Nhan Nguyen grew up in Brisbane to Vietnamese parents who fled from the war. Nguyen refers to himself as a ‘property entrepreneur’ who spends most of his time juggling multiple investment-related businesses and projects. Nguyen also specializes in deals that minimize the investment of his own money and educates others on how to complete property developments.
Learn about the life and story of Nhan Nguyen, how he bought his first 3 properties by 21 years old, and the strategies that allowed him to quit his full-time job to focus on property by 23.
Born to Vietnamese parents, Nguyen identifies himself as being a property entrepreneur who specialises in deals that minimise the investment of his own money.
I’m Vietnamese, my parents came over from Vietnam in 1975, and I’m a property entrepreneur. I do a handful of things related to property development, property education, from time to time I’ll do land subdivisions as well as renovations but my preference is definitely land subdivisions; I’m working on four projects at this point in time, a childcare center site, a large land subdivision or 30 odd lots, and two small land subdivisions.
So the majority of my deals are done using my own money; just settled the childcare centre site in Melbourne, I think the purchase price was around $840,000. I put less than 20 thousand dollars in myself to settle the site and if I need to we can capital raise the rest. So a lot of these are the sites that I do are using only a little of my own money and that's my specialty, being able to do deals with a little of my own cash, and being able to teach that to others as well.
While there is no typical day for Nguyen, he often spends his time juggling his various businesses, investment projects, meetings and events.
I manage a couple of businesses, one is a property development business, and like I mentioned before being a property developer, I juggle a handful of projects. At the moment I’m doing a large land subdivision as well as a childcare centre and then two small land subdivisions, so I’m managing the process of acquisitions, the process of development and sales of those various projects as well as running a proper education seminar business, so I juggle those two and we’ve teams working on various projects and basically bring those projects out of the ground into fruition and make them profitable. So it’s a very, very busy day. Sometimes I’m in meetings with town planners, engineers. Other times I’m talking to potential other guest speakers to speak at my events.
Nguyen is able to handle all of these tasks by leading groups of trustworthy teams that assist in all his ventures.
It’s a lot to juggle and I know for people, especially if you’re working a job, it’s hard to fathom what capacity a person has, but it’s taken me a while to be able to manage and lead people. So for example in my education business I’ll have, let’s say, a half a dozen teams about half a dozen, some people are local, some people are overseas, to be able to organise copyright, organise websites, organise speakers, organise my schedule and at the same time I’ve got a property team, full-time acquisitions guy, part-time virtual assistant, engineers, town planners and surveyors and things like that which are outsourced, so I think the main thing is to be able to keep things on track while moving forward. Most of the time they’re not on track because it’s delayed due to council more than anything else with development. It’s about being able to manage teams, being able to communicate to teams, ask for what you want, and being able to train them as well. That’s the key distinction: you know what you want, but how do you communicate it in a way that other people can give it to you and be happy about it as well is what matters. Sometimes you can throw a tantrum and ask for what you want, but not necessarily get it.
Nguyen learned leadership skills and the importance of a team early on.
When I was younger in my late teens and early 20s I had found myself a mentor - and I’d do mentoring and training for others - but when I started out I had my own “rich dad” and he coached me, and one of the early things he told me to do was go do some multi-level marketing. At that point in time, I was young and basically followed his instructions, and through that training of multi-level marketing, I learned sales skills and communication skills and personality types and how to lead people and how to do sales and things like that. I believe that a lot of fundamental training came from the early years of my life and as I pushed forward with goals and dreams and things I realised he was right. A lot of the leadership skills and interpersonal skills with people are so critical and can get you what you want because you’re going to have to basically find out what they want. Because if you can give people what they want you can get what you want. It’s a balancing act of all time, energy, participation and being able to diligently pursue your dreams.
Growing up to refugee parents in Brisbane, Nguyen was originally set to go down a very different career path.
I grew up in an area called Ipswitch, which is on the west side of Brisbane. We grew up in a housing commission. My parents were refugees. They met in Australia actually, and they came over in 1975 after the fall of Saigon there. And yes, I grew up in a suburb called Carroll Park which anyone in Brisbane will know is a very industrial and rundown area. Yeah, you definitely wouldn’t want to raise your kids there in the 80s. It was okay; it wasn’t too bad but definitely low or bottom socioeconomic part of town and that’s all my parents could afford to be Housing Commission refugees. So that’s how I grew up and they encouraged me to study hard because obviously if I could get good grades it meant I could get a good job and get some financial security. So that was really much where I grew up, and the unfortunate part of all that was that even though I did get good grades and I wanted to become a doctor as per their advice for a few years, I realised that wasn’t really what I wanted to do, and that was where the fork in the road at roundabout the age of 19. At the same time I began to go to a few seminars, not necessarily property seminars, but business seminars, multilevel seminars, share seminars, offshore managed funds seminars, anything I could go to. It was very much that I didn’t want to become a doctor, it was a path that really conflicted with the theory of Robert Kiyosaki’s “Rich Dad Poor Dad” cash flow quadrant, make money with money, don’t work for money, and then I’d really had to choose a path and reinvent myself though.
Despite finishing a science degree, he didn’t end up going on to study medicine.
I actually did go to university, and I studied Bachelor of Science and I found that the more houses and seminars I looked at, the more my grades started to drop and drop and drop. I remember even my third year of my science degree - which I eventually received because I think the University of Queensland felt sorry for me - because I felt I failed one of the subjects, biochemistry; I was out looking at houses the day before that I should have been studying my interest just wasn’t there and it was really, really tough. I remember talking my parents halfway through the degree and this is not what I want to do and crying. For me to cry it took a lot, I was so upset about the path and I just persisted to finish it off because I’m not one of those people who quit halfway through. So one of the subjects I failed was biochemistry, and they still gave me my degree. But while I was going through the seminar-phase, I applied to become a doctor through what’s called the GAMSAT which is a test you had to take to become a doctor and I failed that not once, but twice. So they talk about it wasn’t meant to be, I don’t think it was not meant to be as such as more so that I was basically sabotaging myself from performing and killing off the opportunity and closing that door subconsciously, anyway. So even if I wanted to I couldn’t become a doctor. That door was shut down, and then I started to request and apply for the jobs at some of the seminar businesses that I went to, so I applied for one job and I ended up becoming one of the employees.
So much to his parent's dismay, he pursued what he was really interested in.
Initially, I was a customer for a year or so, and then I ended up becoming an employee of theirs and started to learn about property on the inside because they were teaching it, and then I started to learn it. And that's pretty much my progression from going to university, leaving university and working for a property education company, and leaving there and going to a property marketing company, and learning the ins and outs of put and call options, small developments, construction, bill contracts and within that two to three-year time frame I'd learnt enough and had enough courage and resources to be able to quit my job and do property full-time. So I know it's a bit of accelerated story.
Like many know, straying from your parents wishes can be difficult, but it all turned out for the better in the end.
Yeah, very much a tough time for me and definitely a tough time for them as well. I think they didn't really like the fact that it was so painful for me to struggle. At high school I'd excelled, I was doing sports and music and had a lot on, and was able to conquer all so to speak to a large degree other than being a bit overwhelmed at high school, but I think they were more so relieved than anything else. I recall a few years later when I was talking to them about that time in my life where I said, "Look, you know, I'm not a doctor. Are you still proud of me?" and they said, "Look, as long as you're not a drug dealer, we don't care what you do."
But at the time it was a significant thing, I really felt like I had let them down.
I’m not sure how your parents are with yourself with their Asian beliefs and upbringing. But I believe that parents at the end of the day, if they’re open to their kids performing and being happy, as long as they’re making money and as long as they’re happy, they’re prospering - they don’t necessarily have to be the next Bill Gates or Warren Buffett - they are happy, too. I think that’s what my parents have resolved with myself and I can see that with my younger siblings as well because I was under very much a high pressure environment at home growing up, but I found that as I grew up, my sibling’s pressure was taken a lot of them and maybe they saw that it was counterproductive, the high-pressure environment, whether it was on me or my siblings. But at the end of the day, as long as everyone was happy and healthy and productive, and not doing stupid stuff, sabotaging their lives, getting into drugs and stuff and dealing with gangs, my parents were happy. I believe that’s how my parents were able to deal with it and these days they’re very happy as long as everybody’s moving forward and not doing stupid things. That is great.
Nguyen had a fast-paced start to his property investment journey.
I remember when I was working for, let’s say, property education company number one, I worked for them I think for one year and I had a goal of buying 200 houses. I didn’t get anywhere close to that; I think I bought three, and working for them full-time it allowed me to save up a deposit, it allowed me to borrow money so that for the first two properties that I bought in the Ipswich area I used the principles that they were talking about, buying under market value, adding value by renovations, refinancing or selling or whatever, and so that was my experience working with that company the first year that I was in the property market. I was very, very active, and I bought one property, two properties and then a third property within that time. After the second property, essentially I’d run out of cash and serviceability and so the third one I had to figure out how to do no money down.
Despite not being able to purchase his third property on his own, Nguyen found a way.
At the age of 21, on my third property deal, I think it was in November 2001; I bought my third property and it was a joint venture. No money down and I got it. Simon had fully funded it. He was a Qantas mechanic at the time and he had a $65,000 income, and he was able to fund a property that we bought I think for $67,000 on top of $85,000, so my point is that through the process of the first three projects I learned how to do a deal using other people’s money. And that was one of my constraints early on, is how do you do deals after the bank lends you money and then you run out of money, which is a common problem that people have, especially when they want to grow and expand.
Around this same time, he decided to move on from his first job working with the property education company.
After that first year wherein I bought three properties, I changed jobs and the second company that I worked for had a different angle, they weren't properly educators as such.
They were property real estate agents and property marketers. To really put them in a box, they had a finance company; they had builders on board as well as acquisitions teams and things like that, so they moved somewhere between 50 and 80 properties a year. Within the two years that I worked with them, I learnt a lot of things about the bigger world of property, how to buy property, how to sell property through instruments such as put or call options, how to go to a developer and do a takeout which is, let’s say, they might have 20 apartments and they would do a bulk buy and get 20 or 30 grand off 5 or 10 properties, buying in bulk under option and then on-sell them with a 20 to 30 grand margin in there.
I learnt about the instruments that you could buy property and sell property using none of your own money because that’s what they did, they would secure properties under option, whether apartments or land, and then they would package them up so they were able to make money off other developers, and they’d buy them wholesale and sell them at retail. So during that two years, I really learned a lot and even though I wasn’t getting paid much, I was learning a lot and more than enough to be able to do it on my own in that two-year period working with them.
After spending time learning what he needed to know in his first full-time job, he was ready to take on bigger projects.
I was approached by my mentor or my mentor at the time, who told me to go to a multi-level back in my late teens. I was basically ready - I think I was 23 or 24 at the time - to fund projects and he basically proposed to me, “you’re ready now to go do some projects. I want to buy some property” and basically he was funding my projects 100 percent and allowed me to go buy a couple of million dollars’ worth of property with a 50 percent stake using none of my own cash.
So my point was that in that three-year process, first year working for the property education company, year number two and three working for a property development and sales and marketing company, I built up the skills to be able to do deals using none of my own cash and was able to get a funder as well, able to fund my projects, which is very similar to what you’re talking about in your situation, where you’ve got potential investors and all you need to do now is find deals.
And I was able to do that.
Pretty soon, Nguyen was able to quit his job and focus on property full time.
I was working full time and then part time out there finding deals for my business partner Lee, and Lee and I, we don’t do much in property anymore, but we still have contact and I still manage some of his cash. There was basically a stage in my life where he was ready and keen to go do deals, and I used that as a platform to quit my job and do deals full time because I had a financial backer.
He was able to do this all in the time before many people would even have finished their degree.
I was 23 and a half, turning 24, it was December the 10th, 2003.
Nguyen explains the timeline of how he managed to quit his job at 23.
If you think about it when I was 18 I went to uni, so I started going to seminars when I think I was 19. So then I started working when I was 21, 22 and 23, so I’d only worked at a job for three years. I worked for one company when I was 21, and then the second company when I was 22 and 23 and left at the end of that second year with them, so to speak. So when I was 18, 19 and 20, I went to uni, three-year degree, 21 I was in the workforce for three years and left around about the twenty-third and twenty-fourth year of my life, so it does sound pretty quick. And looking back I sometimes blink and go, “Jeez that was pretty crazy”. It was a reality because I’d work full time. Around me was property. That’s all they talk about. You wake up in the morning, you talked about property, you talked about finance and build contracts and settlements etc., but on weekends I’d go and on Saturday I’d spend you know five, six, eight hours every Saturday looking at houses and lunchtimes and mornings and after work, so it became a bit of an obsession. And then at night, you go to seminars.
With some encouragement, this obsession turned into something a lot bigger.
I wasn’t married, had no kids, no mortgages. I just had some real dreams and at the time I look back and people said, “Nhan, you’re on the right track, keep going.” I had no idea what they were talking about. Great, thanks for your advice but I’m just having a good time and going hard and pretty gung-ho at the time and I just really didn’t know what I was able to or not meant to be able to achieve because I know a lot of people feel that they have constraints on them, whether they’ve got kids or mortgages or limits. But at that point in time, I didn’t know what I could or couldn’t or shouldn’t have been able to produce at that age. And that’s coupled with a lot of challenges because I grew very, very quickly and hit the GFC in 2007, 2008, had a lot of projects that I was managing and some of them made money. Some of them didn’t, some lost money. And so my next round of learning really taught me a lot of lessons, and that’s what I do now. I teach the lessons that I’ve learnt so that people can manage and be able to navigate bad times, tough times, high-interest rates in a way that’s manageable. I suppose that’s part of the beginning of my journey.
Nguyen shares one of the hardest lessons he’s had to learn from his journey, with one of his worst investment decisions.
I’d say it was one of the best learning experiences and the worst ever experiential, emotional times for me. It was when we had 20 odd blocks of land under contract and so like I mentioned before in that property development company that I work for; they were putting call options on property. So how that works is essentially you sign a piece of paper which says that you have the right to buy these properties and let’s say at a wholesale discount but you also have the obligation to buy them, so you have the right to buy them and sell them, you buy them wholesale and sell them retail. But if you don’t sell them, you have to buy them, so it’s called out and call option and I did that in April 2007, we secured 20 blocks of land at a wholesale discount. The worth was, let’s call it 5.4 million, and we’d secured them for 4.7 so there was about a 700 grand paper profit in there, and the market shifted during the time that they were developing - it was off-the-plan - and we secured it for 4.7. The market lifted and then we were actually able to sell them and sell them for a million bucks clean profit. So I sold them for 5.7. So I and my business partner found buyers, secured at 4.7, sold for 5.7, it was a great time in our lives where we started to spend money that hadn’t hit our bank accounts, so we made a million bucks on paper between us and started upgrading things like cars and offices and staff and wives.
No, I’m joking. I didn’t upgrade my wife. My in-laws are Sicilian, so if you know anything about the Mafia, they’re Sicilian and you don’t want to mess with the Sicilians. We started spending money on debt in credit cards before the money had hit our accounts.
But things took a turn for the worst.
And that was very, very painful when the GFC came back a year or so later 2008, 2009, and a lot of the contracts, a lot of these buyers that were pretty committed started pulled out of these contracts, and they were doing it legally because we had an 18-month sunset clause, which meant that if they hadn’t been provided with the block of land or they couldn’t buy the block of land within that 18-month period, they would have essentially been able to pull out of the contract. And that’s what they did, a lot of them pulled out, but luckily we were able to onsell a lot of the blocks at a cost to cover our 4.7 million dollar commitment that we had. So they’re definitely a lot of learning and very, very stressful time, because if we weren’t able to sell those blocks directly to repay that commitment, essentially we would have had to either buy them or sell them. But you can’t buy them, you have to sell them, we would have had to buy them ourselves and we just didn’t have the cash, it was a very tough time get any funding from the banks or any capital from investors at that point in time.
It was very, very, stressful time and especially since we expected it to make a million bucks and we ended up making still 200k, which was a good profit but it was a lot less than what we anticipated making. And so I’d even booked a trip to the States and to Europe, and we were overseas and a lot of our contracts were falling over while we were overseas, and managing those settlements from overseas as they were crashing was very, very hard, especially with the time zones, currency wasn’t 80 cents to the dollar, it was 65 cents to American. And so it was really painful. Everything that went wrong went wrong. But at the end of the day we still made a profit on that project and lived to learn the lesson, and now the projects that I do are structured a lot differently and we aim to get in. One of the phrases that I teach is “get in, get out, get paid” so that you’re not exposed to the long-term changes of the market. Interest rate rises, GFC type plays where people can potentially drop the contracts. A lot of the training that we do these days are centred around how we survived the GFC, and were able to not be greedy and sell our blocks of land very, very quickly and move on.
Nguyen knows how important it is to be aware that the market could change at any time.
I think that a big part of why I’m educating people is because I know that my growth from when I was 21 to 27 was a really huge curve, and once I knew how to get investors and I could find deals, then the world is your oyster. You just keep combining investors with capital, capital with deals, and then you keep buying and buying and buying, because if every deal profitable, so to speak, then you can get in and get out and get paid, and it just becomes its own monster and accumulates. The challenge is that if you think that you’re bulletproof and you don’t have a defence mechanism or you don’t have a backup plan, then you’re basically arrogant and naïve enough to think that you’re bulletproof, and that’s when the trouble happens. You start spending recklessly, you just buy everything you can without considering if it doesn’t work out. How do you get out of this if the market changes? What if interest rates go up and what if the market drops 5 to 10 percent or so? If you’re looking at places like Sydney or Melbourne particular, as an example, if you’re just gung-ho and you’re expecting to make the 30 to 40 percent profits that you have in the last few years, then you’re basically exposed and then you’re in trouble.
He believes a real investor understands how the market rises and falls, and doesn’t just expect it to always rise.
That’s why we suggest a handful of things, one is you make your money when you buy, so buying under market value when you get in and also get in, get out, get paid. So it is the velocity of money when you get out, you reduce your debt; you reduce your risk and exposure in the marketplace.
Especially in Sydney and Melbourne, there was a huge arrogance around buy and hold and making 50, 80, 100 grand a year just by sitting on it. But they weren’t around when I was around in 2007. For example, in Bondi where people couldn’t give away blocks of apartments, people just weren’t wanting to buy them at all, and now know roughly 12 years later the market has come again back again to correct itself and it’ll go up again for sure.
It’s like the sun goes up and the sunsets. The tide comes in; the power goes out. So people just have too short a view on life in the marketplace because essentially a lot of them that play during the times the market goes up are gamblers, they’re not investors, they’re not long-term players. They speculate and jump on board because everybody’s playing the game.
Aside from just property education, Nguyen believes personal skills and personal development is really important for doing well in this business.
I've done a lot of personal development training and one of the courses I do suggest people do is what's called Landmark Forum, they do courses in Brisbane, Sydney, Melbourne. I don't get any kickbacks or affiliates by recommending them. But it's a really great personal development course that I think has allowed me to look at a lot of my blind spots and a lot of guys from Tony Robbins also go to Landmark Forum to be able to deal with the things holding them back.
I think some people go to learn about the property; they go wanting to learn about the strategy, which I believe is important. However, I believe the more important thing is learning about themselves and personal development, and the balance between the two which is technical skills and personal skills, really allows you to become a much better investor because you’re aware of yourself, not just about sitting behind a computer with a spreadsheet because you’re going to have to be able to negotiate with people.
''Properties are a people skills game, a people business.''
I do a lot of negotiating with property owners directly and so you need to be able to one, have people skills, and two personal development and be able to deal with things when you’re not winning or not getting your way or things are going too slow and things are breaking down. So answering your question is that my “aha” moments came to me when I was resolving a lot of my personal issues and it made a huge difference in my wealth creation in my businesses because I was much happier, I was less arrogant. I was able to communicate better with people because my personal skills were a lot better and it actually added to my bottom line, as opposed to people thinking you read more books, attend more seminars, get more education to be able to increase your wealth. It’s not necessarily the case.
Nguyen believes with one weekend you could learn a whole range of skills that you can apply to business and your personal life.
It's a three-day event, Friday, Saturday, Sunday, it's only about 800 dollars. Very, very cheap and cheap as chips.
It doesn’t necessarily focus on wealth creation. You go in there and you have to resolve a lot of stuff you don’t even know that’s holding you back. And some people deal with personal stuff, some people deal with business stuff, some people deal with parents, siblings, past relationships, it’s a whole plethora of things in my life and a lot of my clients have done it. I think Ross Williams has done it as well, a lot of my trainers I suggested doing it because it just gives them the skills.
It’s like someone gives you a screwdriver as an apprentice or a hammer. It’s a skill to be able to improve yourself personally, one which other people aren’t necessarily are able to help you with, your own reflection and self-improvement internally.
I think a critical tool of this game is being satisfied with what you've achieved and balancing that with being dissatisfied but not angry at yourself, to always go to another level.
He explains how starting with a number of deals allowed him to make this jump.
I think the couple of deals that I did preceding me leaving my job were ones into twos or two into two, so small developments you could say. It was with the help of my mentor and business partner at the time who basically funded the handful of projects, so one was a two into two which is what we call a splitter block in Brisbane here and another one was a one into two subdivisions near the airport, and we had a couple of other projects. One was a five townhouse project in Mackay. So we bought a swag of properties I think during the 2003 and 2004 period, and that allowed me to attain enough passive income as well as enough stock to be able to buy and sell to be able to do more deals.
So you actually had quite a number of deals running maybe about four to five in that period of time and I remember reading up not long ago that there was one deal that you took on which had a quite a large subdivision development which I think goes up to 20 blocks or something like that you took on...was it quite close to after that period of time or is that much later?
It was a little later, so that one was a subdivision of 20 lots in 2007 to 2009; that was one in the GFC where I had a lot of stress and we were able to buy it at a discount but we sold it for good profit nearly a million bucks, a so-called million bucks. The time the GFC came and a lot of the prices fell and a lot of the contracts got terminated. So we ended up still making 200k, that was about three or four years after that spate of deals there; in-between that I’d done a handful of deals where I found other investors, got bank funding myself, a load of loans at the time, and bought a handful box of land and built houses and sold them. So I went through a period of townhouses after those 5 two-bedroom townhouses we did. I think another 15 or 20 or so townhouses in Mackay which were blocks of three blocks of five, duplexes and I learned the process of strata titling and then after that year that’s when I bought those blocks of land and built those houses and specified them or they call them specy homes where you buy them, build them and then sell them commercially as a speculative play. After that, I rolled into those 20 blocks of land.
Nguyen warns that it’s important to start on smaller projects before making the transition into bigger developments.
That’s one of the challenges I find these days, whether I’m doing courses educating people or talking to investors, is a lot of them want to, after they’ve done one into two, they want to jump into one into 10, one into 20, because they think that they’re superman and bulletproof but it’s one of the biggest naiveties that people the greed gland just pumps and they think they can do anything. When they say anything is possible, absolutely, you can go to the moon, fly to the moon, however you need to build up the skills and the capital. So rewinding back a few years, probably back to 2002, 2001, I did meet another mentor who was doing blocks of 20 and blocks of 20 apartments and townhouses, that was his speciality, and essentially I built a plan or a model to go from individual properties to multiple properties, and I broke it down to various parts. That’s why I went from let’s say ones and twos into multiple townhouses and blocks of units or townhouses to strata title; that was one thing I wanted to learn is how to do strata titling because if I wanted to 20 dwellings, which was modelling off my mentor at the time,
I needed to learn how to strata title, so I took that opportunity and did a bunch of strata titling in Mackay. I think it was 23 townhouses we strata-titled and sold; and then after that, I thought, “Okay, well, my mentor is doing construction, I need to learn how to do construction,” and that’s what I did, I ended up building my own blocks of land and building houses. During that time, probably 2005 to 2007, we built a whole stack of houses in a suburb called Bulimba which is a top-end suburb about four or five kms from Brisbane there and another suburb called Wakely where we built a bunch of houses as well. I learnt how to deal with one, with multiple investors, multiple loans, multiple bank accounts, multiple houses, construction, project management and it’s an organic growth to go from one deal at a time to do two deals and five deals and 10 deals; and it becomes a process where you just gradually expand it. Expand too much sometimes, it can get too overwhelming financially as well. But with those five houses that we built at Wakely, we had about 20 to 25 thousand dollars a month holding costs. Interest rates were low doc 8 9 percent, and it was pretty scary especially when we weren’t getting the prices we wanted to get. The market was starting to come back a bit and we couldn’t rent them either because they were high end 800,000 dollar homes and we had to keep them pristine for owner-occupiers to buy.
Nguyen believes a good developer is educated and knows not to get in over their heads.
Before we went into the big 20 lotter there was a lot of education that I had to learn on the court. These things are very hard to learn and of course, you have to experience the pain. It’s like having kids: you can watch a YouTube video or read a book about how to raise kids but only until you’ve got kids and you’re dealing with the day-to-day challenges of crying and all that, and feeding and financial challenges such as not being able to work does it become experiential learning. That’s what makes me a good developer because I know what my limits are and when to slow down and when to accelerate.
Nguyen calls this middleground between risk and rewards the “sweet spot”.
One of the things that I've learnt from my mentors is finding that sweet spot.
I’ll just tell a quick story about his experience and then coming back to my experience. He was doing blocks of 20 at one stage and then he expanded it; he was doing 50 townhouses on another deal that was a lower socioeconomic area called Logan that a lot of people may know about, and end product was really cheap at 300,000, 320,000; but he lost money on that project and he basically clarified for himself and for me that you need to find your sweet spot. For me, something around the twenty dwellings is very, very comfortable.
Nguyen shares with us the types of development projects he has going on at the moment.
The projects that I’m doing at the moment, the purchase prices are up to two million dollars. So one site is about 30 dwellings. I paid about a million bucks and my business partner who’s bought the site next door is about 500k, at 1.5 million. We’ve got about 30 blocks of land between us that we’re getting approval at this point in time. So that’s in council. Hopefully that’ll come out the next three months or so. Another project I’m working on is a childcare centre, purchase price about 840 and about 2000 square metres which unfortunately we couldn’t get a subdivision or a townhouse approval on. But there’s a scope for a childcare centre and then I’m doing two small subdivisions which are essentially bought and held, because I subdivide the blocks, two into four, and then I’ll build a little mini boarding houses to get super cash flow. So in summary I suppose I’ve got a reasonable-sized land subdivision, a child care centre which we will get an approval and sell, and then two into four subdivisions where we’ll subdivide, hold and build buildings on to rent. So it’s a combination of buying, sell and development in the combination of buy and hold.
The length of these projects depend on the size of the development.
The two into fours which are ones into twos essentially one is a 600 square metre, cut that into two, and the other ones are 840 odd square meters, cut that one into two. They’re generally a 6 to 12-month play and that’s what you will find when you’re starting out is the ones and twos up to about ones and the fives or so is that they can be quite inefficient relative to the bigger ones. The 30 lotter I’ve owned that for just a bit over a year now and we’ve probably got another 6, 12, maybe 18 months, depending on how we stage the project. So the bigger projects can take 18, 24, 36 months depending on the marketplace, finance, rate of sale. They do have more bang for the buck but they do have more challenges, more holding costs, more consultants fees. It’s a balance, and that’s why at this point in time where the marketplace is I’m happy to be where I am. I don’t need to prove myself and try to compete with the likes of Gurner and the bigger boys who are doing bigger projects. It’s about maintaining momentum, confidence and being able to complete projects; you don’t want to have 10 development sites which are all vacant, no rental income and you can’t get it out of the ground because finance is difficult or the planning approvals are very much delayed. So it’s about momentum because I know in 12, 24 months the market will pick up again and either way I’m still aggressive with my buying.
I just need to be very, very conservative with in prices and strategies all the way through.
So realistically for any beginner or starting investor even to an intermediate level, these things take quite a bit of time, as you said you know up to 36 months or three years or so. So it's a patient's game as well but also to work out what you can actually hold for that time because anything can happen in three years, it's such a long time and I guess to be able to do that. Does that mean then you should be funding everything as much as you can initially from upfront through either option deals or make sure that you've got cash flow from somewhere to be able to fund your life because you still have to eat right.
That's right. And I don't generally eat 2-minute noodles unless I'm camping.
So it’s a very good question, and it’s very thought through. So I think that’s one of the things that - when I had those five houses that I was building in the holding costs of five grand a month each roughly, let’s call it 20 grand a month - I learned that you definitely need that holding power. And bigger isn’t always better because if I multiplied my deals it would also multiply my negative cash flow and also multiply my stresses.
So my point is that when I suggest with people starting doing developments whether it’s just a granny flat at the back or building a duplex is thinking big and starting small, because there’s so many layers of learning about it like you said holding costs, being able to build up the cash flow to be able to sustain that, whether it’s from other rental properties, whether it’s from equity, whether it’s from getting money from investors to be able to self-fund projects and not only that it’s the mental state of it. For instance, in regards to my 30 lot subdivision at the moment, the holding costs are roughly 10000 dollars a month and the house has been vacant for about a year now, I intentionally left it vacant because I intended to develop it. It’s taken a little longer, so we put a tenant in but that tenant’s only paying 295 a week so it’s barely touching the sides of the holding costs, but it’s covering the rates, insurance and things like that. But to handle that 10000 a month...it’s one, having the wherewithal financially to handle it but emotionally not be disturbed or stressed over having that because you’ve got enough that in the deal, you’ve got enough other deals that have been profitable to sustain those deals based on past profit and equity or cash flow.
So thinking big and starting small is absolutely critical but then you can build up and if you need to access more funds from investors short term you might say, “Look, I need another hundred thousand dollars just for six months to keep this project afloat,” then it’s not difficult to do because you’ve got that track record, you’ve got the balance sheet. So it’s the same thing with the childcare centre, it’s a big site, a bit of holding costs in it, three to four grand a month and a tenant ain’t cheap rent because the house is rundown, that’ll exist in a period of 9 to 12 months. So having that wherewithal emotionally and financially to be able to hold it and know that you’re going to exit from it if you’ve got a bunch of negatively cash property, you can negatively gear it but at the end of the day if interest rates go up you’re going to get hurt.
Nguyen balances his development projects with a property portfolio which provides stable income.
I think it’s absolutely critical that you do both. I have a philosophy which is building some, sell some, keep some, and when I say build some it doesn’t necessarily mean you have to build houses or townhouses; you can eventually purchase a development land subdivision is building, you’re building a road, building driveways and building pipes. So my philosophy of build some, sell some, keep some is absolutely critical in that I’ve looked at a lot of other developers who’ve gone one way or the other and I’ve found that if you just sell everything you’re going to miss out on a lot of things, you’re going to miss out on capital growth potential over the long term, you’re going to miss out on a lot of opportunities to build equity and have the tenants pay off your property. So let’s say our tenant is paying 300 bucks a week in a one-bedroom townhouse complex and he’s been paying that rental site for four years. So 15 grand a year, three hundred bucks a week. Times four years, that’s 60 grand that is absolutely critical to pay down my mortgages. So yes, and the long and short answer is yes, absolutely. As I go along every year or two, I look at what else am I holding and what else I am adding to my portfolio.
So for the last 12 months I’ve mainly been focusing on developing it and selling because I’ve seen the market potentially soften and I want to exit. Having said that over the last couple of months like I mentioned about those two sites which are two into four, in those four blocks of land we can build super cash flow multiple income properties on that, and from each of those blocks, let’s call it 5 rental incomes, we’ll have a four blocks and 5 rental incomes each that’s 20 rental incomes in a period of 12, 24 months to add to the portfolio. So my point is yes absolutely I think it’s critical that people do both but yes definitely I think segmenting them is an ideal way to go.
While there are different approaches, Nguyen believes that it’s important to find the balance that works for you.
Sometimes people might build five, sell three, keep two, and that’s definitely a possibility. It does cause somewhat we call intermixing or pollution or it’s not a clean way because the entity that’s developing will be involved in GST and basses and etc. Sometimes it’s better to have one project which you’re going to buy and hold, I might do a want to do a one into three townhouses, keep the townhouses and then a one into nine subdivisions and sell all the blocks of land. So that’s the ideal model but at the same time, you’ve got to figure out what’s right for you and when you’re starting out sometimes keeping one out of four is a blessing. You reduce the amount of taxes you pay, GST; you don’t pay the agent’s commission as well. So it’s definitely an upside. It’s just whether you can afford to use that debt. So being able to maintain that property - what I mean by that is with the Royal Commission and APRA and all that debt in banking funding is definitely an asset for yourself. So if you’ve got it locked up in buy and hold, it may constrain you from doing future development. So it’s a balance in our balance between what you’re selling, what you’re holding, and I find a ratio of maybe one to three or one to four, one to five. Some are closer to one in 10, but that’s okay. The one in 10 that they hold they might put a multiple income property on it and that’ll be five sources of income for just one property.
So everyone is horses for courses but wherever they can, they're holding something, definitely allows you for the long term paying off of debt and having a debt that's paid off, a property that's paid off with positive cash flow.
Fantastic and that's really good that you raised this up because most people who are developers don't usually talk about this side of things because it's usually just development, development, but I think the smart developers out there do buy-sell proportion and keep a small percentage of it or whatever that they decide in terms of portion wise as well.
A good model you might want to look at is Meriton. You live in Sydney and you look at Meriton and Harry Triguboff, he's developed 60000 apartments roughly 2000 a year, and so he holds two to three thousand apartments any one time, he's found it a high cash flow model which is serviced apartments and he might hold part of a building or a whole building at any one time.
The cash flow comes in.
Exactly. And so I basically looked at a lot of different models of what other people have done. Westfield is an extreme model, they hold on to pretty much everything, I wouldn’t say everything but a lot, I think they’ve sold out some of their shopping centres. But that’s one extreme model, the other model you might want to look at is Mirvac. Mirvac has a model where they sell all their residential and they hold commercial sites. So what that says to me is that they find that residential has a great development profitability where they essentially develop it and sell it, and then the higher yields are in the commercial properties so that that’s another model which is congruent to if you look at Harry Triguboff, he’s selling all the apartments and that one that is keeping, the serviced apartments, essentially becomes a commercial property for him which is a high yielding rental income. So yeah, that’s where I’ve gotten my conclusions from, is looking at other models and the philosophy of building some, selling some, keeping some.
Starting his journey at just 19 years of age, Nguyen shares the various reasons why he decided to embark on his property journey.
There’s a handful of reasons for that. When I started out, I was 19 and I worked for the property education company, I actually wanted to present to people and the first topic I presented on was on goals and I remember even the topics I was talking about was you know, if you have a jar and you put ants on the top of the jar, they’ll go round and round and round in circles. And the reason I mention that is that I’ve always been wanting to share what I’ve learned. I used to read a lot as a teenager, personal development books, Dale Carnegie “How To Win Friends” etc. and I’ve always been fascinated with education and self-development and how to bring the best out of people. Especially me. And then I saw Robert Kiyosaki in 1999 I think in the convention centre and it just resonated with me that I really want to educate and share the message about financial prosperity, even though I was 19 I didn’t have any properties, I didn’t have any wealth so to speak. I just wanted to share a message and impact people in a positive way.
So ever since I was 19 and in my teenage years, I wanted to impact people and make a difference to other people. And when I was 19, 20, 21 that was when I suppose I had a lot of growth and had a lot of support for my mentor, I had my own rich dad using the words of “Rich Dad, Poor Dad”. Lee, my first mentor who I still keep in touch with today. I just felt so grateful to be able to be gifted with his teachings and tough love so to speak and I felt it was my Christian background as well, it’s necessary to give gifts to other people as well. I’ve got a handful of mentors and they ongoing give to me willingly and freely, and I think that’s what part of my mission is to relay and share some of those messages and its impact of so many people. I’ve got clients making 500k profit year in year out on the developments, they’ve quit their job. Some of them their wives have been to be able to quit their jobs because they want to quit. The impact of my mentors teaching me and instilling with me great information generously made a mark on me, and now I do the same for others as well. I think it’s just a mission that I’ve found has helped through the years and the more I do it, the more I enjoy it, and it’s very worthwhile and satisfying.
Like many, Nguyen used various resources and books to educate himself along the way.
There's a handful of books out there that are really, really helpful. I might rattle a few off, I'm sure you may have covered these in the past. "The Richest Man in Babylon" is a good classic, the "Rich Dad" series. I'd say that probably the earlier ones like "Rich Dad Poor Dad Cash Flow Quadrants" are the more fundamental ones if you can get them in audiobooks. They're really good as well. I also recommend a lot of my clients who build up a property portfolio on a property business that they look at things like "E-Myth" and looking at ways to build their business in a structure as well, in a format that's not just a home business, mum and dad type business, but a professional business because E-Myth talks about McDonald's and how to systematise a business. I think that's one of the biggest things that I bring to the table when I'm educating people is it's not just about making money, it's about how do you turn your property investing and developing into a business, and that's leverage, that you can go on holidays, that you have systems, you're not always putting out fires and built to support itself and support you. Not just for the sake of making money and putting out fires because you know you've got to check the phone every three minutes when you're on holidays.
Having come so far, Nguyen shares the best advice he’s ever received.
Like I mentioned before you, “Think big and start small” I’d say is a really good phrase to start with. Another one that I’ve heard throughout the years is you make your money when you buy, not when you sell. I know that in many instances, let’s say the market has changed or is changing, if you buy well then you essentially build in the equity or the protection or the buffer for the market change, so you know whether it’s from Robert Kiyosaki or Warren Buffett. There’ are a lot of good philosophies that keep your ego in play and make you a lot more careful, because the property is easy to get in, hard to get out, is another saying I have. You sign a contract, you’ve got a full-time job, you can borrow, that’s a bit of equity, borrow from the parents, get into a deal. But on the other side, moving it on with at a profit, you know 10, 50, 100 grand more, isn’t always easy as it seems. When the market goes up, it’s very easy to hide people’s mistakes because they don’t know what they’re doing. Look at Sydney, for example in 2007 I was down at Bondi and they were giving away blocks of units that people were not interested in. But over the last five or so years the market has gone absolutely crazy and everybody jumped over each other to buy a property sight unseen whether it’s a dog box or not. But the tide has turned, whether it’s Melbourne or Sydney. And so make sure you buy right whatever the market does.
Nguyen shares some of the significant personal habits that he believes contributes to his success.
One thing is meditation, if people can find a way to meditate, it’s really, really important. I think hobbies are important as well. Some people just get so stuck in the world of got to make money, got to make money, want to get out of my job. I get it. You know they’re in their job, they may not like their job, they want to get out of it; they hate their boss and they go from a nine-to five-job and after hours they’re going to different seminars to educate themselves, but all they think about is making money and I get it; I get that. That’s why I’ve been in the past as well. But I think your meditation is a good thing. Also participating in hobbies that give you a rounded lifestyle, not just making money, but also the third thing that I participate in is a thing called Landmark Forum. It’s three-day course, it’s quite reasonably priced, less than a thousand bucks and I do a lot of that work. It allows me to deal with stress, or pressure a lot more easily and quickly and also resolve a lot of angst and anxiety or stress that one might have.
Here is what he would like to tell his younger self if he got the chance:
I'd say that persistence is the key, if I were to look back on the times, persistence is the key. You'll always find a solution as long as you're willing to work hard.
Cut down on the alcohol is definitely another thing I’d tell myself. I joke about in seminars how during the GFC I used to drink probably half a bottle of wine a night red wine a night and for some people, it’s not a big deal, but as you know with Asian genes, two glasses can be fatal. And definitely that those are the things persistence, just keep going, keep putting in the effort and cut down the alcohol, because there are times to deal with stress and I promise you there’s not many people willing to admit there are that kind of problems.
Nguyen has taken to the philosophy of solving his problems, such as stress, instead of hiding them.
There’s always a solution to the problem, and there are always people willing to help. Sometimes we just forget that and prefer to hide and run away from the problems, and then that’s where the problems fester. Long-term you have financial problems, personal problems, health problems and that’s where people start dealing with marriage breakdowns and heart attacks and stuff like that, so I know that’s a bit of a different conversation that we may have started but you know that’s what you get with me, you’ll find it’s more of a bigger picture view of success. Development is definitely a part of my life but it’s not the only thing that’s important to me, having a great marriage, great relationship with my kids and great health is important too. I’ve had money and in terms of the past in my health I was getting sick quite a lot back then probably 5, 10 years ago and because of the stress or the pressure I was putting myself under and now I’ve had to spend a lot of time on my health to maintain that and I feel well that’s a very important part of my life. Some people are overly committed to that and that’s the only part, they’re fitness freaks, but they’ve got no money. They’ve got no future. That’s okay.
In fact, Nguyen has a very particular approach to conditioning his mindset.
I think that’s the difference that I bring to the table, is my values aren’t just about making money. It’s a more well-rounded approach of happiness and health and wealth than we call it. And effectively with happiness and health, it really doesn’t matter if you’re making 100 grand or 10 million dollars a year, if you’re happy in your relationships you’ll automatically make more money, and if you don’t, it doesn’t matter you’re happy anyway with what you’ve got. You can have a 5-metre boat or 50 metres a boat, if you’re happy, it doesn’t really matter what you have, if you’re unhappy then it really matters what size boat you have or what lifestyle you have, or cars you’re driving. So being satisfied I think is a critical tool of this game, is being satisfied with what you’ve achieved and balancing that with being dissatisfied but not angry at yourself, to always go to another level.
Upon consideration, Nguyen believes he rarely relies on luck in his development deals and focuses more on effort.
In the book "The Richest Man of Babylon" I think it talks about the goddess of love or something.
So there’s a saying, and the saying is the harder I work, the luckier I get. And I’d say look it’s you to effort, and I’d say it’s 99.5 five percent effort and persistence and then the luck sometimes comes, just because you’re out there pounding the pavement. In regards to the three deals that I bought recently, you could say it’s luck, but I’ve invested capital, I’ve invested time in these relationships, and invested time in the systems and the qualifying press deals. So I think success is when preparation meets luck and the preparation has been many years in the making. People think that luck is a big part of it. I don’t think so. I think if you keep putting it out therefrom a physics point of view, every action has an equal opposite reaction, if you put it out there enough, something will come back, and it’s just whether you’re willing to take the opportunities or not. Some people put it out there, but then they sabotage themselves when the opportunity is there. They hesitate and then they sabotage like I said and then they miss out on a lot of opportunities. They complain that they didn’t at the opportunity, but it’s a process of persistence and recognising opportunities, and willing to take that opportunity and grasp them as well.
If you’re looking to reach out and speak with Nhan Nguyen, here’s the best way to do it:
We have a free report so they can go to our website at advancedpropertystrategies.com.au and can get a free report on opportunities and learning lessons that I've had in the past; definitely get subscribed to our newsletter and from time to time we'll have events in Lebanon and things like that, but I think that's the best thing is if you're just subscribed to our newsletter and get that free report check it all out, and learn as much as you can and take advantage of the freebies on offer.
Developers managed the process of acquisitions, the process of development and sales of those various projects as well as running a proper education seminar business. They deal with town planners, engineers. produce the structures, and rent out, manage, and finally sell it.
The idea of developing a property to its highest and best application value is key to the development process. The advantage improvement offers in comparison to other avenues of protecting and creating wealth in property.
It enhances the value of the land to create wealth. This normally means establishing new or additional houses on the block for rent or sale
Study the skills, personality types and qualities of successful developers. Learn the importance of knowledge in the development process to be able to deal with one, with multiple investors, multiple loans, multiple bank accounts, multiple houses, construction and project management.
It is definitely one of those enterprises where you require to walk the walk as much as you talk the talk Being ready and keen to go do deals is also a key part of a developers life.
This episode was produced by Ashlyne Ocampo with narrations and interviews conducted by Tyrone Shum.
Joining us in today’s Property Investory podcast is a property educator and founder of the D.G. Institute, Dominique Grubisa. Working not only as a practising lawyer with an asset credit licence and migration licence under her belt but Grubisa also works as a professional investor and developer and helps to plan and obtain wealth through low-risk small developments.
In this episode, we’ll be taking it right back to the beginning as we discuss Grubisa’s journey as a Law Student, her dedication to becoming a barrister and how a spontaneous apartment purchase kick-started her property investing career. Following this, Grubisa will share more into the investing ups and downs she experienced, specifically during the global financial crisis. She’ll also go into detail on how she moved forward from her rock bottom moment and how she’s utilising the D.G. Institute to prevent others from making the same property investing and developing mistakes on their property journey.
With a number of qualifications up her sleeve, Grubisa explains what she practices and her position in the property world…
I am a practising lawyer as well as an asset credit licence holder and I have got a migration agent licence but at the coalface.
I am a property investor and developer.
Grubisa continues that for the most part, her day consists of assisting others on their property journey, or running her company the D.G. Institute…
Most of the things that I do relate to educating and empowering others around the property. I formed the D.G. Institute which is a vision that I had to be a one-stop-shop for property people so that they could get all the professional services that they needed as well as the knowledge and education to do things better and keep raising the bar so that involved me flying around the country educating at live events as well as online and running a team of professionals to meet everybody’s property needs.
Despite having only recently founded her institute, Grubisa explains that she had already been educating people about the property for numerous years…
The DG Institute was only founded two years ago but I have personally been educating and in the property space since 2009 and it's just that I finally got all my ducks in a row with the vision that I wanted to go it alone and that happened two years ago.
Before I was just more a one-man-band, just teaching my methods. But I did that through other platforms, so promoters and other marketing channels and multi-speaker events and that sort of thing but it didn't give me much scope to do what I wanted to do I was just almost a gun for hire who turned up to delivered. Whereas I've been able to now grow into a bigger vision.
Growing up in the North Shore of Sydney, Grubisa completed her secondary and tertiary education there.
I grew up in Sydney. So the North Shore of Sydney and I went to a good Catholic girl school, Monte Sant’Angelo in North Sydney and have always just stayed very close to home. So I went to uni - Sydney Uni in Sydney - I studied law, I went back and did a Masters of Law and I became a solicitor in 1994 and 1996 I went to the bar not to get drunk.
I always lived and worked in Sydney.
Despite this achievement, however, she explains that her choice to study law was actually secondary to her original career dreams...
I actually didn't ever have any passion to be a lawyer. I naturally did quite well at school and the HSC, but straight out of school I auditioned for NIDA National Institute of Dramatic Arts because I really, really wanted to be an actress. But they knocked me back and so I was bitter and twisted that I couldn't have my A-dream. So then I just went and studied law because of a show on telly at the time called L.A. Law and they swarmed around in little suits and I thought well it’s not acting but it's kind of like acting you do a performance as a judge or jury. They listen. And I just thought that that was something that I would like and I didn't actually like it so much - the studying part of the law. But when I got through it at the end I'd like the practising of law and the reality of it. I’ve never been a big one for formal education.
Regardless of her dislike for studying Law, Grubisa went on to complete her degree, taking a gap year in between her studies…
I actually had a gap year off in between law. So you did three years. That was Arts Law - so part of your law degree went to an arts degree and I did subjects in that, that I thought might be good like archaeology.
But then I thought it would be like Raiders of the Lost Ark but it wasn't, it was just the old Greek pots and trying to date them and things like that. So I just really hated all of that. So I liked and I still like acting and drama and that sort of thing so I took and did an honours year in English literature but it just had to do a thesis and you could do that remotely so I travelled. I went to Europe and backpacked for a year between the arts degree and the law degree cause then I did another two years in a different campus and that was pure law. My law degree actually took six years when it should have taken five.
It was after graduating and completing her degree that she went straight into the workforce..
I got a job as a solicitor, the L.A. Law thing didn't pan out. I thought that I could get a litigation job but none of the big firms that do litigation wanted to hire me. So I just ended up taking a job with a solicitor like in a backroom at Chatswood doing the soul-destroying work of debt collection on repossessed motor vehicles. So all I did day in day out was just bankrupt people. So at the end of two years, I just had to slap myself about the face and say “What are you doing?”. And I also wanted to pay back everyone who I thought had been mean to me by not letting me you know to be the litigator I wanted to be. So I just thought well bugger you all, I'm just going to do it anyway. So I just went straight to the bar which is probably a no-no in the system, you kind of have to do your time as a solicitor for at least 10-15 years, get contacts, get experience and the journey to the bar should be something that you graduate to when you're older and you're financially sound because you don't make money in your first year and you need to have a whole network of contacts of people to give you the work so you should have a stable of solicitors that you've built up along the way with all your experience behind you. But I just went and did it anyway with nothing.
Could you firstly for listeners who don't know what bar is, explain is that an acronym for something in the legal industry?
Yes. So they when you’re a barrister they call it the bar. So yeah the New South Wales Bar Association is the body that controls or that regulates barristers.
She explains the interesting process she went through in order to become a Barrister and how she was able to become successful through persistence…
I did really well at that in a relatively short period of time. I was just, I think I like better doing something I love and being able to be my own boss and do it on my own. I probably didn't work well as a square peg in a round hole in employment for those two years as a solicitor but as a barrister, I could just start with a blank canvas and I was just very, very focused on being the best I could be and because I had no work because no one would believe me, I used to wear my robe every day because they actually cost ten thousand dollars. It was all that I had in the world to become a barrister. When I graduated Law the Law Society gave us a Gold Mastercard and it had a ten thousand dollar credit limit on it and that was MasterCard's just said, “You'll be rich one day as a lawyer, so here's some credit. Knock yourself out”. So I went and whacked all the robes and the gear on that card. So the wig is horsehair and the robes are silk and I looked the part so I used to put on my drag every day and I'd go up to the Supreme Court and I'd just swan around the corridors. I had this theory that people would give me work if I looked the part because I thought that they’d just think well she’s here every day, suited and booted, she must be good and it never happened. So with the time I had on my hands every day in the early years, I just sat at the back of the courtrooms and watched the really good guys at their craft like the top senior counsel and I just learned by osmosis, I just soaked it all up and just when I was watching 18 hour days, I'd work for free if they'd throw me a bone, just to prove myself to be able to get them under on the board. So just through sheer tenacity and blood, sweat and tears I was able to claw my way to the top of my game at the bar.
It was after a number of rules and laws that put Grubisa out of her specialised job as a barrister that she suddenly decided to pursue a new type of career instead.
So I did that until the late 90s and early 2000s. What happened the catalyst for me to change there, was actually thrust upon me and they changed the area of law that I had developed into, they changed the rules and the laws in New South Wales so that it became a statutory regime. So basically what they said is we don't need barristers to fight these sort of cases, let's just codify it all in a set of laws and that can be the written law. There'll be no litigation around this. Lawyers can just make reference to the statutes and that can be the end of it so it meant that a whole lot of barristers were out of work and they all immediately went to other areas and tried to specialize because you’re much better if you specialize. I always say focus which means follow one course until successful. So I just focused and focused on one here or there to be a specialist and get to the top of my game there, it's like a magnifying glass if you hold it really still over one thing you want the rays of the sun will convert and start a fire. Most people wonder willy nilly around looking for the next tiny thing and they don't succeed. So what had happened was where all my focus had come to nothing and I could either go back and grow my expertise in another area of law or I could reinvent myself. And I chose the latter. I just couldn't have the whole journey all over again in law.
It was at this point that Grubisa took a leap into the investing world mistakenly purchasing an investment property.
After that, on the side, I’d been doing property as well as law just as a property investor. So once when you focus, things happen. I started to make money, my accountant said you need to negatively gear. So I just went and bought a little studio apartment and I bought it at as an investment and I just fluked it. I bought it, it was near where my chambers were as a barrister in the CBD of Sydney and I bought this studio, first person in the door, first opened for inspection, I'm a very Fire Ready Aim type person and the agent had done the usual thing of getting a whole lot of people together and showing us all in one inspection. It was so small it was like about 10 square metres or something ridiculous and we were all squashed in but all I saw was views, I could see like that little spot of blue in the distance and I got excited and was like I just have to have it, so I just got immediately emotional so I ran over to the agent cause I panicked because I thought everyone in there was going to make an offer and so I said how much. And he said well they're looking for about $160 000, and I said done here’s the check, $16 000, a 10 per cent deposit, I'll sign an unconditional contract, get everyone out of my apartment. And so I then went to my conveyancing solicitor and when he looked at it he said right and I changed my mind getting emotional. I just thought I'm going to live here. This is my home now, I'm going to live in my little studio right near work. I’m moving out from Mums and Dads. And so I’d been to IKEA on the way to the solicitors, and I picked out my bookcase and my bed and everything and then the solicitor said, “Right, so you’re a barrister are you?”.
And I said, “Yeah that's right”. He said did you actually read this contract before you signed it. I said no and he said “Right, well you wanted to live here, I don’t think that’ll happen if you read the contract, it comes with a lease in it and there’s a tenant in there and they're there for two years,” I said, “Oh that's okay, look it was really meant to be an investment and it’s negatively geared” and he said, “Well there's your second problem, you paid $160 000 and it's rented out on a two-year lease for two hundred and ninety-five dollars a week”. So it was actually a bit positive and I was happy to make that mistake on my first ever property deal and it just hooked me on property. And when I went back to that agent and I just said, “Hi, I don't know if you remember me when I bought that one”. He said, “Oh how could I forget you ever, I’ve never had anywhere, the first person in the door, and offer within five minutes for the asking price, unconditional contract and you're a barrister like I thought you guys were smart and with properly you can actually offer less”. And I was like well I would have paid more and he said no good on you, you got me on the spot. It was a divorce situation. It was priced to sell and they had met the market to move it and you put your money where your mouth is and I love that. So I thought I had a little epiphany about buying under market distressed properties and because of my knowledge of law and the legal system, I knew when people had to meet the market like that and I know it's the holy grail of property and it's like looking for a needle in a haystack but that's what I did. I applied my focus to just looking for those under market deals and that was my little formula and I did that.
But on the side all through my 20s just doing property deals and when I reached, well I’m just pushing 30 but I moved to the next level and I bought a Mirvac one off the plan, and when I had to segue way out of law, I sold the Mirvac property and did really, really well, like I just made a million dollars from buying well off the plan and I did it with a deposit bond. So that's what I thought that's part of the reason I didn't go back out to specialising in a different area of law. I thought wow I did that on my side without any focus what if I really focused on the property? So then I just turned to full-time property.
Thinking back to her childhood, Grubisa shares that despite her parent's interest in the property, her own interest wasn’t sparked until her property journey began…
I think you know they say when the student is ready the teacher appears. My parents were always digging in property but I was never interested.
So every Christmas my father would give me you know think and grow rich or Robert Kiyosaki which Dad poured out and he'd write things you know little inscriptions at the start of the book and I would just think why are you wasting your time I'm just not interested in this. I remember that they tried to get me in off the plank when I was earning money I might say you know to come and look at this we know the agent you can buy one better it year the market is going up and I was just like why would I spend three hundred thousand dollars that's so much money so I definitely wasn't interested. From my parent's persuasion, I was almost the opposite way where I resisted and it was just having that initial success on that divorce property. And I just that was without my parent's help. It was almost in defiance of them now not five of the plans but I do it myself and I'm going to buy it in Sydney cause the I that never go Sabih day.
And so than when at work I think I caught the bug myself and then I just sought out other mentors and my own books to reach. So yeah probably not because of my parents. Probably to spite my parents I didn't.
While she’s had many successful property investments, Grubisa has had her fair share of worst investing moments...
I probably have made every mistake in the book and made it in a big way and I think it's because I'm a fire, ready, aim person. But one thing that happened was I had a client who was doing well in property development. So he was buying out in Kellyville which was sort of a greenfield area in Sydney at the time so it was all farmlands, and they had rezoned that and people were subdividing. And I did the legal work for him on that site and then I was interested in how he did it because I saw the profits he made so I asked him to connect me with the agent who sold him the land. So I just said to the agent, “If anything comes up like that again or you can get me in on anything like you did with this guy, can you let me know?’” And he was like yeah and then a few days later he rang me and he said look I might have an opportunity for you, I'll get this guy to ring you. So this guy rang me and anyway when we talked it turned out he was selling like an off the plan at Ballina and I said, “Oh no sorry there must be some confusion, I was wanting to develop and I was looking for land.”
And he said, “Oh well you know I'm a friend of Danny’s and I just thought he said you were up for any opportunity - this is a big opportunity.” And I tried to push him away but he was like, “Oh I’ve booked my flight to Sydney and I've hired a car so I'm going to come out to see you,” and I just said, “No I really don't want to,” and he’s like “No, no, no it’s fine like the least you could do is give me a cup of tea, it's already settled now,” Anyway I just thought oh fine I’ll give this guy a cup of tea and get rid of him. Long story short I bought an off the plan dual key apartment for eight hundred fifty thousand dollars at Ballina. I don't know what I was thinking I just fell for all of the sales talks and that it had fallen through, but the price had gone up and it was worth a million and the developer didn't know if they’d put it back on for a million, but because I was a friend of a friend, they’d try to get it for me at the old price of eight fifty and then you could come up and see it and we can babysit your kids and we'll take you out on a boat and you can eat prawns and I just felt so incredibly obliged that I signed on the dotted line. So that was a big mistake.
Ouch. And what happened after that?
Well, the market fell in the interim. It wasn't going to be what it had planned to be. Banks were lending on those holiday sort of rental scenarios and just fortunately for me and my legal background I was able to find a loophole on a technicality and get out of it and get my deposit back.
Yeah I was lucky with my knowledge.
However, Grubisa shares that while she had been extremely lucky throughout her property journey, there was another investing disaster that she had experienced…
I think because I had done so well and because I dodged bullets along the way, I got a false sense of security and I thought that I was invincible. And even my worst deals, I kept making some profit. So the more successful I became the more bulletproof I thought I was. And at a time when banks were just lending so easily and they were low doc and no doc loans anyone with a pulse could get credit. Banks were just throwing money at us so we were just buying and buying and buying.
I had entered the property game in an upmarket and I'd probably never look in my adult life I've never seen a recession or the bad times or anything like that so I guess I thought that property markets only ever went up and I thought the property was a licence to print money. I thought all you need to do is get the bank to convince you to get a loan and you grow a portfolio. And because banks would let us refinance, we'd renovate, we’d create extra equity and then we pull out that equity and we'd roll it into another deal so we just spread ourselves so thin that we just weren't ready when the GFC hit. And what happened to us as we had a development site and we had finance, we had everything ready to go and then the bank pulled the loan from us. And we were so dependent on lines of credit and banks and everything and we had a situation where a few things collided at once. But at the end of the day, we just had no wriggle room at all. So when you expect the unexpected they say, when a couple of unexpected things happen together it just caused a knock-on effect that just put us in a total tailspin and we lost everything.
We’re millions and millions of dollars in debt. Because I mean, leverage is great in property when it magnifies your profits, but it can also have a backfire effect and magnify your losses.
She reveals how it was after this experience that she had hit an all-time low…
At the time when it hit we were just reactionary. So it was just fought or flight adrenaline. We just had to take the kids out of private schools. We had to just do whatever had to be done, sell things really quickly. But rock bottom for me was a moment of realization when the dust had settled was that we were literally homeless and what had taken me 20 years of blood, sweat and tears to build up slowly.
I just lost in the blinking of an eye. We were living with my parents in law and we were very lucky that they would have us in, but it was also, we were in a fold-out lounge in the living room and watching Seven Brides for Seven Brothers on a Saturday night with my father in law. It was just very, very hard days and I just beat myself up. I felt like such a failure and I felt so incredibly guilty that I'd failed and I felt disgraced. So that was the lowest point.
She explains that it was with tenacity that she was able to overcome the challenges she had faced and get back on track to her property investing journey…
There's just only so long you can sit around in your mother-in-law’s lounge room, in your pyjamas, crying all day. I think I adopted a glass half full approach and that paradigm shift made me realise that okay, it is what it is, I've lost everything, but what can I do now? So it was solution-focused, rather than problem-orientated and I couldn't go back to law. I couldn't go back to the property because it was the GFC by then, so no one was lending and no one was buying. I still had faith in property because it had done so well for me so I identified the problem as my reckless behaviour and my disregard for markets and my lack of knowledge in that sense.
But what I did have in my favour was my legal knowledge and my knowledge of debt because I was actually dealing with my own debt at the coalface and I was literally trading my way through it, just treading water dealing with creditors and so I put my focus on debt law which is an area of law that few specialists with my level of knowledge ever look at, just cause there's no money in helping people in debt. So no one ever focuses on that area of law. But for me, it was self-interest obviously. And then I was looking for a way to make money without having to go back to law and without being able to do property anymore. So I started looking at Internet marketing - just probably out of desperation if I'm honest. And I started going to seminars for that and what I was focused on was okay, there's a new way of communication, there's a new way of sharing knowledge like the old way of pay for solicitors at an hourly rate with billable hours and everything that's a way of the past and the Internet is about sharing knowledge. And so I then thought well I'm going to share my knowledge on debt law because there’s a GFC going on and there's a whole lot of people in debt. So I just focused on adding value that way in a new paradigm. So I wrote books for people about levelling the playing field and from there I then had this vision that ultimately was realized of building the D.G. institute.
And how after following this process that the foundation of the Dominique Grubisa Institute was laid...
I started helping people in debt, at first just for nothing just because I could and I had the knowledge. They were in debt themselves, so they couldn't really pay for it. But I then saw opportunity just by working and being there - I saw opportunities of how banks were repossessing property and how the whole industry worked. And I realized that the system was ineffective like, that they'd never had sort of the repossessions on the market that they had after the global financial crisis and I got to be up close and personal with that. So I realized that there were other ways of transacting property apart from just going to an agent and buying at auction because I saw the aftermath of the property market with the global financial crisis. And I also put my legal knowledge into play than in property in a different way because I didn't have the money to actually go to the bank to get it. And I had a bad credit rating after things went wrong for me so my credit score meant I couldn't get a loan. So I started to channel my knowledge into things like property development where I could get properties using options without needing bank finance and I could add value to my knowledge of zoning and getting development approvals and that sort of thing and that helped me build wealth back faster. Looking at distressed properties and property development and transacting properties without needing bank finance. What took me 20 years to build up and then lose, I needed to be able to make back a lot quicker but without the money or rather the loans to do it and without having the luxury of another 20 years to do it slowly brick by brick.
With so much success and resilience this far into her journey, Grubisa delves into the pivotal aha moment that allowed her to realise how the property could change her life…
I’m refining and learning and as I grow but a real tipping point for me as I went from law into property full time. So I reached a glass ceiling in law not from being a woman but just because I couldn't work any harder and I couldn't do any more to increase my earning capacity because as lawyers, as barristers you’re self-employed. And the law is that you can't have a company, you can't have employees or just gunfire.
So you're selling yourself your skill as a litigator. It's a bit like a specialist. So just as those GP’s and specialists in medicine - and if the GP can help you then he will but if it's serious he'll refer you to a specialist - that's what solicitors are to barristers. So I was a specialist. But the heart surgeon can't say oh here's the work experience boy cause I want to go out and look at properties today, you know, it's your skill and that was the same with me. So I shackled myself to that one finite resource that everyone shares at that time. So I had the same 24 hours in the day as everyone else I was working about 18 of them because I was working so hard and like no matter how good I was, I could keep raising my hourly rate and I could raise my daily brief fee of how much people would pay to engage me, but it would always be finite because I was selling my time. And then I realised that I'd made seven figures in an off the plan property that wasn't my money, wasn’t my time, wasn’t bound to anything. And that’s when I realised that there was the possibility of exponential and unlimited potential in the property as opposed to working.
Delving into how she progressed in her property investing career, Grubisa shares the details on the one million dollar deal that changed it all…
I actually had clients who wanted me as a lawyer to go in and open for inspection. So Mirvac had a site at Walsh Bay down near the Rocks in Sydney and it was an old industrial pier and they were turning it into luxury apartments and they knew they had something special because there were marina boats that the council had given them permission to have boat moorings for the more expensive apartments, and that was really really rare in Sydney. So my clients came to me and said we are VIP clients, we've been invited to the prelaunch and it was like you know lining up in the street for tickets to a Madonna concert or something, people were camping overnight to be the first in the door to buy these apartments. Mirvac’s deal was that they gave you - they opened the doors and you to be there with your lawyer on the day to sign away your rights. So in South Wales if you're buying property unconditionally you'd normally get a cooling-off period and if you're going to wait for that cooling off, your lawyer has to sign for you. So they asked me to come on a Sunday to sign for them because they said we want to buy about five of these properties because they're just so finite and special and we just need you there.
So when I got through the door it was just like a feeding frenzy and they were all the agents there and there were just red sold stickers on everything and I just thought, I've got to have one of these I got caught up in the excitement. But I didn't have the money to do it so I’d done property before but it's just that I was playing at the $200 000 level and these things started at one point two million dollars, so it's just a million short. So I thought, “How can you make this happen?”. And there was a guy that I mean I wasn't even dating him but I'd been on a first date with him the night before but I really liked him and we got on well over dinner and he just really liked property and I liked properly and I just thought well I'd just see if he’s interested so I rang him up and said, “I had a really good time last night, do you want to buy an apartment?”. So he could have thought that I was psycho and a stalker got scared away but he did say I'll come and have a look. And he got out and he had a chequebook in his hand and I just thought oh my god it’s happening so fast and anyway long story short he had a different thing in mind, I thought we'd be buying one together and that’s how we'd get the money. But he just said I don’t know about you but I’m buying my own. So he bought one and then I not to be beaten, I went to a guy selling deposit bonds so that Mirvac had organised that on the day because as a developer they were prepared to accept a deposit bond, which is like a bank guarantee or an insurer that will put up the surety for your 10 per cent deposit because I didn't have the hundred twenty thousand dollars. But I had seven thousand dollars which it cost for them to issue this bond. So when I got my foot on one apartment I asked if I could have a mooring and they said they were only for the top floor penthouses and then they just said look alright if we - the Mirvac agent said - look don't tell anyone I'm not meant to offer them to the little peasant department. So how he let me buy with another deposit bond a mooring and that cost one hundred twenty thousand dollars.
It was after purchasing the apartment, living in it for a couple of years and then selling it that her property journey really kicked off…
Then anyway this - the guy who I'd been dating - kind of had to marry me after that because we had neighbouring and when it was built in four years time we just thought it would be awkward is if things weren't amicable, so that kind of united us and we ended up we had three children under two. So like within a couple of years our lives had changed and these of the plans were going to take four years to build. So ultimately we sold his apartment, but we kept mine thinking that if we settle on this one and move in and it’s our home we want to pay capital gains tax and also it will be far more attractive because the market was just going up and up and we thought when people can actually see something tangible in their views and it's not just a hole in the ground they'll pay more. So before we even got to put it on the market, the Mirvac agent came to us and he said I've got this investor and he's very, very wealthy, he's just jetted in from Hong Kong.
He wants one of the moorings in this block and he said but the thing is the strata rule says you have to own an apartment to have the right to buy a mooring. He doesn't want an apartment, he just wants the mooring. But he gets that he has to own an apartment so he selected you because you literally have the worst apartment in the block to come with a mooring at double-digit. This is how we roll. He just is a numbers man he said I do business with him for 20 years, when he wants something he refines his numbers and he only makes one offer. So he said I’m about to make you an offer if you don't accept it this guy will be on an eight o'clock flight back to Hong Kong. And they offered us, he offered us 2.166 million. So we just jumped on it and between Kevin - my husband’s apartment - we sold that for more than two hundred and fifty thousand dollars more than he secured it for off the plan and with this other one we made over one point two million on that whole development. With the hindsight that was beginner's luck but at the time we just thought we had the Midas touch and we could do no wrong.
While this opportunity certainly propelled her forward, Grubisa explains that it wasn’t until later when she moved into property development and property options that things really took off.
I'd done it as a lawyer for other people like I’d drafted up the agreement. So I knew I had the knowhow behind it but I'd never done it for myself.
So our first development wasn’t actually an option. It was a really just a splitter block where we just got AV Jennings - just a project builder - to take it through council and put another property on the back. So it was an infill situation in like baby boomers downsize area where people, we just built for that market and we renovated the front block and sold it off. But even that little deal yielded us about $400 000 dollar profit. So we realized that okay the answer is that the bigger rewards are in property development if we can just manage the risk around it and so then and especially right now, options are in a cooling market. Options are more, it's more of a buyer's market and sellers are more open to be negotiable.
She outlines how she came across that property and what she had to do in order to make sure the project was a success…
That was blood sweat and tears that one. So it was before the Internet was as advanced as it was and that the sharing of knowledge - there weren’t as many tools available so I just got very specific about it. So I think I was talking about the property developer who was my client who did really well out at Kellyville. So I modelled myself off him and I was looking at what he was doing. He was just an area expert so I reverse engineered his process and I just chose an area and we were Northern Beaches of Sydney and so we at the time chose Wheal Heights which was a kind of less salubrious area more working-class sort of near Collaroy but not as nice and so I just really, really got to know that area. Physically, I went into the council, and of course, you can do this online these days but I physically went and pulled out the massive maps of colour-coding, looked at zonings and looked at what was zoned what and where. So the council had identified this suburb in this region in their planning as a what they call infill. So there's Greenfield’s like Kellyville - like I said it's all just farmland and they've said okay the growth corridors are moving out that way and we’re going to with our urban planning, we're going to build infrastructure out there and we'll allow smaller blocks so farms can be subdivided off. Infill means where they say well okay not everybody is going to want to live that far out. There is still a need for dwellings closer in already built-up urban areas but demographics have changed so much so that people who 50 years ago when it wasn't common to have divorced when people got married at 21 and started their own homes and their own families. Now there's a lot more demand for a lot of smaller homes. People are staying single for longer, there’s split families and it's just very normal. So what happened was they said.
So they had identified in this area that it was baby boomers that didn't want to leave the suburb but didn't need the big homes anymore. So they’d zoned certain parts. So they said from No. 35 to No. 85 Smith Street, we’ll allow subdivision. And you know, had to have certain frontage and certain land size and setbacks and so I got myself really, really familiar with the rules and the requirements and I looked at colour coding, I physically walked the streets and drove round-up and went to open inspections every Saturday and listened to what agents were saying, who was turning up, what the market was wanting and I went round to the agents and said if anything comes up for any of these numbers in these streets come up for sale or anyone wants to sell let me know. No one did, but I was driving around one Sunday because I always just I was very, very focused and there was a for sale sign outside one of the houses that I wanted. So I rang the agent because I really just spoken to him that week, like one of the agents and he said yeah sure I’ll let you know so I rang him up and said.
You know, he said oh it was a sign I put up already, I didn't know and he said yeah that's an old lady that needs to go into a home, they're wanting a quick sale so they didn't realize that it had gone up so quickly. So we were able to get that and we could move really quickly on an unconditional contract. It was a short settlement and so we negotiated that one well and then we kept her house that was there and we did a little renovation ourselves and we sold off the front block. Because we had no money and we were so risk-averse, we needed to cut down the loss so we sold off the front block and that basically paid us back, so we were debt-free on the back block and we just went out to homeworld cause we'd never done it before and the builder - well the AV Jennings - knew the council, knew the area, so they got it all approved and they built it up to lock up point. So I think we bought and these numbers are fake - but we had a two in front of it and we paid for it back in those days, we sold it for the front block for 290. So there wasn't much of a premium for a bigger block in that area for just a weird market. You didn't get much more from having an 800 square metre block then a 500 square metre block so it didn't matter so much that we cut off the backyard and then the rest was profit and we shelled the back house for 400 odd. Which meant at the end of the day when everything was put through the seven stamp duty and everything else. It was a four hundred dollars thousand profit.
Delving into the pros and cons strategy aspect of her property journey, Grubisa explains why she prefers property developing as opposed to renovating or buy and hold strategies…
If you can delegate, I find property developing actually easier and safer, because even though it sounds counterintuitive, not many people do it because it is perceived risky and you need expertise which just isn't the case and everyone piles into residential lending and flipping properties like they've seen the block and there's a lot of competition. So it's harder to buy well when you're competing with everybody else but there's not much competition in the development space. You're also not bound by APRA. So the Australian Prudential Regulation Authority controls lending and credit in our markets and how banks can lend. And right now they're really targeting residential lending. So this idea of responsible lending and banks have to be really careful who they lend to and how they lend and what that has meant is that it's really it's getting harder and harder to get a loan. They're cutting back interest-only loans. So it's like a game of musical chairs. Everyone's on interest-only loans cause they've all been speculating in a hot market but they only last for five years so as those loans fall due banks aren't going to offer interest-only again. So people will be having to pay down principal and interest but they can't afford to on the current lending criteria. So that's what we're seeing a lot more distress as people who bought and borrowed when times were good in a tougher market now can't refinance and can't pay principal and interest. And in the development space, it's a different area of lending so it's not bound by APRA, it's not residential lending it's actually what they call commercial lending. Now that's not commercial as in business. They call it commercial because they look at a property development venture as a bid as they would a business venture so they're not approving you as a borrower, they're approving your deal and the profit in it.
And the profits are so much larger than there's just more of the pie to go around, so that yeah like you said you can afford to pay more, pay money partners out, get investors on board because you're creating something that wasn't there before. It was a vacant block of land, now it’s five townhouses. Where if it's just a house that you're putting a new kitchen and bathroom in the profits are so minimal that you end up having to do a lot of the work yourself because if you're paying trades there's nothing left over. So just a bigger pie, bigger rewards means more for everyone so it's a win-win.
She also shares how much of her development projects are not limited to one particular area and can happen all across Australia…
At the moment we're involved in one in Fitzroy in Melbourne and we've got one at Newport in Sydney that were involved in and another one in Cairns in Queensland.
You're not bound by your local market and you can pay.
So we've got project managers on the ground obviously watching the day today.
But how exactly did Grubisa go from subdivisions to property development and options contracts?
I started small in the sense that I wasn't going to take on a big development and build. The first one we'd actually got project builders to do it. And what I decided we would do, and that's the beauty of development, is that every step of the way you're adding value and someone will pay more for that. So even if you secure an option on a property you can then go and get a D.A. and you can sell it to someone else who will pay you more for it because it's got a D.A. and it's the time value of money. A developer will come in and go okay great all I have to do is start building now. So even that small step will add value. You don't have to go out and build 100 apartments straight up.
Giving us an insight into the tools you can use to gather information on properties, Grubisa shares with us a success story on property options…
Now that the world's a lot savvier and the Internet's a lot more sophisticated. There are actually a lot of tools that can help you with that sort of thing especially when you're just starting out. So Core Logic, so you've probably heard of and your listeners have probably heard of RP Data. So Core Logic is an American company but they've come to Australia and they've bought up all of the data sources in Australia when it comes to property. So they pretty much own that space and they've recently bought a business called Cordelle that developers used. So it's quite niche. But with Cordell's it's not just for builders, once you know what's available and what's possible, what that will tell you is - and I look at it like a gossip, a gossipy neighbour - they've been around for 100 years and they know and they tap into council and they also look at what's happening, who's applied or inquired about development or what development are going through or what stage they're up to. Like they'll physically look and update their database and so you can know an area where for example recently from our community there was one at Lidcombe and that was a gross corridor in Sydney. What they did was and that was an old service station and so they got it on an option and they paid the one per cent option fee. So it was 10 million dollars and they paid one per cent of that so they paid $100 000, but they then went to the council and they had to do - don't get me wrong they still had to do stuff - and it costs them money on the way through.
So like you know hundreds of thousands in places like soil contamination reports and all sorts of things to do with the service station.
But at the end of the day for $350,000 they turned an abandoned service station into something completely different. It was a D.A. for 94 apartments and retail space on the bottom and they'd been working with the council. It was an infill area and the council wanted to see that in the area, so they wanted that sort of infrastructure there and what all these guys were doing was just delivered to the council and the market, what it wanted. And they were then able to use Cordell's to say okay who are the developers in Lidcombe and it will show you this guy’s just finished building 100 apartments and it's completed or this one's halfway through. And so they were able to, it's almost like a Rolodex that you'd have if you'd been in the industry for 20 years, they were able to approach them and say we've got this and this is the approval and they could buy that option off them and they made many millions of dollars just in that. So think they bought - the option was for 10 million - but they sold it to the developer. So they knew they were buying it as a service station but the developer was buying it as a D.A. approved site for 94 apartments and retail space and he paid $17 million.
She also explains how long the process took to get the D.A. approval for that particular site…
The option period was for 12 months but we also had a clause in there that said that we could extend it for another six months just in case things went wrong at the council. So they didn't pay their hundred thousand dollar option fee without knowing. So they were kind of massaging both sides so they were talking to town planners at Council about what was possible. In the meantime, they were talking to the owner. And so when they bought the auction from the owner they knew that council was on board with their idea and then they ended up doing it in 12 months. But if we needed to we could have had an extension on the option for another six months just in case.
The zoning fit though so it was compliant, it wasn't like they were having to ask for some special exception and some discretionary thing on the part of the council. But yeah they did know upfront like is this possible and with this zoning you know and all things being equal, could you do this? And the council said like yep, we'd be really happy to see that as long as there are some green areas and this. So they knew in principle it was possible.
Looking for guidance to aid her on her property investing journey, Grubisa shares that her mentors were not always the most conventional ones…
For me, a mentor may not be a physical person. It may be just a book that I'm reading. So I am a big reader and so I would read anything and everything. I'm embarrassed to tell you Tyrone but I'll tell you the truth…
Back in the early days I actually from rock bottom um I read Donald Trump’s The Art of the Comeback. It was about him being put in the Guinness Book of Records for the greatest ever financial turnaround and so I've read The Art of the Comeback and then I read The Art of the Deal, like his first book and that’s why I'm a bit embarrassed to say Donald Trump.
But like I would think in any situation like the Ballina apartment I go okay, so what would Donald Trump do now? What would he do in this situation? Just so like not that I could ring him up as a mentor or anything but I could at least leverage his knowledge and try and bottle myself off things like that. But I have had physical coaches and mindset coaches so as an educator I just had a lot of blockages. It's kind of a male world - the property education space and speaking from the stage and I wasn't good at it. So I actually had to go and get help with that. And at first just because - I don't know the lawyer in me - I'm just black or white and I thought I just need to learn to do public speaking because it's different from talking to judges and juries I just have to get someone to tell me how to do stage speaking. And that didn't really work or translate to me and then someone said I saw a guy I was waiting to go on stage at an event and there was this guy speaking and he was a mindset speaker and I was listening to him thinking oh god you’re good and I love everything you say. So I actually said to him can you teach me how to speak and he said it's not about speaking it's about what's in your head and your blockages and you're making that a self-fulfilling prophecy. So he still coaches me to this day on my mindset.
Wow, that's phenomenal. Now I'd love to know who this guy is…
You’ve probably seen him, he’s been around a long time, Paul Blackburn.
Oh yes, I know Paul, wow he’s phenomenal.
So my blockages were all - that's what he came to realise, I had a whole lot of baggage and Catholic guilt and everything about
I had massive dialogues going on in my head like while I was on stage and the lawyer in me. And I've softened up a little bit now but you can imagine Tyrone, like questions that you're asking me now like saying, “Well tell us a bit about that deal? and I'd be like, “Oh well I've got to get a non-disclosure and I can't talk about that and if I say $400 000 it was actually $405 000, is that misleading and deceptive?” and you know I had all of that baggage following me around.
With such baggage weighing her down, Grubisa shares how she was able to overcome them…
He asked me some hard questions. And yeah, it's still a work in progress, like obviously the bigger you get you know the more success you get. There's also an element of downside with that. So even more recently I've been getting more into an online space and I'm starting to want to share a lot more knowledge and doing content marketing. But the greater your reach, also you do get some detractors and I have such a soft underbelly that my husband actually forbade me to read emails after 9 o'clock because one night I read a bad email like someone wrote something just in a service business [where] a customer complained and I just took it so to heart that I'd been waking him up in the middle of the night at 2 a.m. going, “Hey hey you know how this person sent this, do you think they meant that…” So Paul did a lot of work with me and there's a real weakness where I need to be liked. And so if I need to be liked that then that means that I'm giving away some power because I can't control what people think of me. But if I'm wanting that approval or some sort of verification from others then that's a weakness because it's outside of my control. So it's been a big journey for me to even have a Facebook page and be online and embrace the digital age, which you have to do in business or you're going to die. But for me, that also means that people can write negative comments and if I don't toughen up and get a thicker skin and learn that it's okay and that not everyone has to like you and you can't please all the people all the time, then you know, I’ll never get ahead in business.
Asides from her current mentors, Grubisa explains that the best advice she had ever received actually came from someone she worked with in her earlier profession as a barrister…
If I had to pick one, it would be to - and this is something that someone told me very early on - it was that to just guard your time with your life. So one of my it was actually a barrister who said to me, “We worry so much about losing money, but when you lose the money you can get money back again. We’d be just outraged if someone stole some of our property or possessions and yet we let people steal our time every day.” And he said, “You've only got 24 hours in a day, it's yours to make the most with whatever way you can”. So, and this comes back to being liked again and...
He said the number of people who just don't say no to things and I read a quote Warren Buffet said a measure of success. Successful people often say no to things more than ordinary people so just learning to just be that focus, that you can have the guts to say no sorry that doesn't suit so that your days not reactionary.
On a more personal note, Grubisa reflects on the personal habit that she believes has contributed to her success…
I would often let the day invade my time and I’d kind of start my day on the back foot because the first thing I do - I always have good intentions to do something like I'm going to exercise.
I'm going to set the alarm clock at night after you had eaten a meal and had a glass of wine and you're feeling good but you're feeling a bit guilty, I’d think, right this is it. Tomorrow I’m up at five and I'm going to the gym or whatever and I’d just set my alarm clock at five and five would come on and I would just hit snooze. And it was just so easy to go, “Do I feel like it? Nah I just really don't feel like it.” And then when I did wake up later on the first thing I do is reach my phone and then I'd look at emails and then I'd start answering emails and then the tail was wagging the dog because I was jumping to other people's request and demands and I would just sort of fall through the day without any real plan. So I've got this thing now where my alarm goes off at 5:00 am every morning and I don't know if you've heard of Mel Robbins - but before my brain can even say, “Do I feel like going for a swim?”, like of course I don't feel like going for a swim at 5 o'clock but before that dialogue even kicks off in my head I just go five, four, three, two one, my feet are on the ground, I'm in the car, I’m driving to the pool and then swimming for me is like meditation. So every stroke I'm just counting on my brain to just make plans I can organise my day and then I'm in charge of the day from there because I've just set out with that intention and that's sort of my catalyst, my comfort zone of how I launch my day.
With so much more success ahead of her, Grubisa thinks back to the past to reflect on what she would tell herself ten years ago…
I'd say hang in there. It gets better.
Because 10 years ago was a low point for us, 10 years ago with the GFC. You kind of don't realise it when you're in the eye of the storm. I mean 10 years ago I may have even given up because the little things, they just seemed so overwhelming. But um yeah you don't need to see the whole staircase, only the first step. So I just had to just keep putting one foot in front of the other to climb out of the hole and then new opportunities present themselves if you just keep in motion, as they say, body in motion stays in motion.
Looking ahead at the endless opportunities she has and the resources now available to her, Grubisa delves into what she is most looking forward to in the next five years, not only in regards to her property journey but to the D.G. Institute as well…
I'm loving inspiring and working with other people, so we've created and as I started getting into the digital space, a community of like-minded people all doing the same thing nationally. So partnering with each other on deals, money partners. One of our values here at D.G. Institute is to challenge the status quo.
So it's just I think, we’re living in a really, really exciting time. So one of the things we're doing, for example, is setting up a peer to peer lending platform. So it’s kind of like crowd-funding for property within our community and that's a new area of financial technology that our sector is behind at the moment.
They want Australia to be blazing a trail and it's like what Uber was for taxis and what Air BNB was for hotels, it's a disruptive change in the banking space.
With so much knowledge to share, Grubisa also goes on to tell us how she can assist you on your own property journey…
I've actually got a special gift for your listeners. So if they go to dginstitute.com.au/mwc-giftpack, what I got is three of my books. So one of them is on asset protection for their property portfolio, another one on managing debt and a final one on distressed properties. So those are the three areas that we focus on here at the D.G. institute and I've written a book around my knowledge in those areas that they can download those.
This episode was produced by Andrew Faleafaga with narrations and interviews conducted by Tyrone Shum.
Affluent property developer John L Fitzgerald, from JLF Group, has a focus on buying land in areas of growth that will inspire you to kick-start your own property journey. Also, find out why you should be looking interstate for your next property and how you can build your wealth in seven steps!
Discover why Fitzgerald says you should always triple check the cash flow rate before making a commitment, how you can find your all-important mentor to guide you in your property investing journey and learn from a template to success that 3 of Australia’s top investors endorse as a great way to accumulate wealth.
Starting his company when he was very young, Fitzgerald has invaluable experience in creating and running a business. But it is finding a purpose and a balance along the way that has been a challenge.
My name is John Leonard Fitzgerald and my company's JLF. I started my company when I was 18 years old, which is crazy and I must have had these egotistical visions of grandeur, of having all these companies. And now I suppose I've got 26 companies that I've operated for over 30 years and I look back on the whole journey and say, ‘Wow, you do need to have some balls, you need to get out there and make a statement of who you are or who you want to be at a certain stage, but you've also got to have some balance to that.’
And I suppose I’m here to give all of your listeners some of the balances that I've found have been valuable to me in creating, then running a business and finding purpose in both those two things.
So what does he do in any given day?
My main business is property and property development and I also run a school for youth at risk. So I do two things on any particular day: I coach my headmaster at the school, we have 100 boys who have been kicked out of all mainstream schools and we have shit going on all the time there.
And the second thing is I oversee my operation, which is in five states and we've done 370 developments in five states around Australia. We're developing pretty much all over the place. While that is phenomenal, I mean humanish, that's quite a lot going on as I think I need to go have a lie down right now.
Growing up, Fitzgerald’s upbringing was coloured by the trauma of a parent’s passing and financial struggle.
Well my story is interesting in this regard - I’m a Melbourne boy, born and bred in Melbourne and one of five kids from an Irish Catholic family. And you know Fitzgerald, obviously the Fitzgeralds immigrated from Ireland in the early 1900s and landed in Melbourne. My grandfather had 11 kids and my dad was the youngest of those 11. So when I was eight years old, I was the third in the pecking order with two older brothers and two younger sisters.
My dad was killed in a car accident and it was… life is an amazing thing, because the timing of it couldn't have been any worse for Mum. Dad had three businesses, menswear stores that were going OK but really needed his involvement. And Mum was a stay-at-home mum and on top of all of that, they had a house half under construction. So you know life just was turmoil. Mum was a 40 year old widow who had to then go into business; she hadn't worked for the last 15 years as she was bringing up kids, the three older kids, which as I said I was eight and my two other brothers 10 and 12. A year later Mum said, ‘Look, we're struggling, we need to send you away to boarding school.’ And this was in 1974, so I got the news that I was going to be sent away. She went to the Christian Brothers in Melbourne and said, ‘Will you take these boys?’ And I was shipped off to Christian Brothers College in St Pat’s in Ballarat which became the whole... there was a whole controversy in this whole St Pat’s thing going on at the moment. The epicentre of that was in Ballarat and I’d probably say patterned everything going on there.
And just as a sidebar on the issue, I was listening to - and I don’t take that much interest in it - but I was listening to bits and pieces on the news in relation to the inquiry and I heard a lady say that the damage that has happened over that time can be equated to the fact that 14 kids or their families committed suicide, who attended St Pat’s during that particular time. And when I was listening I was thinking, ‘Wow, I actually know some of those kids who committed suicide,’ and then just put two and two together, that they must have been victims of sexual abuse.
After completing his schooling there, he was ready to get out and find a positive direction in his life.
Anyway I landed at boarding school at age 10 in 1974 and I can honestly say, I spent five and a half years there before I got kicked out of that school in year 11. And then, crazily enough, Mum begged them to take me back in year 12 because you know I just thought there was no chance to be getting matriculating, so they took me back in year 12. But the minute I finished school I was out of there, I was out of Ballarat and I was out of Melbourne and I hitchhiked from Melbourne. I finished in January 1980, I went downstairs, I had a backpack and said, ‘Man, I'm off.’ ‘Where are you going?’ ‘I'm 16 years old man, I'm hitchhiking to Queensland. There's nothing for me in Melbourne and you know, I've had a gutful, I don't know what I want to be.’ When I think back and think how I imagine having a 16 year old like me, it would have been a terrible last year. And so Mum said, ‘Look, by all means.’ I think she was glad to get rid of me; she said, ‘Whatever happens happens, I wash my hands of you.’ So I said, ‘You know, it's OK, fine.’
So I hitchhiked from Melbourne to Queensland and that's when I think life took another turn. And I tell kids who I mentor who say you know, ‘John what should I do when I finish school?’ I say, ‘Here's what you should do - get out of your comfort zone and go and discover yourself.’ And the thing about leaving Melbourne and coming to Queensland, I did not know anybody so I had to reinvent myself - and I could reinvent myself in whatever way that I thought I wanted to be. And I got there in 1980, in the middle of a massive property boom going on and you could feel it, you could feel it in the energy as you always do. I thought, ‘Wow, I've got to get into that, I've got to be a part of that.’
So I started work as 16 year old; I started work in a real estate office, selling real estate for a fantastic guy called Bert Cockerell. And Bert was a jack of all trades, he did the fishing report on the radio, he owned the Palm Beach theatre, he owned another motel in Miami and he was building a big house himself. I spent a bit of time with him. He wasn't a mentor in the sense that he couldn't give me the time and then I saw that I needed to find a mentor, someone who's been in the business for 20-30 years or somewhat that can really guide me and had a lot of energy. But to no direction.
Then Fitzgerald reached out to the wealthiest person he knew, for guidance.
I reached out to the wealthiest guy I could find who owned shopping centres and he connected me with a Jewish guy called George Margolis. And George was a guy who owned probably half of Cavill Avenue in Surfers Paradise, back in the day, and lost it all when he went to Lane Subdivision in Gladstone in the crash of the 1970s. And he was emerging, he moved back up to Queensland in 1979 and he was funded by some Jewish connection from Melbourne. He took me in and literally took me under under his wing. This is probably the turning point that I say to people, ‘Success is about your habits.’ George used to say to me, ‘John, do two things everyday you don't like doing.’ And I remember thinking to myself, ‘Well the one thing I hate doing is getting up early.’ I thought that that is the number one on my list; so since then I made a dedicated effort to do that.
He said, ‘Then do two things everyday you don't like doing and then, learn to like your dislikes. Learn to like your dislikes, make that a habit.’ I used to get up every morning at 6 o'clock and now, you know 30 plus years on I'm still getting up, in fact I get up at probably five o'clock everyday. And the other thing that I hated doing was knocking on doors. You know I think it was just the fear of rejection and all that sort of stuff - and I just knocked on doors and knocked on doors and knocked on doors. And I'm still knocking on doors. I'm still doing that, whether it's billionaires doors in China, I'm just out there. If someone's moving or want to know what's going on, or to meet them, or you know want to find out about it. And I think that the habits that I've adopted… firstly learn to like your dislikes and most importantly, face those obstacles and challenges rather than turn away from them.
His mentor also taught him another valuable lesson, which became the basis for Fitzgerald’s book Seven Steps To Wealth.
And the second thing he taught me which is interesting other than that, ‘There's only truth in numbers and successes repetition.’ And that was a penny that really did take a while for me to drop and that's when I wrote the book Seven Steps To Wealth, which I’m going to talk about a little bit later, in its eighth edition. All the things that I tried to communicate to strangers about real estate, number one is that the money's in the land, the land is the appreciating asset, and number two the mathematics of success is compound growth. That's what it is, that's the maths Warren Buffet uses, Bill Gates, anyone uses compound gross. So if someone's got a formula for success, I will ask them, ‘What is the formula that gives you compound growth?’ And that's what I let work from my mentors. So that was the beginning, so-called, of me. I had decided I outgrew George in the real estate side of it within a few years.
His parents also had somewhat of an influence in his property journey.
If [Dad] would have been alive, he would have; he would have had a strong interest in property, because I knew he loved the property. And Mum, because I'd been working in property, she started buying houses - and she did well out of it but she wasn't an active property investor or somebody committed to do that as a an investment tool that was going to make her wealthy. Albeit she had quite a few houses, as she did build up a window which she sold to businesses and she retired, sold her business and she put her money into property. But she felt it was better in property ownership back in the 70s-80s, high inflation time, she just thought her money was better in property than in the bank.
And Fitzgerald’s passion for property is clear, through his close connection to the real estate industry over so many years.
I've never been in any other job than just real estate. So I started selling real estate, then I did syndication, then development and then when I could I just started buying, selling and trading myself, developing and then building my portfolio. I still have not done another job.
The first deal Fitzgerald undertook was in building spec houses.
The first deal I ever did, the first big deal, it was some sort of like I started building houses, spec houses, and I was buying land for like $16,000 a block for 1,000 square blocks and building houses for around $30,000. So the total cost was $46,000, I'm selling them for $55,000 and that was a lot of profit.
Then I was sort of trying to get a business up and running to do that. And my skill set wasn't actually in building, my skill set was actually finding and buying the land - and buying the land really, really well!
Since then he has turned all of that into a system that works. But how did he manage to balance his career with actively buying and selling property?
Well the thing about my mentors is that they teach you habits and those habits lead to building a team of people around you, because you attract people similar to you with the same habits. And once you realise that, you realise that two plus two equals five. So I then had builders who said, ‘Hey John, we want to do business with you, we like you. You get up early, you run and hire other people; I want to do stuff, I want to do something.’ And when you get people saying that you think, ‘Wow,’ I mean I've got resources beyond myself. So that's when the penny started to drop for me.
By the age of 20, just two years into his journey, he found a great opportunity - but it would cost him!
So back in 1982-83, I started knocking on doors in Sydney and I was, what 20 years old, asking them to loan me $3 million, because by that stage I’d actually been buying and selling property.
I always think really big and I thought money was coming to southeast Queensland from mainly Sydney and Melbourne and a lot of it was the wealthy developers; and a lot of them happened to be Jewish. I sort of thought, ‘Well look, if I go down and see the developers and ask them to loan me $3 million, I’ll make them a deal.’ And what I did was, I found a deal - there was a massive block of land in Logan, behind the Logan Hyperdynamics and it was approved and zoned for 700 blocks. The owner had gone broke and the owner was a guy called John Bartlett and he had gone into default. The mortgage to that property was by a company called Entrad; they were just a property holding company that sold its about what it had a mortgage. And I knew the guys at Entrada and I said to them, ‘Look what if I can find a buyer to back me to buy it? I'll buy that waffle off you for $2.8 million.’
So they took a chance on me and gave me six months free option to find a partner or backer to buy that bigger land. Now the land was about 250 acres and I knew that the secret was it was approved for 700, but the average sized block was around 1,100 or 1,200 square metres and I could redesign the subdivision down to 700 square metres and improve the yield to maybe 1,200 lots. So I knocked on doors in Sydney, asking people to lend me $3 million saying, ‘We're going to buy this property, sell it in a year's time and when I get it rezoned for $5.5-$6 million, they'll make a million dollars.’ I thought it was a good deal for them, a good deal for me.
He soon found that this was a lot harder than he thought.
Twenty doors shut in my face, you know people laughed at me saying that because I was 20 something I should borrow it off my dad or something, you know. They said, ‘We'd be embarrassed, giving a 20 year old $3 million.’ But there was quite a door that just opened and it was a company called Daneford Ltd, who had built most of the high rises on the Gold Coast and the chairman was a guy called Michael Hirshon, who went on to become just a fantastic father figure and a mentor of mine. And it took him five minutes to wake me up, make a decision and said, ‘Here's what we'll do. I'll get to know you over the next couple of months and if I like you and my wife wants to, we'll do the deal.’
So he came up to Queensland, we spent some time together and it was mentorship and personal relationships, what are my habits, what do I do, all those sorts of things, are they funded? And sure enough, we bought the block for $2.8 million. We rezoned 1,200 blocks and then six months later, I took them a contract for $5.8 million. We had that property and this is 30 years ago, I sat there and there were three old Jewish guys and Michael Hirsh was there. I was sitting there I was, I was shitting myself, I was just sitting there opposite the table thinking, ‘I am the friggin golden boy and I've just made a million bucks,’ because the deal I did was they get half the profit plus 20% interest on their money, which at the time wasn't a lot because they hadn't put in the whole $3 million, we borrowed money from the bank. So the net to me was I would get a million bucks - and this is an amazing story, it’s life changing.
And I'm sitting there with these real estate guys and I said, ‘Guys it's been fantastic doing business with you, here's the contract for $5.8 million. You sign it and we're done. We'll celebrate and then we'll each go our own way.’ And they looked at me and said, ‘What are you talking about?’ and I said, ‘What do you mean what am I talking about? I said we did a deal where you lend me $3 million. I buy this, we sell it and then we're gone.’ ‘No, no, no, that's not how it works,’ they said, ‘You're our boy now, you're with us. So you’ve got to do all deals with us, that's how it works.’
If you've had success with someone, you keep going. I said, ‘Well look guys I'm telling you now,’ - I was 23 or something - ‘Guys I made a million bucks out of this; I want a million bucks.’ And they said, ‘Well look, let's develop the property. 1,200 lots in Brisbane, let's develop the property,’ and I said, ‘No, no, I want the million bucks.’ They said, ‘Why do you want $1 million?’ I said, ‘Oh you know, I want to buy a new house.’ And they said, ‘How much is it you have to set off?’ ‘$400,000.’ They got the checkbook out and wrote me a cheque for $400,000 and said, ‘Here's the $400,000, go buy yourself a new house. Tear up the contract and let's get to work!’
At 23 years old it was the biggest cheque he’d ever seen in his life, which he believed to be a divine sign in the direction he was meant to be heading towards.
I took the cheque, sat in the park, looked at it and thought, ‘You know I'm a person of destiny. God, the whole universe, has put me in this position and sent me to these people.’ We're connected as they are very, very successful. Let's go for the ride! We're just out for the ride and I still had an awful lot to learn. But you know, why would I check out? Why would I check out with just a million bucks when I could tap into their resources?
And better than that, they were just great people. They knew everybody, they knew everything. They were all in their 50s, 60s, so there was just a wealth of information. And their company was exciting and I wanted to be a part of what they were doing as well.
He believed this shining start to his property journey was the biggest a-ha moment that led him to achieve more great things along the way.
You never really do design your future, all you do is just visualise where you want to get to and just let the universe take you there. And it'll introduce you to people and take you to places that you'd never dreamed you would get to. But then, you'll feel the magic and it’ll start to click; go with it! Absolutely go with it, it's really important. And look I've got and have had lots of solid mentors, I learned from everybody I possibly can, but Michael Hirshon was my closest. The three of them have all passed away now, that's my closest confidante who was like a father figure to me - just a fantastic human being.
For those who are wondering what happened after the dust had settled, eventually Fitzgerald worked off the company’s residual debts and was able to attain his financial goals through becoming a developing success story.
So back in the 80s it was lunch and free money and Daneford were a massive property development company, they had over $500 million in debt. They were building 6 hotels, Brighton Le Sands, they had office buildings, they had Terry Hills, the biggest office park in Australia. They had just stuff everywhere and then I was their Queensland partner and the rules I had for them was I could use their balance sheet, but I couldn't borrow from the same banks as they did because they had a cap on their lending; so I could go to any bank. They had 28 banks that they borrowed from. I could go to any bank, but not their banks. So I did, I was buying land using their capital and their balance sheet right through the 1980s.
And then in 1991, in Paul Keating's recession that we had, the banks in Australia absolutely ran out of money and you know State Bank in NSW for example, who doesn't exist anymore, Commonwealth Bank took them over. Westpac lost $3 billion in the GFC, 28 foreign banks left Australia - and this is where Australia really did teeter on the edge of it and died for their company. That was a public company, but they had no personal guarantees and those three guys were very wealthy individuals themselves, they just put their company into liquidation. What I ended up doing was they were a partner in my business, so I bought out the receiver of the all their Queensland operations and I was funded then by the State Bank in NSW, ironically who were teetering on the edge of an administration themselves. That took a punt on me, which worked out really well. And what I ended up with was development sites - probably thousands of blocks of land to develop and I built buildings, commercial office buildings, and really you have inherited a portfolio but with debt.
Then I just had to work my arse off to get my debt down to a comfortable level and since then, I've literally just been developing, developing, developing.
However despite all the wealth he accumulated through those deals, he has always been involved in giving back to the community.
I actually took a bit of a left turn, because Michael Hirsh said to me when I was about 25 years old, ‘Hey, what are you going to be remembered for? Do you mean to be remembered for making money, or to something give back?’ So even when I was 26, I started a charity called Toogoola and that works with youths at risk and then converted it into a school. And now we have a cutting edge school with 100 kids - but there are 100 kids who have been kicked out of mainstream schools. And what I do, I spend Monday mornings and often a Thursday morning at the school and these days, I sort of get back from the business and spend more time at the school. That's what I really get an interest in.
And the byproduct of what happened after Daneford I think was that Michael sort of taught me that to can be young and successful, you do need to learn humility - and the only way you can properly learn humility is to give back unconditionally. So I took that route and that might have helped me with the banks in 1991 as well, because they saw that I had a registered charity, that we're doing stuff, so I thought they probably helped out and did a lot of development.
And then in 1997-98, I took another turn because I realised that Australia's biggest problem is that our baby boomers are retiring and they're going to be broke; and I knew that land was the secret. I had to communicate to them how to build wealth out of real estate, so I wrote a simple book called Seven Steps To Wealth, on two premises. One is focus on the land because land appreciates, buildings depreciate and secondly, compound growth. I've just literally been teaching Australians about that over the last 20 years and that's been a big part of my energy, in my efforts of my businesses. It's just teaching that and that's what took us to the eighth edition that's been released in the last few months.
To disclose a worst investing moment that has transpired in his journey, Fitzgerald has learnt that timing is crucial.
What you learn is that cash is like oxygen. If you run out of cash, it will be over very quickly for you and the term any property developer throughout the years has always known is if you've survived 20-30 years and all that sort of thing, then you would have had to have worked out how to survive running out of cash. Man, I think when I talk about probably the worst deal, there's no such thing as a bad deal it’s just bad timing. It will always go up. Have you got your timing right? I lost a million dollars once, I bought a subdivision in Redland Bay. I've got a lovely family subject to getting myself the approval, which I like to do for 300 odd blocks and it's my time to go unconditional. And I took a punt that I was going to get the approval within 90 days, which is when I was due to settle. And I didn't get the approval and I found out later on that there might have been some shenanigans going on with the council, that sort of thing. And you hear about that all the time and that's just part of the trade, I suppose.
But I didn't get the approval, so the bank wouldn't lend me the money to settle the block because it was rural - and I couldn't settle it and I had to pay them. They sold it and I had to pay them the difference; that cost me a million bucks. That's the worst deal I've ever done, from an active prospective. From a passive, I take a long term view and I've never done a bad deal. I always do my homework, I always do my numbers. So that's where you'll get yourself into trouble in property, is timing.
Don't be emotional about it. Everyone wants to buy around where they live and where you live is going to boom maybe two or three out of 10 years. You're better off, if you're going to be serious about building a property portfolio over 10 to 20 years, get used to doing your homework.
Something that Fitzgerald believes holds many people back from investing into property is the looming fear of losing everything.
I had nothing to lose, so there was nothing holding you back. And the mindset gets harder as you get older, because as I coach people in their 40s and 50s their fear is what they can lose, that's front and centre. And then they have the fear of being broke at 65 which is the biggest fear, being broke at 65, or losing everything.
Now you shouldn't lose money in property if you set up your cash flow properly, so don't ever take a risk on cash flow. That's what I say to every investor; and you do your homework on that, don't kid yourself on that - triple check the cash flow and do your numbers. Only truth in numbers. So what I say to everybody is by the way it’s not for everybody you know, you can't sweat the small stuff.
You do have to recognise that you will have to manage tenants, talk to agents you know, communicate with valuers, banks and a myriad of people and you have to work with them. But if you can do that you can make millions of dollars out of property. I've got a client who started with $20,000, whose portfolio is worth over $3 million in net today. He started with $20,000! I could tell you lots of stories of people like that, but he doesn't sweat the small stuff and he's got a good backup plan. And look the only time you'll get into problems in property is cash flow.
So don't kid yourself on cash flow; cash is like oxygen, if you run out of it it’'ll be over very quickly for you. And that was drilled into me from the start and you know essentially, just triple check your cash flow rate.
In our previous chat with him, he attributed a lot of his initial success to his mentor, Michael Hersch. But how do you find such a great mentor?
They'll find you. You know when the student is ready, the master will appear. I remember I knocked on 21 doors and 20 shut in my face. The first door that I knocked on, my presentation took you know 25-30 minutes where I was just babbling on. The 21st door, it happened in five minutes. Michael Hersch said he just looked at me across the table and said, ‘You've got five minutes.’ I looked at him and I said, ‘It's so hot I only need 36 seconds. I'm John Fitzgerald, I buy and sell property. I've got a deal - we can buy 700 blocks, rezone it for 1,200 lots and double our money within eight to 12 months.’
It's amazing. It's over that many times of repetition and also practice, you really became articulate at what you had to put across and that's how you were able to put something across in such a short period of time.
You know they'll make their decision about you within one minute. Warren Buffett said he could do it in 10 seconds, but they'll make their decision about you in one minute and there's nothing worse than someone who babbles on.
Fitzgerald’s book Seven Steps to Build Wealth details how you can become a millionaire, endorsed by three of the wealthiest property investors in the country.
Look I'm really proud of the fact that three of Australia's property billionaires have read it and endorsed the book and that's really good. Bob Ell, Maha Sinnatham, and the late Nev Pask passed away a couple of months ago. The book is a template, Seven Steps to Build Wealth in property and it is fail proof.
Step 1 - and this is step one of any journey that you make - is commit to growth. So step one is growth now and in seven steps to all this, buy land for growth. Steps 2, 3 and 4 are cash flow, cash flow, cash flow; and that is your income, your tax deductions and your finances, how you set that up. Step 5 is making time work for you. This is really important. And 6 is affordability. Step 7 is that power of compound growth and repetition.
Now you could use this model for everything that we do in life, because everything has got to start with you’ve got to get up everyday, you’ve got to do this yourself.. So have I reached my full potential? No. OK, so what am I going to do today that’s going to take me one step closer? So that's where Seven Steps really gives you a mentor - and almost like what I learned off my mentors. It gives you a purpose every particular day, ‘How can I just go one inch closer, one inch further?’
Love that it's very very good. It's just those little things that you do as a habit that continues to compound and build and help you move towards closer to your goal.
Habits will make you or break you. We’re all made by our daily habits.
He has also read many inspiring books about others’ success stories.
I love autobiographies about successful people and I love Ray Kroc story which is Behind the Arches of McDonald's that was published. That's an old book now, I think it was really in the 1980s. But I loved it because one of the first deals I ever did was with McDonald's and I got to meet Pete Ritchie who ran McDonald's in Australia. So the whole Ray Kroc and the founder and everything like that. It's just a fantastic story. I really like the Frank Lowy story, that's an older book as well but it’s the story of Westfield. And Westfield is an interesting story because you know, technically if you had to put $1,000 in Westfield in 1960 when Frank started the place for more than $100 when they sold out a few months ago, that thousand dollars would have been worth about $300 million now. A lot of people don't realise, but that is compound growth on steroids. And Westfield's property strategy and their land strategy is absolutely phenomenal; so they're probably one of Australia's greatest companies.
Kerry Packer's story - I just love all those stories that I've read you know, all the main stories... BHP’s story was a great story; how they came to the brink of nearly losing it back in the late 1990s and then turned things around and had the biggest boom they've ever seen in the company's history. I just like reading stories and autobiographies. And I didn't read any one Arnold Schwarzenegger to Mike Tyson, Kevin Hart the comedian, I loved his story - and his story is interesting too, because they all have the same steps. To work hard, to have a vision of what you want to achieve, what outcome you want to achieve, work hard find a mentor, be authentic, then give without wanting to receive, all those sorts of things are all very common. And they are people with strong, positive habits.
Having developed a plethora of properties across Australia, Fitzgerald’s strategy is focused on buying land in high growth areas.
We deal specifically just with investors who want to build a property portfolio, so if someone is only looking to buy one property, they wouldn't deal with me. But if you want to build a portfolio of 5-10 properties - and I've got hundreds and hundreds and hundreds of investors with 10 or more, that have bought 10, 15, 17, 20 properties off me over the last 20+ years - then the strategy I have is that we buy land. Number one, we identify land in high growth areas. So I'm just a numbers person. There is only truth in numbers, so I'm looking at land in high growth areas and I'm trying to get the biggest block of land for the smallest amount of a square metre rate that I possibly can in a high growth area. And I want to get my timing right, timing is vital.
So let me give you a practical example of this: In Sydney, as an example, where some of your listeners may be in Sydney (and if you're not in Sydney don't worry, I'll try and put some texture around it). Sydney was a basket case in 2003 to 2011; Sydney had literally no growth. Now from 1998 to 2003, the median house price in Sydney doubled from $260,000 to $520,000. It went up to $560,000 and then came back down to about $523,000 and stalled for eight years. When the GFC hit, Sydney was a basket case. The government was in turmoil, everything was just horrendous.
In 2011 it had been eight years and they had had no growth. I decided we needed to get into there and we needed to get our clients into there, because there was a shortage of land supply and we were able to buy blocks around, because there was some infrastructure being built - the M5 and M7, which was a loop road around Sydney right to the outskirts. It was going to open up lots of areas in the west; 60% of people live west of Parramatta anyway. So we started buying land for $400 and $500 a square metre and doing house and land packages.
With his clients buying house and land packages for $395,000 back then, within 5-6 years that same land has increased in value to $900,000-$1 million.
One of the best sites and best areas that we went to will probably give you an example of how we do our homework. We went to a place called Edmonton Park, which was literally a new city that was being built - or I should say a new town centre that was being built - around a $1.5 billion rail and town centre infrastructure. And we put clients into there when it was just a paddock and the quires paid around $400 a square metre for their land - and their land now was worth about $1,200-$1,300 per square metre. So the land is tripled while the median house price in Sydney is doubled, or just on double.
People often say to me you know, ‘John you buy land in the outskirts. Aren't you better off buying in the 5-10 km radius?’ I say, ‘No you're not, because you can't get the big size blocks, which is 400, 500, 600 square metres. And secondly, if you're buying in the outskirts close to infrastructure it will grow by a faster rate than in the inner areas.’
And I did the example and I took a sale and resale of a house in in Roseberry, which is a case from Sydney CBD, that factual sale in 2007 has grown by 108%, whereas Edmonton Park had grown in the same time by 176%. So if you get your numbers right and you really do look hard at infrastructure, transport, considering all the disabilities and amenities, then you get landed a really good rate per square metre. You absolutely took a huge goal - and that's what we do. We do it in Sydney, Melbourne, Adelaide, Brisbane and we have done a lot in Perth, we did about 500 properties in Perth.
So by the sounds of it, at the end day it seems like a recurring theme because as you said, property or land prices constantly go up; it just depends on the timing of the market.
But it's also getting you cash flow. This is an interesting point you raise: a few of our clients pulled out of Sydney in 2014-15 when the Sydney median house price got to $800,000. But more importantly, the returns on housing were 3.8-3.9%. So it meant that if we were borrowing you know 90% or thereabouts, it would cost us $100-$200 a week. And I just felt that that's too much of a burden. I'd like to buy a property that's cash flow neutral or positive. And I thought that instead of investing $800,000 into a particular area, there was more opportunity for growth in Melbourne. So we hammered Melbourne really hard in 2014-15 and that's all now… we would have made $200-something million out of Sydney for our clients and our clients have made you know the best part of $500 million out of Melbourne in this cycle.
The key points to take away from this is to buy well and ensure you hold your properties for the long term.
Don't be emotional about it. Everyone wants to buy around where they live and where you live is going to boom maybe two or three out of 10 years. You're better off, if you're going to be serious about building a property portfolio over 10 to 20 years, get used to doing your homework and buying in areas before they actually cycle.
For his personal property portfolio, Fitzgerald focuses on residential.
I have housing. To be honest I think there's nothing better now than housing, so I'd buy land and houses. So what my clients do is have a massive portfolio of that. I have a little bit of commercial property, but I found during the GFC, the banks when they do commercial loans that they can make a margin call on you. And I thought that's really tricky for investors you know; so I stick with residential.
And if you look at residential housing here, a really good example is that first block of land I told you about, it must be 50 minutes ago I was buying land for $16,000; that was in Brisbane. That was 1,000 square metres for $16 a square metre. Today that land is worth $750 a square metre. Now do the maths on that: that's 30 years ago. There's nothing you can show me that you've grown as an asset class in Australia that's outperformed residential land in Australia. And we have got the highest population growth in Australian history and with the lowest interest rates people should. But the population growth is in the four main capitals, particularly the three main capitals. So you've got to be careful about where you actually go to.
In terms of personal habits that have aided Fitzgerald in attaining success - both in life and in property - he attributes yoga and meditation.
I get up in the morning at 5:00, I exercise for an hour and I do that because I don't eat anything and it kicks my endorphins and it just starts my day and gives my mind a boost, because successful people are positive people. So you want endorphins, you want to give yourself a chemical kick without coffee and all that sort of stuff as well. So I do an hour of exercise and then I do an hour of meditation and yoga, where I literally just still my mind so that you're literally ready for everything.
And during that time you've prepared everything that you're going to do and then you have breakfast and get to the office and hit the ground running, organise the people with what I want to achieve today. I'm very much an outcome focused person. There's often two types of people in the world - there's process people and there’s outcome people; I'm an outcome focused person. So at the end of each day, I want to have received an outcome. As small as it might be, I want to have achieved an outcome, I don't want to get stuck in the process.
I mean lots of people say yoga asanas or movements or all that sort of thing. True yoga is just a union of your mind, a stillness of the mind. And there's a saying in yoga that the fast mind is sick, the slow mind is sound and the still mind is divine. And when you just still every part of your mind for that period of time, you really do tune in to something, tune in to the universe. I spoke about that, it’s really been a determining factor to every meeting, every coincidence, everything that happens and you just open yourself up to it you know, and I find it quite amazing. So I’ve been practicing that for as long as I can remember.
If Fitzgerald were to meet his past self from ten years ago, what advice would he give?
I'd say just keep doing what you're doing. I love everything that I do and I’d say to myself ten years ago, ‘Slow down.’ But looking back now I'm happy with the pace that I had.
And continuing to work at that phenomenal pace, now he is excited about working on a new project within the next five to ten years.
The next five years, I'm working on a project which is probably the biggest urban project I’ve done. I have a massive block of land in fact on Broadbeach, which is a block of 1,550 apartments. So that will be my big project; over the next 25 hectares of waterfront land, that'll be my big project over the next ten years and where I want to spend a lot of my energy and time.
For such a long term project, Fitzgerald says it’s always important to keep the end goal in mind, as well as working with the right partner.
You always start with the end in mind. So who is going to buy the product and what is the product going to be in that regard? I'm not an apartment developer, so I'll partner with probably one of Australia's top developers or a partner from China or Asia, who has a specific product for a specific market where they have a model and a margin built in. I've had lots of people talk to me, but I've got to find the right partner for that. I mean I'm in no hurry in that regard, I've had the land for nearly 20 years so I'm not in any hurry to do a development there. But I think it will reach a stage of maturity where it will be good to develop it over the next ten years.
If you wish to get your hands on his new book for a great insight into building your wealth through property, here’s how.
The best way is you can buy it the book shops today, I've seen it in all the bookshop, it's called Seven Steps to Build Wealth and please send me a note or send me the book and I'll sign it for you and all that sort of thing. So I like to keep in touch or go on our website Seven Steps to Wealth and you can get get a copy online. You can get it in the bookshops, in the airports, all that sort of thing and all the money goes to charity - so the good thing is that nothing comes to me. So you're doing yourself a favour, but what you'll like about it if you read the book, is it really does give you a template where the proven template is. I've had clients use it for 20 years who are now millionaires and multimillionaires, starting with $50,000, $20,000, $100,000, starting out with a little capital base. So it absolutely does work.
If you want to reach out and learn more from Fitzgerald about his strategy, you can check out his website.
The best way is just go on our website and reach out. In my head office, there's about 60 of us here and if you go on the website and say, ‘Hi John,’ you know it'll come to me. It’ll come through Nathan, who is my executive assistant, and it'll come to me and I'll happily engage with you and you can ask me any question you like particularly about property. I get emails from clients and from people everyday.
You can also find out where he is speaking in all the major capital cities across Australia on how you can kick-start your property journey!
You can find out on our website as well, we do workshops in the main capital cities maybe once a month and I will be speaking. I do speak every three months or so, I've just been a little bit busy going back and forth to China and all that sort of thing; but I often attend and do the workshops and love to say hello to everyone.
In this episode, we’re talking to professional investor in property development, Jason John Byron. He will describe how he became successful and how filming a speaker shifted his career, from a cameraman of 20 years to property investor.
You’ll hear how a severe leg injury forced Byron to change the way he approached property investing; how his first property investment was made seven hours’ drive outside of Sydney; and how “the paintbrush guy” learned that sometimes, it’s better to hire professionals to renovate your investment properties.
Within Byron’s company, he uses effective time management strategies to get the most out of his day.
I call myself a property developer because that's mainly what I'm doing. We never actually buy a property and don't do something to it. So I probably started off as a bit of a property investor/developer, but now pretty much I'm concentrating full-time on developing.
We follow a very systemised pattern. Every day we have a meeting in the morning with our team - and it’s not a big team, because a lot of them were on the outside as well - but we'll do eight-minute meetings in the morning and we'll look at our top operating priorities to get through the week. We break everything down into an epoch. So that means that this is week 38 or something that we're on and we'll go from what we have to do within that system to get to the goals that week.
So what is an ‘epoch’ system?
A lot of people are very much about a system that we run under and a lot of famous companies out there in the world run under systems. So it just makes life a lot easier to get that balance and also that communication between different parties. So if I'm just telling you, ‘I'll meet you on this particular day,’ or this happens you've been this date and some people get confused about what we're actually up to. When you're doing development, there's a time frame.
And so an epoch is the first week of the year; will be one of 52 weeks in a year. So that's where we go, ‘OK. What is our first epoch to our second epoch?’ So an epoch for us starts on a Monday and ends on the end of the last hour of that week, and then starts again. So that's how we can say where are we up to - on Epoch 38 or at Epoch 45 we've got to have another site. It makes life so much easier, especially in a team environment.
It was something that's been invented - epochs actually go from the beginning of your life from zero, the first second. You can do it in that way as well. I just found a lot of companies out there using this type of thing, because I examined some companies that have been very successful in the systems that they use and I found this was a really easy one to get on board with. Also good for setting goals. You can say, ‘In the next two epochs I've got to do these four things.’
Growing up in a somewhat an isolated area, Byron had a fun childhood.
I grew up in Sydney, on the Northern Beaches. So I used to go boating one day or surfing the next day. The very remote area though, because there was no train and the bus took an hour to get into the city. So it was one of those places - really fun place to grow up but I never really got that close to the city, so it almost felt like I was in a country town and people who live in the Northern Beaches, down in the very far end, would know that feeling.
During his education, his thirst for learning propelled him into a school that would instil strong discipline.
I’ve always been a bit of an overachiever, so I needed a lot of support for my whole life. So what's happened is that I started off going to local schools down in those areas, but then really didn't get the guidance that I needed for what I wanted out of life, especially in education. About halfway through high school, my parents realised that the teachers weren't really performing to what I needed - especially when I was really into computer studies and economics and so, they put me into a military school. That means that you have military service for a period of that and you’ve got to go three days a week to a school in full military outfit.
I went there for the computers and economics teachers and that type of stuff and it was quite a hard test to get into. But coming from that military-type exercise really taught me to be very diligent and to be problem-solving, because there's no such thing as problems in the military, it's just the solution. So I think that made a big difference in my life.
This gave him the opportunity to enter into the Australian Army, however...
When I finished from the school in Year 12, I was an NCO and so they said, ‘Well pretty much all of what you've been doing, you’re qualified to come into the army.’ So I just had to have a think back then and go, ‘I think I'm a Christian. It's a bit late.’ I totally respect the army and the way that works in the military and I loved it. But I just didn't like the aspect of having to kill someone type of thing. I kind of had to think about that back then and go, ‘I don't know, there’s a bit of a moral conflict there...’
On completing high school, he spent many years in the television industry through his father’s connections. However, he was unhappy in this line of work, so Byron began searching for a new path.
My dad was in television, so I became a cameraman when I was about 12 years old - video cameraman. So I trained from about the age of eight. But it was kind of something that my dad did and I got really good at because I had a lot of influence around me. So I kind of went straight into filming and I was also a pretty famous DJ in those days too. Both of those things, I think a lot of people look at the media industries and think there’s a lot of money in it. There's a lot of expenses in it, so it's not really a career that I think I could use to make massive amounts of wealth really - all the people underneath it seem to do all the work.
I was a DJ for about five or six years. Then I got serious, ‘I can't stay up at night and party all my life,’ so I stopped and then really heavily got into doing filming on television. And that was 20 years. I'm in my 40s now, so I changed my career to property about 9-10 years ago now because it was a thing where I got really good at being a cameraman and I was very good at filming sports. I'd always keep people in the frame and I used to do TV shows and other stuff as well. But people admire you when you're a cameraman you know, ‘Wow, you're in film and television! Sounds great,’ they’d get excited about it.
And I was good at my job. But the only problem was that I didn't love it. And this is a funny thing, sometimes you confuse how good you are at something and another external acknowledgement, with your internal acknowledgements. I thought, ‘Why aren’t I happy? I’m pretty good at this and everyone thinks I have a great shot.’ I appreciated having that talent, but at the same time, it just wasn't in my heart.
Little did Byron know that being a cameraman was what would lead him to shift his career into the property.
By coincidence, I had a guy called Gary and he calls me up and he goes, ‘I film these people who talk about property and this woman on stage walks back and forth from the stage all the time. I can't keep up with her, she keeps going out of shot and the guys I’m working for are angry at me because it looks really bad. You're the best in the industry for filming football players - you’ll be able to keep her in the shot.’ That's honestly how it happened.
I said, ‘Gary, I don’t really want to film someone indoors, I film sports.’ And he told me how much he’d pay me and it was four times the amount of what I got paid just doing intern. So I said yeah because as a subcontractor you chase every buck you can - that's the only way you're going to get wealthy and that type of mindset back then, just work as many hours, get as much as you can. because you never know when it’s going to dry up or when you'll get some expenses.
So then I'm filming this woman on stage teaching about asset protection, trusts and this type of thing and I wasn't paying attention, I was too busy trying to keep up with her. But then, the a-ha moment was when she started bringing students up on stage and they said, ‘This is our job, this is what we do. Then we get this property stuff on the side and we made an extra $50 000 cash this year out of doing it.’ And that was it. I was like, ‘I need to know how to do that.’ That's like winning the lotto on a scratchy or something like that, which is probably what I was doing back then. Then that was it, I went home, I spoke to Amy my partner and said, ‘I've found a pot of gold. This is what we're doing now.’
This was his first glimpse into the world of property, as it turned out there was no previous influence from his parents at all.
This is the strangest thing - Amy's parents and my parents had one house for years and years, tried to pay the thing off. It would have been principal interest loans. I remember only being in one house for a very long time and so they didn't have any real estate stuff, didn’t have any investment properties. None of the family on both sides had ever been into real estate at all. So there was no influence from it.
Byron’s journey into property investing started when he considered his true financial position.
We looked at where we were at - I wasn't even bothering doing my taxes every year, I'd kind of put them off and wait a bit longer so I knew I could just wait a bit longer to do them next year. I didn't really care about my finances, because I wasn't going to be able to get a loan anyway and I wasn't interested in it and that's a really bad place to be, where you're just living by your income coming in and just spending it. I don't even know how I got there, but that's the attitude we had back then. But there's a big confusion over properties. Number one is financing it, number two is buying the right deal. So I think the beauty of seeing that type of education from a figures point of view - how do you get loans, how do you set up certain accounting structures and why that was important first before you've got to get a property because that's an investment - really propelled us into going, ‘Hang on a second, our finances are bad. We have to get that fixed up first.’ Then we both agreed that if we could put ourselves in a financial situation where we were good to be able to borrow money, then that would be the first step of us being able to progress into this new stage. And I think that's one thing people have to look at.
This network that I ended up in has had so much support. I was just flabbergasted from the accounting side, they'd never ever wanted to sell you a property. It was different - it was like, ‘Let's just teach you the background behind accounting,’ and that's what made a difference for us. Then we did the education. I kind of hated education, I didn't go to university, so I was like, ‘Well why do I need this?’ But I realised that education was something that would help me make good decisions with more confidence. So I went and did the course, then we did our first property from there.
After taking the time to educate himself about property investments, he purchased his first property outside of Sydney. The goal was to find something that would generate positive cash flow.
I went to seminar and there would have been 300-400 people there, sat around tables and went through all the strategies, then went through all the accounting which is really great. Then they show you about different techniques you can use, you can subdivide, you can renovate and it was all positive cash flow, which we liked because we didn't want to spend any extra money paying something else - we wanted to have a positive cash flow.
The conference finished after three days. Now on the fourth day, we're out looking and trying to find that property, our first property. I'm starting to talk to an accountant and Amy’s talking to her accountant. Our first property was seven hours out of Sydney because we could only borrow $100 000 because we just weren't structured right financially at that time. We both had jobs that were close to $90 000 pay, but that doesn't mean that that money has been put in the right place, or you might make $100 000, you might have $30 000 on a credit card. That $30 000 does disappear, you've got to then make almost $130 000 to pay that off! So that was the first thing, structurally getting ourselves ready and then keep looking for that property, week after week. But the strangest thing was out of the 300 people in there, I thought that they all left the room and went straight into it. It was really strange like now I look back even a year after that, I met some people and ask them, ’Have you started looking?’ - ‘Oh no, we haven’t.’ And I'm like, ‘Isn't that what we're all meant to do?’
Then within six months we'd gone seven hours out of Sydney, used some advice from what we've been able to find out from what other people were doing, investing in, and then find that positively geared property.
Even today it's all about manufacturing growth to us. Warren Buffett says, ‘Price is what you pay, value is what you get.’ So that's always stuck in our heads right from the start, that whatever we do we are going to manufacture it. We've got to pull out more money than we put in.
So that's where we went seven hours out, found a property that was on a double block, which means that there's a block of land attached to the house. We renovated the house, subdivided it, had a spare block of land, reevaluated it, brought up some equity and that's better-manufactured growth. To make it even better, we got a house that we could cut in half, we cut that house in half and moved it 100 km down the road to where we were. Say 10 years old - which was good for a country area - and put it back together, but that on that spare block land and then we had two rental properties, both positive geared and two houses.
In the midst of all this, disaster struck, forcing Byron to approach his property investing goals from a different angle.
In the space of the first nine months that something really bad happened to me. I went to do paintball and it was kind of like an Army version of paintball, you go up and down hills that type of stuff, so it's a bit more serious than the average one. I twisted my right leg to a degree where it all shattered. I shattered the whole of my right leg from my knee down, so it wasn't just as simple as putting it back together but it was like well you don't have bone here in there, so a rod was put in it and I was disabled for a year. I wasn't going to be able to put any pressure on it - I'd have to learn to walk again because it wasn't a natural bone, from top to the bottom. And that was the end of my filming career pretty much, but we'd had that first property, so we'd already started there. I was in bed and I'd had to stay there for at least three months before I could start rehabilitation. Amy put a laptop on my chest and said, ‘Well I'll work and maybe try to get some extra money in and you can do this property stuff.’ So that's how it happened.
I found more deals that we could possibly buy with our income, that's when we put out the JB partners and that's what really has made us quite a success in the industry today - that from the start of it, we were forced. Not only that we could only get a property for under $100 000, but we made that work by being able to create two properties, two positive incomes and have now two properties within one year, which is what most people don't get. This set the equity up so we had another $70 000 equity we could pull out of that, which would be the immediate deposit to be able to put into another buy that we did. But it still took us two years to get our borrowing capacity up to where we could afford something so that we were finding stuff that was around $500 000 that we weren't able to borrow into yet - so that's when we got the JB partners on board.
We did the same thing again and again - found blocks of land where there was intrinsic value in the house on it and we would subdivide the land and in this case, just build new properties on those spare blocks of land.
Being young and naive, Byron undertook the renovations on his first property himself - with the aid of a very small paintbrush!
The first one we did the renovations ourselves. We knew nothing. People know me as a paintbrush guy. I got up on the roof, we had a very small paintbrush - I think it was two centimetres wide - because I'd never done it before but it can't be that hard to paint something, because we thought the roof needed painting because it was just red and rusty. But I went down to the local hardware store, just a city boy kind of thing, going, ‘Where’s the paint, where’s a brush?’ He just points me, ‘There's a brush,’ and I just thought, there's a brush, I didn't look any further. I'm quite tall so maybe I didn't see the second row down, but I just picked it up. That's it. I suppose it’s like shopping for a new car, if you don’t know anything about cars, you just know the options.
So I didn't do too much renovating and she was in marketing and stuff, so we did our best. I got up on the roof and it took me two days painting a whole roof with a two-centimetre paintbrush.
The amazing story indeed!
When I think about it, I think ‘Yeah I'm glad that it's a funny story, but there are two sides to the story.’ One side is ‘What an idiot. You could’ve used a bigger brush.’ But the second side of it is, ‘You give me something to do and I'll get it done.’
The renovations on the first property were limited by budget, however with discipline and hard work he managed it. But from there on out, he decided to hire other people to complete necessary renovations for him.
From there, we had a budget, we had $5 000, that's it. We did all the work ourselves every day. So that place could have been 100 years old, who knows? When we bought it we did all the work on that ourselves. Imagine this: you've got a job. Friday night or Friday straight after work, your girlfriend met you at your work with all the stuff for the weekend, you drive seven hours to a country town, you get there past midnight. You run inside, you have some sleep, you wake up at the crack of dawn, you start renovating and on Sunday at 5:00 you've got to drive back because you have to start work on Monday. So that happened in seven weeks and that was hard.
Then the place next door, we hired people. They went somewhere, they picked it up, they put it there and then we just told them what to do. We did a little bit of painting and laid some lawn and that, but the amount of effort is what resonates with me today. People like renovating, there's nothing wrong with it, but there is so much effort for the reward sometimes - there's no definite what you're going to get for it, at the end of the day no one would say, ‘I'm going to get the amount.’ It is a lot of time out of your day and a lot of time away from your family, I think people kind of don't look at that time and how it affects it.
So it was five times the amount of equity increase on the one that we got everyone else to do the work. Then the one that we did all the work. So from that point forward, we were like, ‘No I’m not lifting another brush. If I can make this work, we are paying someone else to do it and managing them. Have a system and make sure I get systemised, then that's what I want to be doing.’ So any reno we did from there on was us managing it and that's the secret behind renovation - don't lift a finger yourself, just buy the property that you're going to get a nice chunk out of it while you’re doing it.
What we do now develop properties straight from the land up because the amount of time vs reward is so much more. If you just do a property for wealth and you're not doing it for your ultimate passion or the love of renovating, then why not do that?
The hardest part of Byron’s property investing journey was not knowing what he was doing when managing his first property.
The very first property was really hard because it was very cold out in that country town and we didn't know we were doing - that was the hardest thing. But then when we put the other property on the other block of land, we figured out our strategy from then on. We've had quite good outcomes because we had very systematic solutions. I think you can stuff up heavily if you put all that reliance on yourself and don't have a team of people that have done it before, professionals around you. When we try to do everything ourselves, you often fail, or you learn a life lesson and go, ‘Well maybe I should be managing this.’
So from then on, I think I have been disappointed some times that I didn't go hard enough on that property. But the experience has been good - I've seen a lot of people make mistakes out there and I suppose I've been guided by that too. I see people get into certain patterns where they don't see the value in using tonnes of people, or just being a bit smarter and losing that total emotion behind the property and just going back to numbers. So there aren’t really any bad experiences.
With the 80-20 rule, I think it also works in that 20% of deals aren't going to work and 80% are. From both sides, I don't expect that everything is going to go perfectly - 20% of what you do is not going to go perfectly. But it's your ability to be able to problem solve it with five different scenarios of how you can get out of it. That will make you so much more powerful in the future. So people get stuck out and give up on property if they have challenges.
I suppose the worst thing is when I put in a skylight with a team and it leaked. People came along to inspect that property to buy it and they walked into the property in this big puddle of the grout. I thought, ‘Now they're not going to buy it.’ But straight away, I stepped up and said, ‘Get these guys out here and just fix it.’ Water is one thing that you’re going to get on every property. But water does not like being outside.
So you're going to have these things happen and sometimes you don't even know why, but you’ve just got to trust the universe that you're a good person, you're doing this for the right values.
As he has become more successful in his property investing ventures, Byron has also made a point of putting money back into the community where it’s needed.
Every company we've done, we've been very successful. We've been able to pull money out of that, use it for replacing our income, but also help other communities out there around the world that have a need to be helped. So they're not being helped by anyone else. So I think when we drove from that point of view of where we started to make a profit, we said they were going to take a certain percentage and now share that out somewhere else, which is just our moral upbringing. It's kind of something that we've thought, ‘Whatever challenge we're having it's happening for a reason.’ Because at the end of the day, we always try to do our best by our JB partners and be very fair - which is a big word. Also, use that wealth for more than just yourself. If you're out just to make money out of this real estate game, you're not going to make money. But if you're out to be successful at everything you do in real estate, you will make money.
The moment where everything clicked for him was when he discovered a great property and found a strategy which would catapult him to success.
When I got into doing property development, that's when we looked at what we just built - two properties in Leichhardt in Sydney, duplexes - and they were brand new, built right from the bottom up, knocked down the place and built two next to each other. Very expensive build, one of them actually got bought by Boys Town which is now called Yourtown or something. So it was a lottery one, that was so good. When we looked at that, Amy and I spent about 10% of our time on that property and the profit was so much more than anything else we had ever done. But it was a smart buy and the right system that we used behind that. That was our a-ha moment because we were like, ‘That's it. That's what we're doing now. We're going to find the best mentors we can and we're going to look at property developers out there because this is a so much better way to do it.’ Because we knew that by the time we finished this property, or even with the property now the pre-sales are good, you can see the profit in there, because you're increasing the value of the product. That's where you end up with. You don't start unless you do that. And that was a hell of a lot better than being in this moment before, where you might renovate something, you might do something else, and you never quite know what the value of that property is going to be at the end. When you build something brand new, you're automatically building at a 20% margin of the value it would be worth afterwards which is in manufacturing that. That's where everything changed.
The most successful people are in the BRW rich list. They're not property investors, they're property developers. They don't leave properties alone. They're not just going to a buyer’s agent and saying, ‘What should I buy for positive cash flow?’ They’re manufacturing properties or actually building into it, so even if you just build one house, that's property development.
So what held Byron back from initially investing in property?
I was quite a negative person back then. People who even knew me in business back then said that I was quite an angry person, I thought that forcing things would get stuff done and there was this whole thing off I had set beliefs. And this is what I mentor thousands of people now. The main thing that I've got to get them through is that you've got to change your beliefs to get into property development because everyone going through life as they grow up and you’ll either have a set belief that you're brought up with - it might be your background or where you grew up, or else it might be something that you've adopted that you've heard out there. My set belief was I’d finished high school, I was a cameraman, that's all I knew how to do. I had done my HSC but that's all, I didn't go to university so what else could I do? I was going to be a cameraman for the rest of my life. And that was the set belief that I had back then and then if it wasn't for me, kind of seeing someone else do something in a similar situation where they didn't have a university education or something like that to fall back on, what did they do? Then my belief would not have changed, I would still be a cameraman now.
Since then he has conditioned his mindset to consider things in a more positive light with the help of one of his mentors.
What I teach people now when I teach them about property development, the first thing I teach them is the mindset. I tell them first off you've got to put down what your weaknesses are and that's really hard because you go right down to, ‘OK, my weakness is my budgeting, my weakness is I don't know enough about this, I don’t know enough about that.’ That's really hard, to admit what you're not good at. Then you put down what you're good at as well.
But from that point on I realised that my weakness was negativity - I was very negative, I’d get into something and start thinking, ‘I shouldn’t be doing this, what am I doing?’ So I found a mentor on the Internet called Les Brown. He just said things in a way that made sense that would reprogram my mind to say, ‘No, it is possible.’ So if you listen to Les Brown, he kind of instils this faith in you that says, ‘No, keep going forward. Don't stop. It'll come, just don't go back to the negative.’ So I listened to him a lot when I first started, I was having the education that was working, but listening every single morning. Then I wrote down my weaknesses and made a plan to tackle those weaknesses. That's very much what it was, it was a plan, ‘Who do I need? What do I need to do? And then this week I'm going to be doing these things to get better at that particular issue, that I had to get better at.’
With a background in media, Byron found it natural to become attuned to negativity. However ultimately, he discovered that he needed to make that change to his mindset in order to succeed.
I was in media for 20 years - I've been media trained and been with reporters and done television shows and a lot of news and that - and the first rule of media is that bad news is good news. Good news is not good. So you look for fear and things that are negative because that gives people a chance to complain about it; no one is going to complain about someone that did something good. So it's just a natural way that we're kind of programmed to do and it’s easy just to sit back and accept things and complain about it over and over again. Analyse problems like, ‘This guy did this, this problem is this, this guy did this,’ and not come up with solutions. That's how the world is, it’s 90% problems and 10% solutions, unfortunately.
What people don't realise is if you just change that belief, you can believe something else. There’s not total equality out there in the world. We’re still at a point where people are told that you can't do this, you can't do that, even when it comes to what we're really on about with marriage and that type of stuff. There are all these rules and so all these things happen that keep coming up for people where they're told they can't do things and that's a belief, then people just don't do it. Women are told you have to marry a rich man and that's just the craziest thing and it's just a culture thing that comes into it too that stops you making decisions to change things - and you just go with the pack. So that's where I had to say, ‘Hang on a second, I'm just being negative for the sake of being negative. I've got to look at everything from a positive angle,’ and instead of me saying, ‘I can't find the property,’ I've got to say, ‘I haven't found one that's stacked up for me to be able to progress forward to the next level. But I'm going to keep looking, I know it's out there.’
The best advice he has ever received has allowed him to adapt his goals according to what he has already achieved.
I think it just comes back to doing what I'm doing now with development. If you suddenly get better at something, then you need to scale up. Don’t underestimate your talents. I had someone tell me once outside a conference, look at Amy and myself and say, ‘What are you guys doing? You're fantastic at doing this, you've already done one house, two houses, three houses. Why not go into moving up into development, what's stopping you?’ And I suppose it was a fear and uncertainty and thinking that you need all this money and you really need no money for development because that's what investors want. They want a brand new product where you just knock down the land, build something brand new and have a 20% margin. That's easier to find a JV partner for that than it is to do any other type of technique. So we were just kind of using that as an excuse that you need lots of money when it's the total opposite. That's the best advice I've been given, don't underestimate yourself. You've got to this stage, what are you holding back for?
When thinking about trying property development, everyone has to start somewhere. Byron says it’s easier to break the process down into manageable steps.
I use this thing called a proven track record when I teach people about stuff. I say that you’ve just got to look for people out there that are doing whatever technique that you're interested in and try to find the best person that's doing it. So you go right to the top, so I went to Meryton to have a look at how they did it. I don't want to build the type of stuff that they built, but I looked at what techniques are they using to be able to do what they do, then break it down to someone that's just done a duplex or a fourplex, or something like that.
You look high at the biggest achievement and then go down. When I looked at it I said, ‘Well these guys have systemised - they run it like a business, where it's a system that you've got to go through.’ So it's the same thing that I do now. I look at it and go, ‘OK. Let's break this down, it can't be that complicated.’ If they started from the same place I did, which is the same as Harry Triguboff, then what’s my fear? Everyone started from somewhere but our fear is when we look at the big picture and don't break it down into a process.
On learning more about how to succeed in property development, Byron says that it’s about implementing an effective method, across the board in order to guarantee investors of your feasibility.
There's this defining line and that's property investor or property developer. The most successful people are in the BRW rich list. They're not property investors, they're property developers. They don't leave properties alone. They're not just going to a buyer’s agent and saying, ‘What should I buy for positive cash flow?’ They’re manufacturing properties or actually building into it, so even if you just build one house, that's property development. So I think you need to change your mindset from, ‘Am I an investor, or do I want to develop properties? Do I want to do stuff to add value to them?’ That's what investors want. They want to see if someone is going to JV with me, they want to go into a deal with me, they want to see that I've already got some way be able to buy it for a certain price and add value to it. So at the end of the day, the value of the product is actually more. Even with renovations, I find it very hard to give that investor assurance.
So when we looked at JVs, we had to break down our whole system for them and showed them who was the people behind us, what was in our analysis, what was our comparables to show this area would actually work that way? And we kind of branded ourselves in a way to say, ‘This is who we are, this is our crew. These are the people we use, this is our feasibility.’ We always do an information memorandum, which is a document that just breaks it down for them and that's what an investor wants to see. It's really not about you it's about what can you present to them. You've got to prove yourself in this world. I think a lot of people just wait for that investor to come along, that JV partner with all the money, then try and find the deal. It just doesn't work. You need to find a deal and back yourself up, almost like a business plan.
Like a business proposal to the bank, kind of thing.
And that's been our success every single year for the last nine years. We've been in a JV and that's what's got us to where we are today. That's where we were able to retire and just do property almost like as a hobby, because it wasn't our be all and end all if we stopped doing this we wouldn't have any cash flow to live. We've got property investments that we've developed now that are fine, they’re going to be there for as long as we keep them and they're chugging along with good.
But when we started to be able to do joint ventures, every year we knew that we were doing it for ourselves and at the same time, we were going to manufacture growth out of the property, split that with the joint venture partner. So that means that every year, I'm guaranteed of having cash flow as a chunk as well. Then we get up to the stage where we can do 3-5 investors at once because if we systemised - and this is what people need to start thinking about - what's the most successful restaurant franchise in the world?
McDonalds. Does McDonalds have a system?
And I mean everyone knows that. And do you look at McDonald's and think that they lose money?
No, definitely not.
You wouldn't mind being left McDonald's tomorrow, right?
Yes, of course.
But what if I said I’m going to leave you a fish and chip shop?
There's no guarantee.
You'll be a little bit worried like I don't want a hassle, but the reason why McDonald's just works is that it has a need, and this is actually the same with property development, I break it down to people very simply. The need of McDonald's is yummy burgers, fast food, in convenient locations. The system is the actual McDonalds franchise, what they've set up. They've copied it and the process is using that system to make the burger. I didn't do anything different from McDonald's, neither does Harry Triguboff, neither does Gina Rinehart, neither does the prac guys with Busy Recycling. They all have a need. So my need is people want affordable, classy, brand new dwellings that are close to amenities and convenience - and that's townhouses or units. They'll always need that, so I've just got to find out whether they need it the most.
So what is Byron’s system that he utilises in his own business?
My system is something that I teach people now, which is really the true part of our success, which is we break development down into 12 stages and like I told you about the epochs right. If I'm up to stage 4 in our development, then I know I've got that system up to stage 4 then I can start another development and go back to system one and keep it going. So then the system turns into a process; the process ends up building a finished product. And that's what I think people need to understand, as a property developer you are the same as most successful companies in the world and that's why they're successful.
As a property developer, I have a system that other people work in and I produce money. The same thing that the most successful people have is systems, where other people work in their system. So you’ve got to figure out are you working in someone else's system to make money? Think about it, sometimes your job is that you're working in someone else's system and you’ve got to figure out how to overcome that and why you’re not getting forward. The smartest people have developed a system as I have - I get 75% of the work done by people working in my system. I do 25% of it, but I have that system and I know how to run that system and the processes that all those teams of people have to go together to produce my product at the end of the day, which is always in need. And it’s a lot easier to produce a product that people need than something that you've got to try to put out there and hope that someone will buy it. That's why I love doing what I do.
Setting goals is something that has become an ingrained personal habit for Byron, which in turn has aided him on his route to success.
The habit very much goes in making a yearly goal. So our annual priorities say that we want to get this many developments happening this year, then we break it down into quarterly goals, monthly goals, weekly goals and weekly epochs. An epoche is what we could be up to within 52 weeks of the year. So a lot of planning is behind it. But then we will use our system behind us to know exactly what stages have to happen within that stage and what the person that's doing the construction has to be up to at that stage as well. So if I'm following that system the whole time, then I actually feel a lot more confident that even if I've got issues, I know how to solve them because I know what's happening next. And I kind of work backwards. That's our monthly program and then I can go and have holidays because I get to a stage that I can get someone else to follow that system and it's not all in my head. That's what we've done now, we’ve employed people that do the minor work and we're just the big thinkers of doing acquisitions and that type of stuff.
Considering future prospects in terms of investing and developing he utilises fundamentals which help him identify the right property and the right area, they also create a product that is in demand.
I've got developments within 6km of all the capital cities I look at. So that's where I find the highest demand for my product, that's what I like. Where we're developing at the moment, I came up to Brisbane four years ago because my parents were getting close to a very old age and so within one week we left our place in Sydney, packed our clothes, left all our furniture in our house, moved up here and started doing property development straightaway We had that luxury of being able to do that and we had JV partners that would finance it for us. So we ended up in Brisbane because my parents were up here and I said to Amy, ‘We're married now, but I don't really know my parents enough. I haven't spent that much time with them.’ Because they moved when I was 18 up to Queensland so I didn't properly see them for a good 10-15 years. So I said, ‘I don't want to lose that part of my life with them.’ So she said even though we're doing stuff in the city in developing, we're going to come up here.
Now the cool thing about property development and what I teach is target strategy, it's certain things that I can tell you exactly where to find that property. The biggest thing people say is, ‘I can't find the property, I can't find a deal.’ With property development, it works backwards. You can use targeting to target exactly where it's going to work. So you can give me any state and I can tell you exactly where to go to build that townhouse or that unit development that will work. And I purely go back to my demand - people want convenience, people want to be in an area that they can access to work within a decent time frame. They want access to fast food, they want access to infrastructure, they want access to cafes and entertainment. So that's where we do this big analysis, I teach people how to do it and then we nail down and go, ‘That's where you're going to do it.’ So I teach people all around Australia how to do it and it works over and over again. And that's what the smart developers know. Even the big guys, you look at them - they'll always be close to several points of infrastructure, or cafes, or districts that service the need of the people that want to be there. So the product, eventually you're going to sell it because you're servicing that need in that area.
Now when it comes to media, the biggest problem people do is they read magazines and they trust what they say. Now getting back to my history in the media, it's very easy to get facts and write factual stories. But there might not be the actual story behind it, it’s a factual story and that's very different. So I can tell you a factual story now is that I knew here's an area where it's had 25% growth in one year; surely that means that you should be going into this area. Anything that happened there was rezoned.
That changes things.
So what's the story behind it? This is the whole thing, so when you become smart is when you stop listening to everyone out there, or you take hints about certain things but then you go back and you use fundamentals which is what we teach and go, ‘Hang on a second. Let's just look at what areas people need to be in, first?’ When you’re developing that's really easy because you actually just create the product that they're actually demanding the whole time.
Byron also explains that as a developer, there are needs as a service provider to create a growth corridor in a certain area.
The biggest tip I can give for property developers is our job is so much easier if we're doing property development than anyone else's, because we have all these grants that happen for brand new properties; we have a natural influence for people to be able to borrow more for a brand new property or get a higher yield for a brand new property. But then we have these things that the government do call growth corridors and you can Google them in every single state, they’ll show you where those growth corridors are and that's where the government councils say, ‘Property developers, we actually need you! We would like to help you.’ Because you think about it, no matter where you live you'll know a growth around you. That's where the government says, ‘We're going to spend all the money on the infrastructure.’ That's where that area is going to become beautiful in the future. We're going to spend all our money in there because we want a growth corridor.
Now a growth corridor means high density. That's what growth is - what do we build? Medium to high-density products. So they want us there because they want that area to have more people in it and they will support it 200%, but guess what? The government and the councils can't do it. They don't build high rises in townhouses or units, so they actually need you. This is the best thing, I can sit down with the council and go, ‘Where do you want me to go and where are you going to help me?’ ‘Now can you go here, because we need this density here to be double.’ The only way I can double the density is to do more on the block of land. So that's where it's going to get rezoned.
So if Byron were to meet his past self from 10 years ago, what would he say?
I think I'd say don't be afraid to go and do some education. I think that's the biggest thing. Just because you didn’t go to university, or just because you didn't know exactly what you wanted to do in life, the more you try different things out that you're interested in from an educational point of view, it will come to you. All my friends went to university and none of them is doing what they did their degrees for in a university. What they eventually got to is that they used the university as an education platform to go, ‘Actually this is what I thought I was going to do, but I heard about this and I want to do this now.’
So there’s plenty of short courses on this and that, so just go and explore it. How do people make money? I don't care what industry it's in, but you have to go along and spend some time on yourself and say even if it's going to cost you money, if you're spending it on yourself there's no problem - and I don't mean buying clothes, I mean spending money on your brain.
How much money do people spend at university, sometimes up to $60,000? If they're scared to go and spend $2,000-3,000 on some education - even if you just pick up one point out of it. Don't go in the spruikers’ ones where they just try to sell you properties or stuff like that because if it's just to sell property, there's no education and that's when you should be leaving those seminars straightaway, asking for your money back. And they'll all give you your money back. Most of the good ones out there, if you’re not happy with it, they’ll give your money back straight away. So what's stopping you from doing it?
If you wish to connect with Byron or attend one of his seminars, you can reach out to him via social media.
I think the brilliant and easiest way is just Jason John Byron on Facebook. Just become my friend and then see what I do; I share stuff on there and you know, social media has been a great board for me to do that.
If you're interested in property development we call ourselves Property Developer Success. So that's exactly what we lead from success, right? So it’s just www.propertydevelopersuccess.com.au and you’ll find information there. Anyone can ask me questions and anything like that, I'm happy they give them some direction.
Chatting with CEO of Metropole, Michael Yardney, we will follow his journey to success - starting from a joint investment at the age of 21 - and how he learnt the importance of cash flow, the property cycles first-hand and to explore and develop your investment. Uncover the multi millionaire's humble beginnings in business at a Melbourne restaurant called ‘Metropole’ and learn that you don’t have to do it all on your own.
As one of Australia’s leading property advisors Yardney will provide his nuggets of wisdom, fresh from his wealth of experience, on everything from the intriguing evolvement of the Australian market to the importance of being cautious when getting into bed with other professionals.
Michael Yardney is known as one of Australia’s leading experts in wealth creation through property. He shares what his passions are.
Interestingly, one of my passions is the psychology of success and wealth creation. I've been voted Australia's leading property investment adviser four times in the last six years. I'm an author of eight books - five of them have been best sellers.
As the CEO of Metropole Property Strategists, he shares what a typical day in his life looks like.
I've been involved in over $2 billion worth of property transactions and through our property management department, we're managing $1.5 million worth of our clients’ assets. But I'm not a theorist, I'm actually still involved in real estate. I'm currently involved in four property developers personally to keep in the long term and I'm an active property investor myself.
I've gotten to the point where now I'm the conductor of an orchestra and I have a lot of people working for us. We’ve got close to 50 people in the team in three offices - Melbourne Sydney and Brisbane. I enjoy running the business side of things, but I'm very much involved in the marketing, in doing the research and the overall big picture strategy. And I spend quite a bit of my day writing, doing podcasts and speaking to the media about my thoughts on real estate matters.
Yardney describes himself as a long term player in the property investor game and also likes to add value to his portfolio, taking the time to develop his properties.
Over the years, how I do things has changed. But today I'm a long term investor but I love adding value. So I'm currently involved in four medium density developments, duplexes of four-bedroom townhouses in good upper-class, middle-range suburbs of Melbourne that I'm going to keep as a long term investment. So I've always got a few small developments on the go that slowly but surely keep adding to my property portfolio.
So who is Michael Yardney? Expressing an interest in wealth creation from a very young age, he owned that seeing his friends’ parents acquire wealth via property investing was fascinating. As he got older, he endeavoured to find out more about how they did it.
I came to Australia at the age of three. I had migrant parents. They were both hard workers and as I grew up I saw that a lot of my friends’ parents were wealthy. They had businesses, they had cars, they went on holidays, they all seem to own real estate. So my friends’ parents - in fact, happened to be my parents’ friends - were much wealthier. My parents didn't have their own home until I was much older. We lived with my grandmother; they both worked hard. They saved up a little bit to go on Christmas holidays. We never went anywhere fancy, my parents didn't have their own car till much later on in life also.
And I sort of figured that these other people were becoming wealthy through real estate, or that's how I saw it in my eyes as a young kid. I decided I wanted to get involved in real estate as well. So I spoke to them, I learned from them, I modelled them. Because it wasn't the books, there wasn't the Internet. So I decided I wanted to become wealthy - I wanted to become an estate agent. So while other people wanted to be an astronaut or a fireman, I thought it was the estate agents who were wealthy. I didn't understand that just because they drive fancy cars, they weren't wealthy at all. It was the people who owned the real estate that was wealthy.
He moved to Australia with his family when he was a child and expresses how growing up within a non-wealthy family taught him important values.
Initially, I was born in Haifa, Israel. My mother was from Vienna, Austria. My father’s from Czechoslovakia and they escaped Hitler and made it to Palestine. My father was in the British army and so, therefore, we were able to migrate to Australia and became Australian citizens very quickly.
I came at the age of three in 1956, so I didn't know the language. English wasn't my second language even, I knew Hebrew and German. So I went to India and my early memories were of tears as I sort of didn't understand what was going on. But I soon learned that children learn very, very quickly. And I guess I knew no different. I didn't realise we were poor till I guess in my teens when I never went without anything and my parents taught me lots of good values. But we didn't have the trappings of what I saw as wealth and as a child, I wanted it all.
Prior to getting started in property investing, Yardney worked throughout the university in order to support himself.
I actually worked during the school holidays and Christmas holidays in various jobs. For many years I actually worked in the storeroom at Portmans over the school holidays, the ladies fashion store as well, just to get pocket money because again we weren't particularly wealthy. So I had to work my way through.
Yardney began venturing into property investing at a young age. He says that due to a lack of information, he was forced to learn from his mistakes and to teach himself how to succeed with his investments.
Interestingly when I was 21 I bought my first investment property - I actually went halves with my parents. So around the early 1970s, we borrowed $2 000 (because I did some jobs, I worked my way through school and through university) and I had the half from a deposit on a property in Large Street, South Cawfield that we went halves with - cost $18 000. We got $12/week rent and I took a 30-year mortgage because we had no idea how we were going to make money out of it.
Again in those days, there wasn't any information about where to buy, what to buy. There was no computers or internet, no research data. So I made all the mistakes. I bought the right near where we lived. I bought a street away from me where my school was. I bought my comfort zone; I bought where the shopping local shopping centre was where my mum went shopping because that's all I knew and what we could buy. Interestingly it was the time Gough Whitlam came into power in Australia and inflation was rampant - 17% inflation - and all of a sudden this property that we bought went up in value a lot. So much so that I was able to borrow against it a couple of years later to buy another property.
The worst thing that can happen to a beginning investor is to get it right the first time because you think you're smart.
I just wish I knew what I was doing. If it was nothing at all to do with that, it was dumb luck. And then I bought a second one and in a few years later I got married and I made one of my first mistakes. I sold my properties. So I sold that $18 000 property to my parents. I sold it for my half share of $32 000 and it had gone up that much. Again very high inflationary times in the early 1970s. So I sold it about 6 years later. Interestingly I bought it back from my mother in 2002 for half of... I bought the whole lot from her for $256 000, I have since built two townhouses on it is, worth about $1 million each. I still have my first investment property with a big gap in the middle. It was worth $18 000 then and they're worth about $2 million today.
During the property boom in the 1980s, he made some courageous decisions which catapulted him towards investing in commercial and industrial properties. While he believes he got lucky, he says that any mistakes he made taught him the importance of cash flow and cycles.
One of my early properties I knew the concept of renovation, I thought it would be a good way to do things and I tried to do my first renovation myself. Nobody told me that you actually could open up the ears to get ventilation when you paint a place. So the first thing I painted properly, I actually got quite sick and made myself unwell. But it has added value to the property. And when I eventually got married and had to sell a couple of those investments to buy our first home - again not understanding the concept of refinancing and moving on - I ended up with just a house and over time, using my cash flow and some savings, I got involved in property investment again. I knew nothing about cycles, knew nothing about when the right time to buy was, or even that some areas performed better than others. That lesson came to me a lot later.
But I bought a couple of investments and then in the early 1980s, I got involved in property development. I was in my thirties and had a couple of business partners and we got together and were very, very brave. I did some things that if it wasn't a property boom at the time I would have gone broke. But a property boom covers up lots of mistakes, so we were buying properties to pull down and buy townhouses or occasionally houses in the middle ring suburbs and it actually worked okay because prices went up. But one time I looked back and thought, ‘Hey, if I just actually held on to that land and hadn't done anything, I would have made as much.’ It was just a property boom that covered me up.
Then in the late 80s, I got involved in some very brave property developments, did a couple of subdivisions. I did the renovation of inner-city building in Melbourne and again carried away a very strong property boom early in the late 1980s, that came to a very abrupt end in the early 90s when we had the recession. Unfortunately during that time, a number of my friends and colleagues went broke because interest rates went from 10 and 12% - we were happy paying 10% interest in those days - to 17, 18% and things ground to a halt.
So the bank said to me, ‘Sell up,’ as I said, ‘To who?’ Because they wanted to pay down some of our debts and there was no one buying. We owned a lot of industrial property at that moment. So one of my early mistakes was getting involved in commercial and industrial property, where values dropped considerably as interest rates went up. Fortunately, I had cash flow because these properties were leased, so I was always able to repay the banks and so they chased people who were not repaying them more than me.
But the early 90s was my first experience, even though it was 20 years into investing already, of the importance of cash flow and the importance of cycles. And I thought at that time the importance of counter-cyclical investing - even though it changed my tune on that too. So as a few of my friends went broke I thought, ‘But by the grace of God go I.’ So it's made me a much more cautious investor personally and for our clients.
Starting with his company, he shares with us the interesting reason behind the name, with its humble beginnings as a restaurant in Melbourne.
I started the company Metropole Properties as my family trust and it goes way back to 1979. And it was named after a restaurant in Melbourne, called the ‘Metropole’. So that's how it got the name. I still have that company. I've been a director of it ever since, but the company that deals with clients in - there's a Metropole Properties Melbourne, Metropole Property Sydney and Brisbane, so there's a number of companies in the Metropol group - but yes that goes way back there and was when my friend and my solicitor at the time Michael said, ‘Would you like to be my business partner? Let's do some developments together.’ And that was at a restaurant called the Metropole.
That's a very interesting story. So a restaurant turned into property development. I like that story!
And I have survived it and that restaurant is actually still there but it's changed names 15 times.
Well, at least you’ve outlived that restaurant, which is good. What kind of restaurant was it? What type of food?
I can't remember, it was in High Street, Armidale there in Melbourne. Now a burger place.
Through trial and error, through learning from others and through implementing partnerships, Yardney attained his knowledge of the property investment scene.
I made a lot of mistakes. I studied, and learned, but basically from books and speaking to people and I had a couple of mentors. One of the things I learned along the way is, rather than try and do it yourself and learning yourself, to learn from other people. So this partnership that I had with my friend - his name was Michael - also we actually buddied up with a couple of people: one was an architect, one was already a reasonably serious developer. And so we had a nice group of people who had various skills that helped us.
But again, I made so many mistakes that as I said, were covered up by the rising prices of a property boom. It was actually easier those days, there was less regulation. We got builders to do the building and it seemed to work. One of our biggest projects was an industrial subdivision where we bought a farm - very brave, very stupid people in Bayswater in Melbourne. We bought this big farm, subdivided into 30 blocks of industrial land. We sold it all off the plan in those days in the late 1980s. Then went to the bank and said, ‘Here's a farm we're settling on in six months. Here’s a fixed-price contract from the engineers to build the roads and put all the services in, here’s 32 contracts of sale. Would you please lend us the money?’ We never figured what would happen if we hadn't sold those and how we could have got caught and got ourselves into trouble.
The excitement of youth and getting involved in things and fortunately got away with it. Learnt so many lessons that now make me a much more cautious developer and help our clients. We're still involved currently as our project management services with 52 developments for clients. We're still doing it and Bryce Yardney my son, today is taking over that and he is running the projects division after my previous business partner, Gavin Taylor who is an architect by degree just retired a few months ago.
These issues he had throughout his journey could have been a detriment to his success.
It took a six-month settlement and all of a sudden - I'd never done one little road subdivision. I found a firm of architects, of engineers and town planners who designed the roads, designed all the drainage chutes. We didn't know what was involved and then they outsourced it to a couple of contractors and got us some quotes, but we actually did that in the wrong order. We hadn't done the feasibility before and if we had not done it, if we hadn't been lucky and the sums didn't stack up as well as they did, we could have gone broke.
So we bought our land and then thought, ‘Well, what’re we going to do with it afterwards?’ rather than the other way around of, ‘OK. Before I commit to this large sum of money, what are my costs? What are my outlays? What are my risks? What's potentially going to go wrong? Will the bank even lend me money?’ That's what you have to do today.
He reminisces to time as a young man, where he learned the hard way that not everything that glitters is gold.
In my reasonably early days, I was scammed by somebody who tried to get me involved in a gold mine. What happened was one of my friends invested some money in a gold mine and this person told him how he could make lots of money. And I said to Brian my friend at the time, ‘Don't be stupid. Oh, why would you do that? Why would he need your -’ It was $5 000 those days, which today would probably be equivalent to a $100 000. And it was a lot of money.
So the end result was I sat down with him. This guy came in my living room and he pulled off a nugget of gold out of his pocket and explained to me that I could have this as well. And he showed me these plans. It sounded very impressive. Asian Pacific Development Corporation was actually a mine. Asian Pacific mines, I should say. And the end result was I gave him my money as well and he scammed a whole lot of people. He used it to buy himself cars and helicopters and jeeps and things like that. None of it went to re-develop this mine in Weatherburn, in Ballarat in Victoria.
So it was a couple of lessons out of that. First of all, not everything that glitters is gold. Do your homework and due diligence carefully. There is no get rich quick schemes and it was a blow to my ego of a young guy in his 20s, thinking I was so smart getting involved in this big company with a fancy name. So it was a humbling experience, which has remained with me since to teach me that, as I said not everything that glitters is gold. Be careful who you get associated with.
Yardney also says that the real estate business is a slow method of acquiring wealth and to trust your gut instincts.
Have recently been throwing out old copies of Australian Property Investor magazine - this is the magazine recently gone broke - and I've had all these copies way back for the last 17-18 years. And there's I've been throwing them out I've actually been just reading through and seeing who's been around and who isn't, who's still there. And I've been dealing with the public now since about the year 2000 and there are two or three other people who are still around from that time. I was noticing the ads in the magazines of who's come and who's gone. The ideas they've shared, the stories that have gone on. And it's interesting that there have been lots of interesting characters in this industry. And so I guess one of the lessons I've learned is, again not everything that glitters is gold. Don't believe everything that people tell you. Do your own careful due diligence and realise the fact that real estate business investing in general, is a slow way to get wealthy. Wealth is the transfer of money from the impatient to the patient.
The realisation that he didn’t have to undertake everything alone was a pivotal moment in Yardney’s property investment journey. He recognised how important it was to have a mentor and continue to grow and learn more over time.
I think the biggest a-ha moment I had was when I realised that I didn't have to do everything myself. My father taught me to learn from my mistakes. And I think when I first started, I tried to do everything myself for one of two reasons. First of all, because I was cheap and I didn't want to pay for other people. And I guess I couldn't afford it. But the other was to try and learn. And it's just very hard and very demoralising to do that. But when I recognised that other people before me have actually done it and achieved it - I think I learned the concept of modelling and mentoring from Tony Robbins many years ago when I went to one of his seminars - and it taught me the importance of mentors. I clearly remember the concept that he did, what's called a firewall. And people go there and walk over the hot coals. And I thought I'm not stupid. I'm not going to do that. I'm going to watch everybody else do it now. Just sit back. But interestingly I did do it and I learned that if you can not pay attention to concentrate on the hot coals below you, but actually look at the green grass ahead of you, you can get through anything.
So I learned from many mentors - people I pay, people whose books I’ve read, people who have seminars I've been to - that if I stand on their shoulders, I can see a lot further.
I've done some of my best thinking and got some of my best ideas from my mentors rather than from myself, that has taken me investing to a whole new level. And I still have mentors. I still have business coaches. I still have people who I pay, I still belong to parties it's a mastermind group because I'm still wanting to keep growing.
With so many years of experience himself, he says that the mentorship he seeks is similar to that of an athlete. He asks his mentors to keep him accountable for his actions and to help him out where he needs it.
An interesting question that people ask me is, ‘How come if you are very wealthy and you own more properties than your mentors, would you use them?’ But the example I use is the top tennis players, the top golfers. They all have coaches who actually don't necessarily play better than them, but look at their blind spots. I asked my mentors to look at my blind spots to keep me accountable to have transformational conversations with me.
So while I am better in some areas, I'm actually not as good in other areas. So while I have strict discipline in a lot of my business things and my writing, for example, I don't have discipline in my health. You know, I'm overweight. Even just before our chat today, there was somebody giving some chocolate bars in the kitchen here - from one of those charities you know, they collect for the fundraiser. Everyone else bought one chocolate bar.
I bought three.
Maybe he focuses it in other areas of my life, like maybe looking after my health or things like that instead. So there are always people I can still learn from. And I think that if I ever forget that, I'm going to stop growing. It's a lesson that you will find from the most successful people. They want to keep growing, they want to keep learning. So I set aside time to do this. And some of them nowadays with the Internet - it's so much easier to have mentors and mastermind groups and speak with people around the world.
Yardney has found mentors in various different ways, acknowledging that as time goes by his mentors change in accordance with his needs. Now he is excited about exploring and learning from those who are following his own mentorship program, as he is able to learn from them as well.
I have a business coach and I've had business coaches for 15 years. I pay over $100 000 dollars a year for business coaching. And interestingly I see that as an investment, not as an expense. I wouldn't have been able to grow my business to the level it is without having somebody like that there. I have others in areas that I'm interested in, like marketing. One of my great mentors in other areas or mastermind groups is Tom Corley who's in the United States - he's very like-minded. I've just written a book together with him, so it's through other people and over time the mentors and the coaches I've had have changed. After a few years, I've outgrown them or things have changed. So the people I'm hanging around with today and the people that are helping me today are different from the people who helped me five years ago.
There's one other group of mentors that probably don't realise they are. And that happens to be the people in my mentorship program. For over a decade now, I've run a 12-month mentorship program. I actually think you can find out about it at michaelyardney.com.au and I've run over 2 000 people through this 12-month mentorship program. And I learn from all of them. I learn things to do and things not to do and I probably haven't given them enough credit to actually say thank you, because you've heard it said before, I'm sure that as a teacher you learn a lot as well.
When he made his first investment into property, Yardney’s way of thinking held him back. He's come to believe that in developing his mindset and making the time and effort to invest in his headspace is of the utmost importance.
When I first invested in property I had a desire, I had a drive, I had a dream. So, therefore, I believed that I had the right mindset at the time. The trouble is that you’re not born knowing how to do money, you learn that from the people around you and your early mentors tend to be in general your parents. So your learning and the conditioning you have as a child will only get you that far. So it did get me to a certain level, but unless I changed what I call my wealth operating system the way I think, feel and deal with the money I wouldn't have got to the level I am today.
I believe if you took all the money in the world and distributed it evenly, it would be back in the same proportions again in four or five years time. Would you agree with that?
I mean it’s the old story, the people who win the lottery and all of a sudden they lose it after five or six years time. So if you suddenly become wealthy. or you get an inheritance, or you get a bonus and you don't grow to the level of your wealth you're more likely to lose it.
So I had the initial mindset to get to a particular level, but I didn't recognise the importance of that. I didn't know any of that sort of stuff. It was only later on in life when I was introduced to the concept of personal development, that you can't outgrow it - you can't become wealthier than your personal growth. But the fact is that you can change and you can do things differently and you can learn.
So one of my only mentors was Jim Rowan and somebody who I never met personally, but I bought his tapes and I listened to this master teach me about how to become a better person, how to learn to grow into a bigger, wealthier person by thinking and doing things differently. So my mindset still grows and still changes - once a year for five days, I get together with 50 people at wealth retreat on the Gold Coast and most of those people are already out of the rat race - very high net worth, wealthy individuals, business people and entrepreneurs. We spend four or five days talking about how to become wealthy and while an element of it is about tax, finances, structures and property, a huge portion of it is headspaces, mindset for every year. I personally also go through up-scaling and upgrading the way I think about things because I want to keep growing.
So how do you keep growing? Yardney explains that to change and implement your own wealth operating system requires assimilating ‘rich habits’.
We all have a way of thinking about things and nobody wants to think illogically. So what average people do is very different from the way wealthy people do this and that's why the rich keep getting richer. It's because of their money habits. In fact, my last book Rich Habits Poor Habits with Tom Corley is now a best seller internationally, it’s doing really well in America and in the UK as well. And Tom, who is a CPA, spent five years studying 50 wealthy people and 183 poor people and working out what their habits were. Similarly, I've gone through teaching over 2 000 people over the last decade in my mentorship program.
We actually worked out that the wealthy people don't have anything different to invest in - either businesses or shares or property. So they don't do different things, they just do things in a certain way. They think in a certain way and they have more rich habits. Early in life, they have money habits that get them there, including delayed gratification, learning to save and invest and then build an asset base.
You'll find that wealthy people hang around other people who are wealthy also. I'm sure you've heard it said that you become like the five people you hang around the most. So if you hang around whingers, complainers and people who don't save and spend all their money, you're likely to be like them. How to get started early is educate yourself about financial fluency and get some mentors to drag you up with them, to become like them.
Australia is one of the wealthiest countries in the world. So why is it that many people never get out of the rat race?
At all of my seminars, I actually ask, ‘Hands up anyone who's got, multimillionaire parents?’ And occasionally you'll find somebody who puts their hands up and I say, ‘Don't you think that the conversations around their kitchen table were different to the conversations around my kitchen table, where my parents used to argue every month when the budget didn't meet and there wasn't enough money to pay the bills?’ So that made me angry about money, that made me resentful for what was going on. And so I rebelled, while my sister is the opposite. She's actually become very much like my parents and very concerned about money and very conservative. So different people respond to those things early in the piece.
So a lot of us have had poor education about money, the system doesn't teach you, the schools don't teach you, different cultures, different religions handle money differently also. So why most people don't get out of the rat race is they don't know how to - they've got bad habits, they've got bad money habits. And that's the basis of Rich Habits Poor Habits, where we all have empowering beliefs, empowering habits and disempowering habits. So we're driving around with one foot on the brake and one foot on the accelerator and what you think about the most, you become.
If you continuously think about the poor money habits, you're not going to become wealthy. So the first step is to recognise what's not working, then you've got to recognise those disempowering habits - such as spending more than you earn, gambling, wasting time on Facebook and Twitter, rather than educating yourself and not looking after your health or not getting a steady income. So you replace one by one - slowly, you can't do it all at once - the disempowering habits with empowering habits. And this is so important because just like we learned from our parents, many of the people listening to this podcast will be parents or are parents. We talk about mentors - we are the best mentors for our kids and we will be their mentors for most of their life, most of those formative years. So this is such an important lesson for us, as adults and as parents and grandparents.
Talking about his personal finance book Rich Habits Poor Habits, he explains what sets it apart from other books on the market.
So if I wanted to find a marriage counsellor - and my marriage is very happy, I'm only suggesting it as an example - then I would want somebody, not just who's written the book, but somebody who is happy in their marriage, lived together for a long time and is blissfully comfortable. You’ve actually got to get it from people who've actually done it.
So what Rich Habits Poor Habits has done and also my Guide To Getting Rich, is actually not just outline the special money education that the wealthy have got that the average person doesn't have, but more importantly it gives a blueprint of what you should do by people who have actually done it. The results are that over the years, I personally have educated more successful investors than anyone else in Australia and I've been involved in over $2 billion worth of transactions for clients, I must have picked up something along the way!
My first book was How To Grow A Multi-Million Dollar Property Portfolio in Your Spare Time. That was written in 2006 and it's become a classic on most investors’ bookshelves. It's one of the most sold books in Australian property history and last year it had the 10th-anniversary edition.
I also wrote a book on All You Need To Know About Buying and Selling Your Home. There's been one that's just out of print recently that we're doing again, on What Every Property Investor Needs To Know About Finance, Tax and the Law and when I first started this I thought, ‘How much more can you write about the property?’ And then I wrote the Rules of Property, which was different all over again! It's interesting, it successfully is a book about money, shares, personal finance. But I've always wanted to write something on the psychology of success and Rich Habits Poor Habits was only last week written up in Forbes magazine as being a top book as well - so that's why it's going gangbusters in the US. You can find out all about these at michaelyardneybooks.com.au.
Yardney’s inspiration to write these books was to give back to the community and create a better world for future generations.
I believe that once you get to a particular level, it's an obligation to give something back. So I ruined the first half of my life chasing money and chasing the wrong thing because I was angry and cross because of my childhood. When I actually found a useful purpose for money, such as contribution and giving back - we run a charity ball, Pam my wife and I are running another one next year that will be the third charity ball - giving back to charity and the community is important.
And giving back the things I've learned, because I'm coming from an abundant mind space, having learned the fact that I'm wealthy doesn't stop other people from doing it. And rather than dragging people down to the lowest common denominator, I believe if we can make everyone wealthier and make more money go round it's going to make the world a better place for my children and grandchildren. So I believe it's my obligation to teach people.
When creating financial freedom it is vital to develop a strategy. However, with such an abundance of information, it is difficult to gauge what steps to implement. Yardney explains the nuts and bolts of his own property investment strategy.
My property investment strategy has changed over the years. To be honest I didn't have a strategy when I started; I bought close to where I lived, close to where I went to school - I knew no better, no different. Then I started getting all this information and research which suddenly became available and it was very useful. But today I think investors play with too much potential research. There are too many things going on, it's hard to get perspective.
So when you get all the information on the Internet and magazines, it talks about what’s happened in the past. I'm now looking at what's going on in the future and since I've done that, it's changed my investment results and those of my clients considerably. And what I'm looking at is what is probably going to be in continual strong demand in the future which has so much to do with demographics. I'm very comfortable that Australian property values are going to keep increasing for two main reasons: number one has to do with population growth, and number two has to do with demographics. Property values increase because there are more people wanting them - and it's not just population growth but household formation - but you also need people who can afford to live there.
So it's not just buying anywhere but it is where people have got high disposable income. It also has in the short term to do with supply and demand but more importantly, location and the people that live there. So I use a top-down approach because, in my opinion, location does about 80% of the heavy lifting on your property's performance and about 20% of it is the property in that location. So, how is the economy doing? Is it a good time? Sometimes in the economic cycle, you just don't get involved.
The next step is then which [capital cities] are likely to outperform the averages and I believe Sydney and Melbourne have decoupled from the rest of Australia. So the majority of economic growth, the population growth, the wages growth in our capital cities - and in particular two-thirds of jobs being created in Melbourne and Sydney, that's where most of the migrants are going. Queensland comes to a third runner with only 12% of the migrants out of the rest of Australia. So where are the people going to go? Then you actually look at areas that are going to outperform the averages because of the demographics, people who've got higher disposable income. They're the ones who are going to be able to be prepared to pay to push up property values. So we stay away from those areas just as people are moving there.
It's not judging the people, but I'm looking for areas and I'm looking forward to all the new census data that we dig into because you can find that over the last census period, wages went up on average about 16% over the five year period. But in some municipalities wages went up double that. And these are the areas we're looking at because those people have got higher disposable incomes and they can pay more for their houses and be prepared to pay more. So we're drilling down from state to suburb. Within the suburbs, the right streets - some streets are more livable than others. Then within the streets, the right properties and then the right price. And to me, prices down the bottom on purpose because you make your money when you buy the property not by buying it cheaply, but you make it by buying the right property.
Outlined in How to Grow a Multi-Million Dollar Property Portfolio In Your Spare Time, there are six identifying elements involved in choosing the investment-grade property to invest in.
What is an investment-grade property then? I have a six-stranded approach to that:
When considering adding value to your property, it is important to base it on what you can afford as well as your goals for the future and your risk profile.
With offices in Melbourne, Sydney and Brazil, we’ve got access to every property on the market on the east coast. But we don't sell the property to clients. We sit with them and understand where they are and the property strategists at Metropole often come not from a real estate background, but a financial background. So they understand - they have economics degrees, we have CFAs, we've got CPAs - to actually give it a wealth advisory because that's really what people want when they want the property. They want financial freedom, they want choices, they want the ability to go to work because they want to, not because they have to.
So what we do is we actually take this holistic approach of where they are now, where they want to be in the future, what their risk profile is and then we also see what their budget is. Because while many people want to become a developer, most don't have the financial capacity to. And even if they do, I wouldn't recommend the first property you buy is a development property because I think you've really got to cut your teeth on owning a property - having some ups and downs, having some vacancies, having some problems with the tenants and the property managers - before we get into the deeper issues of property development.
My concept of development is to buy and renovate, or buy, develop, refinance and hold. It's not to sell. You don't make enough money selling it. So you've got to buy in the best location and if you can't afford to buy one that you can develop there, then at least buy an apartment, a townhouse - it doesn’t have to be a big house - which you can renovate down the track or straight away. Because a good renovation gives you a wider appeal to a wider range of tenants. If you get better rents, you get a better socioeconomic group of tenants, you get great depreciation allowances and you manufacture. You get a one-off little boost in capital value.
Speaking of investing within specific Australian capital cities, Yardney has made the observation that due to the services and employment opportunities, there are certain locations which have had more capital growth during this cycle.
Interestingly I just finished a session on Canberra radio, where they asked me about the concept that there were only three places in this property cycle that have had real capital growth - in other words, capital growth beyond inflation.
So since the beginning of this cycle, which happened in December 2010 after the last slump in the property market. Canberra radio picked up the fact that I wrote that only Melbourne Sydney and Canberra have had real growth. So in that cycle in this period of time, Melbourne has had 63% growth in value since December 2008 till now. And that's a real growth after inflation. In Sydney it’s 76%, so even though Sydney property values have doubled, if you take away inflation real values have gone up. Canberra’s have gone up 16% and every other state hasn't even kept up with inflation.
And these are figures from Core Logic. So it's not my research it was just my commentary on it that they asked about.
Yardney attributes that being resilient, learning from his mentors’ failures and taking action have helped him to achieve his goals.
I think the habit of reading and learning not just from people's successes, but also from people's failures because you can learn more from those.
But I've learned the concept of when these things do go wrong and I'm only as successful as I am because I've failed so many times, in many ways. In my personal life, in my business life in my investment - even though I haven't made many bad investments in the last 10 years or so - I've learned the concept of having a useful belief. So I used to be a bit of a blamer and a victim and that's a bad habit. That's a poor habit. Rich people take responsibility. And when I learned to not blame others and took responsibility for my actions - become the pilot of my life, not the passenger. So I was in control. I felt much better and I acted and behaved better. So when things went wrong, I was allowed to be miserable for a few minutes and be angry and cross, then I had to come up with a useful belief. What is a useful belief about that? What can I learn from that? To take in the future to move me forward. I think that's one of the biggest lessons I've learned about mindset.
I have had many mentors over the years. I mean the fact is that there are no rich victims in most of those books. The concept of being the pilot of your life rather than the passenger were words I actually learned from one of my mentors, many years ago, called Roger Hamilton who is still around. I've learned a lot of very good things from him. I've been to his courses, I've done some work with him in other ways as well. And I guess he is one of the early people that transformed my life. Christopher Howard, who trained me a lot in ALP in public speaking and in the psychology of success, was a great mentor. Many years ago they were both people whose seminars and courses I attended. Brian Tracy in my early days of selling, Jim Rowe and overseas.
I've learned everything from somebody and I'm not very clever at coming up with original ideas. These other people I've just mentioned have - I think Roger Hamilton's come up with some very clever, unique concepts. So all I've done is I've taken them from other people and blended them together. But most importantly, I used them and took action. So I think that's a big difference between why I'm successful and some people aren't because I've actually taken them, I've had a go and if it hasn't worked I've just got up one more time.
Another excellent learning resource is Yardney’s podcast which he recommends to those who are looking for information on personal finance and investing in property.
I'm most excited about my new podcast that was released. It’s at michaelyardleypodcast.com - and it was something a lot of people said to me, ‘Michael, you've written all these books and you've had a share of another very popular podcast for the last five years. Why don’t you have your own podcast?’ I'm having a lot of fun as I know you are, by actually creating those.
Over the years I've had a blog that has 115 000 subscribers, it goes out every day and all the top Australian property experts are there. But it grew considerably as I changed the property update blogs - www.propertyupdate.com.au - to widening it into the areas of success and money, personal finance. So what started as a property blog, a lot of people who want property want all those other things as well. And so the podcast is not just about property investment, but it's about success and it's about personal finance and money.
But I did a survey and about 2 000 people responded to my survey about what they wanted. The number one thing was property investment information and the number two thing was the mindset and the psychology of success information. Now interestingly didn't surprise me, but it confirmed what the content of my blog my podcast has to be. So it's going to be my thoughts with a few guest experts and some of my mentors and some of my mastermind group. But it's basically going to be my thoughts on property, on success, on wealth and on the mindset of the rich and the habits of the rich.
The other thing that excites me is once or twice a day, I get an email from somebody I've never met who emails me and says, ‘Michael, I picked up one of your books at the airport or read one of your things online, and it's actually helped me. It's made me think differently or I bought a property and it changed my life. Thank you very much,’ That is an amazing moment, that really makes my day.
To find out more from Yardney, you can connect with him through
propertyupdate.com.au is my daily blog. All the property experts like Andrew Wilson, Louis Christopher, Tim Lawless, Cameron Kusher, Pete Wargent and Michael Matusik all write from my blog as they want their information out there. John Lindeman... I've left out a whole lot of people. So it gives me an opportunity to easily share property investment information with lots of people. Under there, there's a subsection Michael Yardney Podcast, or you can just go to michaelyardneypodcast.com and it will tell you all about that as well.
Meriton’s Managing Director Harry Triguboff gives a rare and personal insight into his life on ABC’s One Plus One program. Interview by Jane Hutcheon.
SBS Business Reporter Ricardo Goncalves spoke exclusively to Meriton founder Harry Triguboff in this rare on-camera interview, where they discuss the RBA’s recent warning to property investors, his take on negative gearing, foreign investment, and where he thinks there is value in the market right now.
Laura Sparkes interview Harry Triguboff who shares his secrets to success.