked for someone. And I don't know why, but I just hadn't ever considered that I couldn't do something that was wholly and solely of my own creation. And, you know, I couldn't work for myself doing something that I loved.
But as you know, four years ago, as those sort of light bulbs started to switch on, I'd say that was my biggest light-bulb moment or aha moment where it was like, ‘Okay, you've worked for other people and, being a company man up until this point, have a crack at something of your own. Because that way, it can be wholly and solely yours. Your effort that you put in should correlate directly to the effort that comes out. And you can craft something that is to your standard and to your liking’.
So, I'll tell you that was the biggest one, followed closely by, well, this property development stuff is my path to going out on my own and being my own boss.
Ledingham explains his mindset when he was starting up his property development business and how he wanted to gradually phase into it.
I kind of structured it to phase it in. So, my first project I did, which was a six-lot subdivision, I was fully employed in a day job. So, I essentially ran that project in the evenings. Like when I get home, after a day of work, I'd have dinner and then, sort of, punch out two to four hours worth of work in the evenings and then on weekends as well.
As I got that one almost completed, then I bought a second six-lot subdivision online—and I was still working full time. But then, I knew I needed to have some guidance and some assistance with making the transition. So, I started looking around for mentors and essentially linked up with an awesome mentor who helped me craft my exit plan from full-time work into full-time development. And it occurred over the period of about a year, year and a half. So, it was a planned process.
With his experience in building the big commercial projects, Ledingham shares why he decided to go down the route of subdivisions rather than the many available options.
I wanted to just start simple and then build from there. I believe that subdivisions are relatively low-risk in the scheme of development because you're not putting a product, a built product, on there that you're having to essentially guess what the market wants to buy. And I understand that there's a lot of research that goes into formulating the products that the market wants.
But at the moment, I just want to keep it simple. Start with land subdivision. Build that process up towards a solid, you know, process. I can essentially fine-tune it. And then once, you know, three, four years down the track, if I believe I'm at a stage where putting a built product on the land is of benefit to me and my investors, then I'll take that step.
But just as part of some of my mentoring, it was hammered into me: Just keep your focus narrow. You know, don't look at all of the shiny options out there in terms of lots of fancy and different development strategies. Just get focused. Get really good at one strategy and then branch out once you've nailed that. So, I also see subdivision as having the benefit of other exit strategies. So, if the land product isn't generating the interest that you need in terms of sales, you can take the next step of adding a built product. And that might be just a normal dwelling. It might be a dual-occupancy dwelling in some councils. It might be a rooming-accommodation dwelling.
But I liked the fact that I was keeping my strategy simple and also my costs low. Like I obviously don't have to get financing and fund building, let's say, six houses before I can start to pay down that. So, that was the sort of two driving things—I guess, simplicity and overall funding.
We learn more about the strategy behind his subdivisions. And Ledingham explains how he is able to find the best deals for his subdivisions.
So, my strategy now, after I have educated myself and learned from a lot of other way more knowledgeable people, is that you need to understand the council area that you're working in. And by understanding that, you know, the zoning of different land, you will know the minimum and maximum requirements of law. You know the density and sizes you can put on land. So, once you have that knowledge, you can assess different sites, and you can get an educated but not conclusive view of what you could do to a piece of land.
And there's lots of different approaches. But, sort of, the one that I took on my first subdivision—to be specific about a project—is that that was a one acre property, and the selling agent knew that it was capable of being subdivided but didn't know how many lots.
From my education at that point, I knew the same—knew it could be subdivided, didn't know how many lots. I had some initial chats with some of my project team and the town planner. They guided me to say, ‘We believe you can do four lots for sure. That's a given, the council zoning and requirements’. And then on that basis, I got the project under my control—or the property, sorry, under my control by putting a purchase contract onto it with a due diligence period.
And then in the due diligence period—that's essentially where you start getting really specific and speaking to the council and finding out what they will generally approve in the case of the subject property. So, that site was in Moreton Bay Regional Council in north Brisbane. And they have an awesome facility where you can book and have a pre-lodgement meeting that you don't have to pay any money for; they're free.
So, all you have to do is book it in and wait about two weeks. And then you can go into council, sit down with them and say, ’This is the property I have. I would like to subdivide it. We're thinking this many lots. What are your thoughts?’. And they'll give you a planning and an engineering view of the development of that site. And they'll give you some written notes to take away from it. And that was the process I did for that, for [that] subdivision, where I got the project, the site under my control in the due diligence period.
I met with the council, and they guided me to say you can subdivide this into six lots. However, if you do want to subdivide it into six lots, you must provide a new piece of council infrastructure in the form of a new road. So, that was the point where the selling agent thought that the site could only have a yield of four lots. But then I discovered I could actually get a yield of six lots—so, a greater profit.
But then, I had to factor in how much it would cost me to build the road. And then that sort of process then takes off, getting your engineering costs nutted out and worked out, and then assessing before your due diligence period ends, whether you are comfortable with the due diligence you've done and whether you're going to proceed with the purchase.
Henry Ledingham Learns From His Experience And Other Investors
There is nothing like having experience. And he talks to us about how his previous life in commercial construction has helped him find deals and understand if they will be profitable.
Depending on what council I'm working in, I really insist on trying to get some consultation with the council and getting their feedback. And it's generally in the form of that pre-lodgement meeting. So, at least, if you go to council with your intention, they can either sort of say, ‘Yes, we will support that’. Generally, they'll give you some feedback as well. I say, ‘Look, we'd support that, but you may have to add this element or you may have to compromise on that element’.
Or, I've had this as well: I've taken sites to council and they've shot it down from the get-go and they've said, ‘No, absolutely not. We're not doing that’. And that's what you need to be aware of. Before you actually get in a position where you go unconditional on a purchase of a property, you can end up settling on a site that is not developable—or, you know, instead of 10 lots, which you imagine you could get, you might only get five.
So, that is my sort of gold standard of due diligence: doing all of the costing and work with my project team, but then also getting council consultation on what they will and won't support. Because at the end of the day, they're the people that will be approving your application and the development.
We expect these successful property investors to have sophisticated ways of getting deals. But sometimes the best deals are right there for everyone, but you just need to know what to look for.
All of my deals, apart from one, so far have just been out there on www.realestate.com.au. So, I had a bit of a misconception when I started educating myself that I must get everything off-market and I need to build up a big network of agents and deal-finders to be able to get a profitable site.
But I was pleasantly surprised by, you know, the sites that I've found so far. Seventy five per cent of them have just been out there, and they have either been sites where people haven't gone to that level of due diligence. Like they haven't sat down with the council and said, ‘Can we do this? I may [have] missed an opportunity’. Or, maybe it's a site where there's some issues that, engineering-wise, someone hasn't been able to solve—whereas the engineering team that I've worked with have been able to solve.
I've only had one project so far where it's come to me essentially off-market. But that is a part of my business where previously I haven't had the time to be able to build up those connections because I was working full-time. But now, I'm starting that process and sort of developing a regular network of agents that hopefully can bring some of those opportunities my way.
Part of that as well with my chosen strategy—so my focus is land subdivision, as I mentioned, but ideally I'm focusing on projects that are between five lots and 20 lots. And I purposely want to attack those projects because I believe that the competition for those kinds of sites is a bit, you know, generally staying away from the splitters and two and three lots of divisions. There seems to be a lot of competition because that's the, I guess, the entry-level development site. And the, you know, people starting development generally start out on those. So, there's a big section of, I guess, you'd call it the beginner development market and looking for those sites.
And then, there's a lot of bigger developers, way more experienced and knowledgeable than me, that are attacking much bigger sites, 50 to a 100 lot sites. But, by me focusing on, you know, just a bulge, the beginner people and below the big boys, I hopefully can get that competitive advantage on the sites that I attack.
Ledingham discusses his property portfolio. And we find out how many subdivisions he has completed over the past few years.
My business has only started this year, so it’s literally only—we're in April now—four months old. So, I've completed four projects today. And this next one, which is a nine-lot subdivision is sort of the next evolution. But that will be the first project with me working in the business full-time.
On 'The Big Why' And The Books And People Who've Made A Mark On His Property Journey
We delve into the motivating factor of the ‘why’ behind choosing the path of property investing.
I have a four-year plan. And the sort of high-level view of that is to help me get to a point with my personal wealth where I don't have to trade my time for money anymore. And the intent of that is so that I can essentially help my friends and family around me. [To] get to the same level of wealth where, you know, if a pandemic hits, then there's no real stress. If you lose your job, then that's cool because you've got, you know, a portfolio or lots of money just as a nest egg in the bank. And the overall intent is, you know, once I can help myself, I help my friends and family. And then after that, the world's my oyster. I can, you know, branch out into any area that I choose.
But that's what I realised over the past four to five years that I was trading my time for money. And a lot of the time was spent working, and I wasn't really having much time to enjoy life. The goal now is to be able to get to the point where I do still work because I love it, but I can spend a greater amount of my time living and helping other people live and enjoy their lives as well.
Ledingham shares with us some of the people that have had the biggest impact on his successful career.
'My strategy now after I have educated myself and learned from a lot of other way more knowledgeable people is that you need to understand the council area that you're working in.'
Matt Jones definitely helped me greatly with joint ventures and [in], sort of, opening myself up to them. I sort of took part in lots of his seminars and education. Someone else who was sort of my most recent mentor is Rob Flux. So, he's based in Brisbane and he runs the Property Developer Network.
So, Rob has monthly meetups in Brisbane that I was attending. And then I reached out to him at the beginning of 2019 when I went. I knew I wanted to sort of leave full-time work. And I asked him if he offered mentoring, and he came back with a course that he has run very successfully and is running still now. It's called the ‘Property Development Formula’. And essentially that course was like a 12-month course that paid mentoring on specific property development strategies and techniques and education.
But then, it also paired another awesome element, which I hadn't really thought of too much before, and it was specific on mindset. So, back then when I did it, Rob was partnering with Tony Meredith, a great coach. And that mentoring over 12 months was essentially lots of, you know—three or four times a month—, focusing on a property-specific mentoring session. And then a mindset session. And those two things sort of built my exit strategy.
That is the real reason that I was able to leave my full-time job when I did. Because without that level of mentoring and that accountability, I believe I would have done it eventually but I wouldn't have done it as soon as I have been able to.
He provides some of his best book recommendations for us.
I read, a couple of years ago, one called, Secrets of the Millionaire Mind. It's by T. Harv Eker. And that was a really powerful book for me in just understanding wealth and how your money mindset or your money or your wealth, sort of, thermostat is created and set. There was nothing really specific about property development in there. But that's a really awesome book just to get a high-level understanding of how your mind works in relation to money and whether you've got a healthy or unhealthy relationship with it.
I read also a book by Steve McKnight, 0 to 130 Properties In 3.5 Years. And although that is sort of more buy-and-hold-investing focused—and it may be a little bit outdated—, the concepts and just the story in there that Steve went through and his success was really inspiring. Like, I read that and went, ‘Wow, this guy has basically charged out and done this all on his own and has been able to make a great success of it’. So, that was really inspiring.
And then one that I've just finished at the moment, which is a bit sort of more business-focused-on-marketing focused is called Sell Like Crazy by Sabri Suby. And that's, sort of, on marketing and digital. And it's something that I had not a great deal of knowledge about before. But it's sort of a one-stop shop in terms of how to approach, you know, marketing and branding and bringing in customers to a new business. So, that's, again, not property development focused, but [it’s] really good for anyone that has their own business.
If he could say anything to his past self from 10 years ago, what would it be?
I would just say open your eyes up to other possibilities—other than being, you know, an employee. Like at that point 10 years ago, I hadn't even really thought about the concept of working for myself. So, I would just say stop thinking about that because there's lots of other opportunities out there for you. And in this day and age, it's getting easier and easier with the information out there for people to do their own thing.
I would also say start finding out about property because I only really started researching and getting my head around property when I was about 33, 34. So, like I would have loved to have gone back in time to when I was 18 and at my first job and just say, ‘Stop and start educating yourself’ back then. Because, as everyone sort of knows that, the time that you're in the market is a massive advantage even if you don't have the means to be doing much in the market at that time, and it just helps a massive amount.
[I would] just say [to myself]: ‘Find out about property and think outside the box in terms of employment. You don't always have to work for someone else.’
How much of your success do you think is due to skill, intelligence and hard work? And how much of it is because of luck?
I think that 90% is skill, hard work and intelligence—that there's always an element of luck. And sometimes that's bad luck. I was thinking about it in the sense of, you know, the pandemic that we've recently experienced. No one really could foresee that. And in most cases, even though there's, you know, short term challenges and hardship, it's only a small percentage. And if you just keep cracking, that skill and hard work and educating yourself and getting more intelligent about what you're doing, that will always overcome it.
So, I'm a big believer that hard work and drive overcomes luck and chance any day of the week.
Brendan Shine is a buyer’s agent and investment consultant. His love for property has allowed him to help others acquire wealth and leverage equity through investing with his consultancy and buyers’ agency, Strategic Property Acquisitions. After realising he would never earn a sufficient income for himself working as a baker, Shine jumped into the world of property investment and where he has now purchased six houses, four duplexes, two blocks of units and one boarding house.
Join us in this episode of Property Investory to hear how Shine was inspired to get into property by his boss at the bakery, how he and his wife managed to purchase 15 properties and his worst investing moments and what he learnt from it that could ultimately inspire you along your journey!
'At the end of the day I was only ever making someone else rich. I was never going to be able to make the big piece of the pie just being a worker.' Brendan Shine
We find out what Brendan Shine does and what his job description is.
I currently own a lawn and garden maintenance business, which I've been running till the last four years, which I have built up to 130 regular clients. But property is my passion. I've been investing in property for the last 16 years. And last year, I decided to put my experience to work full-time. And I'm in the midst of starting up the buyer's agency business—that's where strategic property acquisitions was born.
He delves into what a typical day looks like for him.
During the week I generally try to get up around 5 in the morning. First thing I do is get my coffee machine on; I [have] got to start the day with a coffee. In my house, the first hour of my day is generally the quietest. So I try to work on my mindset. So, I listen to a podcast. Or I try to read a book—and I've always got a book or two on the go at the moment.
And then generally around 6 o'clock, my two little girls generally wake up. And that's the end of my mindset-work for the day. And I generally help organise them with my wife, get the breakfast, get the lunches, and get them out the door by about 7:30 a.m.. And as I mentioned, I run a garden and lawn maintenance business. So, at the moment I'm working two to three days a week there.
I've got a guy working with me as well. So, I organise with him if I don't need to be there. Or I work with him and the other days I’m building up my buyer's agency business. And so I spend my other days on that. And Saturdays, I'm getting out to open homes, getting to know the local real estate agents and what not. And as opposed to the BA business, my time is spent over developing relationships with brokers and agents.
I’ve spoken to a couple of clients so I've already gotten potential clients that I've been introduced to. So, I'm doing that. And I'm researching and doing properties on behalf of those clients and coming up with strategies and consulting on investment strategies that they may want to be doing, and looking at the trends, and I've been creating a few feasibilities. One of my clients is looking at doing a duplex, so we're just going through that process at the moment to see what it will cost—if it's worth doing or not worth doing. So, that's generally my day.
Before he was interested in property, Shine discusses how long he has been in the lawn and maintenance business for.
I've been in that business for the last four years. So, I moved back to the Gold Coast four years ago. And we had decided we'd build our family home. Then we built on the North Coast, up from the Tweed. So, I was with the builder and I had spoken to him. And I said to him I would like to work from the beginning to the end on a build just to learn all the procedures along the way. Like, I've done a lot of renovations over the year, but this one was a complete build. So, I wanted to spend the time; we had the money there, so I wanted to spend the time. And there was a delay in our starting of the build. So, I thought, ‘Well, what am I going to do while I'm waiting?’
I've done a bit of landscaping; my dad's a real keen gardener. So, I thought I'll just start my own lawns—that will keep me occupied until we start the build. Well, next thing I knew, I had 10 customers, 20 customers—and yeah, over the last four years, I've built it up to 130 customers, a full-time business. I did have two guys working with me. But as I said before, my passion really is property. So, last year I decided I'm going to change that.
And you know, I came across and listened to a few podcasts, heard about buyer's agents and that struck a chord with me. That was something that resonated with me. So, I made a decision last June to start transitioning out. So, I'm at that stage now. I've got all my licenses. I've got my business ready to go. And I've just secured a buyer for my business three weeks ago—and hopefully that will settle next week for us—and then, we'll hit the ground running.
From Becoming A Chef And Baker To Diving Into Property
Before discussing how he found himself in property, Shine shares a bit about his upbringing.
I grew up in a town called Laidley, an hour west of Brisbane in Queensland. It's just a farming town they have towards Gutten. So, that's where they grow a lot of your fruit and your veggies and everything. So, yeah, it was just a country town. I think it was about 15,000 people in the town.
Did you go to school around there or did you have to travel out?
There was a school there in town—about 600 people in the high school. So, I went to high school there and got my first job out there when I was at the end of Year 9; I started working at KFC. My mum decided it was time for me to get a job. So, she came home one day and she said, ‘Here is an application for KFC. It's opening up the next town across, and I want you to apply’. So, I started working there.
Mum would drop you off over there as well too and pick you up?
Yes, my mum dropped me off over there. I wasn't the brightest student. You know, I just trodded along. But, yeah, mum thought it was time for me to get a job—so I went.
Shine delves into how he got into the workforce once he finished high school.
I started off in KFC when I was just coming up to 15. And I worked there for nearly two years. And then in Year 11 at high school, there was a traineeship offered as a chef at a campsite about 20 minutes out of town. So, I applied to that because I enjoy cooking and hospitality was something that I did well at school. So, I applied for that, and I got the traineeship out there.
So, I did that for two years while I was still in Year 11 and 12, and I worked out there. And then after school finished, the first year afterwards, they took me on as a cook and I worked out there for another year as a cook. And then I decided I'd had enough and I wanted to move to the Gold Coast. So, I moved down to the Gold Coast and I got an apprenticeship as a baker pastry chef. I've got a bit of a sweet tooth, so I thought that would definitely suit me.
What inspired you to become a chef?
Well, my mum used to bake every Saturday. And I would be there at home, and, always, I used to enjoy doing that. And as I mentioned, I have a bit of a sweet tooth, so it was something I did well at school, and I wasn't the most academic student. But, you know, I was good with my hands. Like I said, I enjoyed cooking, so I thought, ‘Well, why not?’. At that stage, I was like, you know, ‘This is something I like’. It was never about the money or anything. It was just something that I enjoyed. So, I was like, ‘I'll pursue that’.
He goes on to explain how long he was a pastry chef after he moved to the Gold Coast, where he actually began his property journey.
I moved down to the Gold Coast, and I worked for one place for about six months and then they shut down. So, I went to another bakery down at Kirra and, actually, that's where my whole property journey really started. I started working there with the owner, Todd, and he also was into network marketing and passive income. So, that's where he started to talk to me, you know, at one o'clock in the morning—you know, not much really to talk about, no one else was around.
And he started talking to me about, you know, that he was also involved in network marketing and passive income and started introducing to me all these different concepts about passive income. And he was training me to be a baker, pastry chef. And there was nothing to stop me from in four years going up and opening the shop down the road and being his competition.
But, you know, if you have a passive income, or as he was in with network marketing, he could train me up, and I would be able to earn a passive and he would own a part of it. And that really just opened my mind up to a new world. So, yeah, it was working for him. He started talking about that. And that started getting my mind thinking more about, you know, there's more than just working for the money. I could see how he was living—you know what I mean? He had a very nice ute, and it wasn't due to the bakery. It was due to his passive income from the networking that he was involved with.
Shine delves into more about his previous boss, as to how he was involved in network marketing and managed to run a bakery business.
Him and his partner own the bakery, and it was called Ocean Breeze Bakery at Kirra. So they had been running their bakery, I believe when I came along, maybe about six, seven years, and they had been introduced through someone they knew about network marketing. So, when I came along and started working in the bakery, as I mentioned, in the middle of the night, he would spend his time with a young 21-year-old, and we would talk about saving. And he started talking to me about money and putting ideas in my head.
And after a few months, he had introduced me to reading Robert Kiyosaki, which was, you know—that was mind blowing when I started reading Rich Dad, Poor Dad and all those other books by Robert Kiyosaki. It just opened my mind to the possibilities and the different quadrants and learning that I was just an employee and, at the end of the day, I was only ever making someone else rich. I was never going to be able to make the big piece of the pie, I suppose, just being a worker.
Discovering his passion for property in such a peculiar way, Shine discusses how long he was in the pastry chef business before he eventually moved on.
While I was in my first year as an apprentice with Todd and Tracy, the owners, there was a girl who worked out the front of the bakery. She was doing it while she was at school. And when I came along, she was just finishing school. And her name was Rhiannon, who is now my wife. So, Tracy was talking to Rhiannon at the same time, and Rhiannon was, you know, she'd been saving up money for the previous three years when I first started there, and she was ready to buy a property.
She had read everything. She was as keen as could be to buy. So, when we started to date, I was already reading and because, obviously doing night shifts, I'd be finishing around seven, eight o'clock in the morning. I would then have the day to read. And she started uni, so I would catch up with her when she was at uni. Or sometimes, I was reading and she was really keen—so that's what really formed the propulsion.
Within two years, we'd saved up enough money, and we knew we wanted to buy a cash flow property. That was our aim. We weren't worried about growth. You know, at that stage, I was on a limited income period. As an apprentice, you don't earn a huge amount of money. Rhiannan worked casually. So, between us, we had saved up $30,000. And one day she was at uni and she was skipping a class, you know, as uni students, and we came across Mount Isa—and I'd heard of Mount Isa, and it was a mining camp, but didn't really know much about it. And she sent me an email saying, ‘I found this house for $130,000. Four bedrooms, one bathroom, single garage and only one $127,000 for it. And the rental on it is 260’. And I was like, ‘What?’.
We had been looking for probably a good 12 months by this stage, going around Brisbane, Gold Coast, gone out sort of West back towards Ipswich—and we couldn't find something that met our criteria, our strategy. So, when we came across that, all of a sudden, we both did a bit of a deep dive into Mount Isa. And we had learned that xstrata had just come into town previous to this and was putting a lot of money into the town and that they were expanding the mines. So, we jumped in. And that was our first house. We bought that—I was only in my third year of my apprenticeship—and, yeah, we made our first house.
The former pastry chef shares with us the kinds of baked goods he would create in the bakery before he fell in love with property.
We did the normal bread run—so, your wholemeal, your white, your multi-grain, your sweet buns. And then we also made everything from scratch in our shop, so we didn't buy anything. We made all our pies, our pastries, all the different flavoured pies. And then, just your standard sponge cakes, eclairs, jam and cream donuts.
You know, it was a standardised sort of bakery. It wasn't a high-end bakery being right across from the beach there, Kirra. So, we got a lot of surf guys coming in, people down on the weekends, and then people in the local hotels and resorts would pop in for a croissant or a muffin. And they also made basic sandwiches and cappuccinos and everything.
Brendan Shine looks back at his time at the bakery and delves into where he learnt his money skills.
Working with them, to tell you the honest truth. I wouldn't work out the front much, but my wife Rhiannon, she definitely did work out there. And she definitely learnt the cost [of] things that would come in and out. But, I suppose for me, where my money skills really came from was from my parents. My parents were, you know, average people. My dad's on a disability pension as I grew up. He had an accident in the late 80s, and he was put onto the pension because he couldn't stand up for too long, couldn't sit down for too long.
You know, we're a comfortable family. But my parents had very good money management skills and they put away their money. They knew what bills were coming up, and they would put away a bit of money every week towards those bills. That definitely was an impression on me. So, when I started working, my mum and dad gave me a little folder and they said, ‘Right, okay, you've got rego, you've got fuel, you've got maintenance of your car—if you're working now, you're going to need equipment’. So that was a very good installment in me.
So, I started putting away my money every week. And that's how I ended up saving my money. I mean I wasn't a big party-person—and, obviously, working, I worked six nights a week in the bakery so I didn't go out a lot. So, I was able to save my money, and that's where we started off. I think we sort of got into property. And we read the fundamentals from Robert Kiyosaki and other books, and we put them into practice. And, I think, we were both very eager, and we sort of just jumped into the deep end and learnt on the go. It was really a baptism of fire.
From The Kitchen To The Mines While Property Investing
Shine shares with us the next path he took after working in the pastry chef business.
I did that for three and a half years. So, I was in the bank for about two years. We bought our first property, and we bought our second property within a couple of months. Our mortgage broker at the time said...well, we only put down $15,000 on the first property. At that stage, the banks were lending out money, hand over fist. So, you know, we borrowed 97%—and we rolled everything in, and it only cost us just under $15,000. So, the lender said, ‘You could buy another property’. We were like, ‘Can we?’. So, we literally went back out and looked for another property again in Mount Isa because things were starting to move.
And that's where we bought our second property. It was a three-bedroom, one-bathroom, double-garage, a fully-renovated house. [There] was a divorce that was going through. So, it was a stunning house. That was $127,000—and at that stage, it was rented for $260 a week. So, again, it was cash flow positive. And it wasn’t a huge cash flow, but it was paying the bills and putting some money into our bank account every week.
It sounds like you were able to pick up bargains at that point in time as well.
It was. We were at the entry level of the market and, you know—my parents seeing what we were doing—and my mum was a bit cautious about it, but my dad, he was quite pleased. And he said to me, ‘Well I've got a little bit of money saved up. I'm not getting a huge interest’—and because I was always talking, ‘Oh, I want to buy another one. Property is so cheap’—so, my dad turned around and said, ‘Okay, I'll lend you $50,000, but you have to pay me up 2% higher than what I'm getting at the bank’. And I was like, ‘Okay, I can do that’. You know what I mean? Why not? It's just sitting in the bank. I was very fortunate that my dad had faith in me.
He could see what we were doing and what Rhiannon was doing. And yeah, so he helped with his own money. So, we very quickly, or about another two or three months later, we had built a very good relationship with the agents up there. And one of the agents came to us and said ‘We've got a sale’. Again, it was another divorce settlement. They just want to sell it for what they owe as the mortgage, which was $97,000. And so, we bought that.
And about two weeks after it had gone unconditional, the agent said, ‘Would you be interested in selling it?’. And we're like ‘not really’. She goes, ‘I've got someone who's really keen. They were looking at it, but they couldn't act quick enough’. And I said, ‘Okay, well what can we get for it?’. And she said, ‘Well, I'll go talk and see what we can do’. She came back, and they offered us $129,000 and we went, ‘Sold’.
So, in a very short period—once it settled and went through registry and everything and we were able to sell it—we were introduced to the whole flip concept. We'd been reading Steve McKnight and other ones, you know. So, we thought we'll put that into practice. And so we sold that one. And it wasn't a huge profit on it, but, you know, it was more than a year's wage for me in the bakery. So, I couldn't complain.
Since then, how many properties would you say you've bought, sold, or even have in your portfolio at this point in time?
Over the last 16 years, I've probably had about 14 to 15 properties go through our portfolio. I currently still hold a couple of properties in Mount Isa, and we currently hold seven properties at the moment. But we started off like I said in Mount Isa when we bought the two houses, then we flipped one. And then, with that bit of money we got from that and the bit of money that my dad had lent me, I started doing more research.
And one day, while I was researching, I must have just put in houses, because that's all I thought I could afford—I didn't want a unit or a townhouse, and I must have open-searched—and it came up with blocks of units. And all of a sudden, I’d seen a house and it said, ‘One bedroom, $115,000’. I thought, ‘Oh, that can't be right’. And I went into it, and it was an old house that had been split into full one-bedroom units and it was for sale for $115,000. And I went, ‘Hmm’. I rang the agent and they said ‘Yep, that's right’. And I said, ‘How much are they renting for?’. She said, ‘$80 a unit’—like $360 a week. Yeah, so that was our next purchase.
And that was a really big aha moment for me. It had been my reality that we could only buy houses. I didn't even dare dream that I could buy a block of units; it just wasn't in my reality. So, you know, once that happened, all of a sudden I'm like, ‘Well, if I can buy this, what else can we buy?’. So, we're fortunate we still had the money. So, a few months later we came across a bedroom boarding house.
That was $150,000. And at that stage, they were renting for about $60 and $70 a week. So again, I think it was about 25% return on our investment on that one. It was a rundown place, and we knew we were going to have to do some work to it. But, at that stage, we were like, ‘Okay, we can do this’. So, that was where we went. And about a year or so after owning those properties, I went up to Mount Isa to have a look at one of our rentals because the tenant had moved out. And then, the agent had said to us, ‘You know, it probably needs a bit of work’. And as I said, we like to jump into things. So, I decided I would go up there and put my handy skills to work, which I had never done before, but I thought, you know, why can't I do it?
I went up, and it needed new carpets and painting. And I thought, ‘Yep, I can do that’. And then, while I was up there, one of the neighbours, who was an electrician who worked up at the mines, he sort of said, ‘Would you be interested in a job up here? What are you doing?’. I thought to myself, they're not going to hire a baker. You know, I've got no skills in the mine. And he said, ‘Just write up what you've done, what you're doing’. So, I did that. And 24 hours later I got a call from a superintendent at the mines, asking me to come in for an interview. And two weeks later, I was working at the mines and I gave notice to my boss. And, yeah, I decided I would work at the mines.
At that stage, I was still dating. And Rhiannon was still at uni down there. So, obviously, before I accepted the job, we had a bit of a conversation about all that. We weren't living together at that stage. She was still living at home. I was living back with my parents. My parents had in this time bought a house down on the Gold Coast, and I moved back home to help save up my money. And, obviously, because I was working night shift, I didn't really interrupt with anyone else.
I was sleeping during the day and then I got up at night. So, it worked quite well for us. So, I decided I would move into this one-bedroom unit of ours and I would, like I said, I would renovate while I was there. I started working in the zinc lead processing plant there. They mined zinc and lead; it’s one of the mines up there. And, yeah, I had no clue what I was doing. But I turned up on my first day and they said, ‘Okay, you're staying underneath this machine, and you just hose the concrete’. And I did that for 12 hours.
It sounds very much like using your hands, and you've got a very strong skill set in that. It wasn't really too much of a difference except that, instead, you'd be standing there for 12 hours.
It was amazing at that stage. I think it was about 2006—they were really looking for people. So, I went onto what they called the ‘pool gang’, which is just maintenance—so, hosing up underneath the big grinding mills where they grind down the zinc from the lead so it can be processed. Doing basic repairs with things—but, yeah, I was doing that for about two weeks. And then my supervisor asked me if I'd be interested in going on shift and I'm like, ‘Well, what does that entail?’. He said, ‘Well, instead of doing Monday to Friday, you'd start working four days on, four days off, four nights on or off, and basically, you'd be working up here where they learn how to process—like grinding, floatation and all of that’. And I was like, ‘Okay’. And I got a $7,000 pay raise. I was like, ‘This is great’.
So, I went up to just over $70,000 coming from a bakery job where I was earning about $30,000. I was wiping my hands, thinking this was the best.
With all the properties he has invested in, he shares one of his worst property moments.
I would say my biggest thing I have learnt was when the GFC hit. We bought a boarding house, a share house combination. And we bought that in 2006. And while I was working at the mines, we started renovating that property. And, you know, we spent nearly $100,000 on completely gutting the place and redoing it. And at that stage, there were a lot of companies coming into town because things were going quite well with the mining industry.
And we ended up landing a tenant who would take over the whole property. And they were an earthmoving company who had contracts with smaller mining companies. So, we had a lease with them for three years. It was set up at $104,000. It was fantastic. And next thing, the GFC hit and the company who we had, they were fine. But the smaller mining company that we were doing a lot of the work for went belly up. So, they didn't pay their invoices, which then meant he had to let go of his guys, and then, he couldn't pay the rent on the property.
That was a very big wake-up for us. We were fortunate that we had the buffer there to cover the drop in rent. Overnight, we basically lost $2,000 a week in rent. And there was no one there that we could take on. You know, a lot of the companies were scaling back down. So, it was like, ‘Okay, we really need to be aware or not take it for granted’. I think, at that stage, it was all roses. Everything was fantastic, and we were acting like this was going to be forever. And that was something that caught us out.
So, we were fortunate that when the GFC hit, we had a buffer. We had been doing the work on the other properties. We had renovated some of those properties and we had drawn down equity. And we had sold off two of the houses and one of the blocks of units we had bought. We had cashed up. So, we were fortunate. But that was definitely a big learning curve for us, which we still hold today.
What happened to that particular property? Did you just completely ride out the wave and then all the other properties sort of helped that one out?
That's exactly right. Actually, it was nearly vacant for a year before we could. So, it sat there. It wasn't boarded up, but we had a big electric gate on the front of the property. So, that was shut off. And we used to have chairs and tables outside—because the way the property was set up, it was a big long veranda that led into eight different bedrooms. And there was a kitchen and a bathroom and a laundry in the middle of the building.
So, we used to have tables and chairs out for the guys. We had a couple of barbecues there. So, basically, we packed everything up, shut the gate on it, and put a lock on it until we could find a tenant. We didn't want to just put individual tenants back in there because we had had a lot of trouble with that. So, we just basically decided to ride that out until it came to the other side.
That would have been quite a tough challenge. Especially when you say it was like $2,000 a week. That's almost $100,000 of income per year.
It was a massive loss. And, like I said, we were just fortunate. Our mortgage on the property at that stage was only about $220,000. So, it was more the passive side of it that we had lost and—and we weren't living off the passive income. All the money we were generating up until then, we were just putting back into it. We didn't have kids, and we were very bullish about our property. So, basically, as the money came back out, we were growing and learning new skills; we were reinvesting.
So, it actually turned out, when that happened, we were in the midst of building our first set of duplexes back on the Gold Coast. And we were lucky by that stage. We had moved into using a business banker. And when this happened, he said, ‘Well, you're already all pre-approved. You've got the cash buffer there. It's not going to affect you’. So, you know, there were a few nights of ‘Is this going to affect our build?’. We've got a construction loan, but we were lucky it didn't affect it. So, the rent would keep moving on. And we would ride it out until we could get another tenant in.
How to Get Rich Quick with Brendan Shine
Brendan Shine talks about the aha moments where everything just clicked for him.
To tell you the honest truth, my aha moment is something that is always evolving. It really is. We have been growing. Like I said at the beginning, we started off with looking for cash flow. That's what we were looking for. And then as we bought properties and we came across a multi tendency idea, our mindset grew. And that's something I've always tried to keep going—always to try to keep learning.
The day you stop learning is the day you die. There's always new strategies out there, you know what I mean? But in saying that, once I get to know a good strategy, stick to that strategy, try to make it. Once you get to know it, it becomes simple. Don't need to complicate it, just stick to it, you know? And I've always been evolving. So, I wouldn't say I've had one particular aha moment.
I'd probably had many small moments as we've gone through. We've jumped in—and doing our first development, we just sort of jumped in and went ‘Okay’. And we learnt as we went, which then when we went to the next one, we took a lot of those of what we've learnt and applied it to the next one. And it's just continued to fold. And it's given us experience over the years to be able to come into new properties and to be able to see pitfalls straight away, which we wouldn't have picked up five years ago or 10 years ago. We agreed to it then.
So, we've always been hands-on and learning. I love to read books, but reading books is nothing compared to actually doing it.
Adopting The Right Strategy On The Path To Success
Shine shares the kind of strategy he has adopted to help him succeed along his journey.
Currently, we've got a good passive income sitting there. So, in the last, probably, eight years, we have started to move more towards development, trying to build chunks of cash. Again, as I said, when we first started out, it was about cash flow, and that's what we wanted. But we learnt over the years—and as our equity grew in the properties we had and when we started renovating—we could see the amount of equity we were building into the properties all of a sudden.
And the mindset started to change too. We don't just want cash flow. Cashflow is great, but these bigger chunks will enable us to buy a better lifestyle, which, you know, having that basic income wouldn't allow us to do. In 2009, we decided we would try our hands at developing. And after much research, we found a block of land on the Gold Coast on the northern end of it.
A builder—I think there was some sort of health issue—and he had pre-approval to build a sedentary plexus three bedrooms, two bathrooms, double lockup garage on a corner. And he basically just wanted to sell it for what it had cost him. So, he offloaded that to us. We were fortunate that the agent at that stage knew a small builder and put us in contact with him. So, we ended up buying the block of land.
That was just $300,000. And when the builder came in, he said he could build it for $345,000. And the agent had given us appraisals that we would be able to look at selling it for around $400,000 a duplex. So, at that stage, we were like, ‘Oh, those sums that up’. So, we jumped in, never doing it before. But we thought you got to learn on the go. And we learnt many things through the build—what included, what's not included.
When we started doing it, we were on a bit of a hill, and they started building this big cutout. And I said to them ‘What are you going to do here?’. He goes, ‘Oh, that's not a part of the build. That's outside of it’. So, all of a sudden, we had to do retaining walls, which weren't included in it. So, it was a lesson, you know what I mean? Next time we knew. Just because the builder says it's going to be X… You know, they always say you got to have those contingencies, but we didn't have the full side.
We couldn't see what would happen. You know, we knew they were going to cut the block but we didn't think, ‘Okay if they cut on the block that means you're going to have more retaining, you're going to have to do something with that’. That was oblivious to us at that stage. So, again, it was a big learning curve.
He goes on to explain how he has learnt from his mistakes by recognising them as life lessons.
It's the little things that are hidden. We did a renovation on one of our units late 2009. And we replaced everything in the unit, cleaned it all up. But the only thing—it was a partially furnished unit—the only thing we didn't replace was the washing machine because it's only a couple of years old. It's all good. And two months later [we] got a call, the connection had busted and we had water everywhere through the place. And the washing machine had also broken down. The one thing we didn't do failed, you know. We had tiled floors. Like, it wasn't a lot of damage, but it was just funny that we've replaced everything else. Ee replaced the fridge and the oven. But the one thing we didn't replace, because it was only a few years old, was the thing that failed on us.
It's one of those lessons. And now, when we go in, if they're partially finished or renovating, we'll just sell it and we'll just replace it. So, it's all new. It's under warranty. So then, at least if something goes wrong, you've got warranties on it. Take out the extra warranty when you're buying it. When they offer it to you because, you know, as your own stuff, you know you've gotta look after it. But tenants, you know—some are fantastic and they look after everything like it’s their own. But others, they're not so concerned, they're rough.
Things break and you can't say, well, you know you can't just point your finger and say, ‘Well, you broke the washing machine’, because it could have been faulty. But it's safer to just take that warranty out, that extra bit of warranty. And you can just ring up and say, ‘Okay, this has gone wrong. I've got the warranty’. And they'll come out and repair it or replace it, whatever it is.
Since jumping into development, he shares more of the details and whether he ever sought out consultants to help.
In the first one, we [didn’t], because we thought we were being smart. We bought it all pre-approved; it had been through DA, the town planners, everything had been done. We were handed a set of building plans. All we needed to do was take it to a private certifier to get him to certify the building plans. We had all the working drawings. So, in a sense, we jumped a massive step of it, which, you know, we had done a whole development and built these duplexes. But we had never sourced the land and taken it through. So, in that case we didn't.
But the next one, which we bought, we had to do a material change of use. So, we then had to hire town planners. And we went from scratch, taking it as a rural piece of land. And we liked buying corner blocks because we can always split the houses so that the houses face onto each separate street—so they look like individual houses. So, when people come down they go, ‘Oh, that's a house around the corner, that's a house’. And people get a bit more privacy, which we found was always a comment we got when people came through the house. They'd always say, ‘Oh, we thought this was a house being built. It’s so great that they're completely separate, you're not on top of each other’.
How many of these types of developments have you done so far?
We have done four sets of duplexes, and we've also done three houses now. So, we've basically done nearly one a year. So, like I said, we did our first one in [the] end of 2008 into 2009. And then, [at the] end of 2009, we bought another block for Stocklands. And then, as the GFC was hit...because Stocklands wasn't moving the blocks, they actually contacted us. And they said, ‘We have another block, which is only three lots up from yours. And the builders pulled out. We'll give it to you for what we had offered it to the builder who was 30,000 less than the previous block’. So, it was great. So, we had paid $282,000 for the first one from Stocklands and next thing, they offered the next one at $250,000 to us.
We really wanted to do it, went to the bank, and they're like, ‘Well, you're starting to get stretched here’. And that's when I went back to Todd from the bakery. By this stage he had sold the bakery. And I said to him...because we'd stayed friends after I left the bakery and I told him what we were doing—and he said, ‘You know what, I'd love to be a silent partner in this. You guys are doing so well’. So, he came on board as a silent partner and put up 50% of the funds. So, that was our first experience into joint venture. So, we literally had two blocks. We were building on one while the other was starting to go through again. We had to do another material change of use again.
By this stage, we had a good town planner and, on board with us, my partner's father—he was a draftee, so that was fortunate for us. He designed our house or duplexes for us. So, my wife sat down with him and sort of said this is what we want. And [he] made them unique. And that was another key point we had sort of learnt after doing our first one. Because we'd bought from this other builder—we had learnt after that he'd probably done about another 15 sets of these duplexes that were identical. And, at that stage, we didn't know—we knew he was a small builder, but we didn't realise how much he had done in the estate. So, we were fortunate that we had Rhiannon’s father who was a draftee and very creative. So, she sat down with him, and they came up with designs that would suit the block.
We made it—we looked over the state forest—so we made it so each bedroom had a bit of a view. And, as I said, we split the block so that each one had their own driveways on a separate street. So, they look like individual houses. It didn't cost a lot more to make them unique, but we decided we wouldn't go with the cookie-cutter sort of design. We would make them unique. And we would aim towards the owner-occupier. And, at the end of the day, we sold each of them to an owner-occupier.
And, actually, at that stage in 2010–2011, we actually got the highest prices for the duplexes in the estate. Most duplexes were going for around the $400,000 to $415,000, and we had achieved $425,000–447,000 over those four. So, you know, everyone was willing to pay; they valued up. I mean, you could buy a house and the estate of that stage for that same price. But they were unique, and they were a bit different. And that was their selling point.
A lot of investors just want to do the cookie-cutter process—get it over and done with. But when you actually put a little bit of detailed time, you can actually achieve a much better result than just to go with the standard stock-and-bill.
It doesn't have to cost that. And that is one thing over the years. And speaking to other people, you mean, a lot of them just go, ‘I'm just going to buy this house and land package’. But they don't consider that there's probably another 50 of those identical houses down the road. They're like buying a townhouse. What makes yours unique to the next house down the road? Why are you going to get a better price than the guy down the road? You know what I mean? You've got the same layout, the same everything. You've got a lot more competition. Whereas if they're unique, when people came in, they fell in love with it. It was different. They couldn't go out and purchase that anywhere else.
So, for us, that strategy was that we would aim towards our own occupier. We would play on their emotions, that they would fall in love with the property. And we knew that they couldn't find that somewhere else. So, it was unique and that was our strategy with those duplexes, to aim towards that market. And it worked out at the end. We got a good price. We were very happy with it.
Shine shares more about his portfolio, and how many properties he is currently holding.
I currently hold seven. At the moment, just on our investment side, the value would be about $2.7 million in value. And our debt ratio is about just under $2 million for everything. But then, as I said, we've always held a high ratio, so, whenever we could, we would redraw out the equity. So, we also have another $176,000 in offset accounts, which we've drawn back out of the property so that we're ready to go. So, if we find something, we're not having to go to the bank and trying to show our savings.
We've generally got a good deposit, plus from our other developments, we've built up a good cash base to be able to fund to get things started. So, yeah, we currently sit around 80%, which is high. I suppose, for us now, we've got two little girls, we will start to bring that back. But when we were younger and we were hungry, we were happy to ride on the edge of it all.
It's really interesting. Just the reason why I ask that—because you've got passive income coming from those properties, is that right?
That's right. So, at the moment we derive just over $4,000 a week in rental income. So, we definitely have cash flow. So, again, we've had most of these property sales. We did a few more houses back in Mount Isa in 2012 to 2014. I went back working in the mines, and we ended up doing prefab houses up there this time around. There were some blocks of land that were quite cheap, and rates were starting to go back up again. So, to build up there was taking about six months. And it was about $2,000 a square metre, which meant your house is going to cost $450,000 plus to build a basic house.
We ended up doing prefab. We found a company called Westbuilt out at Warwick. We got houses built for about $270,000 a piece. They were three- and four-bedroom prefab. They took them eight weeks to build. They brought them up on the back of their trucks. They sent their guy out two days before. And he just drilled the pier holes where the house was going to be reversed in. And they literally reversed these two pieces of the house in, dropped it down, and put it back together. And all they had to do was patch up the plaster work inside, pull out the tiles, and then our electrician would come in and install the air conditioners. And the plumber would come in and connect everything up underneath.
But everything else was already in the house—all the kitchens, vanities, cabinetry, carpets, fans are all there. And then I would come in on my days off from work, and I had some friends that helped me. I did all the landscaping, everything. So, pretty much from the day we said, ‘Let's build this’, it took us about four months to have it complete. They would have all their side done. And then that was just me working four days on, four days off. I could have done it quicker if I just hired someone in, but I liked using my hands.
So, I did all the landscaping, installed irrigation—because, you know, it's Northwest is quite hot up there. Again, it's going to be tenants. So, I installed irrigation systems just to make it as low maintenance for them as possible, and so that was the last fall. And we re-rent them out now to Queensland ambulance, Queensland police, school teachers; they bring them in. So, when we decided to do that, that was that strategy in Mount Isa.
They want to bring people in. They want to give them a nicer home. A lot of the houses are quite old, and so they struggled to get people into the town. So, when they were looking for a property, they always went to new properties. So, at that stage, that was our strategy to aim towards them. And that has worked out quite well. We’ve had a Woolworths manager in one of our properties for five years. And, like I said, we've had the other services. They just basically change out their people. If someone gets transferred, they just generally put the next person in, which has been fantastic.
Despite prefab saving time and money, Shine discusses why many aren’t choosing to use it.
Do you know, I think there was a stereotype. I know I had it myself. And when my wife first brought it up with me, you know, ‘Oh, maybe we should look at this’, I was thinking that they were going to be very simple, very basic laminate sort of style that was going to be not appealing. I was thinking old cabins—you know, you go to a caravan park and you get those little cabins, and that's what I was expecting. And when we went to our first one, and I went into the display house, I looked at it and I honestly thought there is no difference between this house here and our house at home. You know, they're both brand new.
You have all the mod cons. You can have whatever you put into a normal house you can put into these houses here. So, in our case, once they went on site, 99% of people couldn't tell that they were prefab. They just thought it was a house that was sitting 800 up from ground. You could not tell at all.
Even though we see videos and marketing material behind it, people just don't accept prefab or take it on board as they should. But it's just fascinating. It might be a huge market here potentially to do this because it would spice things up.
I think it is. Honestly, it is fantastic. And the other side of it, where they were building our houses, I had two teams that would work basically from six in the morning till 10 o'clock at night that would come in and you could keep working. There's no wet days; there's no downtime. You know what I mean? You have them on a production line, and they just literally move them along.
Honestly, I think until someone can see it, they then realise the quality of them. They just don't. It's just that perception that they're of lower quality—they're not going to be as high quality as a standard brick and tall house—which is not true at all.
Once you've actually profited from these developments, did you reinvest that or put that money back into the portfolio to pay it down? What did you do with those funds?
With the duplexes we did down on the Gold Coast, at that stage with the first set, we kept one. Well, actually my parents came to visit the building site we were on, and we looked over the Nerang State Forest. We were halfway down a bit of a hill, and my parents loved one of them. So, they said, ‘If you're happy, we will buy one off you’. So, we sold one to my parents. And at that stage, I had moved back to the Gold Coast due to family issues, and we were renting near Robina. And as we were progressing, we thought it would be cheaper to live in this other duplex. So, we decided to do that.
And due to us always having investment properties, and, at that stage, the $21,000 was available as the first-time owner’s grant. My wife decided she would...because we had built it underneath a company structure. So, we sold it from the company structure to my wife in her personal name and she was able to apply for the $21,000. So, that was a great bonus to have. It was very handy. And she then took those funds and set up her own.
She has an online travel business, which obviously today at the moment is not the best, but she set up a travel business doing travel accessories, travel products, which was a passion of hers. So, she took those funds to set up her business. But the next two lots that we did at that stage, we decided to sell them. Looking back on that now, that probably wasn't the smartest idea. With the growth in them, we should've kept them.
But at that stage, our mindset was, ‘We will build; we'll take the chunks out of it’. And so we did that. So, we took the money out, and we reinvested it. When, like I said, I had the opportunity to go back up to Mount Isa, this time I went working underground—and because I don't like sitting around on my bum. We were offered the blocks of land. We found three blocks of land in Mount Isa over an 18-month period. And we did the prefab property. So, on my days off I would be working on those properties, maintaining the other properties. We were very hands on.
And so, we did that up until 2015. By that stage, we had our first daughter Isabella. And my wife, you know, we were struggling living out in the middle of nowhere without any family, which is completely understandable. So, we decided we would relocate back down to the coast. And it must've been the right time because I went into work to handle my notice to say that I wanted to resign. And there was a big work meeting and they said, ‘We want 200 people to take redundancies’.
I've always been a big believer that things happen for a reason. When you put it out there into the universe for whatever reason, it always comes back in some form. You know, you may not recognise it. But when I look back on it later, I’m always like, you know, we were looking for something or I was confused about something, and next thing the answer just seems to appear.
So, we had decided to move back. My wife took some time off work. And we relocated everyone back down. And I thought at first I might do fifo, we'll see how that goes. And that lasted like two months. And that's when we decided ‘No, this wasn't working out’. So, like I said, I went in to give the notice and they put up the redundancies. And so, I had to work another two months.
That was the catch. They weren't ready for everyone to go straight away. But I took the redundancy, and I came back to the coast. And we had our block of land already down at Lambeau Heights in Northern rivers, standing on the Tweed. And so, before I left, we had whatever equity we had in our properties. I had a good income, and we got our house plans drawn up for our family home—our forever home—and got everything approved before the end of the eight weeks. And I took that. And that's when I took my redundancy as I said.
And we had the finances behind me now. I didn’t have to go to work. But when there was a delay on starting up the build, I thought, ‘Well, I don't want to sit around again’. And that's where my lawn and garden maintenance began; it just happened. And it obviously was meant to be, and it grew.
A Mindset That Moved Brendan Shine Forward
Shine goes on to share with us his biggest driving factor for getting into property.
As I said there at the beginning, my parents, my dad was on a disability pension, so there was never a lot of money. We were comfortable. But, as I started working, I started learning about passive income and what it could offer. It became a really big draw for me to be able to be financially able, to be able to do things that I wasn't able to do as a child. My parents weren’t able to offer that to me.
And I wanted to be able to have that freedom—to be able to go, ‘I want to learn French’. So, I can stop, and I can go and do that. I'm not just locked into work. After all my readings and learning, it really came apparent to me that if you're going to just go to work and put your money into super, you're going to work until you're 65 or plus these days. And then your best years are gone. And then you get to retire and then you get to travel.
To me, it didn't make sense. So, my driver behind it was: I wanted the ability to have that freedom if I wanted to stop and I wanted to travel. At the very beginning, the driver was the passive income to replace my income. That was my original goal. I wanted to earn $600 a week. That was my goal, because that's what I was earning. And I was like, if I can do that, I'm set. Obviously I was young, I didn't have a lot of expenses. But that was the goal, and that was my driver.
And then as life has progressed, we've kept growing and we've had a family now. So, now it's more about being able to provide for my family—to be able to provide for my girls. If I want to be able to send them to a better school or if I want to be able to put them into certain educational programs, I've got that ability to do it. Whereas if I was just working for ‘the man’, I have a set income. And it doesn't matter how hard and how good I work for the man. I'm still going to have that set income.
It doesn't matter what I do. But when I work for myself or I build my property portfolio, I can earn extra money. I can create money. And every Monday morning, I know that money's going to come into my bank account, and I've only just got out of bed. And if I decide to travel—like, we were fortunate enough, we worked our tail ends off until 2009, I didn't go out at nighttime. I would be doing renovation; whatever work I could do, we did do. And we sacrificed. So, in 2009, when we sold off one of our blocks or units and two of our houses, we went traveling for three months.
Me and my wife—we went to Europe, and we had a fantastic experience. And that even pushed me further. Now that I had experienced that and I was able to enjoy that, it gave me more reason to pursue that—to be able to have the choice, which I think most people don't have. You don't have a choice. You've got to go to work. If you don't go to work, you can't pay your bill; you can't survive. That's where my mindset comes from. It's about being able to provide, to be able to give back to my parents.
When we got married, we were fortunate enough again. We had the finances; we got married in Greece. A lot of people couldn't do that. But we enjoyed Greece so much. We went to Santorini on our first trip, and we had the money. We were able to pay for my parents to just come. My parents were like, ‘I don't know if we can afford it. But [we said] ‘It's okay, we will pay’. We were able to do that. I never would've been able to do that if I had stayed working in a bakery. It just never would have been possible. It opens so many doors.
The hard working investor talks about the kinds of mentors and resources he came across that have contributed to his success.
Do you know what we didn't, which again, looking back on it now, that would be something where I would have been able to progress a lot faster.
We learnt on the job. We did a lot of research, but at that stage, we didn't. Like today, I'm involved with a lot of different networking groups. Matt Jones, for example. His resources are fantastic. Even though I've done developments, I go on and I listen to his different experiences and the different people that come along. I'm involved in different Facebook groups and you can ask questions.
So, I think if I had that 10 years ago, I'd be in a different spot to where I am today. But back then, you know, me and my wife, we bounced off each other.
We worked really well together so that we were fortunate. What I lacked, she had good strengths in, and vice versa. And we learnt in the trenches. We have the mindset, and we got in hard work. And as those things arose, we would then seek the answers, or we would then ask the town planner, ‘How do you do this?’.
One of the first ones [we] had done—our builder, he had never built a set of duplexes. And it came to the end when we were strata titling and there was an infrastructure charge of $15,000 and we were like, ‘What are infrastructure charges?’, and the builders like, ‘Oh, I didn't allow for that’. And we had to go to the surveyor and he's like, ‘Oh no, that was our cost. It's your cost of strata titling, you need to have this.’ And we're like, ‘Oh’. Again, if we had a mentor or we had someone, we would have known that.
So, looking back on it now: Having those team players, having someone to help you, someone who's already done it, who's down further down the path, would have been fantastic. But we took our journey. We took our path. And we learnt from our mistakes. And then, we would take what we learn, and we would then put it into the next property, the next deal. And it's been a process of 16 years of learning stuff continuously. I'm always evolving and learning new things.
It's amazing what you've achieved in that period of time. I'm inspired just to hear your journey. And I think as part of that, I guess it would have been great to have the mentors there. But nothing beats having that experience as well. And you learn those things so much faster and quickly, too, to be able to apply them.
They stick in your mind a lot stronger. And that's what I was saying earlier. You can read and read, but until it happens, it really sticks in your mind. It's a big lesson, you know what I mean? I suppose this is the impact they can have. You can read it and go, ‘Oh that's not good’. But when it actually happens and you're in the trenches, you know what you’re going to remember for that next time. Or, that's something to really observe when I go look at the next development or next property that I’m going to rent, you know—the infrastructure that's around it. You know what I mean?
You become a lot more aware of your surroundings. It's not just the house you're buying or building. It's the surrounding connections.
A Great Advice For Property Investors And Developers
Throughout his property investing journey, Shine reflects on the best advice he has received.
Always try to be the small fish in the big tank. Always try to be around those elephants—even though we didn't always emulate that—and get out there. But as I evolved, in the last four or five years, I've definitely taken that advice. I've joined up with a lot of different property group and everything. And that has been the best thing I could've done because there are so many people out there that you wouldn't even realise who have done so much.
I go to Matt Jones meetups once a month. And you meet the average person, you know, you wouldn't think of it and you start talking to them, and they're like, ‘Oh, I'm doing a 10 lot subdivision’ or ‘I'm building five townhouses’. And they're lessons, that when you start talking to them, you think ‘Oh, I didn't realise this’. And you go, ‘Oh, I hadn't thought of that before’ and ‘How did that affect you?’ or vice versa. When I'm talking to them, I give my experiences. And you get that back and forth happening.
'I started learning about passive income and what it could offer. It became a really big draw for me to be able to be financially able, to be able to do things that I wasn't able to do as a child.'
If he had some time to reflect on his past self 10 years ago, we find out what he would have said to himself.
I probably would have said, ’Stick to the strategies that you're on at the moment’. You know, for us, we started doing some of the developments, and it became a lot simpler. You know, once we knew the rules, how to do it, and then we sort of divulged out of it like ‘No, this is too simple. Are we missing something?’. And we started looking at other things. And I think, looking back on it, if we had stuck to what we were doing, finding the blocks of lands and the duplexes, I probably would have done more.
We started looking at other opportunities. We didn't pursue them. But there were a lot of opportunities we probably missed because we sort of went off our paths a little bit. But you know, thankfully, it didn't hurt, I suppose, our financial position when we did go off our paths a little bit.
The Combination Of Skill, Hard Work, Intelligence And Luck
So Brendan, how much of your success is due to skill, intelligence and hard work, and how much of it is because of luck?
I would really say, you know, 25%...when we went into the market in Mount Isa, even though we had learnt about strata coming in and they'd put money in it, we never anticipated that properties would grow so quickly. Houses were being sold before they even got onto real estate.com by mid to late 2005. We were lucky that we had made a lot of good connections with real estate agents up then. So, we were getting access to it. And because they knew we were ready to go when they came to the market, we got access to them. But yeah, 25% of that, you know—we couldn't forecast that. The other 75%—it really took us years on the front line, learning the process, taking actions, taking the risks, working through these things, learning how to pinpoint the properties and their potentials.
Dealing with the tenants, financial education mindset, the accounting side of things—like, we managed our properties for the first 10 years, so we dealt with all the tenants. So, you know, doing the rental tenancies and making sure that they're up to date with their rent, renewing their leases when someone moved out, and making sure that we had all that covered. And then, as we sort of moved into the development side of things: dealing with the local councils, compiling the development applications, even though we ended with the town planner, but it was still learning that process, you know, getting through that, dealing with covenants when we went in, what you can, what you can't do. So. it really has been a lot of work being in the trenches.
Seventy-five percent really comes back down to hard work, you know what I mean? If you are willing to put yourself out there and learn, you really can succeed.
I was just going to say I haven't really heard that many people actually manage their own property. So, hats off to you because it's not easy managing your own.
Again, it was that mindset of ‘We can do it’, right or wrong. Like now, we have property managers who look after our properties. And I deal with them, and they deal with the tenants. But at the time, we were like, ‘Why can't we do it?’ We probably lost some rent, you know what I mean? We weren't the best property managers; we weren't. But that being said, the process of it all and going through it again, it was another massive learning curve—dealing with tenants coming in, how to manage tenants' concerns or complaints.
I mean, we had some tenants that were absolutely fantastic. And you wouldn't know that there was a problem at the house and they repaired it. You have other tenants who would ring up and complain and tell you they need an electrician to come out because the light wasn't working, and it turned out they just didn’t know where the light plug was. The electrician says, ‘Yeah, they didn't realise the light point was on the other side of the wall in the laundry’. And I'm like, ‘Really?’. But you know, again, I've been there. So, now, I suppose I have an appreciation for my property managers who will look after my properties when they're going through things.
Again, I've been there. So, I understand what they're going through. So, you know, it's not an easy job. I think a lot of people just expect miracles from their property managers and they're just going to be able to solve everything. Sometimes, it's not that easy.
You're dealing with people. Sometimes, better for worse, they can make your life quite difficult or they might have good jobs, but sometimes they can do the silliest things. Like the light switch [situation]: He was an engineer who worked at the mine, and he rang me and he said, ‘The light doesn't come on out the back’. And I'm like, ‘Really?’. It was a brand new house, and he just couldn't find the light switch. He was flicking a switch. He was looking for the light to come on outside. And I didn’t know what switch he was flicking, but it wasn't the light out the back. And we ended up with an electrician there.
Hadley Nightingale is a buyers agent and property investor, where he actively invests in the Whangarei Markets and in Palmerston North. Before settling back in New Zealand, he had the opportunity to work in the agricultural industry in Wheatbelt, Australia as he had always dreamed of being a farmer. But once he returned to his home country after eight years, his passion for investing in New Zealand real estate quickly flourished which has led him to where he is today.
Join us in this episode of Property Investory to learn how Hadley Nightingale started building his portfolio and how he figured out how to increase his wealth through investing in property!
‘When you're going to purchase a property, your strategy is the key thing.’ Hadley Nightingale
We find out what Hadley Nightingale’s day to day role entails and how it ties in nicely with property investment.
I'm a buyer’s agent in New Zealand and also a real estate investor myself. So, [I’ve] been in the buyer’s agency space for about three years now, or coming up to three years, and from a property investment perspective, about the same time. So, they sort of went hand-in-hand to a degree, as we got into things.
He shares with us what a typical day for him is like where he usually finds himself devoting his time to his clients.
My day consists basically of being out there in the market for both myself and my clients to acquire property. So, working one-on-one with them to sit down and dive into strategy, work through what's really going to get them to the next level and what they’re looking to achieve with their property goals. For some people it's to buy one house, for others to build a portfolio and a legacy. So, I suppose that's the exciting thing is—working with a range of people to create outcomes and get them what they are after.
Nightingale goes on to explain how he became a buyer’s agent in New Zealand.
I'm based in New Zealand. And it really came about through my own personal property journey earlier on. And the piece—so, back when I was 20 myself and my parents went out —we bought a piece of land. And the whole way through the process when we went and saw a real estate agent who said, ‘Hey, look, I've got this amazing deal for you’—which I've now learnt isn't always the best thing to hear of a real estate agent's mouth. Secondly, when we went to a lawyer who went, ‘The payload all looks good to me. ‘It's 2007, happy days. Just go and buy it, and if it costs you a little bit of money, at the end of the day, it doesn't really matter’.
So, sort of fast forward that to where we are. Three years ago when I first started this was when I got back into the property market and sort of realised that there was no one representing the buyer. You know, anyone that walks off the street goes and meets a real estate agent who works for the seller and then they defend for themselves to try and get themselves the best deal. And when you're not in the market every day, it makes it really tough to, to know where the market's at, what you should or shouldn't be paying for a house, and, sort of, what you should be looking at. So, it was more around buyer representation that I wanted to go on this journey. And for me, I still strongly feel that the buyers are hugely underrepresented in the market.
More on Hadley Nightingale's Story
Prior to becoming a buyer’s agent, he shares with us his upbringing in New Zealand.
I grew up in New Zealand in a little town called Fungaday, which is about two hours north of Auckland. So, I grew up there and decided I was going to become a farmer. So, that sort of lasted for a couple of years. And then at the same time, towards the end of that, when I bought this piece of land because that was part of the grand plan, and then from there I worked out that I had to earn some more money to cover a mortgage than what New Zealand was going to pay for me, or paying me for.
So, [I] ended up moving to Australia and worked out in Wheatbelt. So, driving tractors and heavy machinery out there which then turned into operating road trains. So, I was driving from Perth to the Northwest and then transitioned into mining. And then sort of to where I am now. It's been a bit of a chop and a change right through.
Growing up in a small town he delves into his schooling years.
From where we are, the town that we were in is reasonably sized. There's about 80,000 to 90,000 people that live here. We're on the outskirts of town; so I mean, schooling was in Fungaday. And then I went down to a farming school towards the lower end of the North Island for 12 months after I left school at the end of the sixth form over here, and yeah got on with my working there after.
What age did you actually start going out into the workforce to do these different things?
I left school when I was 16, oh, 17. I had more or less made my mind up that school wasn't for me at about 16. And so I struck a deal with my parents that if I got reasonable grades in the last year that I was there, I could leave. So, made sure that I did that so I could get out of there.
Nightingale tells us about the first job he had once he left school at a young age.
First job, I was milking cows on a dairy farm with about a thousand cows on it. So, probably one of the key lessons from that was learning how to get up early and work a long day. We'd start by getting up at 3:00 in the morning to go and get the cows to milk them, we were out for breakfast—out for lunch, if you're lucky—and then, back out milking the cows again in the afternoon to sort of knock off at 5:00 or 6:00 at night. So, they were pretty long days. But I think it put me in good stead to learn what hard work was about and not be afraid of the hours.
That is very long. Especially because it's quite labour-intensive as well, did you have machinery to help milk the cows or did you have to all do it by hand?
We had a 50-bar rotary so that the cows would walk on, then [we’d] milk them. And then as they got round to the other side, they’d walk themselves off. So, it was like a three-hour operation in the morning and three hours at night.
Wow, it's still quite a lot of work though. To be sitting there for hours on end—it's not easy is it?
It was sort of the driving force to try and find something else that was less labour-intensive.
He explains how long he stayed in this kind of job and the direction he took after.
I was in the dairy industry in New Zealand for about two years. And then from that, I had a bit of a dream, I suppose, when I was young about the Wheatbelt in Western Australia was somewhere that I'd like to go and work for a bit. So, when I was 20, I decided that that's where I was going to head. I applied for a job over there, and I happened to land it. And then basically for the next two years after that, I was working on the farm over there in the winter. Then I’d come back here to New Zealand for the summer season. So, six months here, six months in Australia—and then, after about two years, made the move back to Australia permanently to work on farms over there.
After making the decision to move, he shares how long he lived in Australia during this period of his life.
It was about 10 years—so about a third of my life in WA.
What's that like in the WA?
It's a good place. I really like it. I think I'd still be living there if it wasn't so far away from everywhere.
That's true.
Good people, pretty laid-back, and yeah, I had some really good times there.
After living in Western Australia for 10 years, he discusses the stage in which he decided to move back to New Zealand.
I moved back to New Zealand when I was 30. So, back in 2015, or end of 2015, and [the] start of 2016 is when I moved back—when the mining industry was starting to slow down and the company I was working for started to lay people off. So, I thought, ‘Right, well I’ll jump before I get laid off and get back to family and people I hadn't seen for a long time’.
Nightingale explains how he changed industries once he arrived back in New Zealand.
What I did when I came back: I entered into a company over here and then moved to Auckland for about 12 months with a safety and training company, which is sort of where I ended up in the mines, in terms of safety and training. So, it was a bit of a flow on from another flow.
What attracted you to continue to work in that space?
I suppose when you get yourself into a position where that's all you've done for 10 years, you haven't got any tertiary qualifications and you've been chasing the dollar—which is all good and well—when you come out the other side, your options are fairly limited. And I suppose for me, I didn't really have any inclination to go back and sit in a truck or to go and operate machinery.
So, it was sort of a thing of ‘Right, what’s my skill set? What can I do?’. And I suppose it also got the mind ticking as well to go, ‘Well, you haven't been to university. You know, what other options have you got for income?’ I think you have to become a little bit entrepreneurial to, to sort of get yourself over the hump there of, of moving forward as opposed to staying stuck where you are, if that's not where you want to be.
Following the arrival back to his home country, Nightingale shares how he was influenced to get into property.
Not so much from my parents. I think I got my work ethic, most definitely, from them—both extremely hard workers. The only property they own is the place that they live on. Plus, another section of land that they've also got. But I suppose I always remember my mum saying to me, ‘Why would you want to become a landlord when you have to fix people's toilets?’. So, that was her reasoning and her justification as to why you wouldn't want to get into property. So, they weren't into it.
But I sort of sat there and looked and went, ‘Surely there's got to be a way of this happening, a way to do this. Because there's so many people that do use it as a wealth creation tool’.
He delves into the first property he purchased which ultimately kick-started his property investing journey.
In terms of the first property aside from the farm, that was an absolute disaster as a first start. Anyway, the first property that we bought, we got into that by seeking out some mentors. So, myself and my partner at the time went to a Rich Dad, Poor Dad seminar and then went through with their mentoring program as well. And then I suppose that was the thing for me at the time with property investment. Like I said before, it has to work because so many people do so well out of it. But there was the fear and the trepidation there if I get this wrong again, I know what the consequences are. So, that's sort of how we got into it back in late 2016—started investing in a place called Palmerston North in New Zealand. And that sort of propelled us in the positive direction there after.
He goes on to explain the exact timeframe he started investing property.
We started in 2016. So, [we] moved back to New Zealand at the end of 2015. In November 2016, we bought our first property.
How many properties have you accumulated since then?
At the moment we're sitting at three, sorry, we've got four at the moment that we have ourselves with. And we’ve got six income streams from that.
After experiencing ups and downs throughout his property investing journey, Nightingale shares with us one of his worst investing moments.
Lowest of the low with that was a joint venture that we did and we sold. It started out as a pretty straightforward flipping project. Builder was lined up, where he gave us a quote for what the work was going to be. He was all good to go. We got some other contractors to give them a hand, and we were sort of looking at about a $70,000 renovation. So, everything started out good and well for that.
It was a remote project where we didn't have anyone on the ground at the time. And then we were getting updates every week from the builders to say, ‘Hey, look, I've done this and I've done that’ and to say that everything was good and on track. But, I suppose, from a bit of naivety and overtrust, we didn't sort of ask for photos every weekend and actual video walkthroughs of where we were.
We got about a month and a half to two months into this when he told us he was nearly finished and decided we'd go down and have a look at the property to pretty quickly find out what he'd seen and what he'd done were two very different things.
What kind of things did you see?
It was things that he said like ‘Oh, the wardrobes are all finished and everything's good’, and you walked into a room and there were no wardrobes, and yet they were still just ripped back to studs and nobs. Also, things like we walked down the side of the house and there's like a hundred metres of boards that have been put on the property that we would have never asked for in the first place.
You walked down, and it was just jaw-dropping, the stuff that had been done and the stuff that hadn't been done—and then just watch the bills escalate substantially from there.
Wow. What did you do to get out of that problem?
Well, we were very lucky that we had a very understanding JV partner with that. So, we ended up having to sack the guy that was on the project at the time, get some other builders in there, and then just basically strictly manage the build from there to get it over the line. The other thing that we did, because our margins became so tight from a flipping perspective, that we ended up turning it into a boarding house for about 18 months.
A rent-by-room situation in the university town, so that we could get some more cash flow back.
And we were also lucky that the market was rising substantially as well at the same time. So, we ended up cashing out of it in 2018. Just sort of two years or 18 months of holding onto it. I guess I was in a position where we were going to lose money. And I think that was probably one of the blessings. And the key learnings from that was that it's all very good and well to go out with the best of intentions to go and flip something, but at the same time, do you have a strategy in place to go right, ‘If the flip doesn't work, can I do it?’.
The thing is that it was a blessing and a lesson at the same time that with the way the property panned out and how things happen that really emphasise the point that when you're going to purchase a property, your strategy is the key thing. You can look or see out to go and flip a house, but if your renovation costs blow out or the market turns, what other options have you got to hold onto that property to make sure that you're not losing money on the back end of that?
So, that was really our saving grace, so to speak—was that we had the option of rent-by-room there to cover our costs and our expenses and everything else until a time where we could cash out of the property and make the required money that we wanted without it costing us anything along the way.
Despite the disappointing outcome, he shares his initial intentions with buying his first property.
The initial plan for that was just to think of it as a refurb and then trade it. So, carpets, there was a bit of a repair that needed to be done. Paint bathrooms, kitchens...so it was supposed to be about a $70,000 job all up. But, obviously, with the way things that panned out, that didn't quite end like that.
If you didn't actually sell it, do you think you would've held onto that property and still continue to get cash flow from it?
Most definitely. That was sort of where we were looking to go towards the end of it, was just to buy our joint venture partner out of it and then keep it for ourselves. So, just some really rough numbers on it was that we bought it for $210,000. We ended up spending all up, including furniture about $130,000, so the budget went over by 50. But in the end, we were renting the property for about $850 a week with rent-by-room. So, it was cash flow positive from the day we got it.
I guess the question is, do you now look back and go, ‘Should we have kept this and bought it out from our partner instead of selling it?’.
It's one of those things that we do sit there and go ‘Should we have done that?’. It was the next project that we did afterwards...if we'd bought that house, we wouldn't have been able to do the next renovation that we did which sort of set us up properly—and it was probably one of the best deals we've done.
Despite the obstacles he faced along his journey, he looks back on the moment where everything just clicked.
My amazing moment was probably the first house we bought. We walked into the house; there was mould on the ceilings, down the walls. There were people walking out going, ‘Oh, this house is disgusting’. And that one day is probably the moment I probably went, ‘Right, this is what we've heard about. This is what we've been taught to go and look for. Let's go and buy a house’. And so, we sat down; we did our research. We did the renovations that we needed to do on it. And then when we rented the property out, it actually cash flowed and gave us rental returns that we'd figured we were going to get.
I suppose that first house was the aha moment of ‘Wow, this property thing really does work from previous experience of having to fork out each and every week to feed the farm’.
As the first house he bought was an ordeal to begin with, Nightingale explains how much he made on this particular deal at the end.
That first property, well, everything that we do is buy and hold, other than the one that we had with our joint venture partner. So, that one there we purchased for $250,000. We put in new carpets and painted the kitchen, a new bathroom. Painted the outside and just gave it a general tidy-up. The place looked a lot worse than what it actually was.
So, [we] spent about $35,000. So, the revaluation came back at $360,000. And then also, from a rental perspective, we rented that property at $550 a week to a group of students. So, from an equity uplift, it was about $80,000 worth of equity and a cash flow of around $500 a month after expenses as well. So, it was a good little deal to kick us off with.
He goes into more detail about the deal he sold that was later reinvested into another and how it set his future up financially.
That one was a house that we bought and we cut into two. So, that's sort of my strategy now moving forward—is to find properties where there’s potential to either cut them down the middle and so turn one house into two, or to buy something that's got two units, refurbish them, and rent them out.
That one, there was a house we bought that had two kitchens in the property, and we put a firewall down the middle of it so that we had a big unit: a three-bedroom unit and a two-bedroom unit in that particular house. So, that one there, our costs all in for that were around $550,000 for round figures. And then our reevaluation on that one was $700,000. So, there was about $150,000 of equity for that property, and then, from a cash flow perspective, about $1,300 a month.
It really did set you guys up quite substantially there.
Exactly. There's a good upside from an equity perspective—and also some solid cash there on the other side of that.
How to Know the Property Market with Hadley Nightingale
Finding Great Deals and Moving with Property Investing
In terms of strategy, Hadley Nightingale delves into how he plans to move forward with property investing.
More of what we've just done, that is the strategy moving forward. So, if we can turn one house into two or buy a house with a couple of units on it that have some subdivision potential, I suppose that the key thing for moving forward is to make sure that we are getting some solid cash flow with whatever we're buying. But also that it needs to generate some equity and some forced depreciation in there as well, so that we can keep moving forward. And obviously the cash flow in there, from a serviceability standpoint, is really key as well.
The property investor explains how he goes about in finding deals.
I suppose the big thing with these is around zoning. And then also there's a whole lot of intricate bits when the house is built, council requirements, also just the layout of the house in general. So, is it going to be easy to turn into two units? How do we need to go about fire-rating them? And from finding them, it's quite interesting. Some of them stare you right in the face in terms of realestate.com.nz and and Trade Me, which is our other property site, where there's actually stuff on there that may have been on there for like a while that people just haven't seen the potential.
And also too, we work closely with agents that ring up and tell us about deals that are off the market. And the other thing that we have, and it just happened last week for one of our clients that lives in Brisbane, was to purchase him an off-market property that the vendor came directly to us and said, ‘Hey, look, we've got this property; it yields about 9.4%. We've got some other stuff going on. Have you got someone that can buy it?’.
And so, it's really a range of situations that the deals come through to us and that we look at rather than, you know, just sort of [a] one-set piece or one-set website.
When coming across a deal, Nightingale also has a particular process where he looks for certain criteria.
I suppose the first thing that we look at is rent and rental potential to then do a reverse calculation on the yield. So, that's sort of the first thing. If the yield is not there, then we sort of stay clear and move on. Unless there's something extremely creative we can do to make sure that we can achieve that.
So, there's been properties that we've bought that if you looked on paper and clients would buy them, but once we do some stuff to them, then it changes that yield position. Because if we turn one into two, then obviously our rent doubles; our yield increases. But then also, at the same time, location's really important. Building conditions are really important as well. Because at the same time, we don't want to be buying places that need $200,000 worth of work when you're only going to make $100,000 out of them.
It's really important, but overcapitalisation is probably one of the biggest mistakes I see people make where they go, ‘Oh, cool, awesome. We’ll buy the house. We've probably paid a little bit too much for it. But I think we really need to do the kitchen up’. Doing the kitchen up is only going to give you $10 a week more than what painting the kitchen is going to do, to have exactly the same outcome more or less. So really, you've just got to take everything into context. But it really comes back to yield and rental demand in the area as well.
As the property expert has built up his contacts over the years, he discusses how he has found trustworthy people that he knows he can depend on.
We’ve been through a few of them to find some really good people. So, I suppose that's one of the things that we do ourselves. And we also provide for our clients, as well, is that when we go into an area, we've got contacts there or we know people that invest in the area as well that have got builders, electricians, and plumbers and things like that. So, it's really important that you're getting people that are going to do the job. And especially if you are investing from abroad, it becomes even more important for them to have trusted people on the ground.
So, we recommend accountants, mortgage brokers, lawyers also, too, from a trades’ perspective—all the trades that people might need as well—to all of our clients and our Australian clients, especially to get them set up and to get them sorted. I suppose the other great thing is that because we don't provide any of these services ourselves, we are independent to them. So, if people aren't performing, then we've got options to go and find other people there as well.
As Nightingale is very knowledgeable of the New Zealand market, he gives us insight on what it’s like in comparison to the Australian market.
One of the biggest things for New Zealand, or the attractions to New Zealand, is that it's really from a tax perspective. So, I'm not an accountant. This is just an overview or outlining of the differences. So, basically, we haven't got stamp duty, so there's a massive save there for anyone. We don't have wealth tax. We don't have inheritance tax. We don't have capital gains tax. What we do have is a bright line test, or if you’re trading in property and you sell it within five years of purchasing it, then there's a tax to pay. But if you're a long term investor and you sell your house in 20 years time, but you've had the intention to keep it, then there is no tax on that.
So, there’s a huge difference between New Zealand and Australia, and those aspects. The other thing is too, is that we've still got yield over here, which after finally talking to Australians that, you know, guys are chasing yield but are having to go into more remote sort of places to get that—where we've still got it in our big the centres which is also really attractive too.
What kind of yields are we talking about in New Zealand?
They range hugely. So, as I was saying, the last unit that we bought from one of our clients was about 9.4%. And obviously the bigger the city gets, the smaller the yield gets. But generally clients are after stuff from sort of six and a half to eight, where we regularly see stuff with that, with good equity on the other side of that as well.
He also talks about the main differences between Australia and New Zealand in terms of living.
The climate in Australia is fantastic; it’s the same with Perth. If I was in the east coast of Australia, I'd probably still be there. But I think the great thing about New Zealand is that not everything is out there to try and bite you or kill you. It's quite nice going for a walk through the bush and not waiting for a snake to jump out at you, or go and swim and get attacked by a crocodile or a shark, which is quite attractive.
And then, from a property perspective, the biggest thing that I've found is just differences in contracts and things like that. The New Zealand sales and purchase agreements is a fantastic contract because it gives the purchaser, you know, quite a bit of power in terms of what they do from a due diligence investigative standpoint. We don't have gazumping over here; so once you've got a contract on a place, you've got a contract. No one can just come in and pull the rug out from under your feet, so to speak, at the 11th hour. So, things like termites, we haven't got them. Personally, I just find it quite easy to transact and there's a few less things to worry about.
Preparing Financially for Today and Tomorrow
In terms of mindset, Nightingale delves into the reason why he jumped into property investment.
I think the biggest thing for me is it's really been around passive income. It's quite the cliché saying about making money while you sleep. And I think now with the Coronavirus and everything else that's happening with the world, it just goes to show—and it's definitely stood out to me—that having passive income is quite important. That if something happens to you, or for some reason you can't go to work, to have your income cut off today would be a shock to the system. And there's not a whole lot you can do about it because it's out of your control. So, that's really the thing, is just to have something that generates income for me so I can survive and live and get by.
Nightingale takes a look back on the resources and mentors that have helped him along his property investing journey.
In terms of the property side of things, when we first got started, the Rich Dad, Poor Dad training was the first one where we went. And then through a company called Wealth Mentor in New Zealand, which was a really good stead to get going and to start learning about how property works, what we need to do, what we need to look for, and just be there, to give us a guided process. And I suppose, like anything, as you become more involved in the industry, you get to know some more people. And your mentors change a little bit as you go. And your circle of friends changes as you go as well. I suppose that a number of my friends now, we all bounce ideas off each other, and it's just that sort of mentoring component from a property buying perspective at the moment.
From the buyers agency, Ben Handler's been absolutely phenomenal in terms of a shift in mindset, shift in business— and just opening eyes up to the possibilities of where we can go and what we can do. The mentor side of things I think is vital to anyone that's looking to either purchase property or in business. Or no matter what you're looking to do, it's always easier to stand on the shoulder of someone else than to want to try and go on and do it yourself and learn the hard way.
He shares with us how the Rich Dad, Poor Dad training impacted him and his mindset.
They were the ones that got us through the process of the mentoring program. And so we sat down, and we ended up working with Wealth Mentor, a company in New Zealand, to go through our mentoring program to make sure that what we were looking to do was going to fit our needs and our wants and formulate a plan of how to acquire the properties that we needed to get us from where we were to where we wanted to be.
They kind of helped you map out a plan that you could just follow and work together on what you want to achieve in terms of your goals and your targets?
'It's really important to get up, get your mind in the right place and just be really clear and really focused on what you're looking to do, what you're looking to achieve, and just keep that at the forefront of your mind.'
Exactly—and also for someone to use as a sounding board to go, ‘Hey look, we're looking at doing this. What do you think?’. Some of the ideas the guys who were working with said, ‘Fantastic’. Some of the ideas they said ‘I wouldn't touch it. I wouldn't do it. This is where you're going to lose your money’—which is, you know, an absolutely wonderful thing to have, especially when you're new in the game. Having someone that's got the experience. Not your uncle at the barbecue that's never bought something before, but someone that's in the game and knows what's going on to see the pitfalls that you can't.
Reading Books and Listening to Sound Advice
Nightingale shares his book recommendations that have helped develop his mindset.
This is probably going to be another cliché answer, but Rich Dad, Poor Dad was the book that started me off. And the other week, I picked it up for about the sixth time and read it again. But what I found was, is that there was a whole lot of stuff that I missed the first time. So, you read it the first time you go through it, you get some of the ideas about, you know, around what money looks like and things like that. But then what happens thereafter is once you read it and you absorb that information and you grow as a person, your mindset grows, you start to pick up other bits of the book.
And what I sort of found on the sixth time was, is that the book is quite heavily spiritual, not so much from a religious perspective, but from how you position yourself and on an energy perspective on how you view the world or how you view the situations that you're in. It’s not simply just a book about money.
The property expert reflects on the best advice he has ever received.
The best advice I've ever received is what we've been talking about. If you're not sure how to do something, find someone that's done it and find someone that's done it well. There's an old saying that ‘Price is what you pay and value is what you get’. So, for me personally, I'm quite happy to pay people a lot of money to teach me to do stuff—because I know that I'm going to get the value on the other side of it. And the price tag for me is the price tag. But the value that these people can provide should be exponential to what they're charging you, if you apply the lessons that are there.
Adopting a certain mindset throughout his property investing journey, he also shares his personal habits that have helped him along the way.
I think persistence and determination are the two key things. Especially in the game, you get a hang of a lot of no’s for every guess that you get. And if you weren't persistent and you weren't determined, the amount of no’s and opportunities that lead to nowhere would get you down at the end of the day. I suppose that it's really important to get up, get your mind in the right place, and just be really clear and really focused on what you're looking to do, what you're looking to achieve, and just keep that at the forefront of your mind.
If he had some time to reflect on his past self 10 years ago, we find out what he would have said to himself.
Probably No. —dump the farm. That definitely would have been...although there's been a lot of really good lessons learnt from that, and I probably wouldn't be where I am today if I hadn't have been through that experience. But I suppose it comes back to the same old thing of: If I could've gotten to it five years earlier, then that would have been a fantastic thing. But it's more so just around, you know, that persistence, that determination and to follow through on what it is that you want to do and go and get that help that you need.
The earlier you can realise that in your journey, rather than just going, ‘Hey, look, I'll dabble on this and see what happens’, the far better off you are on the other side. So at the end of the day, you don't know what you don't know.
He discusses the future, painting a picture of what is happening for him in the upcoming five years.
For me, the thing I'm most excited about is just to continue on the journey that I'm on at the moment. I'm really loving helping people achieve their goals and sort of coaching them through that, too, to a degree as well. And then personally, for myself, is just to also keep expanding my portfolio and doing projects that I enjoy doing is the key fun to the whole thing. If it’s not enjoyable, it’s not worth it.
And lastly, Hadley, how much of your success is due to skill intelligence and hard work and how much of it is because of luck?
To be honest with you, I've put most of my success down to my team rather than me. That is it in a nutshell at the end of the day. I mean, back in 2016, at the end of 2016 when we bought the first two properties, we were very fortunate that we bought them just before the market and Palmerston North went ridiculous. But, at the same time, without the advice and the guidance from our team, and that's everything from accounting to mortgage broking, legal advice, mentoring about what we should and shouldn't do, and how things needed to be structured, is more how the success came from.
Matt Khoo is the managing director at ICD Property. His ambition in high school was to study medicine and become a doctor, but after not receiving the required marks, he decided to study property and construction. He soon found himself developing a deep passion for property development and managing a $350 million project in Melbourne, which has influenced him to excel at working with million-dollar projects.
'I think what I really love about property and what sold it for me was the tangibility of it. I think of why I always wanted to be a doctor was that you're helping people and you can see the outcomes of it. And for property it's the same.'
Join us in this episode of Property Investory to hear how Khoo got hands-on experience at JLL before completing his master’s, how he developed his skills as a financier that has ultimately allowed him to be the successful managing director he is today!
We find out what Matt Khoo’s day to day role is as well as the projects he is currently working on.
I'm the managing director at ICD Property. We're an Australian based property development company. So Australian based, but we have projects across four States in Australia. Actually, I should correct myself, three States in Australia. I'm actually kind of thinking of four projects. We've got one in Geelong, but it's not a different state, unfortunately. It's very close and very easy to access. But yeah, so we've got four projects across three States in Australia and also a project in Auckland, New Zealand. Projects are largely mixed use projects. Three of which CBD projects in Melbourne, Sydney and Adelaide. In Melbourne, we've got a close to 600 apartment tower going up on King street and that's just starting construction now. We have a Sydney project, which is a land joint venture with the City Tattersalls Club. 125 year old under 25 year old Tattersalls club. You know, big part of the community there. And a really centralised project sits on Pitt Street, Pitt Street mall. You're from Sydney, so you know.
And it's really exciting. We've achieved stage 1 of the DA on that project, which sees us redeveloping the Tattersalls Club, the commercial space. That’s sort of the first few levels and within the heritage frame fabric as well. And then above that developing a boutique hotel and then above that a residential tower. So it’s a really exciting project, actually we just commenced a design competition phase as of last week. So we'll soon have an architect assigned to it as well for the tower.
Due to the DA process being time-consuming and difficult in Sydney, Khoo explains the process it took for this particular project.
I think my celebrations when we got to stage one of the DA probably says it all. We've had that project since 2014 and it's gone through a number of challenges and hurdles. We actually were knocked back in our first attempt to get the stage one of the DA and then worked really closely with the council to finally get there. So it was not a quick process.
I totally understand. Nothing's quick with council any day, to say the least.
Interestingly, during this challenging time with COVID and all they've looked at how they can actually expedite processes and streamline. And we've seen that we've benefited from a bit of that already. Especially through this stage two process, it usually requires physical models and all that which are very practical with the circumstances. So that's been able to shorten a bit of the timeframe and hopefully, you know, there are other areas that are questioned and challenged and especially because we are wanting to build or bring a lot of stimulus to the economy. The construction industry and development industry is a big part of that. We're talking like nine, 10% of GDP just directly through work sites. And then when you look at the flow on to other consultants and material supplies and all that, you're looking at more like an impact of 40% of the economy. And that's with looking at sort of mining materials, material suppliers, developers. There’s a really wide-spanning sort of impact.
Khoo delves into what a typical day in his life looks like.
In my particular role a lot of my focus is around business strategy, which is definitely ramping up a lot more as the climate and the uncertainty into the near and medium term future. But it's also supporting you know, with the large challenges for our delivery team. So in terms of the development team, identifying big problems and challenges and hurdles but also problem solving with them. I've never liked to take that autonomy and management of that away from them, but being really sort of a standing board, and dealing with those challenges. And we do that sort of as a leadership director group with our development teams at least on a monthly basis, but more frequently as the large challenges arise. I am also a big advocate of getting involved in things that you're passionate with. And for me, I like to get quite involved in new acquisitions and partnering as well. So a lot of our projects, actually all of our projects, are in some form of a partnership. I mentioned it before with the Tattersalls club.
In Adelaide, I didn't get to speak about that before, but with the PPP, it’s in Adelaide over there. And that's a redevelopment of a landmark project central market arcade. And doing it with them and with an (inaudible), which is a large Chinese group basically focusing on the manufacturing, but it also has a really strategic system type relationship.
What does PPP stand for?
It is public-private partnerships, so really working with the government and to develop critical community infrastructure but with a sort of a private aspect of it.
Matt Khoo Shares his Early Beginnings
Before delving into his property journey, Khoo shares a bit about his upbringing.
Born and bred in Melbourne. I haven't moved too far from that. And look, I've definitely toyed with the idea of going overseas and working there and I’ve travelled a fair bit. But you know, got to love Australia, phenomenal. There's a good reason why a number of our cities often get in the top 10 of most livable and most recognised cities. I went to school here as well. Went to a local school, high school and then studied at Melbourne university so really haven’t moved too far.
He reflects on his time at Melbourne University and talks about his field of study.
I studied a Bachelor of property and construction which they don't have in the system now, it’s moved to an undergrad system, so I'm a bit older. I had a bachelor in construction and then commerce and then later on I came back to study my master’s in finance.
He goes on to share whether he gained first hand experience before returning to university to complete his master’s.
As part of the property and construction course, the requirement was actually to get industry experience before you graduated. And that was really insightful. Gave me a lot of understanding about the practical elements of my course while studying it. I actually worked at Jones Lang LaSalle and did research consulting, that really helped to understand the sort of macro elements that impact the property industry. Also an understanding of our clients who were investors and developers and what they really cared about.
Khoo explains the job description he fell under for this kind of position and how he was hired.
It was a kind of a mixer, I was very fortunate to get a full time role there. So I got a lot of experience and then kind of moved my final two years of my studies into part-time. And so I found that to be really valuable. And so yeah, they treated me as full time, I guess in the first year, essentially.
How long were you there for?
I think it was about three years in total.
He delves into the kind of experience he gained from working in a large development company.
It was a phenomenal base to start with because it wasn't a specific transactional role in that, you know, if you're doing leasing and property management or something, you learn a lot about that particular part of property. Working in research and in particular the consulting part. You have specifically tailored investment development questions that want to be answered. And they stem from everything around the macro and micro economics of property and the fundamentals that drive property investment development decisions. all the way through to actually doing feasibilities and understanding, you know, like what values are and how to make decisions from that. So it really gave me a great appreciation and understanding of the real world decisions in property investment and development.
He looks back on the kind of projects he worked on during this period of time.
One that was really interesting, it didn't actually end up going ahead because of the GFC, that was around the time when I was working there and it was actually a Dubai group that was exploring what is now Melbourne quarter. There’s a large development that sits on the edge of Melbourne CBD and Docklands and they had this grand vision of essentially doing the tallest tower in Melbourne and comprising all luxury sectors of residential and retail and commercial and hotel. And being able to then explore the study of luxury residential, and back then there wasn't much apartment development even in the CBD to consider. So when you're doing a study, you’re generally trying to benchmark other examples, that's your sort of way of knowing it is feasible, it’s like how a valuer would look at other properties to see if this stacks up to that value.
It was really interesting because there wasn't much around in Melbourne. So you kind of have to look globally and look at what best practice is and take a view then of how Melbourne could evolve. And yeah, 10 years down the track with Sydney and Melbourne, you're seeing a lot of residential development in the CBD. More and more the apartments are becoming bigger and you're seeing people accept luxury living and family living in the CBD. It's really interesting to see how that practice has evolved.
Khoo reflects on what inspired him to jump into property development and construction studies.
To be honest, I can’t say that my parents had any influence in my endeavours into the property and my endeavours probably are a little haphazard and I'll explain all that. So, my parents, my dad has always been investing in shares. Not so much on the properties base. Probably all they've ever owned is their house. And so I never really was exposed to property investment from an early age. And funnily enough in high school, I actually always wanted to be studying medicine and I got to year 12, didn't get the grades to get into medicine. And so I didn't really have a backup option, to be honest. I kind of was like, oh, that's what I've always wanted to do and now I don't know what to do.
I kind of went at it quite logically and I thought well I have decent grades and I could probably do a double degree in commerce and business sounds like, you know, the obvious choice and what should I marry that with? Because I don't want to waste my grades, I should probably do a double degree. That’s an Asian mentality from my parents. And I looked at all the options available to me and came to property construction and I was like, well, I get that, it's tangible. It makes sense. I can see how I would utilise it. And I think probably the thing that sold it for me was I was looking at the Forbes 100 or the 100 rich list and I realised 75% of those people made their money through property.
I'm not saying that's the way you should pick your future career and university courses. Definitely not an advocate for that. But I think as haphazard as it was when I got to university I realised I actually was really interested and really passionate about property. And I think that's how you should probably choose your university course. Do something that you're passionate about. I think what I really love about the property and what sold it for me was the tangibility of it. I think of why I always wanted to be a doctor was that you're helping people and you can see the outcomes of it. And for the property, it's the same. Like you turn something from something to make it better. Obviously my mindset back then was about making money, but actually, you know, better is about how you are influencing and impacting the community and those around.
He reflects on how his life would have been different if he had studied medicine and became a doctor.
It's funny because outside of my work at ICD, I do some personal development but you know, developments are quite capital intensive, so I actually do those with a couple of friends from university and from high school. Both of them are dentists. So I guess you don't necessarily need to study property or even be working in the field to get into it. What is very handy, is in a medical field, those who are practitioners they're very favourable in terms of finances. That's very handy, having good cash flow is important.
Khoo goes on to share where he went to after his time at JLL.
I actually was made redundant, that was how I left. But another thing that I reflect on is the positives, it is a very uncertain time for a lot of people right now. People are losing their jobs. And it's really challenging. I think it's important to know that there are positives. You've got to have a positive mindset to approach every challenge. And the redundancy gave me an opportunity to reflect on where I was at that time. What I really wanted to gain greater knowledge in was actually finance. I had a lot of understanding about macroeconomics and how to look at the fundamentals of property and how that influences specific assets and developments, but actually going through development, I needed a great understanding of finance. And I went back and studied, I was fortunate enough to get a job with a bank as well at the time and navigated my way and eventually got into the property development and investment lending space within the bank.
He explains how long this journey was before he started working for ICD Property.
In total about probably six to seven years all up. And then how I actually got into ICD was...so ICD has been set up by an old school friend of mine and his family. The Mai family and you know, we would catch up when I was working at ANZ in their property division there. And he wanted to understand how to navigate and approach finances for ICD’s first development project in Collingwood. And I wanted to understand more from him, like how they would go about purchasing sites and developing them. So we had a win-win relationship, mutual and beneficial relationship. And one day he called me up and asked me about a particular site in Melbourne CBD and how he would go and approach it from a financier’s perspective.
I sort of explained it and Michael then said, look I actually want you to come over and develop this model. And that was my opportunity, but at the same time I'd never actively managed a development before. So in my own sort of words, I said no to Michael in my own different language because I was like, look, I really care about you. I care about your company. I don't want to come in and make a mess of it. But this is something that Michael has instilled in me is you have to have a lot of faith in people and their capabilities and if you do that, like it's self fulfilling in a sense. And so he had a lot of trust, a lot of faith in me.
He said, look I think you know with your experience as a consultant to developers and investors, and as a financier as well. Taking all that skill and knowledge, you can apply it to development management. And he was really right, having that framework, a structure to approach things, it was surprising that it was really efficient and a useful way of developing or managing a project. And so that that project ended up being an extremely successful one for us. It was the EQ tower project in Melbourne CBD, 633 apartments, $350 million project. And it won multiple awards. We managed to secure an institutional joint venture partner out of China. It was our first international project. So from many angles, it was a huge success both for the company and for myself personally.
As the successful managing director was dealing with a hefty amount of money for this development project, he goes on to talk about the extensive process of putting the deal together.
With that particular project, the family that I work for, the Mai family, they do have a substantial amount of wealth. Personally for myself I don’t think I’d be able to do a large project like that, it is very capital intensive. A lot of that is upfront. And so we did have that backing behind us. But there were a lot of milestones along the way that needed to be achieved. One thing that was important for us was the terms in which we secured the project or the site. So we had 18 months of settlement terms that enabled us to secure our DA in that timeframe and in Melbourne at that time we were able to secure that in five months. So that was a really quick process that really helped achieve all the other outcomes. So we were able to secure a builder, finance from a local bank as well for debt and our joint venture partner. As well as sell out all the apartments before we even started construction. So the day we settled, we pretty much started construction, so 18 months.
He talks more about the joint venture partner with the Chinese company and how much they invested in the project.
Breaking it down to the capital stack, you have your equity component which ICD and this joint venture partner contributed. And thinking about it, that was roughly 30% of the total build cost. And then the financier that the bank, or the senior lender in that instance, provided the remaining 70%. But the split was roughly 50% between us and the joint venture partner.
Is that where your expertise working in the finance industry was able to help contribute towards putting this deal together?
Definitely, I guess structuring a deal with the joint venture partner as well as knowing how to approach the bank to make sure we had all the information right and the project at the right stage to achieve the finance. Because it was obviously a very large amount of debt. Certain things like ensuring that all of our pre-sales or firstly that our design was correct. Banks don't usually support below 40 or 50 square metre apartments. The apartments were structured the right way with good natural light and all the other things that are important from a financier's perspective. Making sure that, you know, the sales rates were within the market range. Making sure that we had also got a good mix of local and overseas buyers as well. That we contracted with a tier-one builder. And that we as ourselves and our joint venture partner were considered a strong sponsor. So all those things are key to what a financier is going to look at. Sponsor, builder, and structuring and all of that. I think that's where I was able to bring that skillset from being on the financier’s side to know exactly what they would consider important.
Khoo shares where he mainly learnt these finance skills that he has developed over time.
Theoretically you do learn bits and pieces of it at university. Practice makes perfect and I think I definitely let up like 95% of it through work experience both in terms of the feasibilities and expectations on returns from when I was at JLL. But in terms of the more detailed understanding of how to assess a good project, how to de-risk it and all that was through finance and through working at ANZ.
Everything You Need to Know About Property Development
The Courage to Purchase his First Property
Aside from investing in property development, Matt Khoo delves into the very first property he purchased.
The first property was the apartment, which my wife and I purchased when we got married. And the thinking behind it was right, we want something with all the amenities around it that we would use. And also one that we could possibly see as an investment long term once we moved out into our family home. And it's funny, at that stage of your life, what your interests are very much determines what the house looks like or the property that you purchased. And then now being in a family home, you never sort of see yourself in that.
But just trying to reflect on the emotions of it, it's really quite daunting actually. When we knew we liked the property, we were very nervous to go to auction. And so we ended up making an offer beforehand. And I think when you make offers beforehand it's obviously to a point where the vendor will be satisfied. Also the agent is advising, you know, ‘you're not going to get a better offer than in an auction’. So you do pay. In my mind, especially if the vendor isn't desperate, you pay sort of top dollar or at least sort of that market. But as a buyer I think you also really want a property that gives you that certainty.
Did you purchase that property in the Melbourne CBD and how long ago was that roughly?
It wasn't Melbourne CBD. It was actually South Yarra, which is in the middle. But close to the city, and that was in 2010.
After purchasing his first property and working in finance, he goes on to share at what stage he jumped into property development.
I was already working at ICD probably for a couple of years. My first personal development actually came through one of my friends, who was already doing development and he wanted a partner to explore, you know, more complicated types of development than just the simple tenors, which he was doing a fair bit of. And so I came on board and we explored it and did a whole bunch of feasibilities and other considerations and ultimately we landed at the conclusion that we could do all that, but actually doing the 10 houses, the simple form was going to be easier to secure finance, lower risk to sell, lower risk and less capital to develop, to build. And the returns were actually stronger as well. So I was like, look I get you want to do this, maybe you're kind of bored of doing the simple stuff, but actually it looks like doing the simple stuff is better for you on many perspectives. And that started our relationship in partnership to develop together. And you know, now I've done four or five of those simple types of townhouses and it's just a good one to have on the side. I get probably a little bit more involved in design elements and stuff. Whereas in ICD, you know, we've got architects who are the experts in that. And you've got a lot of helping hands.
Khoo shares how many townhouses he was developing with his partner at the time.
Most of the sites, or the projects, are generally about three to five townhouses. So really simple. We're talking about buying a residential block, you know typically 700 plus square metres, corners are the best. And then usually north facing with a sort of a vertical direction, if that makes sense. But obviously it depends on the zoning and planning restrictions on a particular site. But yeah, generally that's the sort of size.
700 square metres is a small size. How many can you actually fit on there? I guess it depends on the council too, but how many can you fit on a block like that?
Between three to five.
If you get a 700 square metre block in Sydney, most of the time, depending on which council, most you could do is a duplex. They wouldn't even allow you to build that many on there, which is really interesting. I guess it's depending on the council, depending on location.
Even in the short time that I’ve been developing the councils have changed their regulations. So you do find that what you possibly could have done a few years ago is probably not possible now. And that's around trying to restrict the density in some of the suburbs.
He goes on to reveal some of his worst investing moments and the lessons he learnt.
A big risk for a lot of smaller developments, actually a risk for any development, is around the builder. We've actually had a builder fall over on one of our projects and we're still completing that project now probably a year after we'd like to have completed it. So that has a real material impact on your outcomes. And sort of reflecting on how we could have mitigated against that. I think it's really important to do a greater assessment that you're looking to engage. And I think making sure you understand their financial capacity and cash flow, you know, builders rely heavily on cash flow and when they are in trouble, they start to turn the tap off from their subcontractors and then you get issues there. So digging into that, whether you are asking the subcontractors, whether you are looking out for any court or you know claims against the builder online, and understanding how much work they've got on. A lot of builders that go broke are generally ones that are looking to grow really quickly. They have too much debt. As we want to keep doing the same thing, as we talked about before, like it's hard to stuff up something, you know really well.
He reflects on the process for choosing this builder for the particular project and when he realised things were not going right.
I think that we probably prioritised as an investment, we prioritised price. But also prioritised a gut feeling, they seemed like a good builder. They're very organised, very structured. But probably didn't ask the right questions or we didn't ask the right questions around the capacity and any sort of bubbling issues going on in the company.
I guess that happens when we're going through the whole process as well, due diligence, we try our best but sometimes it doesn't hit the mark.
On the face of it, I think people can dress things up really nicely. It seems okay. But yeah, you do need to dig in further.
He goes on to share some of the moments where everything just clicked for him.
For me, I had a lot of doubt in my capabilities going into ICD and when we were able to secure that joint venture partner, an institutional group and a $30 billion company based out of China listed on the stock exchange there. To invest into our project that I was managing, it to me gave a lot of validity that I'm doing something okay. And I think the lesson that I learnt from that is there is no right or wrong way to develop projects. I guess you just have to find your own logic and make sure that your fundamentals make sense. For me, I drew a lot on how a financier would approach property development. I also, where I didn't know what was the best way of doing things, I benchmarked the best out there. So I looked at what other people were doing globally, locally. And I was like, well if they did it and it works, just copy it.
He further explains how he has been able to put these large property developments together.
It doesn't matter what scale it is because even sometimes the individual smaller projects, you're talking big capital, for anyone, for myself included. Their big decisions and it's easy to focus on the downside. The what if and the negative rhetoric that goes with that. And it's often that, which really holds you back from making crucial decisions and sort of helping you propel forward. I think something I learnt from both Michael who is my boss and his father who's had a lot of experience running a large company, you can't get rid of all risks.
Otherwise you might as well just put your money in the bank or wherever else you can possibly make some risk-free money.
But if you can satisfy yourself that you're comfortable with the worst case scenario, the exit strategy, if things don't work out with your decision then you can sleep at night. So if you know that, and go okay, I'm going to buy this site and I'm going to develop it, but if the feasibility doesn't stack up or the market turns, whatever it is, I can sell this site and possibly lose a hundred thousand or $200,000, then you can live with that, then you can remove the stress. And I think that's a critical part about making decisions, and sleeping at night.
Having the Right Strategy is Key to Success
He talks about the sort of strategy he and his team implement to ensure they reach a certain stage in the developing process.
It's worth having more than one scenario. If you think that everything's going to go this way, then you're going to be in for a rude shock. But generally we'll run probably three scenarios. A base case, a target and a worst case or a stress case. And really the focus is more on the base and the stress, like what do we want to achieve and see is realistically possible. And you know, what if we get delays or things cost more than they should and all that sort of stuff. So that’s the process and then really our decisions would be based on, what's the return we're getting from the base case? Yep, we're satisfied with that. Like that's a good use of our money. And then the stress case is like, okay, what's going to happen if it's the worst case scenario, are we going to lose money? Are we going to have enough money? All those sorts of considerations and then where we're comfortable with that and have the mitigants in place to ensure that is the worst case that's going to happen, but also less likely than it could if we didn't mitigate against it.
Due to the current unforeseen climate, he goes on to explain how the changing environment has impacted some of his projects.
I'll probably use the most, not controversial, but one that I think has been impacted the most from this. And I would say that Adelaide project because we were in the very early phases of that, it's good and it's bad. I wouldn’t say bad even, it's good in that we haven't got everything rigidly in place. It's a development of a 16,000 square metres office. It's close to 10,000 square metres of retail space. It's got a hotel in there. And it's got residential. So if I was to say if we're completing that project now in the state of the market, retail is shot, offices have challenges on the horizon. The hotel hasn't been operating for, you know, the cost of the world. And I think the latest reports, international travel is going to not go back to normal until 2023.
There are a lot of headwinds for a project like that, that's in design, in the sense that we need to consider and work within a very uncertain framework. What is the office going to look like at the end of this? Like is the new normal meaning that people don't work in office spaces anymore. I don't think that's the case, but how much is it going to change and how do we build into that? And we've done part of that by restructuring the way the office is designed. So we were originally going to have two towers. Now we're combining them with a central core, which enables you to have two separate areas still. So there's a lot of flexibility in the sizes and spaces. Or we could have a large contiguous space of two and a half thousand square metres.
That's one element of it. I guess with the office as well, in this challenging time we want to create positivity and we'd like to work with the government, various bodies to potentially firm up demand in that, so I know that there's a number of government apartments as well as sort of groups associated with government that are looking for space. They want this development to go up and go out quickly. That's another way of sort of supporting it. So I'm looking at those areas for office. For retail, retail is a big one, everyone's now gotten used to online. How does that change the retail space? And I think it was already heading in that direction, just probably a bit slower than it has now. So I think the fundamental retail is really making an interactive entertainment focus space. Like it's not just about buying your goods because we can buy our goods. You've got a supplementary source for that. But how do you make it something that is not replaceable.
Khoo delves more into his Adelaide project, and whether they are focused more on residential units as it is predominantly commercial and office space.
It does have close to 300 apartments in there. And you know, that's another area to explore as well. There's a sort of rising trend towards build to rent development. So in terms of mitigating potential residential sales risks, you could look at, and the focus on the build to rent is around yield and yield is stronger in Adelaide than they would be in Sydney and Melbourne. So that's another thing to sort of explore and all these things. You can start to see with a more complex project, there's a lot of things to consider in the current environment.
He shares with us exactly how he manages all of these projects and how he empowers his team to ensure they get things done.
With the team, we've set up a system where the team has full empowerment and it's then up for them to come to us when they need support. Because we are on regular touch points. I should say like me and the leadership team, we get regular updates from the guys on things that matter. They leave us out on the very specific details that are going on. But we get to understand the key drivers, the things that are fundamentally going to impact the value of a project. And that's probably like a good lesson learnt for those out there, is that you can focus on the colour of a tap, or something small like that, you know, a tile that's $30 versus another tile that’s $28 or something like that. But if you take a step back and look at things that are going to make more difference, they're more fulfilling I think, and you know, it gets bogged down. And they're obviously going to make a greater impact. So it might seem like I know a lot about the project. I think if you asked me the details of things, I would struggle for sure. But in terms of going back to your question, managing it, having good people around you that you can trust is key.
The Meaningful Reason Behind the 'Why'
With his impressive achievements as the managing director for ICD, he delves into his biggest why for doing what he does.
I can't say that I started off with the why, when I started working at ICD, but it's definitely evolved, especially now in this leadership role at ICD, I've realised the importance of the why, the why drives everything. If you don't have a reason for doing what you do, you'll fizzle and burn out because you won't have that drive. If I was to sum it up in one sentence as a personal why, for me, I want to do stuff that’s going to make my kids proud of what their dad's been able to achieve. And having that really deep, meaningful reason for doing something I think is really important and I'm sharing that with the team. I realised that it's not an isolated thing.
Everyone that works at ICD has a really deep, purposeful reason for developing what we do. And we don't want to develop things purely just to make money. The important aspect is a commercial as a corporation. But we've actually got a motto, that we want to develop buildings that stand the test of time, beautiful buildings that stand the test of time. What that really speaks to and captures for all of us is this idea of passion. You know, you're doing something you're passionate about. It's developing that sustainability from an investment perspective, from a community perspective. So you're delivering an end product that you know is good for the people you're developing for. That feeling of, yep, I've done something good for our purchases. We're not shortchanging them. They're going to get a great investment themselves. They're going to get great enjoyment out of the product that we've created for them and for our staff as a stakeholder themselves. You know, that sense of pride. We developed a landmark project that I can be proud of, that I can showcase to my family and friends and say I was involved in that. That’s the why.
On the Matter of Educating Oneself
He goes on to talk about the kinds of resources that have helped him along his journey.
Podcasts are great, but there is one book I’d say, and it's not even a property book. It's Benjamin Graham's Intelligent Investor. What I learnt from that was...and that's a book that Warren Buffet often refers to. I think Warren Buffett is probably an important influencer in the way I go about looking at investments. One thing is, and this is why I don't go into shares, is understand what you invest in. Know to the core, the fundamentals of what you're investing in and that it makes sense to you. And anytime I've lost money is investing in shares off people's recommendations, so that to me is really important.
Know what you're investing in and make sure that you're investing in good value, buy at the right time and the right property, so the core. But outside of reading, there are podcasts. Mine are mainly around leadership rather than so much on the property side of things. But EntreLeadership is a podcast that has been really useful for me. And that's more around actually interactions and leading staff. Because as I mentioned before, like how do you manage all this? Actually for me now, in the way I go about running the business is around how I can interact with and influence staff, and influence consultants and stuff. I guess on a smaller scale it is still important, treat people well and you'll be rewarded with dedication, loyalty, and results.
I think structuring things to do that is key, so EntreLeadership is one. Actually at work, we've aligned with a group called Performance Shift, with Kirk Peterson. He comes in and again, it's more around self management and team interaction management. From a property side of things, I look up to Michael who is my boss and his father as well who runs like a conglomerate and really understands the fundamentals around property on a global scale. And there are some really wise people outside in the property industry. One is the head of EG Funds management, Adam Geha. Every time I talk to him, I think I get wiser.
And then there's other people that I've come across, my ex boss at ANZ, I still keep in touch with him a lot, Adrian Blake. He's phenomenal at knowing the property industry and trends and all that sort of stuff. So I think like whenever you find people that really inspire you and motivate you and also give you great insight, you have got to hold onto those people.
If he had some time to reflect on his past self 10 years ago, we find out what he would have said to himself.
10 years ago would have probably been smack bang when I got made redundant. So that would be the perfect time to impart some wisdom. The positive attitude is very important in life. You can look at anything half full or half empty and you will achieve a lot more if you're positive about any situation at all. I guess it's sort of a guiding point, I would say that to my former self. I also feel like I got into property development on my own part a lot later. I definitely thought about it earlier, sort of around 10 years ago, but never took the dive into it. It took a friend of mine to influence and persuade me into it. But if I was able to speak to my former self, I would say just give it a go. The worst thing that can happen is you lose your money and you get a really good lesson in life.
What's interesting as well, you mentioned back in 2010 was when you first purchased your first property, which was that apartment. That's around that same time, wasn’t it?
The timing, not sure whether it was before or after. I have a feeling I got made redundant before then I got a new job and then purchased the property. Because it was late 2010 when we purchased the property. But I think I recovered pretty quickly out of it.
He looks forward to the future, where he shares what is happening for him in the upcoming five years.
Last year, we picked up all these amazing projects. The one in Adelaide, the one in Melbourne and Sydney, and the Auckland project. I'm really excited to be doing those projects and over the next five years, that's what's going to come to fruition as well as the one in Melbourne, which will be completed at that time. And I’m really excited about what's installed for us in the next year or two. There's a lot of uncertainty, but I think once we settle down on these other big projects, I'm really keen for our team to be purchasing and getting involved in more projects.
Last question for you is how much of your success is due to your skill intelligence and hard work and how much of it is because of luck?
That's a good question. Well I’m a dad, I don't think of myself as very skillful, mainly hard work. My thinking around luck is you make your own luck. You’ve got opportunities, everyone's got opportunities in their life, it's what you make out of them. So you want to call that luck, something just drops in front of you, you got to pick it up. And so I would say 90% hard work. And I don't see hard work as a negative either. The hard work is enjoyable when you get the outcome. I think then five, or 10% is skill.
Peter Toma is a motivated elite real estate professional and the founder and director of the buyer’s agency, Elite One Property. His company is trying to create a better life for their clients through the property. They help you build your property portfolio so you are effectively funded for your future retirement.
Join us as we delve into Peter Toma’s incredible journey and we discuss his background and find out about his childhood and where he went to school, how his parents shaped him and their influence on his career, how his property investing journey began, where he sees his property journey going in the near future, his worst investing moment and his incredible aha moment, and much much more!
'We should look at ourselves and say, “We don't have that much time right now, so we need to make the most of it when we're younger.' - Peter Toma
We find out about what a normal day in the life of Toma looks like.
Our main aim is to build wealth for people through property. So any given day we're talking to agents, we're doing market research, we're inspecting properties, we are trying to find new clients, looking for the best deals that we can, strategising with potential clients, with clients themselves on how they can best build their wealth through property and the best way they can move forward to effectively fund their retirement.
Toma shares some stories from his past and we find out what life was like when he was growing up.
I grew up in the Eastern Suburbs and Western Sydney. I sort of split my younger years between the two areas. I Loved playing basketball when I was younger. I really, really enjoy the sport in general. But I really got started in property because my parents were buying property when I was younger and I probably didn't understand the full, you know, I didn't understand what it all meant back then. But as I've got older and I've realized what they were doing, I found it to be a really good way to build wealth and effectively fund your retirement so you don’t have to worry about how much money you've got left in super.
He tells us about the schools he went to and how he was subjected to the different types of demographics within each area.
I went to school at St Gregory's College in Campbelltown as my main high school. Primary school went to St Agnes in Matraville. So it was a good split I think.
Definitely different demographic in the areas and I think just because of the age difference as well. You know, interacting differently with different people at those specific ages. So you know, when you're a lot younger in primary school you just want to probably be accepted and get along and play and all that sort of stuff. But when you're getting a bit older and into that high school age, you're trying to find who you are and you’re probably hanging out with people that you see yourself wanting to be friends with for a lifetime. So I think different demographics but also from an age perspective different characters and different personalities as well.
We learn more about his journey straight after high school and what he was doing at that time.
After school I went to uni, I studied civil engineering for four fantastic years. And that was good. That was interesting. And it really, I think it really helped to hone my analytical skills. Probably not so much my interpersonal skills. But I think it was good from an analytical perspective. And then when I finished uni, I started working in civil construction and was doing that for a long time until a couple of years ago where I just decided that, you know, working full time is great, but you need to find something else that's going to make you happy. And that was probably when I started it.
He decided to make such a massive change in his life after working in the same job for so long and we find out about what triggered that change.
The main thing was I remember one day I was just sitting at home after a long day at work and I think I did about 14 or 16 hours that day and I just sat there and I thought there's got to be a better way to make a living or to be happy in life. And at that time I had just bought my first investment property. Hadn't really seen much growth at that point until a few weeks later. I just realised and saw the potential in property because all those hours are always working and however many dollars I was making during that time, I made more in that short amount of time through investing in property than I'd had in actually working full time for somebody in a job.
And that's kind of what triggered me, this is a way, there's definitely a better way than working full time for the rest of your life.
It's a fascinating thing and that's what I’ve heard so many times from investors is that once you get to a certain point, when you build up a certain amount of properties in your portfolio, that exceeds what you grow and earn than just working full time or even a job. And I think that's ultimately what we all want to try and achieve. It's just we get stuck and a lot of people just can't get out of that, unfortunately, to do what they want to achieve their dreams.
I think it's so powerful, honestly. It's so, so powerful and until you sort of take that leap and start investing in property the right way, it is really hard to sort of imagine or fathom that there's a vehicle out there that can effectively fund your life until you pass or if you decide to pass that on to your children, that's great as well.
Toma talks about his parents and whether they had any influence on his property journey or any of his interests.
It's always been around in my family. Like I said earlier, they had been investing in property, you know, when I was really young and didn't really understand what was happening. Back then I probably didn't even know they had a little portfolio to start off with. But as I got older, my parents started to do more in the development space. And that's where I started to get more involved in the onsite, you know, development and actual physical building just helping out here and there weekends after work. And that's sort of what triggered, you know, what's happening here? What's going on? And that education through them, I started to understand why they were doing it and then further to that is I started reading more books and trying to understand different strategies because there's a million books out there and everybody's got a different strategy. But just really trying to absorb as much information as possible to understand like why are people doing it. And then obviously compound growth and rental return was a big factor in that. So they played a big part and big influence in my investing in property. And I've really tried to just try to continue that.
Through his parents he had been around the property industry for quite some time and we hear some examples of the properties that his parents were investing in.
Initial investments were around just the unit style investments. Once the development started they were just like a duplex townhouse maybe a triplex style. And it was really cool to be able to go back and just see what was going on and what was happening and getting an idea on how to effectively build a development. Not only from a, I guess, physical construction perspective, but the numbers that go behind it. Like why are we building 2? Why not 3 or 4? What are the council requirements? You know, all those different things were the sort of things I was exposed to when I was going to visit after work or on the weekends to help out.
We learn about the locations of his parents' properties and whether they have expanded out of NSW.
No, just New South Wales and they don't do that many. It's just one every now and then. But you know, it's always nice to be exposed to that kind of thing and I'm very, very lucky in that sense that I am exposed to that. And that I can bounce off ideas with my parents with investing in property in general. Not a lot of people can do that. And I guess that's the reason why people listen to podcasts like this so they can get some more information and have a little community on property investing and have someone to talk to if they need to.
Toma provides us with a status update of his parents’ property portfolio.
They’ve still got their portfolio. They're getting closer to 70 which is getting up there in age I guess. But they're just looking to, I guess, enjoy their life now. So they've worked hard and they deserve it obviously.
A lot of people get into property to set themselves up in the latter stages of their life, he shares how his parents’ journey has impacted their life at their older age.
It's definitely been a positive impact. I've seen people that are the same age and don't have property or investments in general. So from a financial perspective it's definitely helped them and it's definitely a positive and it's probably been more stressful than, you know, not having a portfolio. But I think that sort of immediate, short term stress or financial burden, if you want to call it that at that time, it's all worth it in the end because it's a long term game property. So you're not going to get those amazing returns in the first 2 years. I mean, if you time the market, yeah, you might. But generally speaking property is not a short term investment. You know, unless you're flipping. But I think in general looking at them now closer to the age of 65 to 70, we should look at ourselves and say, “We don't have that much time right now, so we need to make the most of it when we're younger.”
We jump into Toma’s property investing journey and find out about how he got started and what property he invested in.
It was a property in Western Sydney. I knew I was ready to invest, had a bit of a chat to dad about, you know, what we can do? Where can we invest? And we had a big conversation about it and him obviously being successful in what he's done, I took a lot of advice from him. And he suggested a property out in Western Sydney and bought that property for $288,000 back in 2011, I think. Now it’s worth a lot more than that. And so it's been great. But I remember investing going, “That's a lot of money to put down for a deposit,” because you work so hard for the money, you work so hard for your savings, for your money and your deposit and you get a bit scared when you’ve got to write or send that money across for the deposit.
After getting over the hump and purchasing that first property, we find out if he has added any more properties to his portfolio.
Since then I've added another two investment properties and currently in the middle of doing a joint venture development. And so I could have bought more investment properties along the way, a more sort of passive income, but I really wanted to get into that development space. So for me in particular, my strategy was more around saving a bit more and allowing not too much debt to build up in my portfolio so that I could fund my next venture, which is basically a joint venture with a couple of people to do a duplex site in the Sutherland Shire, which we're doing right now. So I've added a few since then and now I'm getting into that sort of development space and really enjoying it. More risk definitely, but with more risk comes more reward.
The first property in the portfolio can sometimes be the most important and we learn about whether his first property was the springboard he needed to jump into his second and third properties.
The strategy there was the buy and hold and refinance, obtain that equity, use that equity to buy the next property and then basically repeat the process. Buy, hold it, refinance and use that deposit and use that equity to buy the next property. So it was definitely the same strategy for property 1, 2, and 3. By now, obviously we're getting into a bit of a different strategy.
We hear about one of the worst moments he has had since purchasing properties as an investor.
I bought a property in Queensland. Obviously me being in Sydney I bought it sight unseen, which is fine. That was all good, there were no dramas with that. The mistake I made at the time was the property that I bought and the property manager, the managing agent that I engaged to manage the property, was in two different cities. So I bought it out near the Ipswich area and the managing agent that I had was in Brisbane. And I guess the rookie error, the rookie mistake I made back then was, they're not close by, they can't go to the property often and check up on it. And it caused me a lot of heartache because they weren't managing the tenants properly.
The tenants were paying rent. And in fact that managing agent, I think in the first sort of 24 months, they went through about 5 or 6 different property managers that was managing my property. And that really caused big issues because information was getting lost between everyone and it was really hard to communicate with them. So that was about a $5,000 mistake that cost me. Because people weren't paying rent on time and they couldn't evict the tenants and all this kind of stuff happened in the background. But something I'll definitely remember and a mistake I'll never make again.
On the flip side, we hear about his amazing aha moment and how everything clicked for him.
I think it's what I was saying earlier, just about my first investment when I was, I still remember I was sitting in an apartment. I was just reading a book. I think it was Michael Yardney’s book actually. And I just realised that this is the way to go to build long term wealth for not only you but your family and hopefully future generations so you can pass it on to them. And I still remember it vividly. I was sitting on the couch, it was a beautiful summer's day. Had the sliding doors open, the breeze was coming through and I was just sitting there going, this has to be the way. And that was my aha moment.
Then what happened after that? What did you do and how long?
I just wanted to soak up as much information as I could and contact the broker to refinance to get that equity out so I can do it again. Because I was pumped. I was excited. I wanted to keep going.
We delve into his second and third property investments and how both of them came about.
The second investment I bought in the same area that I had purchased the first investment, I guess the theory back then I was still learning as it's done well. It's got good fundamentals. It wasn't long after I purchased the first one that I purchased the second one. And then after that, it was a little while in between drinks. Because I was looking at the idea of purchasing interstate and have this borderless investing mentality. Which is quite scary for someone doing it the first time because you don't know what's going to happen. There are different rules in different states. This whole notion of buying a property without seeing it, that's a bit weird for some people. But I really wanted to grow a portfolio where I wasn't restricted and if the market was down in Sydney, well then there would be another market that would be growing. And that's when I started looking interstate and you know, I was looking at things like population growth incomes in the area and the demand for property. What's the supply pipeline like? Are there going to be too many properties coming into the market relatively soon? Scarcity is a big thing. So I looked at all of these different things and I ended up deciding to purchase interstate. It was a great experience for me and something I can pass onto my clients.
How To Take Control of Your Own Future With Peter Toma
Toma shares why he moved into property development so early in his investing journey and we learn about the strategy behind this.
For many sort of serious investors, professional investors you know, the buy and hold strategy is going to take you so far. But I think if you want to take it to the next level, then you need to start looking at manufacturing equity. Manufacturing equity can be just through a simple renovation, could be through a subdivision or it could be through physically developing property. It could also be you're buying a block of land and you're building on top of that. But for me, I feel as though if you're serious about investing, serious about building wealth through property, development is something you're going to get to eventually hopefully sooner rather than later. For many of us there is more risk to it, like I suggested. But the financial rewards from an investment perspective can be a lot greater. And when you've got your manufacturing equity from a build and you've got the market moving in a positive direction for you, then the growth just compounds even more.
I totally agree with you in an uprising market, but in a sort of a flat or downturn market, how does that strategy work?
I think as long as you're buying well, and if you're buying in a slow market and you're selling in a slow market, that's great. If you're buying in a hot market and selling in a hot market or refinancing, whichever one, that's okay too. But if you're buying in a hot market and selling in a slow market, which, you know, nobody has a crystal ball. So the biggest thing is you need to be able to do your feasibility studies properly. Do your realistic one, do your conservative feasibility study and do the best case scenario. So you really need to make sure that, you know, if the market drops by 20%, what's your return going to be? Do the numbers still stack up? If they are, well then it's a pretty good sign to go, even if the market does drop, we're still going to make money and move on to the next development. So your feasibility seems to be on point and you just need to be able to risk assess that as best as you can.
We delve into his current property development project and find out how long he has been working on it.
We bought a couple of years ago. The option there was an older house on quite a sizeable block, a 15 metre frontage, 45 metres long. So pretty big in terms of depth. And the opportunity for that was just simply to buy it, to build it and to build a duplex on it. They're the kinds of properties that you can sort of build in those areas for that size block, for that particular zoning. So that's the opportunity that we found and we took it.
Toma told us that he purchased this property in the Sutherland Shire and he explains why he chose that area over many others in Sydney.
That particular one just worked well within our budget. And the return that we were looking at we could probably get better returns in different areas. But the price points are probably a little bit higher. So for us at that time, it was mainly around the price point to purchase the land to do that specific development.
So at the time the land costs us about $1.2 million. And then obviously you get your closing costs on top of that. We're funding the build ourselves and through an owner builder. So the build cost isn't as high as, I guess some of the other commercial builders. But all in all, we're probably looking after we build and refinance, we're probably looking at about a 15% return.
Which, you know, I think in the scheme of things isn't too bad. Ideally you want 20% plus, but I think in the current market that's a good result.
Basically you're able to sell those duplexes individually for roughly how much in the area?
If we were to sell, we're looking at ranges from anywhere between sort of 1.2 to $1.4 million for each duplex. It really depends on how many bedrooms and level of finish, but that's probably the range 1.1 to $1.4 million is probably the range in that area.
We delve into what he plans to do once the property development is complete.
I think with the current climate, I think we'll just see what happens. Expected to finish soon so it just depends on if the market is going to take a dip or not. For us it’s just a bit of a wait and see game right now.
When is it due to complete?
Probably looking to have it finished in the next sort of 3 to 4 months.
We jump into the process side of things and Toma talks us through the steps he had to take to get a project like this done.
DA approval was a nightmare. Just with the council. Took forever to approve our plans. I think it took us 8 months to get approval.
When you're paying interest for 8 months for nothing. It's very painful. It's a very frustrating process. And I'm sure a lot of people who've done it before can sort of agree with that. But look, from the process, I think you'd need to be clear of the council requirements, what you can and can't build on specific size blocks. Because no matter what the real estate agent tells you in terms of you can build this, you can build that. They'll always tell you subject to council approval. So you really need to be sure. From there we engage somebody to do the plans for us, submit the plans to approval. And that in itself is a bit tricky because you need to sort of, I guess, have an idea of what you want to build, level of finish, the style of property.
You have got to make sure you've got all your ratios right in terms of landscape and hardstand and you need to be sure what you can and can't build in that space. And then once the approvals go in or once the design goes in for approval, from that point it's just a waiting game. Honestly, it's just a waiting game. During that time, you can talk to builders, get pricing from them as well. Council will want to know your estimate of the budget for your build costs as well. So you need to be across that and then once you do get approval it’s all hands on deck. You just got to get started as quickly as you possibly can. There's obviously specific gates in between or during construction where you got to get private certifiers out or council out to come and, you know, get the tick to keep going. The build is actually probably the quickest part if you know what you're doing. It's the research, it's the upfront research. It's the council requirements, the application, which takes a long time.
We discuss the process of figuring out what the land could be used for and who he could seek help from to get it developed.
We just spoke to an architect and I looked up the council regulations myself. And I was comfortable enough, but then when the architect looked at it, they said it was okay as well. I just knew it would be fine and there were other developments in the area going up as well. So having a look at those and seeing what they got approved, public information allows you to be comfortable with that decision.
Toma was able to bring his parents in to help build the property but there are a lot of smaller building companies that can do a good job for you.
I wouldn't discount people going to smaller builders in general. I think that they can provide a lot of value and can show a lot more care for your product. Going to some of these larger commercial builders they've got like the specific trades they are going to use. But they're all about cash and money and they want to get in and get out as quickly as possible and may not take the same level of care for the quality. Because if it's your home, you want it to be nice, you want it to feel nice, you want the things that you're after. So, you know, I wouldn't discount smaller builders out there. If you are looking to put a home or even an investment property because they will look after you.
Next, we delve into the mindset behind his success and we find out about what his main motivating factor is.
The biggest one is I don't want to work for someone for the rest of my life. And so that's number one. And the second thing is, when I leave this world, I want to be able to leave something behind for my family to basically live off. I don't want them to have nothing. I don't want to just have enough for my super and that's it, I want to be able to give more when I'm not here. So that's one of the biggest drivers for me. The other part of it is coming from a background where my parents didn't grow up in Australia. They came here with nothing. And for me to just basically, I wouldn't say waste my life, but not build upon what they've already given me in terms of a good life, for me, it'd be disappointing.
Taking that first step can sometimes be the hardest and we hear about what held him back initially before jumping into his property journey.
I think initially it was do I have enough money for it? I thought I needed to have like 20%. I thought I needed to buy in Sydney. And so back then, you know, it's still relatively big money. But knowing what I know now is you don't have to buy in Sydney, you don't have to have a 20% deposit. There's other ways around that to get into the market and if you need to borrow a little bit more to do that and as long as you can support the cash flow, then that's the main thing. As long as you're in the market. But I think that was the biggest thing that was stopping me back then.
We get some amazing book recommendations and learn about some of the people that have been a big influence for Toma.
Margaret Lomas, I've read a few of her books. Like I said, Michael Yardney, they're probably the main two that I guess look up to and read about. Other than that, everyone has a bit of a different strategy. So like people like Chris Gray who's very into buying, renovating and using equity to do more and using equity to live your lifestyle. Some people don't necessarily agree with that theory. But you know, they’re the sort of three that I look to and say, you know, these are some really, really great strategies that these guys are implementing. I absorbed a lot of knowledge from those guys. They probably don't know it, but it's just the material that they've been producing over the years.
We delve into the best piece of advice that he has ever received.
The best advice, the best advice I've ever received has got to be that you are in control of your future. Don't let anybody else control your future. You are in complete control. Things will happen, but it's up to you to decide what's going to happen from there. It's up to you to find a way, whether that be through your own passion, skill drive or going out there and finding advice from other people as badly as you want it, you'll find a way to get it.
A lot of people are creatures of habit and we discuss what are some of the habits that might have contributed to his success.
One of the things as I mentioned before, had that issue with the property management. Since then, I've always been diligent in checking my rental statements as they come in because it's so easy to just assume that they're going to come in and the rent is coming in. There's no issues. Sometimes managing agents do things without your permission because they think it's okay, even if it's a small amount of money. So just a habit of checking your rental statements that everything's coming in.
And checking your portfolio where everything's at in terms of equity, debt and your finance every 6 to 12 months.
If he could go into the past and give himself some advice, what would it be?
Why didn't you buy more properties? I think I would've said, whatever you've got, just start investing, start investing now. And hindsight is great but I think you just got to go for it. No one is going to determine your future. Only you can determine your future.
We find out some of the goals that Toma is looking forward to achieving in the very near future.
I'm going to continue to do what I'm doing. From the development side of things, I'm keen to continue doing that. But I'm also really, really excited to be able to share my knowledge and help other investors do what I've done. And if people are out there looking to build a wealth base through property. I'd love to be able to share my knowledge, show them different strategies that might be applicable to them and really that's my way of giving back is passing on what I've learned to others now.
There are many agencies and strategies out there for us to choose from but we hear why Toma’s strategies stand out from the rest.
I think the biggest thing is that we recognize that not everybody's strategy is going to be exactly the same. You can read all the books that you want, but at the end of the day, everybody has a different financial situation, a different appetite for risk.
Everybody's at a different stage in their lives. Some are single, some are young couples and people with kids, older people above 60, they still want to invest. So they're going to have different strategies in different models that need to be implemented to them. And then that's one thing that we do is we really look at people's specific scenarios and situations and tailor that advice, that solution for them. So their strategy isn't going to be the same as the next person.
Last and final question for you, paydays. How much of your success is due to skill intelligence and hard work? And how much of it is because of luck?
Luck definitely plays a part. You know, I was lucky that I was born when I was born and I was at a specific age where I had saved enough money because I'd been working and I got into the market in late 2011 when things started to ramp up. So you know, that part of it is luck. But after that comes the skill, the knowledge, the tenacity, the desire to keep learning, to keep going. Because so many people can just buy one property and just stop and think that’s enough, that's okay, I've got my investment property, I'm good. But if you want to keep going, if you want to build a future, a wealth base, you need to educate yourself. You need to put in the hard work and learn. You need to be able to have those conversations with different investors, different managing agents, real estate agents, and when you're doing research. So I think luck definitely plays a part in it. In terms of percentage, I reckon, I’m going to say 20%. Well, I was thinking 30 but 30% is probably a bit too much, but 20% luck. Everything else comes from your own hard work and mindset.
Julie Wyatt is a renovation coach intelligent investing who is also a single mother and part-time nurse. She became a nurse straight out of high school which ultimately changed her life perception, and she carried this with her in her later years when she finally dove into property investment, a passion she had always been interested in but had never taken that first step.
Join us in this episode of Property Investory to hear how Wyatt won a property mentoring competition where she was able to learn from the best of the best, how she got herself out of bankruptcy and how she fell in love with renovating and intelligent that could ultimately inspire you!
'I think many nurses make great property investors. Many women make property great property investors.'
We find out what Julie Wyatt does and what her job description is, where she proves she is the ultimate multitasker.
I'm a property and renovation coach and I'm also a registered nurse and I still work part time because I really enjoy my nursing. I've kind of let a lot of it go, but my main focus now is my property renovation business. So it's a busy life that I have.
She delves into what a typical day in her life looks like.
I split my time between working at my business as a property and renovation coach here in Perth in WA. And I also work for a mining company up in a remote Northwest of WA. So I'm split between property and nursing, which is a great mix, I reckon.
With a hectic workload, she explains how she manages the time to do it all.
It's fairly structured. So I work a set roster so that when I'm at work, I'm at work, but my time when I'm at home is spent doing things that I really love, which is investing in property and renovating, which is my first love. So it's certainly busy, but you know, it's an easy thing to fit everything in once you become organised and structured in your day.
She explains the kind of schedule she has in between nursing and her business.
Eight days a month I work and the rest of the rest of the month I basically work from Perth, which is awesome. So I share a job with another nurse, which is fantastic. And I'm very lucky that I've got a very flexible employer that allows that sort of working arrangement, which is awesome.
I've had a few nurses on the podcast and it's really interesting how with nursing, it involves a lot of empathy and communication, because you're dealing with patients and this is essential in the property business because it is all about people. It ties in very well. And that's why I think a lot of nurses are very successful at what they do in terms of property investing.
I'd have to agree with you Tyrone. And I think many nurses make great property investors. Many women make property great property investors. I think mainly because of the life skills that nursing teaches you, really allows you to listen to what a vendor is saying for example, and read between the lines and just see what's really going on. One of the things that I have really honed in my journey is being able to understand what's the issue for the vendor. Why are they selling the property in the state that it's in? And being able to come up with a win-win often. Not everyone has that skill and I think it's really important in investing and certainly in renovating.
Julie Shares Her Life Experiences
Before discovering her love for property, Julie Wyatt shares a bit about her upbringing.
I grew up in a military family, so my dad was in the air force so we've kind of moved all over the place. And I guess that again has taught me really well because you start in a school and then two years later you’re moving to a different one, so I became very shy, which I was initially, but also you just adapt to a changing situation. So I was all over Australia, also in Singapore. So yeah, it was quite an interesting background. My dad actually got out of the air force when, when I hit 13, so I had a bit more stability going into high school. But yeah, it is what it is. It's one of those interesting environments where you learn a lot as you go along.
That's very interesting. Do you remember how many different places you went to before the age of 13?
Probably about seven or eight schools in my primary school years and kindergarten and stuff. So, yeah, a lot. I can't remember the exact amount, but you know, that's the life in the military. You move when they tell you to move and your family just has to go along with it basically.
As her father was in the air force, she goes on to explain the kinds of duties her father had.
It was more in supply in doing logistics and stuff like that, but still a very necessary occupation. I think he actually really enjoyed it in the military. He never really found something he enjoyed more after he left. So I guess it's a lifestyle thing. And he stayed there for a long time.
As Julie Wyatt was finally able to settle down at the age of 13, she talks a bit about her schooling years.
Nothing very interesting in my schooling to be really honest. As soon as I started high school, I finished year 12, finished my TA as it was called then, and then went straight into nursing as a fresh faced 18 year old. So they didn't have nursing through universities back then, so I'm showing my age here big time. But yeah, so learning on the job basically and learning very quickly, so really important life skills at 18, like laying out dead people, dealing with trauma. You just get thrown in straight in the deep end. But again, important lessons for later in life I reckon.
As she was confronted with intense experiences whilst working as a nurse, she shares how it changed her life perception.
I think it made me grow up very quickly, certainly. And also I think you really learn important life skills. Like how to talk to people, how to interact with people. And as I said, because I've been changing schools so much when I was younger, I was really quite shy. And you just can't be when you're having to help people with massive issues when they're sick, you know? So it really taught me to grow up and to learn how to actually interact with people and speak to their relatives, speak to their loved ones, all that sort of stuff. So again, I'm very thankful for that because not everyone gets an opportunity to do that, at such a young age as well.
Did you continue on to do nursing from there or did you actually switch into something else?
I became a registered nurse after doing the required training, but I didn't stay put in one place. I kind of was a little bit bored just saying in a hospital. So I went bush, basically I went real remote and just had lots of opportunities to do some amazing stuff that I would never have got a chance to do if I'd stayed in a Perth hospital, just being a ward nurse. So working in rural areas in remote communities. I actually became a flight nurse for Royal Flying Doctor Service in Port Hedland and that was an amazing experience. So, you know, when you take that step out of your comfort zone and go to remote communities, which a lot of nurses probably wouldn't do because they'd be scared or they're not sure if they can cope or whatever, then all of these doors are open. From Royal Flying Doctor service, I went to working offshore in oil and gas and then into mining. So for a nurse in an open mine site, it's not that usual sort of progression career progression that you would normally get. So I've been very, very fortunate that I've had the ability to experience so many different things. So taking that step as an 18 year old, getting exposed to a lot of different things and then just going outside of your comfort zone. It's been amazing.
How many years have you been a registered nurse for since then?
Oh, Tyrone. You're going to ask me that? That's going to make me look really old. 35 years I've been doing that, so it's a long time. But hey, some of the people that I've started nursing with have become my closest friends and we've been friends as we started at 18 year olds all that time ago. So yeah, it's really interesting. That sort of seemed like yesterday, you know?
Julie Wyatt discusses if nursing was always the path she wanted to follow, or if she was interested to explore other options.
Always wanting to do different things I think are really part of the reason I got into property at such a late age. Like I didn't start investing until I was 40. I think there's a couple of reasons for that, but mainly I was married to the wrong person who just wouldn't, wasn't interested in it. I thought it was a perfect opportunity, you know, good income, where we were living and stuff like that. And he's just like ‘no, no, no, we can't do that. No, we're not gonna do that’. So I think that held me back and I went along with it clearly, but you know I always wanted to start investing. Property really resonated with me as an investing strategy. So it wasn't until I became divorced that I went okay, right now we go, this is what we're going to do. So, you know, I probably saw it a lot later than a lot of people, but it was a steep learning curve. It was starting in the forties and a little bit of time to make up, you know.
Despite diving into property in her later years, she shares what else may have influenced her interest in property investment.
My earliest memories of me running around after my granddad and my dad who are both self-taught carpenters, very handy. Like I grew up learning handyman or handy person skills. So I always loved that sort of thing. So I think that's why I really gravitated towards renovating, I was always a tomboy. I was always like hey, I want to be outside helping them. And I think having that sort of background, like if it's something you love then you obviously have a passion for it. So I only have them to thank for that influence. And I think that has really followed me through so once I started doing my own renovations, I was also able to do a lot more than I thought possible. And if I didn't know something, I would advise someone to teach me or I would learn or I would YouTube it or whatever it took to find out how to actually do a task. So I think that's been a great influence as I was growing up, certainly.
Being A Single Mom In Her Property Journey
After realising her passion for property, Wyatt delves into the first property she purchased.
That's probably the beginning of the story for me. I ended up divorcing the person I was with for a while, 20 years actually. So I found myself newly divorced and I was the sole carer for my little girl, she was only 16. We're in a remote area up in Port Hedland and I thought, wow, okay. So I always wanted to learn about property, this is a really good time for me to start doing that. Scary but good because I can remember going through the process of the divorce, so we actually owned a house together, so I was waiting for the proceeds of the sale of that house. And that takes forever as you know, if you've gone through something like that. And I remember looking at my little girl thinking, wow this is actually it.
I have to make some decisions now. They're going to be the right decisions for her and for me. So it really hit me in the face where I thought, wow. I don't know anything about investing. I have no clue, but I need to find out. So I actually entered a competition, didn't even think much about it. Just wrote, I think you had to put in 50 words or less why you thought it would benefit you to be on a mentoring tour for 12 months for a property mentor. And I thought, oh yeah, that sounds good, I need to know. I've got a small amount of money coming to me. I really need to learn as much as I can. So I entered it. It didn't think anything more about it. And then about three weeks later I got a phone call and they said to me, ‘we picked you, we want you to come over to the Sunshine Coast next weekend and start this whole process’.
I'm like, oh my God. It really floored me. I had no clue. I didn't know what to do. Of course, as you do, go and ask the opinion of people around you and they were like, ‘sounds like a scam’ or ‘oh no it sounds too hard. You shouldn't go’. And I thought, no, I really want to do this. So I did and made it happen. I had my own business, I had my daughter and everything to try and organise, but I jumped on the plane, went over there and it literally changed my life. That whole experience was amazing, and pushed me completely out of my comfort zone. I ended up working for 12 months with a very good female property guru who challenged me in every way.
I mean I always had a good income because I've always worked, but I had nothing behind me. So I was a single mum with all the responsibility of my daughter and nothing much to show for 20 years of marriage. So in the 12 to 18 months that followed, I developed, it ended up being about one point $8 million worth of property. And doing lots of things that I had never done before, including renovations. I started with renovations, but also the ability to do this quickly using joint ventures, using strata titling you know, lots of different things that I have never been exposed to. So it really did push me in my comfort zone and so to say, thinking about doing property one minute into actually doing it and going from not even knowing how to write a contract out to, you know, dealing, doing joint ventures with people I didn't know particularly well, it is something that pushes your comfort zone, but it's the only way to grow. So yeah, it was just a massive year for me. A massive year and a half actually. So that's what got me started and I've been doing it ever since. I love it.
Wow, that's amazing. Were there any other candidates that were selected or were you the only one a part of that whole process?
No, there were seven women from around Australia selected, so I was the WA person. So I got to know those seven women very well, we became very good friends. I still keep in touch with them now. That was 10 to 15 years ago now.
I don't hear very often of these kinds of competitions. I wonder why she did it, do you know why she did that?
She was working with another lady and they were kind of a mindset coach and a property coach and they wanted to see whether they could take seven women and teach them a lot of stuff in a year. And they certainly did. It was amazing. I don't know that it's ever been done again, but I just consider myself very lucky to have had the opportunity to do it. Yeah, it was just something that I did as a one off, I think.
The renovation coach talks about the structure of the program and the activities involved over the course of 18 months.
It was the initial kind of weekend that I went to the Sunshine Coast, where I was put in front of 500 women, the audience, to talk about my journey and also you know, who I was and all that sort of stuff. And then four times during that 12 months, they would meet up at various places for the weekend, so they had like a weekend seminar and you'd have to go up and show the projects that you've been working on or what you've been doing. And so it was really good. So people got to know your story and about your journey. And then we used to just keep in touch with the mentor by phone, we'd hook up every week. And we also had the ability to ring if we found a really good deal and just run through the numbers with them and make sure that they were happy with what we were doing. So it was an amazing opportunity in that regard. So you knew that you were pretty much doing stuff that was going to work and that the numbers worked out, et cetera. And I think the thing that taught me the most was that having a mentor is amazing and just taking all the guess work out, is this a good deal? Is it not? Teaching you how to find good deals and how to back yourself and all those things.
Was there a cost to that as well besides your time?
No.
That's a really amazing opportunity. What did you take away from that and what was the particular strategy that you followed?
At the end they had like a finale weekend and you know, all of us got to show what we'd achieved in the 12 months and all of us did really well. Not just myself, all the other girls as well. Then we had the opportunity to continue on with the mentor, obviously paying what you would normally pay, et cetera. But I think during that whole year there were other people that had participated in a paid program. So we were just the lucky ones that won ours for nothing. But I think, you know, the greatest thing that I took away from it is that it's the network, the power of people, having positive people around you, having people you can ring and just bounce ideas off, so you don't feel like you're doing it on your own.
I think that's the biggest thing I got out of it. I mean, it was an amazing signing year and we had lots of stuff happen and lots of fun things, lots of not so fun things. But that's the roller coaster of renovating and property right? It was just one of those things you just learn, you learn very quickly that things don't always go the right way that they think that they're going to go. You know what I mean? I suppose having that support of other people around you just made it such an amazing time and I still look back on it now and think that year changed my life and not just in terms of property. It changed my mindset. It changed my belief in myself and my ability to think, yeah, I actually am a good person and I'm doing stuff that I love. You know, all of that. Because I think each and every one of us has their baggage from their history and stuff and sometimes it's not so easy to move past those things and actually change your mindset and believe that you can do these things.
After developing a good mindset, Julie Wyatt delves into how she has managed to build her property portfolio.
I've clocked up my 11th renovation. So in that first 12 to 18 months I didn't do just renovations I learnt a whole heap of other stuff as well. But like I said before, I gravitated straight back to renovating because I just get a buzz out of turning a really crappy old, horrible looking house into something beautiful. And I think that's the guts of it. And to be able to make money out of that is a bonus. But I really enjoy the process. It's a little crazy I suppose, but it's one of those things where I did a lot of things, but renovating I think is a strategy for me that works well because I just understand it. I've got to feel it. You go into a property and just get a feel for it and you can see, no matter how ugly it looks right now, you can do something with it. So I guess you know, since I started that course, really renovation has been my main strategy.
Out of all those renovations, have you kept all of those properties or have you bought and sold them?The last three we've kept, the ones previous to that we sold. The main reason being is that the Perth market or WA market has been challenging for the last couple of years. So what we would have normally flipped for a profit, we've kept, and we've actually put all of the three properties onto Airbnb and basically just increased our cash flow because the market at the moment is a challenge, and we wouldn't have been able to sell them for a profit. So it's best to keep a hold of them. And Airbnb has been amazing. So it's just a really good strategy and just makes lots of sense in lots of ways. And our guests love staying in a newly renovated place. They really love it, so it's worked really well. Sometimes it's a matter of changing the way things in the property cycle and the property market are going. So never say that you can't do well in a downmarket, but Airbnb has certainly proved to us that we, you know, we've done very well and it's just a good strategy and we will change our strategies depending on what's going on at the time. So yeah, that's been a really good thing for us.
With all the properties she has renovated, she shares one of her worst property moments and the lesson she learnt from it.
I'd love to be able to say that I've just been successful the whole time and everything's been wonderful. You know, life is life and sometimes I've made some monumental mistakes and this one was one of them. I think after I finished the course initially with my mentor, I think I got a bit too smart, and that's just not the word, but also a bit cocky, I think, and probably thought I could do everything and take on too much. So I ended up for some reason, I have no idea what my thought process was at the time, but I bought a business and I thought, great, so I'll put a second mortgage on one of the properties to enable me to go into the sort of business, blah, blah, blah. Very long story cut short was it was around the time of the GFC.
The business didn't go so well and the banks don't like you putting second mortgages on the properties. So really not a smart idea. At the end of the day, I ended with the banks just buying and selling my properties. So that was a bit sad and I ended up being in part 10 bankruptcy. So basically the difference between a part 10 bankruptcy and a normal bankruptcy is that you pay back all your debtors, which I did. So that was to enable me to sleep at night because I think it's the right thing to do. So at the time it was a pretty horrendous process. I ended up also with a relationship breakdown around the same time. So everything as it does, was a monumental lesson for me and something that I really actually am very grateful for now, but you know, just shows that not everyone's perfect.
We don't always get it right and even going through that process and kind of the stigma of a bankruptcy and stuff like that. I got bad advice as well, which didn't help. But really, I think it's really important in these times to take responsibility for what's happened and to use it as learning, which I absolutely did. And I was actually able to turn that around quite quickly. You know, it takes a long time for all that stuff to be sorted and after a year, or I think it was probably into my second year post bankruptcy, then I started being able to invest again, just not on my own behalf, but using people with tools and stuff like that. So it wasn't a fun time. I didn't enjoy the experience, but I'll tell you what, it taught me a hell of a lot.
I suppose it proves that even the most successful investors, when you start talking to them they have all been through stressful situations like that. And that's when they get their greatest aha moments or their greatest learnings from. So yeah, I learnt a hell of a lot and you know, I could have actually at the time gone, ah, you know, property is really not for me. I'm just unlucky or everything is against me and I could think I'm never going to do it again and all that. And I would never think like that, but I could've, I could've just walked away and said this is just not for me, but there's something inside of you that says, no, I just made a bad decision. And you know, you can turn it around and you can move on. And that's exactly what happened. So it was a huge learning curve, shall I say.
Were you also still working as a nurse while you were running this business?
Yes, I haven't actually stopped working as a nurse, there must be something a little odd with me, but hey I actually enjoy it. I enjoy what I do. I always wanted to sort of keep doing that. So all of the money that I've made out of property has been on a part time basis. So I've always been able to juggle the two. I always remember my daughter will never forgive me. I remember when we were living in Port Hedland and I was renovating, I think it was my second or third house, I can't remember now. And it was a school night, so she's asleep on the floor in the middle of the lounge room. There's no furniture because I'm renovating this house and I'm finishing the painting and it was like one o'clock in the morning or some stupid time. And the poor girl's asleep on the floor in a sort of bundle of rags. And I'm thinking, god, I'm such a terrible mother. What am I doing here? But I've got to finish the painting before tomorrow because I had no time. So I don't know if anyone could relate to that, but oh man, you know, you just have to make it work. So we did.
Wow. And I wonder what your daughter says now when she looks back at it.
She goes, ‘you were so cruel to me’. But she knows the stuff that she learnt in the process is pretty amazing as well.
Renovating 11 Properties with Julie Wyatt
You don't just become a renovator, you become a problem solver. And I think if you have the ability to do that and think on your feet and back yourself, then that's my biggest why.
Despite experiencing obstacles along her property investing journey, Julie Wyatt talks about the moments where everything just clicked.
It sounds very negative to talk about your worst investing moment and mine was fairly major, but there's been some amazing stuff as well. And I think the thing that stands out for me the most is working very closely with my very first mentor. And then, you know, just learning the basics for me, that was huge. So how to put a property under contract, I didn't even know that, I had to ring her and say ‘what do I do?’. And she's like, ‘oh geez, Julie, come on, get a contract and put a price on’. And I said, ‘what if I don't have it?’. Because literally with the first property I bought, I had no money. I was waiting for my divorce settlement and I needed $43,000 which doesn't sound like a huge amount now, but for me it was huge.
I needed to borrow that off someone because I needed to pay a deposit and you know, get the ball rolling, put things under contract. And I remember the conversation with her and she said, ‘I'm not going to do this for you. You need to actually think outside the square on this. I know you don't have any money right now and you want this property, so what are you going to do about it?’. And I went, Oh, okay, I actually have to do it, so what am I going to do here? So I came up with a plan. I had a very good friend who had some money. And so again, this was completely out of my comfort zone. So I rang him and I said, ‘would you lend me $40,000 as soon as I get my payment for my divorce? I will pay the money back’.
And he said, ‘absolutely, no brainer’. And I went, oh my God, why didn’t I ask him a long time before instead of putting myself under all this pressure and what ifs and you know, but really when you think about it, there's skin in the game here, right? I had to actually think outside the square. I had to borrow some money and now I really had to make this work. I was like, this is not my money anymore and I actually borrowed off someone, and I need to pay them back with interest, blah blah blah. So you know, for me, this was huge. I'd never asked anyone for anything. I was a very independent person. So for me it was also like how else am I going to get this going? It was really hard. And then once I got that property and kept the ball rolling it became easier to talk to people about financial stuff.
I didn't, I wasn't so self conscious about it. I thought, I'm good at this. I'm good at finding deals. People are trusting my judgement that the numbers are adding up. I was good at putting joint ventures together. I was good at all of the on the ground stuff. So joint venture partners are quite happy to work with bankers. I had the mentor to back me up as well, but also could do it all the nuts and bolts day to day stuff. So all of those things were you know, when you're on a roll and things just move, you know that is going in the right direction.
Working On Property Renovations
After having immense support from her mentor, she goes on to explain how her strategy led her into renovating.
Where I learnt to renovate was somewhere that you would probably not even think of the market being important. But when I started my journey, it was just the start of the mining boom in Pilbara. So the house prices in the area I was were really low when I first started. So I started taking out ridiculous price houses, you know, $50,000, $55,000-$60,000 for a house. And you know, doing renovation in a slick suburb in Sydney and doing a renovation in downtown Port Hedland are very different. So I really had to learn the strategy about a targeted renovation. Not overcapitalising working out what your target buyer is going to be after. So these are the things I learnt really quickly and then how to do it on a budget. That's really important. As I said, doing a lot of stuff yourself is also important.
But also just basically learning and what's going to make you the money? How can you do it quickly? And making lots of mistakes as I did, some renovations weren’t pretty in the early days but hey, you know, if you can buy a house with 50 or $60,000 and then sell it for three or $400,000, why wouldn't you? That was just how crazy it was in that time. So always I suppose part of the renovations is targeting it towards where your end goal is, and buying well, and doing a budget renovation that doesn’t cost you an awful lot that looks amazing, they’re robably the three key things that I have figured out how to make money and how to make it fast. And then when you go to a different market like I'm in now, who is your end buyer going to be and who is going to want it? So if it's for a family, what are you going to do differently? You know, all those sorts of things are really practical. So renovating with your environment in mind is really important. And then also styling and staging the property at the end, right, all the stuff that you learn as you're going along.
As her strategy encouraged her to be quite hands on, she reflects on other strategies and if she would have done things differently.
I got better at that because I got older, and my hands aren't so great anymore. I've had to get better at standing back and going, okay well I can actually pay someone this much money and I can do it this much quicker. So, you know, common sense says if you're going to be the overseer or the project manager of your renovation, then that’s the strategy we've been using probably the last 12 months, which was disappointing because I actually really like getting in and getting dirty. But hey it's quicker and faster and makes more sense and we've got a good team now so we know that we can call on experts to come do the plumbing or you know, we've got a good bunch of tradies who we know will do a good job and they want to work for us. So that makes a huge difference. And I don't feel like I'm just handing over control to someone else, I always am very much involved, but you know, it makes more sense and you can get things done a lot quicker if you're not doing it yourself.
The only challenge that we all face is, and this happens with every single industry, is to actually get time in for the tradies to get the work done. You can't always know, it's just a juggling act, especially when you do have good tradies, but at the same time you've got to manage our time and their time together to get things done.
Well that's the thing that I found the most working with the clients that I've worked with is having a plan is paramount. It just astounds me how many people, and I've got a very good friend here, whose husband is one of the worst at this. When she went to the football a couple of years ago, he just got in there with a sledgehammer and just bashed down a wall that was inside their lounge room and then just left it and she's like, ‘what are you doing? Where was the plan here?’. You can't just smash a wall down and then just go, ‘oh well what are we going to do now?’. And I see that a lot where people have just gone full hell bent in with a sledge hammer and then gone, Right, so that's not there anymore.
Now what are we going to do? And it just astounds me how that is a really common thing. Like there's no planning and you still see these people renovating after 10 years and you're like, wow. You can do a targeted renovation in six weeks, you know with a plan and having your tradies all sorted and all of that, which is what we do, but we can see the flip side of that where people have just gone ‘oh it sounded like a great idea just to knock that out. And then I don't quite know what I'm going to do now’. You just shake your head and go, wow, okay.
As she has completed 11 renovations throughout her journey, she talks about the types of work she does on properties.
I guess my bread and butter renovations are cosmetic. Cosmetic is just much easier. I haven't really gone into structural stuff mainly because you can do and have so much fun with cosmetic and move on quickly. And going back to what I was saying before, when you walk into a property and other people would be scared off by it, that's usually a good sign that you're onto a winner. Some of the local agents here ring me when there's a hoarder's house or there's a...what did I look at the other day? Ex drug laboratory type house, I mean all those houses that have been taken back by the banks and you see the way that some people live and you think, wow, but you know, it happens.
One house that I bought up in Port Hedland, it was a rate default property, so the person had just stopped paying their rates, and the counselor just wanted to get rid of it. And the bank, they just wanted it gone. So I bought it, I think it was about $60,000 I had to pay for it. But when, when I looked at it, it had this god awful cactus right out the front, right up to the roof line. There were snakes in the grass out the back. The whole house had been trashed. It was just dreadful. And lots of people that I knew had looked at the house and just went ‘nah’. But I bought it and I thought, you know for $60,000, you know, you buy it as is and you have to deal with whatever you deal with. So I was a little bit adventurous which I suppose was a bit silly maybe, but it taught me a lot hey, you just got to make it work.
What happened with that particular property, what was the outcome?
That was a property, I think it was my second or third property and I was also running a business up in Port Hedland for BHP at the time, and I bought it and I renovated all the inside of it. And I had a friend in Margaret River that was also part of this mentoring property group that I was in. And she said, ‘oh, I'll buy it off you’. Because the cash flow was crazy up there, we were getting ridiculous rental income from properties. So I think I sold it to her about $145,000, so I still made some good money out of it. I think I only put $20,000 into the renovation on a credit card and then I sold it to her and then she finished it off. So it's one of those ones where I just had to juggle too many balls and I thought, well if she wants to finish it, I’ll keep moving on with another one that I was doing. So yeah, it was interesting and I think she still got that. So the income out of the property isn't so great anymore because the mining boom has stopped and things returned to normal as they do in mining towns.
Julie Wyatt goes on to share a bit about her most recent renovation.
We live down South of Perth at the moment. We did one in Shoalwater, which is right on the beach, it’s a lovely place, bought this house and it had been on the market for about nine months. It was a divorce settle, a divorce situation. And they were pretty happy to negotiate, so got the house for a good price, so we paid $520,000 for it, but it was in a great state of disrepair. So it was a wooden house, which is different to a lot of houses down here, but it had a lot of things, I don't know if you've heard of Dolf de Roos, but his strategy is always buy a house that you can add value to and that has multiple streams of income possible. So when I looked at this house, I went, okay. So it's got a guest house attached to it.
It had a spa, it had a heap of stuff. And I thought this could be beautiful again. So we took our time with this one because we were both working at stuff. So I think it took us about six months to renovate it. Again, just cosmetic, but it just came up beautifully. And then we got it revalued for $640,000, and it was in the middle, this was a couple of years back now, but it was, you know, the market down here is terrible. So to make an equity gain of 70 or $80,000 was pretty good.
Even at that price point, $640,000, where was it located? Is it near the water or something?
Yes, very close to the water. But it's also a very big property and it's unique. So again, there's pluses and minuses of doing that. Sometimes it's hard to value a property like that because there's not a lot of other properties that are the same in the area. But again, that was just cosmetic. This was just paint, new kitchen, new bathroom, but it just made a huge difference to the overall look of the property. And I think the valuers could see that it's changed the streetscape as well, so it's quite interesting. We had that as a feature in Your Property Investment magazine, which was interesting. And lots of people said, ‘oh, you can't make an equity gain in Perth’. Of course you can, of course you can. I'm just thinking about it the right way and going about it as strategic renovation.
As it was a cosmetic renovation, she dives into the details about how much she spent on that particular property.
We probably spent a bit more than we should have, but we justified it as you do because we're living in it. So we spent about 50 to $53,000 on it. But it was like I said, it was all cedar woods, so everything had to be sealed and stained and then the painters took a long time to paint all the outside and inside. So there's a fair bit of cost in all of that. But having it done professionally made a huge difference, and because we’re living in it, it's a PPR. We wanted to spend that extra money, have a nice kitchen, you know, have all the things that we wanted in the property. So it was a good equity gain and it allowed us to then go ahead and purchase other properties as well.
Due to her impressive portfolio, Julie Wyatt delves into her biggest why for doing property renovations.
I love it, simple as it is. I mean it is hey, you have to be crazy to renovate and just ask any renovator. I think if you don't enjoy doing it then don't, it's one of those things, and you touched on this before, they don't always go smoothly and often old houses can throw the biggest curve balls as well. You don't just become a renovator, you become a problem solver. And I think if you have the ability to do that and think on your feet and back yourself, then that's my biggest why. I love turning old houses into beautiful places to live. But also the upside to that is that you can make a very good income from doing that. And you can teach your kids to do the same. And that's part of the reasons why I've started coaching.
Because I had so many people come and ask me, they could see how successful we've been. And they're like, ‘oh, how do you do that?’. Or you know, ‘how do you start? What do you do?’. So when you know that there's a lot of people that are interested, and when you've got things like The Block and all these property shows out there that make it look so easy, it's real easy when you've got a team or tradies working behind the scenes. It's not real, but you know, when people see the money that's generated and stuff, they go, ‘oh, so I could do that’. Well, you need to educate yourself. It's not something you can just snap your fingers and pick up. But if you spend the time and educate yourself, then there's no reason why you can't do this stuff.
I guess that's why I used to...my business coach will probably tell me off for saying this, but I used to go to people's houses and just spend hours in there talking about what they could do and the best prices, you know, to target if they wanted to increase their selling price or the equity or whatever. And I thought well it’s just because I love doing it. And then I thought, well people are asking me lots of questions, obviously there’s interest out there. So that's kind of how I got into this. I think if I can impact and help other people and help them from a place...if they're in the place that I was in when I started, then that's going to be a good thing. Because it's scary when you're on your own and you're a single parent. And you're going, I want to have a great future for my child but how do I go about that? And you can make bad investment decisions if you don't have the education behind you. So that's the reason why I'm doing this stuff because I really, really love it.
Always admiring her talented mentor who she was able to learn from in the beginning of her property journey, she talks about other resources that have helped her along the way.
I think being with that mentor for the first year really opened my eyes to the fact that whenever I do something that I've never done before, I want someone who's done that before. So I wanted to build a business coach, so I have a business coach. And I believe mindset is very important, so I regularly go to mindset type events. I have a friend that runs retreats in Bali where we spend three days just on mindset. It sounds so trivial, but it's so important. And I think if you don't spend the time on those things, then you're not growing. You know what I mean? So I've invested in lots and lots and lots of money and time learning from learning different strategies with people and I’m working with a property coach at the moment as well.
I never stopped my learning and I think that's really important. I think that's what maybe stopped some people where they don't see investing that money or that time or that commitment as important. But you just can't not do that. I think that's one of the most important things that I've learnt, that I need to be learning because the market's always changing and it's not going to stay static. It's changing again as we speak. So it's one of those things where if I don't know something, then I invest the time and the money to learn that strategy or learn how to do that particular thing, so that's so important.
Developing A 'Never Give Up'Mindset Along The Way
Apart from mentors and mindset events, the renovation coach also shares her book and audio recommendations that have ultimately inspired her.
'You don't just become a renovator, you become a problem solver. And I think if you have the ability to do that and think on your feet and back yourself, then that's my biggest why.'
I like listening to your podcast, there's so many different people on there, it's amazing. So podcasts and obviously the media is very good. But the book that I reckon started everything, started making me question everything in my life was The 7 Habits of Highly Effective People by Stephen Covey. That was before I started properly investing, but when I read that book I went wow. I think it started my self development guide, you know what I mean? Like self improvement, you start thinking differently. And of course there's so many different authors out there. Any of the books by Dymphna Boholt, who was my first mentor are amazing. There's so many. I can't even, I can't reel them all off now, but just being part of those communities as well, being in a property of networks and communities where people who are like minded, sit and talk about stuff and band ideas around, I think all of those things are valuable. I don't get so much time to read, which annoys me. Probably audio books are the way to go.
Throughout her property investing journey, Julie Wyatt reflects on the best advice she has received.
I had some pretty harsh advice, like my initial mentor, she just gave me a hard time, I needed that though. I really needed someone to not be nice with me, but to be real with me. And she would always used to say things like, ‘never, ever give up. Don't give up. Why would you give up when you are that close to succeeding?’. You know, you don't want to do a certain thing but find a way to do it. And the second thing is to invest in yourself. Always invest in yourself. And it's false economy not to, seriously. If you don't know a particular bit of knowledge, to not invest in yourself is denying you access to greater knowledge, greater doability of everything, you know. So they’re the two things of advice that mentors have given me and holding you accountable, whether that'd be with a mentor, with your family members or with a group with like minded people. I think when you are part of those sorts of organisations or you have that sort of setup it just makes so much sense and it makes you successful. Really, it does.
I love that bit of advice never, ever give up because it's too easy to just throw in the towel and walk off when it's not working, but you need to keep persisting.
Yeah, absolutely. But lots of people do. And I think a lot of people have asked me, you know, you've heard my story and you've heard that things always haven't gone the way that I expected them to. And I could have walked away when I had the unfortunate incident with the bankruptcy. But I thought, no, I'm not going to walk away because that would be like a waste of 10 years of my life. It's crazy, I don't want to throw away all that knowledge because I have so much knowledge that I know that I can succeed at this. I just have to do it differently. So your mindset, like I know a lot of property investors and I know a lot of them don't actually think too much about this. They think, oh yeah, that's all ‘gobbledygook’. And you know, woo woo stuff, but seriously, it's so important.
If the renovation expert had some time to reflect on her past self 10 years ago, we find out what she would have said to herself.
I would say to her, educate yourself. Absolutely. And believe in yourself. Because I don't think I did back then. That was the biggest problem for me, I wasn’t. I wasn't thinking that perhaps the way that I think now. I would say it is possible and I would say just start, don't keep analysing, don't keep procrastinating. It is what it is, get in the start, get the basics right and do it. And lots of people that I talk to every day, they never kind of moved past that point. They say ‘I'd love to be able to do what you do’. And ‘I'd love to be able to just renovate a room in my house’. And I’m like well, it's not that hard. You just got to have a plan and then move forward and a lot of people just get stuck down in the details and it's sad because it's quite a simple process. If you follow the plan, follow the budget and you just get in there and do it, you know?
She looks forward to the future, where she shares what is happening for her in the upcoming five years.
I'm really excited because I think our business is growing in terms of investing. So we’re now starting to work with investors and owners even doing JVs on renovations, so that's really interesting. And I'm loving that because it just opens up new opportunities that perhaps might not have been possible before. And honestly if you’re sort of strung by the banks a little, then there's other ways of doing stuff. So that's something that we're really enjoying at the moment. But also probably from a personal level, I really want to expand my impact on other people. So mentoring, coaching is a fantastic way of doing that. And you're not confined to physical location, which is really exciting. So, you know, I can jump on a call with someone who might be on the other side of the country and you can talk them through a renovation. You can talk them through how to plan, you know, all of the things, all the steps in this process. And that's really exciting for me because I think I'm not constrained by where I live. So that's really exciting. So that's the stuff that I think I'm really wanting to spend more time on and helping women that may have been in a situation I was in is really exciting as well.
Last question for you Julie is how much of your success is due to your skill intelligence and hard work and how much of it is because of luck?
That's a good question. I really don't believe in luck. I'm going, to be honest. I think lots of people say, yeah, luck has so much to do with investing, and I have to disagree. I think I do believe there are times when, you know, in life things do line up and there's like coincidences or those opportunities or whatever. But I certainly absolutely believe that it's only by you intending or making massive differences or massive actions that you will make the most of those opportunities. So it really boils down to...I mean, education is hugely important and having knowledge is absolutely important. But taking action on those two things. Absolutely the difference between success and not a success. So I think to have the guts and the motivation to move forward when there are things that aren't particularly going well also.
I really think that for things to change or for things to move forward, you have to have some skin in the game I like to call it, there's got to be a commitment from you to make the most of that opportunity. And so really when you look at it like it, it kind of doesn't really factor in it at all really. I mean, there's been things in my life where I think I could have gone that direction or I could have gone in this direction. So you look at the situation and you decide whether you want to put yourself out there or not. So yeah, you know, I could have said no to that competition. I could've said no to the whole journey that I went on and I'm so glad I didn't, but you know, some people could say that's luck, I don’t know. I put it out to the universe and guess what happened? So I didn't know how that would all work out, but I had this burning desire to know more about property. So things present themselves when you put yourself out there, I think.
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