How To Buy The Best Commercial Real Estate in Sydney
Sam McLean is the managing editor and Mark Edwards is the publisher of Elite Agent which is a specialist publishing and education company in relation to the property and commercial real estate in Sydney. Together they have established and changed the way that media and property are able to interact. They have created numerous content through magazines, podcasts, videos, training courses, and more.
Come with us as we delve into their journey together from their start in magazine publishing, their own property investments and some of the stories behind them, how they are able to work together as a team and the benefits of that, we hear about some of their worst investing moments, we find out what they are working on now, and much much more!
-Sam McLean and Mark Edwards
Our property journey has been very mixed. It hasn’t sort of obviously started in a flurry saying, I am going to be a property developer or I’m going to be an investor or what have you. It’s historically on my side of the ledger, it started from a lot of builds. So it started off as being straight off-the-plan and then to progressively modifying your traditional residential plans from your builders to the final one, which we did, which was pretty much straight off the blank sheet of paper and worked at that way. But a majority of it was a principal place of purchase plus principal place of residence. One of the things that sort of gave me throughout that process was sort of seeing the skills that tradies and draftsmen and the process to go through from having a bare patch of dirt to having somewhere you move into. And the joy of obviously having something that, you’ve got everything of that you want versus buying something that somebody else’s put their love, heart, blood, sweat and tears into.
Well, the main one I’ve been involved in has been the purchase of our studio here. So at Elite Agent, we started the business in the laundry. That’s a very well-documented story in the laundry of a rental apartment, a laundry with a view. This was a very flash looking laundry, but there was a washing machine beside me as I was typing early editions of an Elite Agent. Mark and I both have a long history in the corporate world. So before we started publishing Elite Agent, Mark worked for Telstra. I worked for Optus and PWC and places like that. So we’d accumulated a fair bit of super over a period of time and when it came time to move out of the laundry, I mean I would have stayed there forever, but he wanted to go. We decided to start looking for a commercial property and set up a self-managed super fund and we purchased this outright.
On a day-to-day basis, McLean and Edwards have a very busy schedule.
We get up at 5:00 AM, we review the news, we send a news email called the brief to about 20,000 real estate professionals around Australia, which contains the news and features and things like that to help real estate agents do their job better. Then we usually hit the gym in one way, shape or form. Get clean, get into the office and the day starts again. So it’ll be whatever we’re working on. Might be the magazine, it might be Tuesday, podcast recording day. Then we’ll kind of do bits and pieces like that.
I’ve never actually thought of that. We’ve got two starts to the day, don’t we? So I suppose for the general listeners is that we’re a trade media company for the real estate industry. So our audience is the hardworking real estate professionals across the country and growing internationally.
Still growing, been growing for five years now.
Edwards goes on to tell us a bit about where he grew up and his education pathway.
I’ve been all up and down the eastern seaboard of Australia, so born in Queensland, moved to country Victoria for basically for my primary school years and then out of there chasing, chasing down cows and sheep, so playing in the local quarry, doesn’t sound very safe, but that’s what you used to do back in the 70s. And then moved to New South Wales and Sydney has been home since the mid-80s.
Oh great. And you went to school as well in Sydney?
After primary school, I definitely went to high school. I went into I suppose at the time it was TAFE and did an electrical engineering degree. I think it’s quite interesting that the things that we decide that are going to be the path that we’re going to choose to follow at the time is not necessarily where you end up. I would never have thought I’d end up being a publisher of a multichannel magazine website, daily newsletter, podcasts, education business for the real estate industry would never cross my mind. There again, I’ve never thought that I would also sort of be working for a stockbroking firm, which was probably one of my real first proper jobs.
But everybody…it’s fairly common these days. So the career that you think you’re going to start out with morphs and changes over the years. And sort of similarly, I would never have thought that it would have been…my ultimate idea, my ultimate dream would be to just have a tool belt person permanently strapped on, with the padded up Ute and a dog out the back.
McLean grew up on the Central Coast of New South Wales, and she tells us about what her town was like and her education pathway, as well as some of her experiences in the workforce.
The beautiful Central Coast, and went to Kincumber primary school when Kincumber was just a school, a pub and a church basically, and a post office. Not a lot of people remember Kincumber that way because there’s a high school now there and a McDonald’s and a whole bunch of others.
It sounds very similar to where I was in Victoria, but the town was booked by the top pub and the bottom pub. Pub coming in and pub-going out. Not much in between.
I grew up on the Central Coast. Actually, I’ve sort of lived in a few different places on the coast, but that’s a really long story. I went to university, I left the Central Coast as soon as I could to find my fortune in The Big Smoke. Got myself a job after finishing the HSC with though instant Winnie back then and then became an instant young. And the reason I did that was because it was one of those two by two kind of degrees back in the late 80s, where they would pay for your university education and give you a job at the same time. So I was like, that’s it. I’m on a train. I’m off to The Big Smoke. Hated it.
McLean elaborates as to why she made the decision to go to Sydney and the changes in technology she discovered early on in her career.
I chose the career for the convenience of having my university education paid for and also to come and experience the big city. I didn’t like it very much, so it didn’t last very long. And you know, I may end up doing a few, a few other things, but in that late eighties, early nineties kind of period was when technology really started to take off. And I ended up working for another accounting firm and ended up being their technology manager or the technology supervisor, and went through this whole thing, really great story actually, being a 22-year-old sort of standing in the managing partners doorway, shaking in my boots saying to him, I think we all need to have a computer on everyone’s desk.
And I think we also should implement this crazy thing called email.
Not crazy at all.
Yeah. Not crazy at all. But at the time I was considered a bit of a disrupter because all of the partners had their secretaries as they called them back then who used WordPerfect 5.1 and used to put messages from staff members to other staff members on a printed page in a pigeonhole. And so I’ve considered myself a disruptor pretty much the whole time, but then I suppose in the technology space, that’s where my career really grew and I ended up designing solutions for multinational networks with British Telecom and then went from there into what I’d call as a sales role as a bid manager. So I became very good at communicating sales messages to different people and also pulling together multi sort of disciplinary, I guess, engineers and things like that. So I ended up, you know, in effect being a sales coach and that’s how I met Mark and I was his big manager.
He didn’t like me very much at all. And, I’m still bossy and pretty much done the same thing but in a magazine now.
Edwards relates the professionals within a sales proposal to what they’re doing with their magazine, and McLean adds on to her experiences of advocating for new technology in her workplaces.
That’s a interesting one actually, because what you’re saying about having those multidisciplinary professionals within a bid, within a sales proposal, is very similar to what we’re doing in the magazine in that you’ve got a whole lot of different people with their own expertise and their own tone and their own voice and the way in which they want to communicate. And one of them, I suppose, the strengths of what Sam’s doing is that you’re taking all of those different ways in which people are talking and bringing it together in one cohesive publication. And that’s very similar to what you were doing with the beats.
Yeah, and beating people when they were late and stuff like that. Yeah, yeah, exactly. Exactly. But sort of fun, fun times. And I guess I’ve found my way into the real estate industry by doing a job for a company that was selling into the real estate industry. I became quite well-networked within the real estate industry and ended up again, like another wave of the internet where there used to be to sell anything to anyone, you’d be picking up the phone and you would be cold calling and dialling for dollars and all of that sort of thing. Anyway, I walked into this organization and kind of disrupted it too, and I said, “Well, you don’t want to do that. You want to use the internet to bring people to you.” So I started doing a bunch of stuff. In fact, I challenged the managing director of that company. I said, “All right, you have you people dialling for dollars over here and over here I’m just going to build a little website and throw some Google AdWords at it and let’s just see what happens. Anyway, I don’t like to lose, Mark knows that.
Her strategy for generating leads to the website involved writing for a trade magazine, which led her down an entirely new career path.
Part of that strategy was writing for the trade magazine at the time, which was sold the magazine and to try and get my personal brand out there and to try and provide valuable content to bring people back to that website to generate leads to basically win this lead generation contest. But then when I fell into writing for that magazine, it was the easiest thing I’ve ever done. And it was sort of like, okay, is this where I’m meant to be? So I guess just to finish that story, I wrote for that magazine for three or four years and then another wave of digital publishing, because publishing is an industry that is constantly being disrupted. I mean, you only need to go and talk to people from the Australian or 9 or use them at the door or anything like that.
And you know, so with publishing constantly being disrupted, there was a print magazine for this publication, but there was really no great digital presence. And I think he thought the internet was a bit of a fad and it’ll pass. I’m kind of pro internet always veins, even in those dark times of email I’ve been pro internet. That magazine is no more. I found I was more upset about that than I was about any of my other different career changes, that I’d sort of thought, like I really miss, I really miss that magazine. And so after about a year, I grew a pair and decided to do one myself. It was a very bold move.
Edwards adds on the fact that people were telling her she was off her rocker for starting a print magazine in an era of technology where lots of things have become digital.
People were sort of saying so you’re, you’re nuts for starting up a print magazine in a digital era, what everyone was calling was a digital era, but there is something special about a magazine is that it’s very tactile. It’s like vinyl making a comeback. I don’t know whether the CD or the DVD will ever make a comeback, but there is something tactile about having a physical medium and plus anyone can publish anything online. That’s right. And there’s no skin in the game.
And there’s too much of it at this point in time. So we’re wondering what do you actually read.
And what do you believe.
Exactly. Facebook itself just kind of goes, okay, let’s just keep going. Oh, I can’t see anything that’s interesting. Let’s just keep going.
It’s just that constant scroll. Constant scroll trying to find something that’s going to be relevant, but I think there’s there’s a growing trend of social validation of content. So rather than just somebody just spraying something out there and saying, I will publish it, therefore, it must be true. You know, this phenomenon of people validating information before it becomes accepted is something that I think is something to watch.
We learn what Edwards helps within the business that allows her to do what she loves.
I started with the accounting but because I hated that so much, I kind of shifted gears and stayed in the same Bachelor of Business at UTS but changed my major to management.
And do you know what the thing is like, even now, like they say you should work to your strengths and I can’t stand the accounting side of our business as I show in a couple of interesting, well did you do this or did you do that? But if you asked me to sit down and do that, I would really struggle to do it. Whereas that sort of detailed stuff comes really naturally to Mark and he keeps everything in order, and I guess that’s the beauty of how we work together is he gives me creative freedom and also keeps us on the straight narrow.
Operational side of things.
Keeps the bills paid, keeps tax man happy.
Edwards tells us about how he got into property investment, in particular a property he built when he was just starting out in the world of property.
From my side of things, it was more jumping in with my own two feet I think, so there was no real solid foundation from what home looked like. And that was something that I wanted to build in the literal sense. But one thing which I found I did was I got the bug for building. And as I said, so the first home I built was a little 11 square sort of eight-metre wide villa block out far Western Sydney, and just straight off-the-plan with Mustard and Homes. I remember very vividly that house being built in 14 weeks or something because it was basically just, there were no modifications, had no idea of, having the fortitude to say, actually, could we move that wall or could we make that door opening a little wider. So it basically just came straight out of the trust factory and up it went and then it was sort of slapped together and away it goes. And it’s still standing today. It probably would for a very, very long time.
Principal place of residence. Very first home. Was a young and dumb kid doing a few rentals here and there, and thought, well, if I want to put a nail in a wall, I really have to have my own thing. And I found it really challenging to find something that had everything we wanted and nothing we didn’t. And it was a fun experience to be able to see something literally come out of the ground from sort of what you expected to come out. There wasn’t a sort of a flash of brilliance or an awakening one day. It was just basically saying it was the only way that we’re going to get what it was that we that, that we wanted or that I wanted at the time with what was going to be a very young family.
Yup. Yup. Beautiful. So that sounds like a very interesting story in that side of things. Cause I think we all want to get off first home getting to the market. And then once we go from there.
Becoming increasingly difficult for people these days.
Yes. How long ago was that particular one?
1991. So quite a few years ago. But I remember, sort of bought the block of land for $50,000.
So probably spent about 60,000 on the actual house itself. So being able to turn the key on somewhere that admittedly had a very, the front yard was just basically dirt. But to be able to turn the key on a property fo sort of 120, $130,000 that you can call your own is sort of challenging to be able to do it these days. But it’s all relative.
Definitely. Yeah. And you still got that property as well now?
Nope. So one of the things which I have not been very good at is building, keeping, holding and then building again. That sort of approach didn’t come until later in life but rapidly outgrew the 11 square house when kids came along and then thought I’ve gotta make a change.
On the other hand, McLean has been so far more interested in experiences than property investments, and tells us about a chance she missed to make an investment.
Property for me has been more of a work thing. I would say Mumma was a bit more of a rolling stone throughout my life. So I didn’t, as I said, I sort of opted to leave home pretty soon, pretty early at 17. And from there I travelled. I’ve finished my degree. I’m pretty much what, like I think I was a millennial before my time, interested in the experience and living where I wanted to live. I also lived overseas for a while, so I lived in Kuala Lumpur. Just before I went to Kuala Lumpur, it was when I had my daughter, she’s now 17, 18. I was made redundant from Cisco during the Dot Bomb, we call it, which was around about the year 2000 and remember, they gave us such a great redundancy payment that I was about to sort of put a hefty deposit on a property in Drummoyne.
And at the time my then-husband, he was offered a job overseas, so we packed up and moved to Malaysia, and he’s also from the UK where I think that the arse had fallen out of the investor’s market several times and said, no, no, no, let’s not do that. You know, and I’m thinking, no, this is wrong. We should definitely do this. But you know, we took off and left overseas like went overseas and stuff. Anyway, we definitely should have invested in that property because I think it’s probably worth two or three times what it was back then. But as far as main investing goes, I’ve done too much travelling. It’s only been recently that when we’ve kind of looked at, okay, what are we doing at the business and everything else that Mark’s managed to sit me down and say, right, this is how it’s all going to go.
Plant your feet on the ground.
For McLean, her worst investing moments are clear.
Well, that was mine, not investing. That’s a missed opportunity.
As for Edwards, he believes his worst investing moment is centred around not executing a particular investing strategy.
And I think as I alluded to before the enticement of the quick win of selling a property and then having the cash to do it again as opposed to holding onto the asset is the, I suppose, the big lesson. But yeah, if I had my time again, I’ll probably hold onto more property rather than, than, you know, sort of liquidating it and doing it again.
These days, Edwards tells us what he and McLean have been working on.
So the latest project we’ve been working on has been…so we moved from residential into commercial. It’s not as grand as what it sounds. Well, we restructured the self–managed super fund sort of as Sam said, so a number of our super funds around the place and, so this is the thing, this is a learning that a lot of people do is say, well, particularly in sort of my case is that, you move a job and they just basically say, here is your new super fund that you’re going to be contributing to. And all of a sudden you’ve got all of these returns that come in, sort of end of July saying, here’s your super fund and you have made 13 cents and here’s another super fund.
And you get all of these like sort of superannuation statements. And it was a bit of an “aha” moment for me when I sort of sat down one year going, God, this is annoying with all this paper coming in versus this is actually quite a decent sort of nest egg that accumulated through a number of different corporates. And at a time some of the companies I worked for, they were, they were doing dollar for dollar matching with superannuation contributions. And this was before the superannuation contribution guarantee came in and then has ratcheted up to 9.5% at the moment. So that will matching dollar for dollar every that you put into – and that was tend to be sort of some of the perks of the multinational sort of offered their employees, whether it’s paid health funds or whether it’ sort of matching contributions to superannuation or 401ks over in the US; so consolidated all our superannuation into what was initially a spreadsheet and went, hmm, okay, that’s a decent number.
The Advantages of Investing In Commercial Properties With Sam McLean and Mark Edwards
Once Edwards restructured his and McLean’s superannuation funds, it was time to figure out what they would do with the money.
Let’s investigate this SS or self-managed super fund, and what we can actually do with it. I’m not going into the casino and putting it all on black, the first thing to get scratched from the list.
Can’t do that for another 15 years or so anyway.
You never know, you could be lucky.
But then worked out what we could and couldn’t do with the SMSF and the opportunity to be able to – and this was at the time when we were rapidly outgrowing the very posh laundry – for the business and the opportunity then to be looking into it and saying, well as a business you can invest your SMSF into a commercial property as long as you are then not using it as a principal place of residence. As a business that you own can essentially pay rent back into your own super fund, which is so cool.
Since he was able to funnel the money from the self-managed superfund into the business and in turn into a commercial property, he goes on to tell us about the property he bought.
So I bought this old rundown ex physiotherapy rooms in what is a big raid building in the heart of North Sydney, where it’s all being developed.
It is the worst building in the best street.
It is the worst house in the best street. But this is the worst building in the best part of North Sydney.
It is the second-worst building, actually. I reckon the one next door was worse.
But the thing is, this is the last sort of parcel of land in the local development plan, the LDP, in sort of CBD perspectives is usually always a high point and the rest of the city falls away from that high point, right? So we are the high point, according to the LDP and it’s low Stuart Little’s place in North Sydney.
So we’ve got all these big multi-national buildings, the big developments, the deck size and the multiplexes and Aqua lands all going up around us. And there’s this little old building in North Sydney that is a hundred per cent strata. So, trying to get everyone to agree to things took I think around about eight months to get a hand railing out the front the other day. So, winning. But on the flip side is that there needs to be something that’s going to be very attractive to the owners in order to make a decision to move on. And I think that day will come when this will be a very good investment from a floor plate perspective because there will be a 40 or 50 story building here one day.
But on the flip side, what we’ve done from purchasing what was a relatively modest and cheap suite in the building, for what we’ve done for relatively little category capital to renovate it has dramatically improved the price of the actual property itself.
To make it a commercial space, Edwards and McLean added things to the property.
I think it was a three-room physiotherapy studio.
That’s it, the seventies called and wanted their carpet back.
And the wood panelling and the half a dozen bar fridges.
No, we kept the bar fridges.
Why would you not?
Just walking into this place and opening all the myriad of cupboards. It was just surprising to see what we found. But similarly, one thing I have enjoyed is stripping on the tool belt and getting the hands dirty and working out ways in which we can maximize the asset.
We’ve done it before in a residential property, but this is probably one of the most rewarding and exciting ones that we’ve done together.
That’s amazing. And how long has that taken so far?
We bought this place three and a half years ago, and actually it was probably about a four-week renovation, but it was definitely uninhabitable from a business perspective when we bought it. But now it’s a very open, bright light, creative space that sort of gives Sam and her team the ability to be able to collaborate and be very considered with what you do.
After purchasing a suite, McLean and Edwards were able to create the kind of spaces necessary for them to do their work.
But, well this was last year’s project as we outgrew next door. And we made an offer to the owner of this particular suite and said, do you mind if we knock a hole in the wall and we did a similar fit-out here. So this, where we’re sitting now is our podcast studio and outside is our video studio with multiple 75 inch TVs on the wall. So, try and create that TV studio and soul look, they do. Going to be good for cricket and the Melbourne cup. But, it’s a very fit for the purpose of what we need.
We’ve actually had a bit of a side hustle that we probably need to take a bit more advantage of, which is other people come in and use this space from time to time. So the WIWORK thing and the shared services thing, it’s not bad if you wanted to go in and just use an office, but this is purposely soundproofed and what you don’t see out there at the moment is that there’s a green screen out there that comes down and the lights on the roof go on with the switch. So, we could be ready, we could be set up to do any sort of video or any sort of podcast even in about 5 or 10 minutes.
Because of the suite being adjunct to other rooms, being considerate of other residents was important for Edwards and McLean.
And that is the challenges we work side of things is that they’re not going to let you staple up, drag cameras around. So, because being in that shared environment, you’ve got to be very careful of disruption to other people that are paying the same sort of money as you are.
For the future, Edwards and McLean are leaning far more towards commercial when it comes to property purchases, and he gives the reasons as to why this is the case.
We see, the ups and downs of the residential market every day. So, if we’re investing our own money, I think the easy way to be able to get into a property cycle will be through commercial because you can potentially get in with a much smaller footprint and therefore less dollars. I think there’s a couple of trends that people should be looking at so our fractional investment is going to be very interested to see that continue to grow, like your brick Xs and so forth. But the build to rent side of things is going to be very interesting to look at, like your hamlets and those organizations that are building purpose-built properties that it’s going to be creating a community where people are going to be choosing where to live and how to live as opposed to going, I need to have the quarter-acre block with the house on it.
I see you trend towards tribes, because of affordability. So, if young people – let’s talk generations – who are starting now to finish school, my daughter’s just finished school. So they’re now starting to think about, well, what am I gonna do? Where am I going to go to university? Where am I going to live? I do see that she’s probably creative type. She’s probably going to want to live somewhere that other people, like her life. And if you look at this trend towards co-living. I think it’s just a matter of time. Like you look at places like Los Angeles and for example, they can’t afford the rent on an apartment on their own. Or they can’t afford to buy an apartment on their own. And there are some places there where they quite happy to have a very small bedroom in a much larger house because they then get a better lifestyle. Like it’s the experience of the lifestyle.
Edwards tells us about a property that he bought that bore resemblance to communal or co-living spaces that is now starting to become the trend.
Well, it’s interesting actually, one of the properties I bought was just after the Sydney Olympics and it was this place in Lidcombe and it was this little village of probably about 30 odd homes built as the media centre for the Olympics. So though these five-bedroom houses – normal houses – McMansion slices, but they’d all been separated into an 11 bedroom house because it had all temporary gyprock walls in the middle of them. And they’re all wired to the hilt. So, there was Ethernet wiring everywhere because they were actually using the kitchen as a broadcast studio for updates and so forth. But it’s very similar in that it had beautiful open entertaining and community areas because there were 10 people living in this house.
So they had to have these big open areas that people could actually congregate in. And it was exactly what you’re saying, there is lots of smaller bedrooms, but an area where people can actually come together and do things that they need to do together. So, I could see your daughter as being living with like-minded artistic where you can probably see a similar trait for four musos. It’s almost the dormitory revisited.
McLean tells us about another trend in the property market that is starting to appear.
The other thing I think that’s trending – it’s going to be interesting to watch in the next couple of years – is the experience economy. This is places like Airbnb. You can see that they’re now getting into things like restaurants and experiences and things like that. So if you’ve got a property, it wouldn’t surprise me to see themed investments, themed homes where people actually want to go. Where they go, I want to go and live like they did in the 60s or I want to go and live like they did in the 80s. I think that people more and more are looking for experiences rather than just four walls.
It’s a pretty cool concept. It’s like, if you want to live in Bali and experience those kinds of Bali living styles, we can bring them here and create that same lifestyle but rent it. And you could even almost have it by the ocean to create the kind of look, except you don’t have to be travelling all the way to Bali for example.
Or a place down in a foodie district in a big Italian place or if you want to do something in Leichhardt for example, you’d do a big Italian thing all down in Lygon street, you do it as a big Greek theme place. So, I think you’re right, there’s going to be a lot more catering to people’s whims of the moment rather than saying, I’m going to try and create something that’s going to be attractive for everyone.
For Edwards, learning the right skills and gaining the correct knowledge when it comes to investing is all-important.
I renovated my first property and before doing that I decided to do a couple of renovation seminars; at the beginning, it was a bit of a rah sort of thing. But that dies down after a while. It does. But if you go into something that you’re actually looking to get some tangible learning out of, you can pretty much achieve that if you go into it with the right mindset. So I went into it saying, all right, well, I’m not here for the quick win.
I’m here to learn the skills as to what is going to be sort of a good investment and what are they going to be the right bones in the property to be able to look for in order to change it from a three-bedroom, one-bathroom to a four-bedroom, two and a half bathroom. Have you got the ability to be able to, does the property have the scope of capacity to make it dual occupancy or have a granny flat on the property? So during that, doing that due diligence in the actual property is probably one of the biggest things that I learned about as Sam says, so getting good financial advice, particularly around the tricky subject of investing with yourself via super fund. They’re probably the two main things and a healthy love of Bunning’s.
Edward shares with us some of the resources in book form he has used over the course of his career.
I tend to find that we were saying before about so having a journal or a book that’s got some sort of tried and trusted methods are always valuable. For me. It was more around the art of construction, not necessarily the art of investing. I think I’ve probably made a couple of very lucky moment in time investments that if I had it been a few months before or later, then it may not have sort of achieved the same results at the time. But for myself, so my knowledge is usually derived from I’ve got a problem, how do I solve it? I border on the line on the cusp of analysis paralysis. And Sam at times says, can you just make a decision?
He’s cheeky from a good place.
Get on with it.
As I can see, an elite agent, for example, was probably a problem. You didn’t want to be in the laundry anymore. So decide, okay, it’s time to look for property.
So this was an answer to a pressing problem we had. Over the days of the simple life of sort of without the pressures of sort of a larger business. Along with that comes its joys.
When it comes to commercial property, Edwards tells us what he and McLean paid for their first one.
For our first property, and this was literally only three years ago. It was a fifty square metre property in the heart of the North Sydney CBD for 230,000.
It’s very affordable when you think about it.
Absolutely. But then so it was not somewhere you would want to go and work. It was sort of something that we…
Chanel are in this building. I like being around them.
This is the corporate head offices in Chanel at the moment in Australia, . It’s being able to see past the “oh my God, can we possibly ever do anything with this?”
That’s the thing. You want to find the ugliest property in the best street. And if you know that there’s potential, which there usually is…
But also be aware of what the costs and effort is going to be. If you’re not, somebody who’s capable or willing to put the effort in, then you’re going to need to be paying somebody else to do it. And commercial refit out and renovation is quite a costly exercise.
We looked at having someone else to do it and I think it costs 10 times. Like that’s the order of magnitude. We’re just kind of lucky that you’re quite handy.
I would have a swing with a tool belt and enjoy it.
If they met themselves ten years ago, Edwards and McLean would have some sage advice for themselves.
I would just say getting early, getting get on the property ladder early.
Buy and hold. That’s probably one of the biggest things is, so I’m assuming the same if you had met yourself when you got the redundancy payout, put that money in.
The property I could afford was very close to Victoria Road, very close to the Gladesville bridge. And at the time I was thinking, well, I’m having a baby that’s going to be really noisy. And I would just say irrelevant. Like, given where we’ve gone in the last 10 years, I would say to myself, just do it. Yeah. Don’t worry about the noise. You’ll live with the noise.
When it comes to investments, being aware of what leverage you have is key.
So one of the main things is to use to make wise investments, but don’t overstretch yourself because there are going to be times when the market’s going to change. If you had been in the situation in the late eighties where you were able to afford to invest it, high tens in the interest rates, that would have been a great time to invest because no one would’ve thought that interest rates would go into the 20s. But then the risk is with people investing now with the record low-interest rates, leveraging yourself to the Hill in order to buy something that you,
if it’s an investment property, it may or may not have the tenant there or interest rates will change. They will change at some point. So it’s just a matter of being able to make sure that you’ve got the right level of leverage.
Absolutely. So it’s all about due diligence, speaking to our accountants and to get your team around you and you’re showing that you’re making the best decision you can as well
And be aware as to how much effort you want to put into it.
McLean dives in with another fascinating trend that is popping up on the property market, this time in the U.S.
Interestingly, like there’s another trend that I’ve seen that might interest some of your listeners too, is that there are property managers out there now who are guaranteeing rent. So I’ll make a couple of intros for you. In the U.S. they have “I” buyers, which is, they’ll make you a cash offer on your property based on what they think it’s worth. And it’s usually a bit lower than what an agent might get. But now that’s coming into renting as well. Basically, what will happen is, is whoever it is, the agent or the manager will come along and say, well, I think I can get “x” amount of rent for “x” period and you’ll get guaranteed rent. There’s a few places around that are doing that. And that I think is a differentiating point. That’s something that we’re really seeing trend around the place at the moment that’s really popular.
It’s a very good concept because I mean the agents know if that, for example, a tendon does break a lease within that period that they’ve quoted on. They know that they’ve got a database anyway, so they kind of already backing themselves up with that, whereas if you’re just going out there and looking for a tenant yourself, different story, you might have to wait for a few weeks because you’ve got to wait for the tenants to come in. So it’s a different business I guess game altogether.
And I suppose it’s also having a property that’s going to attract to a wider audience as opposed to having something that is going to be very unique.
On their property journey, there are some things McLean and Edward are particularly looking forward to.
Well, I think this is a really exciting time to be in the real estate industry and particularly with some of the trends that I’ve mentioned as in people want to subscribe to things now. And so I think if you’ve invested in the assets like as in property and there’s other things that you could invest in as well so that you could provide a full experience for somebody. There are different models sort of popping up everywhere and you know, like, I can’t see exactly where it’s going, but I think there’s never been a more exciting time to be owning property because of the different, like it’s not just like, I want to rent something from you anymore. There are all sorts of other ways you can get creative around that. And so as an investor you can really, I guess, tailor your experience or tailor who you want to target or what tribes are out there.
And maybe sweat other assets, not just property like, so I think that this is a…although from my perspective, from our reader’s perspective, margins are getting squeezed on the traditional property management side, there has never been a more exciting time to actually look around and look up and go, okay, well I can help this investor with, getting themselves into the next property or I can you know, help them make more margin on this by bolting on some sort of experience onto the rental experience. I think it’s only a matter of time before people start getting really creative like that.
In terms of getting on the bandwagon of trends of co-living spaces and the experience economy, Edwards and McLean also want to try their hand at doing that too.
I think it’s also taking lead from other successful business models as well. I would like to see ourselves as potential sort of redoing what we saw in that property and from the old Olympic village in creating little mini We Work environments, so in the event that we re-invest in other commercial property, I think it’s going to the shared services environment because there are a lot of.everybody’s an entrepreneur these days.
And not everybody wants to work from home. So I think that’s something that’s very going to be very attractive. The experience economy is going to be also very attractive, particularly for the short-term rental, so opportunity to be able to buy multiple properties and have them on the short-term rental, your air bnbs or whatever. Because I think sort of the increased returns that you could get out of there has got the opportunity to be able to pay back the asset a lot quicker. And then leverage the value that now the equity in the property. I mean we’ve stayed at a couple of very nice sort of palatial mansions up in the Gold Coast when we go up there for some conferences.
So we take the whole team up instead of buying, eight hotel rooms, we rent out of an eight-bedroom house for a week, much cheaper from our side of things. When you walk in, there you go, wow, this awesome. But then you go back the next year to try and rent the same house. They’ve taken it off the market because they’ve paid it off there. They’re now sort of using that as equity to continue their growth of other large properties. And what they’re doing is they’re just buying old places on the canals up in the Gold Coast and Broad Beach waters, knocking them down and building these beautiful places, renting them out for 12, 18 months and then paying it off, and then using that asset, either selling it and then buying two more. And they’ve got a fantastic model they use, but it’s a short term play with a lot of upside.
As long as you’ve got the product that people want to purchase, people want to use.
Very smart. I love that strategy.
I think that’s where he really wants to be actually. As soon as we sell the business.