From Tragedy To Managing the Multimillion Investment Portfolio
At the age of 22, Darryl Simms dove head-first into the property investment world with no idea what to expect. After a fire burned down half of his first property and troubles arose with his insurance company, things didn’t seem to be going well for Simms at all on the investment side. However, 25 years later, Simms is now the founder of Latte Property, managing the multi-million portfolios and his day-to-day life is filled with client enquiries and ongoing investment plans.
Tune into this episode and find out how Simms did a full 180 with his first investment property, what inspired him to get into property investment at such a young age and how he plans on continuing his road to success.
My name is Darryl Simms Property Investment Specialist and Founder of Latte Property.
So our primary focus is helping individuals get started in property investment through coaching and guidance on how to identify and buy quality properties. And in addition to the coaching services, we also offer access to off-market and pre-release properties from a network of over 150 property developers, with off the planned properties newly completed townhouses apartments luxury homes and some house and land packages.
Each and every day, Simms is kept busy with his client’s enquiries and investment plans.
My given day, they vary considerably. Yeah, generally lots of follow up with existing clients crunching numbers and assessing you know creating shortlists of properties for clients to consider in crunching the numbers for them and presenting those.
Before he realised his potential in property investment, Simms was an ordinary country student striving to take over his family farm.
I grew up on a week shaped farm near Tampa Bay which is a small coastal town on a peninsula in South Australia and completed most of my schooling at Tampa Bay by with a final two years at Cleave Agricultural College.
And Cleave agricultural college started a certificate in agriculture. My life’s ambition at that point in time was to take over the family farm.
However, due to ongoing droughts, Simms had to look at a different career path and eventually found work, building power lines in South Australia’s outback. This job was certainly not easy, testing Simm’s ability to both improvise and problem-solve.
When I finished college was in the middle of a three-year drought which meant it was extremely difficult to find employment. And I there wasn’t an opportunity for me to go home on the family farm at that point so fortunately, I had a diverse range of skills because I grew up on the land and that led to one of my early jobs was building power lines in the moon with gas fields in South Australia in the outback which involved operating bulldozers drilling rigs cranes and all sorts of other heavy machinery. Most of the equipment was pretty much antique which broke down a lot, which provided all sorts of challenges due to the remote location in the desert and we didn’t have spare parts or a well-equipped workshop so we needed plenty of improvisation and I’d just share one example that springs to mind. We were driving across on a drilling rig across the sandhill late afternoon it was would have been up in the 40 or 40 degrees when the fuel pump started squirting diesel all over the engine manifold exhaust manifold and looking like it was going to catch on fire by the enormous amount of smoke that was coming off it. So back in those days without the luxury of a two-way radios cell phone or a backup vehicle, it was looking like we were going to spending a freezing cold night without food all bedding on the side of the sandhills so we managed to use a pocket knife and improvise a new fuel pump gasket out of a Weetbix packet.
Simms wasn’t afraid to jump around other odd jobs as well.
A little bit of creativity can-do attitude and a strong work ethic were noticed by several prospective employers on that trip which led to quite a few job offers. The first of which was driving semi-trailers and road trains followed by working for one of the largest broad-acre farms on the Eyre Peninsula and then managing a farm machinery outlet and the service department of the Holden dealership. Soon after that, I moved to Melbourne and held quite a diverse range of professional roles. Before starting my own mortgage broker business back in 2003.
What was the real big catalyst jumping into mortgage broking because that is a slightly different thing from working Holden for example?
Yeah, I had various sales roles after I moved to Melbourne after the Holden dealership back in South Australia. Sales customer service roles and I’ve always enjoyed helping people and it just for some reason it appealed to me at the time it was Aussie was pretty big and I didn’t end up with Aussie but I certainly could relate to what they were doing and so I just jumped into it boots and all did lots of training and had a couple of good mentors to coach me. And away we went.
Building on from his mortgage broker experience, Simms eventually started his own business with the goal of helping others along their own property investment journey.
So within the booking, within the first three years, it became very apparent that I had quite a talent in helping investors and that’s what led me into this business that I’m now in. I don’t write loans anymore, I haven’t written loans for probably over five years. So yeah the primary focus now is helping people invest in property and do it well.
Simms initial interest for property investment sparked when he realised he didn’t want to keep living in a rented property.
Aside from not wanting to work as long as my father. He works on pretty ridiculous hours on the land but my real interest came about the year after my 21st birthday when I was handing over my second week’s rent in cash to my new landlord and I had that sudden light bulb moment that this is a total waste of my money and I need to start buying my own property.
At the age of 22, Simms attempted to buy his first property. Despite initially being met with a line of rejections from the banks, Simms didn’t give up on his ambition and took on three jobs to reach the required savings amount.
When I attempted to buy my first property at the age of 22, it wasn’t the most enjoyable task in that I went into the bank confident as anything. I had a good job and a good income and the bank said no. Much to my disappointment as I’d used up most of my savings paying cash for a new car the week before because it had been a sudden decision to buy property I hadn’t actually been planning for it and saving for it I was just saving because that’s what you do and order new car, pay cash for it. So didn’t have much left in the bank so I couldn’t understand that, at the time, I certainly get it now but back then I couldn’t understand why if I’d taken out a loan to buy the car the week before they would give me a loan to buy the house. So it’s all about you know the proof of genuine savings putting it away in the bank and not spending it and being disciplined and all of that. That to me it seemed a bit crazy. But anyway the upshot of that was I do not like being told I can’t do something. That’s one of my traits and not to be beaten I worked three jobs and 18 hour days for the following six weeks to generate sufficient savings to satisfy the banks 20 per cent cash deposit ruling at the time.
The hard work proved worthy when he successfully bought the property with the help of a good residential property agent.
I was extremely nervous and I had a good agent at the time. He was actually a stock and station agent that just did a few residential properties in the rural area as well and he knew the challenges I was facing. He knew my background. He knew I was a hard worker and I don’t know that I told him I was working three jobs. Everyone thought I was working two. Fortunately, well maybe I think, fortunately, each of the employers wasn’t aware that I was getting around four hours sleep a night.
Simms’ passion for property investment grew further when he learned of adding value to the property and enjoyed owning a tangible asset.
I’ve always preferred property. You know, it seems to, you don’t have to look too hard to discover where the predictable growth is and being able to add value to your asset through renovations and other means like a subdivision or all sorts of other things you can do to add value, that appeals to me.
And I guess probably one of the biggest things is the huge leverage you can get out of other people’s money such as using the bank’s money and the rental income from your tenants. So you don’t actually have to put much money into it yourself or once you’re at a point where you’ve got equity in a property you don’t have to put any money in, you can you see equity. So and lastly I think most people were probably similar in this area is, it’s a tangible asset that I can drive past and keep track of easily and unlike shares it can’t and won’t disappear overnight. I mean it could I suppose it could get blown away in a cyclone but you’ve got insurance to cover that haven’t you.
While Simms enjoyed investing in property, his love for it did not mean that was always successful, stumbling heavily with renovation for his first property.
So on that first property, I spent an enormous amount of time and money renovating it because it was, I’m trying to think of a nice way of saying it, it was a bit of a dog of a property, it was old. I don’t think it had ever been painted since it was built.
But it caught fire in the middle of the night and suffered some very serious damage. Almost wiped out half the house. And the insurance companies line of questioning was savage, brutal to say the least. Their tone indicated that they felt that I’d started the fire and that was quite upsetting at the time. I’d been treated as a suspected arsonist as well as coming to terms you know with the damage of the fire. Bearing in mind I was quite young at the time I think I would have been 23 or thereabouts and a few weeks later the insurance assessor confirmed that “Oh no you were never a suspect. Within minutes of turning up on site, I knew exactly how the fire started and I was just doing my job” and he didn’t offer an apology for the aggressive line of questioning which I thought was bad form. And then just when you think it can’t get much worse I discovered that the insurance company wasn’t going to replace the fire-damaged parts of the building with new materials. They were going to engage a builder that offered the cheapest fix and this was totally unacceptable to me and I fought tooth and nail then for around about six or seven weeks until they finally agreed on a cash settlement which I quite reluctantly but it allowed me to throw some of my own money into the ring and modernize the property with a full renovation.
From his struggles with his first property, Simms learned to always be careful and articulate when buying property insurance, only purchasing after understanding.
Well, it was pure ignorance on my part being a young fellow I’ve gone in and I’ve taken out insurance at the local stock agent. I couldn’t tell you who the company was. That’s too long ago. But back then you could take two different types of policies nobody explained that to me. And one of them was slightly cheaper. That’s the one I had. The more expensive one had a new for old replacement. So as you know your 30-year-old home burns down they replace it with a new one. So that was the catch. It was a bit of a nasty one for the sake of probably saving me 20 or 30 dollars on the insurance policy at the time.
From this investment project, Simms also gained many new skills in the renovation.
There were some you know having said all of that there were some massive positives that came out of the experience. I mean the first one we’ve just talked about you know understanding the importance of having the right insurance.
I learned some amazing renovation skills. Carpenter friend of mine lent me his entire equipment for nine months and he helped out a few days, I think it worked out about 28 days in the nine-month period. Just get me started on different projects and so I pretty much did 95 per cent of the renovation myself. So I learned some really good skills there to add value to the property and also learned not to overcapitalise on renovations, I did overcapitalized somewhat on that project. Yeah, that’s just not a smart thing to do. You don’t treat these properties like family homes when you’re renovating you need to think about the numbers.
After working for a few more years at his mortgage broking business, Simms finally had the idea to start helping clients with investing in the property itself, seeking to share his experiences and knowledge while guiding and help educate property investors.
Probably the biggest one which I touched on earlier, was back in, it would have been 2006 or thereabouts. Three years into my mortgage broking business when I had a succession of several clients all asked me very similar questions within a matter of a few days. They all wanted to know the same things. They were asking, I was there organizing finance to buy property, and they were asking me what should they actually buy as an investment and where should they buy.
And I don’t know why I hadn’t thought of it prior but you know it turned out that I’ve actually got quite a good skill set in that space and that turned out to be my true calling, is to share my property investment knowledge with clients and so sometime after that, can’t think how long it was but it took me a little while to set things in motion to stop writing loans and put 100 per cent of my energy in to help educate and guide property investors. So that’s probably the biggest one. There’s been plenty of twists and turns in my diverse background but that one was not one that I initiated. It just sort of came about accidentally.
However for his new business, Simms would learn from his mistakes previously from property renovation. He advises his clients to invest only in what he considered new and low maintenance properties.
I’ve always liked, I guess because I have time for myself I’ve liked the idea of buying something with really low maintenance and focus on your own knitting so to speak like you do what you’re good at. You don’t want to be running around fixing up an old dilapidated property which is how I started with an old property. So I guess that was the starting point. Having a passion for the new property in that respect but also there are very significantly higher tax depreciation benefits on the new property so the numbers just stack up so much better meaning that as an investor you don’t have to put as much your own buyer’s contribution in each month to hold the property.
And I guess the other thing to add to that is a lot of the stock that we work with is off-market or pre-release so, you’re not having to go to auction and get run up by all the other bidders in town. You’re actually, it’s a fixed price you get to purchase it before it is built and sometimes partially built or newly completed. Also, we have that broad range of stock.
For Simms, property investment will always be his favourite career option because it allows him to work less and spend more of his time doing what he loves.
It’s being able to take the foot off the gas a bit and not work such long hours is probably a really big part of it. So you can spend more of your time doing the things that you really enjoy and life and that’s different for everybody. I mean I love the outdoors I love climbing mountains of all things probably pick something a bit easier but that’s just my nature.
Overcome And Face Your Fears By Taking Action: Darryl Simms
With next to no knowledge about an investment prior to buying his first investment property, Simms had understandably, many fears and misconceptions about the state of the industry.
A massive feeling of insufficient knowledge and not knowing who to go to for advice. I really was not connected at all back then to anyone that was investing in property other than growing up on a family farm, we expanded into a second farm but, it’s similar but it’s not the same so really that and fear and I think that’s probably the biggest thing that I see with the clients that come to us, is they have a massive amount of fear all sorts of fears. Interest rate rises, property values dropping, rental vacancies like property not being able to find a tenant is a huge fear and that also is another reason I do like the newer properties. It’s very easy to get tenants. People do like to live in a newer property and there are all sorts of other benefits in living in a new property which you might have noticed with recent increases in our energy bills. The new properties are very energy efficient. With the double glazed windows etc and insulation. But I think particularly for clients that already own property like they might own their own home one of their biggest fears seems to be borrowing more money from the bank. They can’t even think about doing that until they’re paid off their own home which is kinda sad because they’re missing out on some huge tax benefits along the way that could actually help them pay the home off sooner if they got started soon.
Simms aims to reassure his clients from their worries and fears by drawing on his own experiences with property investment to inform them of how everything actually works.
The more, I think they just don’t want another loan and it’s always one if it’s a married couple is always one partner and it seems to me that’s really nervous around that. So you know we’ve already got enough because they’re saying they make the mortgage repayments go out each month and what do you see in return. Yes, your property is going up in value but you can’t actually spend it. So I think there’s quite a nervousness around that. And not surely understanding that once you factor in the tax depreciation benefits etc. and the rental income that most of the properties that we’re getting our clients into are either cash flow neutral or cash flow positive. So if you can just get in front of them and show them how that works. I had an example of this a couple of years ago where I sat down with clients that wanted to get started. They actually wanted to build a portfolio of properties but they were prepared to spend fifteen hundred two thousand dollars a month to do that and were absolutely shocked when I showed them they didn’t have to spend that much.
He’s always been one to work for his success, intentionally going the extra mile to help his clients achieve the best possible outcome from their property investments.
I always go the extra mile. Rather than just do the bare minimum or what is asked of you, if you can always just give that little bit extra time. People really appreciate it and people notice and particularly when it’s in business, if you deliver more than what a client is asked of you they will tell the world, they’ll be thankful and they will also tell the world and that’s where you’ll pick up referrals to new clients.
When investing in property, Simms believes that it is important to get onto the property ladder as soon as possible, as it means that investors will be given the chance to chase for capital growth for a longer period of time, thus maximising their returns.
So strategy wise, the biggest thing for anyone is to just make sure they get on the property ladder as soon as they possibly can. Even if it means tapping into the equity from friends or family particularly for the younger listeners that don’t have the savings to get started. Don’t let that stop you, explore all your options because the longer you’re in property the more you’ll make so the sooner you start the better and just buying the right type of properties in the right location so you’re aiming for maximum capital growth – well my strategy [is] – chase the capital growth rather than where you can get the maximum rental returns. I mean it’s nice if you can get high rental returns as well as capital growth but generally, you’ll need to sacrifice one for the other. So I’ll always focus on the suburbs that will deliver the most capital growth. Unless of course, somebody is asking for something different.
But high demand locations will attract the right tenants. You know such as high-income professionals. They’ll pay your rent on time and they’ll look after your property a lot better so think about where they want to be living when you’re buying an investment property and making sure you borrow every cent at all the costs everything to do with the investment purchase. That’s of course until such time as you’ve paid off all year non-deductible debts then your strategy can change but new properties which I’ve mentioned, before they do secure a much higher tax depreciation benefits which reduce your ongoing monthly contributions and you always strive to get down to cash flow neutral if possible or positive cash flow and avoid buying at auctions is one of my personal preferences as you nearly always end up paying too much. And of course, buying at auctions you tend to be buying older properties which I’ve talked about before further news so it’s an off-market prerelease properties where possible you’re not competing with anyone else then you can get a fixed price and the last one I guess is hold onto your properties as long as you can and use the equity increases to buy more properties as soon as you can.
When looking for a property to invest in, Simms first considers a client’s affordability. Once their budget is settled, he’ll direct them into investing in smaller, inner-city properties rather than larger properties in the outer suburbs.
Well it’s very much you know starting off thinking about what’s the maximum purchase price and you’re comfortable with, what your affordability is at that particular time in the cycle of what you’re doing. And then from there, you’ve got a budget then it’s a matter of “okay where can I guess get the best return for that budget?”. So you know it might be a budget that will buy you a four-bedroom home in the outer suburbs but it will also buy you a two-bedroom luxury townhouse closer into the city. Now in my experience, the one closer into the city will absolutely run rings around the outer suburbs one for capital growth
To prove that his strategy is credible, Simms tells us the story of one of his most successful clients. Despite spending no more than $32 a week, the family gained $146 000 in positive returns over a 2 year period.
It’s quite a success story I believe. So they were looking to create additional income streams, building a portfolio of properties, accumulate some capital growth and were hoping that they’d be able – the properties would become cash flow positive within two or three years. And as it turned out they were cash-flow positive right from day one. The most important thing they were looking for was financial security for themselves and their children. They had young children they wanted to put through school and they were both working really long hours and felt they weren’t actually getting ahead financially and paying a truckload of tax. That’s a little bit agricultural but yeah a significant amount of tax and they really didn’t know what to buy. Or where to buy. And really where to start so. So our strategy was to tap into their equity that they had in their family home which was significant and introduced them initially to a two-bedroom townhouse. I can tell you where if you’re interested in the suburb but it’s in Melbourne.
So that one was 479 thousand that was a two bed new off the planned townhouse and that only required a 10 per cent deposit which was from borrowed funds, not from cash and back then we could say stamp duty there was 13000 and a bit in stamp duty savings. They didn’t use their cash savings, they maximized their tax benefits by using the equity of their home. During the construction which lasted 13 months on this one, it was scheduled to be nine but it ran over into 13 months. The property achieved 61000 in price growth and if that doesn’t excite you enough it’s actually gone on to achieve a total capital gain of 146 thousand in the first two years which is around about 14 per cent growth per annum on a 479 thousand dollar property it’s not a hugely expensive property. Yeah, that’s an average cost property and you know 146 thousand in capital growth may not sound a lot to some people particularly a higher-income clientele but ask yourself how long would it take you to save that amount of cash from your after-tax income.
And the unexpected benefits that they experienced in this, it worked out at thirty-two dollars a week, positive cash flow from day one, the 61000 increase during construction that I mentioned and they were able to – the big surprise for them as they were able to purchase a second investment property for 600000 just a few days later. So now with three properties under their belt, they’re in a position to purchase another and are well and truly on their way to a very significant portfolio.
Simms also diversified the risk in his client’s investment plan by buying a different property type in another geographic location for their second investment property.
The first one was a two-bed townhouse, the second one we went for a bit a geographic spread as well as the type of property. The second one was a 2 bed 2 bath luxury apartment on the other side of the city. And then of course is their four-bedroom family home so total portfolio value of around two point two million and title equity gains in the last two years and three months of 490 something thousand so it’s quite a nice return. So just over two years of growth.
For Simms, his goal is always to positively grow his clients’ investment portfolios rather than his own.
Probably more important to focus on what I achieve or what I have achieved for my clients rather than my own personal portfolio because of all these various factors there and one of them being reinvesting in growing multiple businesses which are in the property industry. So I touched on what we did for a client there earlier in the interview. I think those sort of results are far more important because it’s one thing to be able to achieve success in your own property portfolio but it’s quite another to actually be able to show others how to do it. And so I think that’s more important and we’ve got a whole bunch of case studies on our website and quite success stories in video testimonials etc. that make it very clear that we get outstanding results for our clients so. Yeah, I don’t know Tyrone, It’s not something I really want to stand up on the top of the rooftops and say look how much I’ve got in property, I’d rather showcase my client’s success stories with their permission and generally will change their name for privacy reasons obviously.
After 25 years of experience in the property investment industry, Simms can confidently say that the most important strategy to investing successfully is to overcome one’s fear of investing through research and to take action confidently.
I was a very fearful person so ignore your fears and follow your dreams because as I’ve discovered, I’m not sure where the quote came from but a good friend gave it to me probably about 10 years ago which goes along the lines…
“Ignore your fears and follow your dreams as life rewards massive bold aggressive rapid action towards your goal.” I’ve actually got that printed out and up on the wall of my office.
While Simms has built most of his knowledge on property investment from first-hand experience, he also credits much of it to several important books. Simms’ book recommendations focus on many different topics, ranging from motivation and mindset to professional development.
Back when I was 25 I suffered a major back injury and when I say major, they were going to fuse my spine and that was the end of physical work for me. So with the prospect of not being able to continue and take over the family farm and any physical work which is all I’d ever done, I immersed myself into books and went back to study, did a lot of correspondence courses, all sorts and personal development training materials and courses. And to this day I still have a voracious appetite for reading and have anything up to six books on the go at any one time, much to my family’s horror. And property investment seminars in the early days I’ve found when I used to attend those, I’ve since gone on to present them myself, but I found most of the presenters to be a little light on their depth of knowledge or lacked content that was actually helpful so and they also seem to always seem to be a very strong agenda to sell your property at the end of the seminar.
And after doing some basic due diligence you would discover that either the property or the location or both didn’t really stack up all that well so certainly I really enjoy reading books and one that I would recommend, it’s been around for a little while now and that is 50 success classics by Tom Bartlett back then. That one contains bite-sized portions out of 50 books from entrepreneurs and leaders such as Andrew Carnegie, Warren Buffet, Sam Walton, Eleanor Roosevelt, Nelson Mandela, and a whole bunch more like there’s 50, 50 different books that they’ve pulled snippets out of. And if you’re looking for motivation and mindset then I would highly recommend Anthony Robbins’ book Awaken the Giant Within and for professional development and success my favourite is maximum achievement by Brian Tracy. This was a very significant book for me when I read it over 20 years ago because that was actually my first major personal development book and it lit a fire within me which created quite a thirst for knowledge on creating wealth and success. Property related books I’d have to say start with Rich Dad Poor Dad Robert Kiyosaki. It is very dated now but it still contains some very excellent principles around leverage to make your money work for you.
However, Simms discourages investors from reading too many books solely on property investment as according to him, more often than not, they confuse their readers.
There’s dozens of other books out there on property but I think you need to be really careful not to spend too much time reading up on property investment because the more you read on it the more confused you might become and confusion tends to lead to procrastination and lack of action. So there definitely comes a time when you need to take action to find somebody that you feel comfortable listening to and put some skin in the game and get started.
Simms accredits his tenacity as the reason behind his drive to helping his clients, believing that it is the one personal habit he owes his success to.
So the personal habit that’s probably contributed a lot to my success would have to be tenacity. You will find, particularly the longer you’re around, that you will find that anything worth striving for there will be challenges along the way you will fix setbacks and roadblocks. And it’s important to realise that that’s often only temporary, temporary setbacks and they either will require a slight bit of extra effort or maybe a pivot into a different direction to achieve the success you’re looking for. In relation to the success from within my business, I’d have to say my down to earth approach and willingness to share knowledge and focusing on what’s best for the client. Sometimes that means you don’t get paid because you talked them out – I’ve certainly talked people out of buying property in the past if it’s not been the right thing for them but it is the right thing to do and they notice and they tell their friends.
For the next year, Simms is scheduled to release an educational course on property investment as well as publish his own book.
I’m publishing my book and launching my new property investment course so that I can actually reach out to more people, help more people create success in property that I’m able to at the moment because time is challenging, you can only sit with so many people in a week. So yeah creating a course. I think there’s a huge demand for that and we should be getting some great success for people so yeah that’s what I’m excited about and passionate about at the moment. We’ve been working on that for the last couple of months.
So the book is scheduled for next year at 2019 and the course, property course that will be later on this year in 2018. We’ve got most of the content all together now it’s just a matter of recording it all and uploading it into an online platform. So yeah quite a bit of technical work there to do, yeah as I’m sure you have a bit of technical work with your podcasts.
To find out more about Darryl Simms, his advisory business and his clients’ achievements, be sure to visit his website and download an exclusive quick start guide for a free bonus strategy session, exclusive to Property Investory listeners.
Your listeners can head over to our website at latteproperty.com.au. That’s as in the coffee. Or email me at [email protected] and I have a free copy of our property investment Quickstart Guide for your listeners so they can learn about the pitfalls to avoid, maximising their returns, leveraging the power of property, how to overcome fears, depreciation, negative gearing benefits and a whole bunch of other useful stuff. It is a great starting point for property investors and can be downloaded for free at latteproperty.com.au/quickstartguide. And if you’d like stay nice with that we have a special bonus of a free coaching strategy session valued at two hundred seventy-five dollars for your first 15 listeners that download the Quickstart Guide.
This episode was produced by Andrew Faleafaga with narrations and interviews conducted by Tyrone Shum.