The X- Factor Of Property Due Diligence
We’ll also be exploring the reason behind why he invests in properties and works as a buyer’s agent, some of his greatest fears that held him back as an investor at the beginning, the importance of relying on trusted professionals to get you ahead in your property journey, what he would have done differently ten years ago and so much more!
We’re back with successful property investor and buyer’s agent Ben Plohl and in this episode of Property Investory, we will be delving into the importance of diversifying your portfolio geographically and Plohl’s property strategy, which at first involves a simple by and hold strategy but then involves finding properties with more of an “X factor”.
Learn how Ben Plohl uses spreadsheets to give him an indication of whether a property is a good buy or not, finds the right properties by looking at data that allows him to pinpoint which areas across the country are growing and the importance of having good relationships with real estate agents to get good deals and opportunities on the market.
First, Plohl starts off by telling us a little bit about what he does.
I’m the founder and director of BFP property and we’re a buyer’s agency based here in Sydney. I help home buyers and investors buy the great property and I’m also a passionate property investor myself.
Plohl then tells us about what he does on any given day, from getting his two-year-old daughter ready for daycare to meeting new clients.
My days are quite mixed and varied.
The day starts quite early, around 5:30 am when my two-and-half-year-old daughter wakes up. I spend the next couple of hours getting her ready for day-care and getting my wife ready for work.
Once I’m back in the home office I’m starting to get abreast with any property news that happened overnight. Always keen to get updated on new property-related news. The rest of the day is really around managing existing client relationships and updating them on their property acquisition journey. Meeting new potential clients interested in buying a home or investing in property. Also building, or nurturing, existing relationships with referral apartments, mortgage brokers, accountants, real estate agents. I help do recent research around the property markets, sourcing out potential deals, negotiating deals with real estate agents or vendors directly. Also finding time to manage my own portfolio.
So you’ve got a quite varied type of role in what you’re currently doing. There’s a lot of business development. There’s a bit of property investing, there’s a bit of client relationship. It’s like a mishmash of everything in your day. Sounds exciting.
Absolutely keeps me on my toes and my business is relatively new. So building that network is important. Obviously getting my name out there in terms of getting some interest and building that solid client base is important. And yes trying to keep abreast of my own portfolio at the same time.
He grew up in the southwest suburbs of Sydney in Fairfield and Liverpool area and tells us a bit about his education pathway.
Primary school I was at Sacred Heart in Cabramatta and high school I was at Patrician Brothers College in Fairfield.
From high school I then jumped into a business degree. Once I completed that I then went on to do my chartered accounting qualification as well.
He shares with us the reason he entered into business, from the fact that he was always passionate about learning how businesses work and his interest in economics.
I’ve always had that fascination with money and creating money and business and how it works. I always had a passion for economics. It was a natural progression to jump into business. Then I drifted out into the accountancy path. I spent quite a number of years, like 15 years in total in finance and accounting.
From an accountancy cadetship to CFO, Plohl recounts for us his career path before he became a buyer’s agent and property investor.
I got what’s called an accountancy cadetship. Straight out of school at the age of 18 I went to work. That allowed me then to study my degree part-time. Now I’m 33 and I haven’t stopped working since the age of 18. So I’ve been quite lucky that I’ve always been in work. But I was in professional services for many, many years and then I drifted into more corporate and commercial type roles. I’ve been lucky enough to work both here in Sydney and overseas in London. I progressed all the way up to the CFO level in a couple of different businesses here in Sydney.
For those who are unaware what a CFO does, Plohl shares some insight into this interesting and demanding role.
It’s quite a mixed and varied kind of role when you’re at the CFO level and it’s leading large teams around your general finance function. It’s partnering with the CEO and the board of directors around business strategy. Things like entering into new markets, raising capital, listing businesses on the stock exchange, I’ve been involved in that. So it’s some pretty interesting and fun work that I’ve been exposed to over the years. Especially in the CFO type role.
He tells us about why he left that type of corporate and commercial type roles to do what he is doing now.
When you’re at that level there’s a lot of demand. There’s a lot of stress involved in leading or managing quite large businesses and complex businesses. I’ve always had the dream of working in property, something that I’ve been involved in since the age of 18 as well. So I also value my time and spending time with those that I care about, that being family. I felt as though in the corporate type of environment that is challenging, not to say that you can’t achieve it. I guess I wanted something more in life and something that’s a lot more flexible. And I wanted to be involved in a career that allows me to give back to others. In my buyer’s agency I’m very fortunate to be able to help people on their journey as well.
Inspired by his parents’ diligence and his interest in money and economics, Plohl developed an interest in property investing.
My parents were always very hardworking people. I was always inspired by their work ethic and determination to make a great life for my brother and I. My interest in investing in property is something that I developed on my own from a very young age.
I was always interested in money, I was always interested in how to make it and how to grow it. And I guess that’s what prompted me to start investing at the relatively young age of 18.
He then shares with us how he bought his first property at 18, a step he took to create a stable financial future for himself.
In my late teens I recall reading the property listings in the newspapers, looking through the shop windows of real estate agents. That really sparked my interest. I was really interested in creating a solid financial future for myself at that relatively young age. At 18 I teamed up with my brother and we bought a two bedroom unit in the inner west of Sydney. That was a really exciting time in our life.
He found this property through the old-fashioned way despite his inexperience.
At that age we didn’t know what we were doing but we knew that the suburb that we’re investing in was fantastic and it still is today. So we kind of knew what kind of a block we’d like to invest in. A small boutique type block and it was just speaking to real estate agents in that local area. We got that property that way.
Plohl’s first property was a bit of a risk, but he made the leap because he wanted to acquire an asset.
Looking back on it now I think I took the punch and a bit of a risk. What I know today is nowhere near what I knew back then when I was 18. But it was just that drive to do something and to try and achieve something and take that educated risk. And property was something that I’d always been interested in. It’s something that you could see, you could touch, you could feel it. I understood the fundamentals and the economic drivers of property market. So I was kind of comfortable with that. So I guess it was more just that drive to take the jump and then acquire that asset.
Plohl managed to accumulate money for his first property by working at Woolworths since he was 14 and with the help of his brother.
I was able to save some of that money for the deposit. At that time when we bought it I’d already been employed in my accountancy role, very lowly paid as you would imagine at that time. But it was enough to put together a deposit for the property and then obviously buying with my brother. It was much much easier.
That was the only asset that I bought with him at the time. So all my other properties are now owned with my wife.
Over the last 15 years, Plohl has bought seven properties and put together a portfolio valued at just over three million.
We’ve been quite fortunate to get to that point. But having said that, we’re only partly through the accumulation phase of our journey. We’re still on the lookout for quality assets albeit slightly different assets to what we have at the moment. But we’re definitely keen to continue to grow it.
His lowest point in his property journey was when he was dealing with property vacancy and not-so-great tenants.
There’s a property that I have in West Brisbane and there was a stage where I was having some pretty significant issues with the tenants in that property. I think we went through about three sets of tenants within the space of six months. So you can imagine that was quite challenging and we also had some significant period of vacancy throughout that period. Some of those tenants didn’t treat the property in the way that they should have. The vacancy issues stemmed from an oversupply of new properties coming on from a recently developed housing estate that was in close proximity to my property. That’s one of the reasons why we’d struggled to find quality tenants. But look, fast forward and we’ve had a good run with that property since. Although we’ve had to reduce the rent a little bit. It’s not a major issue. So that was probably one of the major issues that I’ve had within the portfolio.
How did you overcome it to ensure that you got better tenants in there?
The main thing we had to do was to drop the rent.
And that triggered a lot more interest in that property. So fast forward, we did manage to find a new tenant. They stayed in that property for 18 months after that point. We were quite lucky and they treated the property like it was meant to be treated. We were quite happy in that regard. But it was challenging.
To prevent the same thing from happening again, Plohl suggests researching the area you are about to buy in.
I’ve been very lucky and I guess there are some lessons learned from that sort of instance. Researching where you’re buying and making sure that there isn’t an unexpected oversupply of property in the local area or in the vicinity of the property that you own. That does affect your vacancy and potential appetites for tenants. But I guess the main one is making sure that you have cash buffers in place in your portfolio. There are instances where—and I think most investors will experience some somewhere along their journey—is protracted vacancy in a property. And that means you need to fund out of your own pocket. So having access to cash buffers is extremely important especially when you’re building a sizeable portfolio.
It’s really good to hear that because I think a lot of people tend to forget that part, they go on that accumulation phase, buy a lot of properties and then don’t realise there might be potential tenancy issues and they’ve run out of cash to be to have that so the cash buffers. Is there sort of a percentage you’d recommend to have in place or have you done that for yourself as well?
It really depends on what type of asset you’ve got and what location that they’re in. Personally I like to at least have anywhere from 50,000-$60,000 in available cash for the portfolio in particular. It gives me that comfort and I’m able to sleep well at night.
For Plohl, his “aha” moment came when he realised a buyer’s agent could help him build his portfolio.
Early on in the journey I was buying properties myself. I was doing the research and the like and that was okay and we did well. But I guess my major aha moment was when I discovered the concept of the buyer’s agent. It was long before I became one. I used one to help build the majority of my own portfolio.
So when my wife and I decided to ramp up our investing, we decided to work with a buyer’s agent. That really helped us and opened our eyes up to different markets and different types of assets as well.
He tells us about why he chose to go with a buyer’s agent to build his portfolio.
I knew I was confident in it myself but at that time we had a young growing family. It was taking too much time out of our family life to be able to make those right decisions and knowing where to buy. When we found our agents, we were given that confidence of knowing where to buy at that particular time, knowing how to get out and how much to pay for a particular property. And the key was really just saving us the time. That was where we saw the biggest value in using that particular buyer’s agent, it was saving us time. And to me time is precious and it’s something that you can’t get back. So that was the key reason why we went with using that buyer’s agent.
Plohl found this particular buyer’s agent through a Facebook advertisement and bought four properties with him over four or five years.
One night I was on Facebook and this was early on where buyer’s agents weren’t very common. I came across, I think it was a Facebook ad or a post, and I reached out to him. That’s where our relationship started and we had a fantastic journey with him and were fortunate to work with him.
The Importance of Cash Buffers
Earlier on, we learned that Ben Plohl has a portfolio worth around three million. He now tells us about the importance of diversifying your portfolio geographically.
Geographic diversification is key and that’s common across my portfolio. So we’ve got assets spread across here in Sydney, Brisbane and in Tasmania. We’re across three states at present but we have the aspiration to spread it even further across other states and even overseas.
Plohl’s strategy for building his portfolio was a simple buy and hold strategy at first, before extracting equity and then buying properties with an X factor.
We started with a simple buy and hold strategy and there’s a purpose around that. That’s to build that foundation for the portfolio. We then began extracting equity as those properties grew in value. We’ve now gone down the path of buying assets that had more of an X factor. When I say X Factor, that means that they may have potential for a dual occupancy or our granny flats subdivision potential. We have one asset that we’ll do a unit development on as well. It’s getting a bit more diverse and complex as well in my mind. But obviously buying assets that can generate significant equity later on down the track.
Being interested in granny flats subdivisions, Plohl has had experience doing some property development.
I have built a property in the past so that was more of a buy, build and then on sell. So I do have experience in constructing properties. But it’s more of something that I’ll be continuing to educate myself over the journey.
The Strategy Behind His Portfolio
He tells us how he manages to get good deals and opportunities on the market, mainly through having good relationships with real estate agents.
As a buyer’s agent I’ve looked at a pretty diverse and elaborate network of real estate agents in the regions or areas that I invest in. So it’s having those on the ground relationships. That exposes you to some really good deals and opportunities as they come up onto the market. It could even get you access to off-market opportunities as well.
It does take time and nurturing as well and it’s spending time on the ground in those chosen locations. Providing some sort of value to these relationships as well and not expecting too much from them early on. It takes time to build and nurture these relationships and that’s key. And it does take time before it actually yields some results as well.
Plohl tells us what is involved in the process of managing his portfolio, from managing relationships to planning around possible future acquisitions.
Every day with my own portfolio can be quite mixed and varied. It’s probably not every day that I’m really into it but it’s managing your property managers. Keeping in touch with them I think is important. So over a number of properties it’s the multiple relationships that you need to manage. And it’s also just planning around potential future acquisitions. As a finance person that’s really interested in economics and data, I’ve got some sophisticated spreadsheets that model my own personal portfolio. I run scenarios and things like that and feasibilities on potential development sites. For me, it’s all about continually educating myself and then obviously using that education to help my potential clients.
He then goes a little deeper into what factors he looks at when he is using his spreadsheets to give him an indication of whether a property is a good buy or not.
From a simple buy and hold property it’s all around a couple of different metrics. Certainly I’d be looking at the cash flow of that particular property; regardless of what it is the cash flow needs to be sound at the end of the day. Cash is what will allow us to hold that property. It’s cash flow that will allow you to hold it for a long time is what I’m trying to say. It’s crucial that it is sound and it’s strong. So cash flow in particular property or assets is paramount. You need to understand what that looks like. Using indicators that can plan what potential capital growth could look like for that particular property is important. There’s also a whole bunch of other non-financial metrics that need to be satisfied to recommend a property to a client.
Plohl finds the right properties by first looking at both non-financial and financial data that allows him to pinpoint which areas across the country are growing before undertaking further investigation.
We’re looking at things like property days on market metrics, we’re looking at vacancy rates, we’re looking at anywhere from up to 20-30 different trigger points. Once we see that these trigger points are trending in the right direction we’ll go into those markets and we’ll investigate. We visit them in person and just sort of speak to people on the ground. That’s quite an elaborate process that we go through in order to recommend a particular location. I guess that’s all part and parcel of the fun of trying to find that next spot.
As a result, as part of his job, Plohl does a fair bit of travelling around Australia.
It’s going up to Brisbane quite regularly. Every couple of weeks in Adelaide is another one that we spend a lot of time in. We’d be out there at least every month to check up on properties that the clients are putting offers on or checking new properties. We’re on the road quite often.
Property Investing Mindset
Plohl shares with us his biggest “why” behind his investment into properties and doing what he does.
It’s about providing a better future for my family and for my children. And it’s actually never been about getting rich or anything of that sort of nature. It’s about building some level of wealth that will provide us a passive income that will buy us some time back. And that’s really important to me and my wife and it’s about giving us a choice to travel. We love travelling and the option to spend more time with those that we care about. That’s really the driving force behind why we do what we do and it’s all around giving us options in life.
He then tells us about his fears that held him back at the beginning of his property investing journey and how he overcame them.
I guess it was like all investors at the beginning, it’s the fear of buying in the wrong location, the fear of overpaying for a particular property or the fear of wasting your precious time looking for that particular property. There’s some of the common fears that are prevalent across all investors and I was there once upon a time. It’s all about just trying to get comfort and overcoming those fears, and then just having a go. Having a crack at it and getting that first property and just continuously building upon that. I think it’s just trying to get to that point that is important.
Try to educate yourself as much as possible and think about the big picture. Think about why you wanted to do what you’re doing, and getting comfortable around debt and obviously that’s very important. It’s just educating yourself, whether it be by reading books or listening to podcasts, and reading magazines. Things like that are important. Also speaking to other people that have been there and done that. Seeking out other successful investors and getting comfort around what they say and how they started is important.
While investing, he found a mentor that helped him greatly on his property journey.
It was more towards the end where we started working with the buyer’s agent. I could say he was a type of mentor to my wife and I. He helped us build a larger portfolio relatively quickly. But it’s then using the expertise that comes through podcasts such as this one that are out there that you really get access to industry professionals; and just overall successful investors and you learn so much from listening to podcasts like this. I think we’re quite lucky and fortunate to be in a time that we have access to this type of material.
Plohl goes on to share with us a book on property investing that really made an impact on him.
I’m not a big reader. Ever since I was a young guy I have struggled to sit down and read books. I have read one that stuck out and that was the “Armchair Guide to Property Investing” by Ben Kingsley and Bryce Holloway, two very smart guys down in Melbourne. It’s a real practical guide where they share their experiences. They give some solid advice on how to go about building a solid portfolio. I quite enjoy the stuff that they put out there.
Plohl reminds us of the importance of relying on trusted professionals to help us get ahead on our property journeys.
It’s really about using trusted professionals.
I think that stems from my days of working back in chartered accounting. There was a job or a time where I was working with some significantly high net worth individuals, I remember speaking to these guys a lot. Part of their success was put down to them relying on professionals and advice for guidance. And I think that really stuck with me and so in my life today I’ve tried to adopt a certain element of that. Using professionals in certain parts of aspects of your life and you’re not overwhelming yourself, and not trying to do everything yourself, because it can be challenging. So relying on trusted individuals and trusted professionals can really help you get ahead.
Plohl attributes his ability to achieve his goals to his drive for success.
So for me I’ve got personal family goals, got property goals and I’ve now got business goals. I think it’s my drive and determined nature that really allows me to go out and achieve those goals that I set out.
When asked what he would have done differently if he could go back ten years ago this is what he would have to say.
It’s the benefit of hindsight. We’d all be in much different positions but I guess I wouldn’t change anything that I did. I have no regrets but it would have been nice to have bought more properties back 10 years ago. It would be fantastic. But I’m excited to get to continue adding to those properties now. But look it’s hard but it would be nicer to buy more.
Plohl shares with us some of the things he is most excited about on his property journey over the next five years as well as in regards to different areas for buying property.
I’m quite excited about the current state of the market to be honest and most people probably think otherwise. I think people that are in the game are seeing opportunities left, right and centre and I’m one of them. And it’s all about just continuing to add quality investment grade properties to portfolio. Also branching out into developing a couple of the sites that I currently own. So that’s going to be the plan over the next five years.
In my business as a buyer’s agent now I’m quite excited about a couple of different areas at the moment in parts of Brisbane. There are certain pockets that really present exceptional value. Adelaide I think is a market that has rebounded. Based purely on the state of the local economy down in Adelaide I think we can expect some really good things. Perth is another one that I think has bottomed out and is starting to rebound. There’s some certain pockets over in Perth that are presenting good opportunities. Northern Tasmania has a couple of different towns there that I like and I’m buying it for certain types of clients. Not all, but there are some exceptional opportunities in that market as well. In Sydney as well, at home. We’re seeing some development sites pop up that are either being sold due to developer distress or whatnot. There are some opportunities that are popping up there.
Plohl believes you create your own luck in life and that both skill and education are key to success.
I think you create your own luck isn’t it? It’s about taking a punt and taking action I think is what I put it down to. Skill? Look I’ve been fortunate to pick some of the pretty good markets but yes I think it’s more down to understanding the game and just taking action, and property is a very forgiving sort of investment class and you can always do relatively well. And it’s not always about buying that perfect property, it’s sometimes about just buying a property that fits your criteria and then over the long term you’re going to do well, so I’ll put it down to just taking action.
If you would like to get in touch with Ben Plohl, you can contact him here…
You can jump onto my website, bfpproperty.com and this has all the social links, email and my best contact number.
This episode was produced by Annie Gao with narrations and interviews conducted by Tyrone Shum.