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Hosted By Tyrone Shum

How to Improve Portfolio Management & Acquire 30 Properties by 30

Updated 03/08/2018

Property entrepreneur Keith Grisman, who has outstanding expertise in property management and founder of Property Only, will take us on his journey from a kick start at investing when he was 17 to build a portfolio of over 30 properties by the age of 30! We’ll find out the mechanics behind this and how he used mathematics to leapfrog equity.

Also uncover how the property surfer recovered from the GFC and what precautions he is taking to avoid a financial flogging again, why neither the police academy or working for a property developer was for him and how he went all in and began his own flourishing businesses.

"There are people around you who are buying and selling and building and thinking and talking, and I guess if you've got the right filter you can try and absorb the good stuff and discard the bad stuff."

-Keith Grisman

Grisman is the founder of management specialist company, Property Only among several other property-related businesses and describes himself as a property surfer.

Hi I'm Keith Grisman, property entrepreneur I guess is the best description for me but I like to call it property surfer. Why do I say that? Because surfing is my absolute passion, after my family, and the property is an investment strategy and a lifestyle for me that allows me to do that. So my wife and I run a number of property-related businesses, we have a reasonably large residential property management role, we do some commercial management because it's a large area of my expertise in the past. We also have a couple of residential sales agencies and we obviously do a fair bit of investing, which in turn often tends to be a little bit of property development activity. 

In any given day, he likes to keep his routine flexible so as to make time for his family.

My days are random and that's what I like. I'd like to say that I run my day by the tides and the swell and that's partly true, but in reality, obviously, we've all got commitments. So I'm a full-time dad 50% of the time, I share my son with my ex-wife, so every second week I need complete flexibility. I do the pickups and drop-offs every day. So all of our property businesses do revolve around me being able to be completely flexible.

Originally growing up in southern Sydney, Grisman’s family quit the rat race of Sydney when he was a teenager.

I grew up in Sydney. I was proudly born in what's called Kogarah in St George Hospital. My mum and dad had grown up there, they were very young when I was born, 17 and 19. So I was kind of born into the young adult world and I was dragged along to every circumstance so I like to think that that helped me a lot in terms of my early communication skills.

Mum and Dad eventually decided to leave what they called the rat race of Sydney when I was 14 turning 15 and we moved to Queensland. I thought it was about them and getting out of the rat race, but it turned out that really it was about my sister and I and they thought there was much more opportunity in Queensland - and I completely think they were right. 

So you know, the peak of your adolescent years I completely did not want to come and the only way dad managed to get me into the car was he showed me a map which was where we were moving to, which was three streets from the beach and I couldn't get in the car fast enough.

Completing the final years of his tertiary education in Queensland, he was engaged in a stage of empowerment that cultivated early entrepreneurial skills.

We ended up living in a place called Bribie Island, which is completely in the middle of the outer limits of Brisbane and the Sunshine Coast and we were the first lot of graduating students through that brand new high school. So what was really cool about that is the principal really empowered us, I was a school captain, but empowered our student leadership group to do everything from designing the uniforms to putting some of the processes and procedures in place. So it was kind of like a little entrepreneurial lesson and he was clearly teaching us and playing with us without knowing what was going on. But it was a fantastic experience. 

Wow, that would be awesome to have at school - teachers who actually encourage children to do that. That is just unheard of, to be honest, I haven't heard of any schools doing that.

We were lucky. Obviously, at school, there was a tussle with the principal and there was that like, we're all trying to get away with stuff and he's trying to keep us on the right. But I was blessed that I had him, his name was Greg Peach. To sidetrack on that, about five years ago I was walking out of my office and there he is sitting - and I had seen him a few times beforehand, I know his kids - he's sitting in a restaurant with a group of about 10 other clearly teachery-looking people. I walked over and said hello and it was his retirement party. I literally happened to walk into his retirement party, so I got a chance to say the things that you'd like to say to that favourite teacher about the principle that as a young kid you may not be able to say and it was fantastic.

After this amazing high school experience, Grisman was motivated to get a job quickly. 

I seem to remember that it was Boxing Day after I finished Grade 12 and I’d applied to a whole bunch of unis and TAFEs and kind of figured I'd keep all of my options open. And I was watching the cricket on Boxing Day and dad walked and basically gave me a service and said, ‘What are you doing with your life? Why are you sitting on the couch? Why don't you have a job yet?’ So my dad was the son of a Russian Jew, a Russian immigrant, and dad was 19 when I was born so he worked like a pretty intense life with a young family. So he wasn't one for sitting around much.

An ad came on the TV for the Queensland Police Service looking for jobs and I pointed to the TV and I said, ‘Dad, I'm going to do that.’

What was his response to that?

I don't even remember what he said, but it was one of those serendipitous moments that was both silly and also life-changing. So what I didn't know at the time is the Fitzgerald Inquiry had just run through the Queensland Police and they were doing the single biggest intake ever, which was 400 students, 400 cadets. And 10,000 people applied and somehow I managed to fall my way into the last 400 - and I started there in February after literally getting a call the day before and saying, ‘Hey, what are you doing in the morning?’ I drove down to the police academy at Oxley and my life as a policeman started, basically.

However, this stint didn’t last longer than three years before he decided to do other things.

It was a fantastic three years, I’ve got to say as you do in your early life, I've met some amazing people, some lifelong friends and the things that I learnt in the police about people, the community, communication, all those sorts of things are things that have stood me in great stead all of my life. But it was a pretty short stint; I loved it but I'm a born entrepreneur and I didn't know it then, so necessarily it wasn't the place for me.

I left there and did a couple of really odd things. Like because I did three years there, I missed the gap year/backpack around the place, so I kind of toured around a bit and I ran a farm in Tasmania for a while with a Bnb attached to it, I sold saucepans door to door which was fantastic for sales skills and a couple of those jobs definitely were what I didn't want to do, as opposed to what I really did want to do. And then I ended up working for a property developer on real estate sales and marketing sites, so that got my professional property career started. But from a day to day property investment perspective, when I was 17 at the police academy I bought my first property, so I guess that's really where it started.

The influence to start investing in property so young stemmed from Grisman’s father, who was always looking for ways to add value to their home.

My dad's an electrician, so growing up I grew up in a house that I could best describe as being eternally renovated; probably lived in three or four houses while I was at home. But Dad was always looking to value add. And so for whatever reason, I'm just blessed that - and that's most likely the Russian Jew heritage in my dad's side - but I'm just really good with numbers. So I just remember how much they bought a house for, how much they sold it for. I guess at 17, the property just made sense to me and I knew that one and one could equal 2.2.

With his father’s experience as an electrician and his leaning towards renovating, the family moved around a lot.

My mum used to say that my dad was part Gypsy because we did move a bit but just in the context. I mean, again Mum and Dad were 17 and 19 when I was born. You know I don't know about you, but at 17 and 19 and even at 27 and 29, I'm not sure I knew what I was doing in the next year, let alone on a long term basis. So I think they just did the best that they could in terms of trying to survive. So there were only four or five houses I guess in the 17 years that I lived at home - but one thing's for sure, we never lived in a house that didn't get regularly updated or changed in a term that we now know, value-added to. 

Grisman worked for a property developer, which kickstarted his property career, and he learnt a lot that chalked up to experience.

The property developer that I worked for, he was a large land subdivider. So I mean some examples it might know is Washington MI developments, they were pretty atypical buying large parcels on the fringe of town and sometimes beyond the fringe and then cutting them up and taking people there. These guys did pretty much that. 

So basically what they did is they started in a real estate sales office and we were effectively asked to pretend to be day to day residential real estate agents, but with the specific task of selling their land. I can't say it's a model that I particularly liked, but I learnt a lot about the property business there and as I said before with some of the other jobs I had, I think it's really important to learn what you don't want to do, as much as what you do want to do. Because I think that can shape your activities and your energy as well as your ethics. 

Definitely. And the thing is that it's easier to just do things that you enjoy, but if you don't actually experience what it's like to do things you don't like and experience that overall, you won't know because in the end of the day you might to jump into it down the track and realise, ‘Holy Moly, I spent all that time doing the things I hated,’ and then realising, ‘Gosh, I had all that time to learn about it.’

Yeah, definitely. I mean in those environments, there's a lot to be said for osmosis. There are people around you who are buying and selling and building and thinking and talking, and I guess if you've got the right filter you can try and absorb the good stuff and discard the bad stuff.

Although enjoying the sales side of working for a property developer, the ethics side of it didn’t sit well with Grisman. He then moved on to a different company in the Sunshine Coast.

I learnt a lot, but it was time to move on and there was this little ad in the paper - and I don't really remember what it said, except it said, ‘Sunshine Coast,’ and it said ‘Property.’

And I wanted to get up on the coast because of my love of surfing. So I turned up for this job and really what they were looking for was kind of an apprentice kind of gofur person that was three directors of a company, two of them were commercial real estate agents and one of them was a builder and they had their own little commercial agency. They would put deals together for themselves and do small development, so I was the first non-administrative employee.

When I did the interview it was kind of apparent that they weren't really looking to pay much more than apprentice’s wage and somehow I convinced them, because I owned two properties at the time, that I was worth a try and they agreed to pay me a bit more. Then I started and I clearly remember the first day I turned up because I got out the briefcase, looked up at the office building and thought, ‘I have no idea what this job is about.’ But it was on the Sunshine Coast and it was in property, that's all I knew.

In the time he was employed there he learnt a great deal about the local market and commercial property, which is now an area he specialises in.

So what they did is they told me commercial agency and obviously, commercial property as a method is very mathematical in its approach. So I was blessed that I worked with two guys who were really on top of their game in terms of their local market. For the next three or four years, they proceeded to teach me everything there was about commercial property. Sadly the three of them kind of ate each other up in the end; two bought one out and then there was one left and then eventually I ended up buying him out about four years later. So during that time though, the Sunshine Coast was growing like most coastal areas and you would get a tenant requirement or even a bar requirement, where they would be looking for a building with a red door and a green roof, or 300 square metres with this dimension, or whatever. And quite consistently, the buildings didn't exist that they wanted.

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So I guess I drew on two little, tiny bits of experience. One was I built houses, so I understood that you could create something that didn't already exist. And I did tech drawing at school, so just from the point of view of understanding how to draw something. So I would say, ‘Well I can't find what you're looking for, but here’s a block of land, here’s a sketch,’ - and I'm talking about back of the envelope, really crude stuff, but if I could get their buy-in then I would trudge off to a builder and say, ‘Would you buy this block of land and build a shed for this person? So what I kind of ended up falling into was a design and construct mentality for tenants, so purpose-built requirements is another way to describe it.

The commercial property business, opened in the mid-90s, still operates today under different ownership.

When that business fell apart, obviously in a small town there’s a bit of rumour so I got approached by another guy who'd been a big agent in Brisbane and him just kind of came to the coast, was a one-man-band. He wanted to grow, so he approached me to employ me and I said no and explained what had gone on. And long story short, it’s best described that we merged the businesses - and that business still exists today and on the Sunshine Coast, that's a supply business. It's now owned by an international firm; but the genesis of that business was that phone call, and out a merger with two little tinpot, local agencies.

Grisman’s early start as a property investor began on the Sunshine Coast when he was young and confident enough to have a go.

As I mentioned before, the first house I bought at 17 while I was in the police - and if you like I'll tell you that story, because it's an interesting one. But in Grade 10 a friend of mine’s parents had a caravan at Coolum on the Sunshine Coast, so we would go and stay there for two weeks and just surf our brains out for two weeks.

So then when I was 17, I was at my then-girlfriend's house and walked past her dad who was reading the Saturday paper and there was an ad for some government land being auctioned at Coolum. And being - I was probably partly showing off, to be honest - but being the arrogant teenager that I was, I pointed to that and said, ‘I'm going to buy one of those.’ So I then hatched a plan by talking to dad about how we would make that work and we ended up going to the government auction and bought two blocks of land, dad bought one and I bought one. What I didn't know at the time is that you weren't actually allowed to buy land I don’t think until you’re 18, but no one told us that, so I didn’t know.

And the government return was pretty attractive, you didn't need to qualify for a loan and what would happen is you’d pay 10% on the drop of the hammer and then you’d pay another 10% in 12 months’ time. So basically I had a year to work out how I was going to make this work and it's not something at all I would suggest people do, but again at the time I was probably young enough and dumb enough and ignorant enough and arrogant enough to have a go. And I think that that's a trait that stands against a lot of property investors, they don't get in and have a go.

So how did he make it work and scrape enough together for the 10% within a year?

What happened was at the end of the auction we owned the property, we paid 10%. I discussed with Dad borrowing the money off him, unfortunately, my grandmother had just passed away so there was a small inheritance, he lent me some. The block was $2,500, you'd buy a few of those now if you could get your hands on them! So it was $3,250 we had to pay so dad lends it to me on the basis that I came back within a year. And I'd kind of budgeted it, including the money I earned from the police academy, I think I was about $20 leftover to be able to save up the payments that I needed to get to the end of the year. As you do, a bit like a university assignment - as the day comes you haven't necessarily done enough or put enough away.

So I went to a local real estate agent in Coolum as I walked in, the lady at the counter said ‘Rentals are that way.’ And I went, ‘No, no. I'm here to sell a block of land.’ ‘Oh, OK sir, well over this way.’ So eventually I found an agent who suited me and he came back with an offer for $47,500 and coincidentally, it was from the government. So the housing commission was looking to buy some land and here was the government selling it to me. and here they are again lending you the money and then offering to buy it on another. It was a classic story and complete dumb luck.

From there, Grisman managed to build a house on his block of land and worked hard to create a property which would increase to a value of over $150,000.

But what ended up happening was they had another block in the street, they’d kept one back from the auction and obviously the right hand didn’t know what the left hand was doing so they turned me down and pulled out on the contract. I then went to the Queensland Police Credit Union which was my bank at the time and said, ‘Well this land has now got to be worth this much, doesn't it? So will you give me the money to pay the government out?’ And they did and through that process, I don't remember exactly how it happened, but I somehow worked out that I could get enough money also to build a house. So I think for the princely sum of about $85,000, I managed to build a house on this block of land.

And then I kind of did what dad did; I negotiated with the builder for no carpet, no driveway, no landscaping and then I just did all of that myself. So I literally slept on the floor for the first couple of weeks that the house was finished and while I painted myself inside, I did my own driveway and landscaping, all the things that I’d just seen dad do to save money. And obviously what I was doing is creating equity and value and savings, without necessarily knowing it is a technical term.

It was a great time. I mean I got some great blokes and some friends in, we’d get into the pub at night and I’d shout them some beer and they’d come and paint the next day. The things that people do! But it worked and in the end I got it revalued and it was worth I think from memory, about $135,000-140,000. So that was kind of it. So going back to the developer story, by the time I was at the developers that property was probably worth $150,000-$180,000 or so. I can't remember exactly but we were selling land, I found a block that I liked, I approached the developer that I worked for for the chance to buy and get a bit of a discount and I just did the same thing again.

Having come a long way since he was 17 and jumping in, by the time he reached 30 years of age he had 30 properties under his belt and leapfrogging off the equity they produced.

I think by 25 I probably had, I can't remember exactly, but three or four. I seem to remember at 26 I might have had four or five. And largely speaking, it was buying a block of land, construct a building of some kind. I did my first duplex in that period of my mid-20s because I worked out mathematically that I could buy the land once and use it twice. So again, mathematical approach and my commercial experience at the time would have helped with that, as well as my background. But by the time I was 30, I had 30 properties and really what I was doing was just leapfrogging equity.

So at that stage, you didn't need lenders mortgage insurance at 85% LVR, so I would just constantly run the numbers on valuation and LVR on my portfolio. I've got a spreadsheet that I use to this day, very similar to what I used back then and I just put what I think it's worth, is there any more equity I can squeeze out. I would then go on to talk to the bank, the valuer, do the rounds and if I could round up my equity then I'd be on the hunt to find something else. So it was just the constant process of revisiting and running the same theory. I was definitely benefiting from having come from Sydney; I remember very clearly what happened with my parents selling out of Sydney to come to Queensland and it's not unlike what's going on now, in my opinion. And that was the late 80s, they couldn't sell their house in Peakhurst for $180,000.

So what they decided to do was they’d rent it out for a year, moved to Queensland and then to sell it down the track. After they put it back on the market a year later, they sold it for $320,000 in the space of a week. Then the houses that we were living in and that my parents were looking at buying as a home in Queensland, were $60-80,000. Now I didn't know much about job economics and macro and micro at that point obviously, but I definitely remember that ‘Well hang on - houses up here are a hell of a lot cheaper and it’s a much nicer place to live.’ So I went hard in my 20s, thinking people will work this out, they'll work out that it's expensive down there and that it's cheaper up here and this is a much better place to live. So I just went all in.

However, he does admit that sometimes, being all in has its risks and drawbacks.

Look, being all in doesn't always work. Plenty of times I've done it and got it wrong and I'm happy to share, but at that time it did. By the time I was 30 I owned those properties and I specifically remember having a conversation with my then residential property manager. I worked out that they weren't doing their periodic inspections and my creations, my properties, were pretty precious to me and I just thought that wasn't right.

At about that time, property managers were earning about $30,000 a year too, so I could do the maths - 30 properties, they made $30,000 a year, that all made sense. So I thought, ‘I'm just going to hire my own person, they'll manage my properties and when they've got spare time, they can do some of the admin load that comes with owning properties.’

So you were pretty much running your own agency, by the sounds of it.

Yeah, well that's exactly what happened. So I kind of tied that in with a few other things and you know friends and friends of friends and I started the business that still runs to this day. It's called Property Only, which is a residential management specialist.

A lesson Grisman learnt during his property investing journey was not to place life on the back burner while focusing on his goals. This came about when the infamous GFC hit.

In the GFC I got completely and utterly beaten up. The credit market that existed at that time was certainly something that I didn't even know it could exist in that fashion, let alone that it would play out the way that it did. So if I try and take some gems of wisdom out of that, it's that what I learnt a lot through my investment strategy up until then is I was doing delayed gratification.

I was putting all of my money into my property and now certainly having a good time, but largely speaking I was completely focused on my property portfolio and kind of putting life to the side. And when the GFC hit, as I said I got beaten up really bad; I realised that now there is no substitute for time. So it's all great to talk about an investment strategy and wealth and doing this, but ultimately also you've got to have that balance. And that's very cliche, but it was so true.

So what happened, in this worst-case scenario come true?

So at 30, I've got 30 properties and this is in the really crucial period around when the GST is introduced. And as we all now know, after that happened and before the GFC - I call it the period between the Gs - up here in the Sunshine Coast, everything you did in property would turn to gold. We had property literally double and double again in the space of about five or six years. So for someone who was owning 30+ properties depending on where you want to peg the time when you have your portfolio double and double again and you always run hard on using up all your equity to reinvest, I literally couldn't buy properties fast enough or spend my money fast enough to keep all of my equity at use. And what I failed to do was kind of reset the strategy.

So I got to a point where pre-GFC, I think I was up to 67 properties. But they weren't all just residential houses, there was a bunch of commercial properties in there because I was acting as a commercial agent. Very early on in my commercial career. I wouldn't invest in commercial property because I didn't want to be in conflict with my clients was one reason, but secondly, the LVRs weren’t as attractive. So it was a lot harder to buy property. But as I transitioned out of the commercial property through my design and construct, I ended up becoming I guess you’d say a hard-core developer.

And so, therefore, I started investing personally in commercial properties. So when I had the 67 odd properties pre-GFC, a bunch of that was commercial; so economic times were tough, interest rates were going up, credit was harder to get and businesses were doing it tough - so I had huge cash flow shortages in my commercial portfolio. Then as we now all know, the banks were herding on their own credit so they started to withdraw credit facilities and in some cases, they’d do that overnight. So the music stopped and there weren't enough chairs to go around.

The only way he could overcome a situation of this magnitude was to live, learn and alter his strategy.

I was in the wilderness for a long time, financially and mentally. I guess if I discuss how I treat my strategy now, I don't push as hard - and experience and age have certainly helped with that. But I don't push my LVRs as high. Like in today's terms at 80% and my portfolio goes to 70%, I'm not looking to go out and use that 10% to go and buy something else. My LVRs are much more conservative, I'm extremely cautious about commercial debt and business debt. I mean if you look at the banking industry now, largely I don't really want to lend to small and medium businesses. They're not interested, their property is primarily residential security and in my opinion, commercial debt is largely a 90-day bank bill that they can withdraw at any time on some pretty horrendous conditions. So I'm extremely cautious about commercial property, despite the fact that I know it back to front.

I just got beaten up you know, like I tore up millions and millions of dollars. And whilst I definitely made some mistakes, as no one can go through getting beaten up and say it was all them, or it was all someone else. Whether it's pushed too hard, made the wrong decision to buy the wrong building, or sign up the wrong tenant, or whatever it might be. We had a really unusual situation in the credit market where there was mass withdrawal, so how do I deal with that now? I'm extremely conservative on the type of loans that I take, the type of properties that I buy and the LVR that's there. So if there is a drama, I can potentially do what I couldn’t have done if I have taken a different strategy pre-GFC; I'd have sailed through and gone, ‘GF what? Sorry I'll never know what you mean.’

The thing that Grisman likes the most about property investing is the simplicity of it, with three alternative ways in which to generate wealth from it.

With property, I don't know that I've literally been in the middle of a transaction and I went, ‘A-ha!’ There are some times certainly where I'm trying to solve a puzzle where I like I property that I can’t work out how to buy or how to approach it. You know, I go for a run, or go for a swim, or go for a surf and headspace allows you to come up with some solution to the puzzle. But the thing about property to me is it's really actually quite simple.

There are three ways to make money in property - you buy something for less than it's worth, you buy something that you can value add in some way, so you know renovations is the most commonly discussed one but there's subdivision, there's addition of an additional dwelling that can produce income, there's the rezoning of it. There are so many things you can do to a property to the value add it. And the third thing, of course, is that you can buy in a high growth area and do nothing except just waiting for the tide to come in.

So those three approaches are really simple and if you can find a property that can combine all three, then you can go really well. And that absolutely exists, the deal of the decade comes along once a fortnight. So you just have to be patient and wait for the right one. But all of those things are just about solving a problem. And you know you mentioned it before, in terms of business and in terms of property, go and find the crappiest property you can and solve the problem and you'll create value. It's that easy.

I love that, that is exactly true. Regardless of whether it be in property investing or business or anything in life, if you can solve the biggest problem and add value, you’ve created wealth. 

Even in relationships, you know you can have a relationship but I don't necessarily mean one at home, I mean with friends where a tribulation can turn into a great asset in terms of that relationship if you can solve it.

Time Poor Property Investing Strategy With Keith Grisman

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So was there anything that held Grisman back from initially investing into property?

I think that I was both ignorant and lucky early on that no, there wasn't. I didn't experience the fear that I can completely understand when people are looking to go and make a transaction. The one I think, most of the time that fear is based on lack of knowledge, like when people come to me - and they do all of the time - and ask for different help. I could categorise almost every conversation into at least two parts of it and one is that they come and they go, ‘I want to do this, this or this,’ and I say to them, ‘Why do you want to do that?’ And they just go quiet and kind of look at the sky and first they're shocked, then they get it.

And then you know why you're doing it, you're trying to make a capital gain, you're trying to improve yourself, you're trying to get cash flow. If I can work out what the real reason they're doing it is, then all of a sudden their choices can really narrow down. Then the other thing that I say to them is if you're not sure about the value of that, we'll go and look at 50 of those same properties. When you walk into the 51st, you'll be able to tell me within five seconds how much work. 

Yeah, that's right. 

So if you don't definitely know, then don't do it or do your research. 

In the previous episode with Grisman, he credited his father as a significant influential figure in his life, who mentored him in his journey.

The funny thing about Dad is that I don't ever remember he actually said anything to me. He definitely never said, ‘Go buy property at 17.’ I mean who would do that?

Yeah.

I just watched him and you know my dad was an entrepreneur and I didn't know that until my dad passed. We had those conversations you have when someone's passing and he told me a lot about his dad who passed away. I never met him when my dad was young my dad had passed away. So he told me a lot about him then, but that he was an employee all of his life. But I guess I just took it in and watched what he did in terms of value-adding and really, all he was doing is he was just tinkering on, improving, what he had. 

So yeah he was a huge influence. I wish I had a bit more our mentors if you like, I can't say that there's any one specific. There's a couple of people professionally who I worked with and I've got to say, I didn't always like everything that they did. But you know that might be one thing I took from him and one thing from her and another thing from the next person.

But in terms of reference materials, in the 90s there wasn't much around. As anyone who was investing in it is well known, Jan Somers. My first financial book was Making Money Made Simple, I think it was called. I read that when I was 17 and that was it. It was a great book. So early on, there wasn't a lot but look now, there's so much reference material to find in terms of social media and Internet stuff. I think you have to look at the purpose for which that material is put out.

Yeah

A lot of it is what users we called them in the early 2000s on the Gold Coast, but there are a lot of property professionals who are Dracula in charge of the blood bank that they're selling these excellent investments and they're ripping out fees of $30,000 each. And really, I can't see any value add that anyone can make because they're largely Brandon asylum packages. Yes, there might be a time that demographically in an area in some cases, an anomaly of its new land, it is on the fringe. I can't see much of that done soon. And one thing's for sure, they're not telling them are you there some of them for them. And that's the shame of the way that the industry’s structure.

But there's so much good information as well, you just have to feel threatened and put your brainbox on and you know, ask lots of questions instead of just deciding you can't do something and then rocking up and often doing it the next week. I’d go look at 50 houses, look at houses before you even decide what anything's worth or what you like there.

Other resources Grisman turns to for mindset inspiration are those like Think and Grow Rich and Property Investory!

Just pick up some of the books and just read that and start to form some new opinions, even in the current market. There are still some great resource materials and there's a bunch of people, without necessarily singling them out, that I've got a lot of time for in terms of their material and they've got their hearts in the right place and stuff. So yeah, it's tricky, but in terms of books Think and Grow Rich by Napoleon Hill and I've heard your podcast in the past, a number of people have suggested that there's a very good reason why books are a classic cliché for business reading. It’s a fantastic mental approach to life and business and property investment and there's not one single property tactical trick in it.

The best advice he has ever received? Treat others how you want to be treated.

Treat others as you want to be treated, I think would be it. And it's not property advice, but it’s good to be nicer to each other. The world would be a lot better and probably you'd find your property transactions like a hell of a lot better. 

Grisman’s strategy for purchasing a property in Australia is centred on his one hour rule.

Well if I'm talking residential property, then if you can gauge what the market is worth - and I'm not suggesting that you've preconceived where you're going to buy here - but one of the rules I follow is I've got a one hour rule. If something goes wrong, I want to be there in an hour to make a decision about how to fix it. So I live on the Sunshine Coast in God's Country in Queensland and I probably think Adelaide is too far now. I could get there, I can get a plane, I could even convince myself that Sydney, where I used to live, is only an hour away and I've got to go there and fix it. 

So I balance out my lifestyle around my investment strategy I suppose and I'm lucky, I live in a high growth area that provides lots of opportunities. But that's the one I want to point to, is work out what is in the marketplace. So in other words, how much is a three-bedroom, two-bathroom house? Can you get a block of land and get a building built for cheaper than that? And if you can, then can you add those two things together and have them work for you? By the time you complete the product has it cost you 20% less than what the prevailing market price is? And if it is, then you go and do it.

He expands on his formula for one plus one equals 2.2, which determines the overall value of a property in the aftermath of adding value.

The way that I've described, it probably makes it sound like I'm thinking about a housing estate but I'm not. Look there is a whole block of land in let's call it suburbia that hasn’t been built on. So there is an opportunity like you can find us a block of land in an older suburb? And what I mean by older is 10 years or so since it's been developed, then that's really around the mass. How much of the block of land, how much is it to build a house and what would that be worth compared to the five or 10 houses that have sold in the neighbourhood?

But where it works best is if you can find an old house that's not a large block of land. I've got half a dozen of these projects on the go right now, where I like to look for an old house on a large block of land and I then look to what can I use the backyard for because backyards don't need to be as big as they used to be. Probably practically as well as in terms of urban land use. But can I build another house out the back in a couple of the backyard and create an extra block? Can I build a second dwelling out there and call it a duplex, or can I just do the dwelling and call that a granny flat and get income?

So what I'm looking to do is is a value add to that property. So then indeed, if I use a really simple example, I bought a $500,000 house on a large block of land - when I cut the backyard off, what's the front house worth now? 5,000 square and a block in the front house is still on that side of the 2,000 square metre block and the front house is still on 1,000 square metres, probably still worth $500,000. So then I've got a free block of land at the back. Now I obviously have to cut it off and put the cost into infrastructure and driveways or whatever it is. But if I can say spend $100,000 on that block of land, it’d be worth $200,000 - and it’s just one plus one equals 2.2.

"We just don't embrace failure enough. And the only way you're going to learn and improve is by trying things."
-Keith Grisman

With this scenario becoming more and more common, Grisman understands the reason behind it and explains why the mathematics of it makes sense.

I've got lots of friends that live in the Shire in Sydney and I can say a few of them aren't that happy with it, but people are coming in and buying old houses and knocking them down and doing duplexes. And then they don't like it because they live in their nice, old houses and that affects the neighbourhood. I can completely understand the reason that those people are doing that is they're running them, they're going well, you know this house might cost $1.5 million to knock down, but we can then build a duplex and that duplex might cost $1 million to build into a pretty decent home.

I'm into two and a half years, but if they're worth $1.5 million when they're finished because they're brand new - and yes, there are duplexes with a common wall, or a duplex tile, or what they've still got a decent sized yard area - they're brand new compared to the older houses in the area and the land. The deal might earn them $2.5 million and yet, they're potentially on the market three times. One thing I can be sure about if there's a bunch of them going on and the other’s not, every one of the people who are doing them is paying cash for the whole lot. They're probably borrowing money from a bank and therefore value is supporting the maths that they're using in their approach.

For those who feel like they can’t get into the market right now, he endorses rentvesting as a great approach to kick-start your journey.

Look, I'm sick of hearing, ‘I can't afford a house here,’ you know, ‘We can't afford it ourselves,’ is the most nonsensical thing I've ever heard. What you're really saying is you can't afford a house in the suburbs you actually want to live in, or that you grew up in. Do you expect to be able to buy a house in the suburbs that you grew up in when your parents probably bought a household bunch of you know, probably have to buy somewhere else.

Rentvesting is a completely viable way of approaching the property market, where maybe you don't live in the first three or four houses that you own because you're renting them out and creating value and stuff. And you might be doing that because your ‘why’ is that you want to be able to own your own home. So you’re investing in a handful of properties, you make some money, you build that snowball up until you can actually go and buy a house that you want in that market. You have to go and demand it straight away.

And for those who are short on time and caught up with other commitments, Grisman says the only way to get it done is to make the time.

It's tricky. Look I'm not sure that there's an easy answer to that and to be honest, there shouldn't be too many. If people are time poor and they're looking to invest, it's going to be hard but you just have to start to drill down. So if I were someone on a pretty average wage and I was living in Sydney, then I might be looking at Western Sydney, I might be looking at Queensland. Now my investment philosophy of an hour away doesn't really have to be someone else's, I'm probably privileged enough that I know enough that I can invest here. But if I lived in the most beautiful place on earth and it wasn't a growth town, I wouldn't be investing here because the mass would tell me not to. So I would go and find a town where I can do it. If your time-poor, then you're going to have to start with some holistic research of someone like Michael Motivic in Queensland and puts out a whole bunch of data, some $100 a year, that will be a great place to start. I mean the tree right is another one up here on the Sunshine Coast. I'm just talking about people local to my area. 

So for every region that people live in, there'll be a bunch of people who just go and start to filter down and then understand your ‘why’ and your ‘what’ and part of your ‘what’ is, ‘Well how much do I think that I can borrow and how much deposit have I got?’ And if the answer’s, ‘You've only got $400,000 dollars, then OK. Ring residents and say how many suburbs are there in Australia with an average price of $400,000? Out of those, can you give me the top 20 that have decent growth characteristics - and that's a good start. So is it going to be easy, no? But if it was easy, everybody would be here. 

Although he prefers not to disclose the details of his current portfolio, Grisman now appreciates what he has in his life in contrast to all he has previously lost.

In my pre-GFC period, I never had a problem answering that question. I wore it as a badge of honour. I knew exactly how many properties, to the tee. I could probably tell you the net worth, probably tell you what percentages they are because I knew my maths really well. But to be fair I was bragging because I earned more than most people, or anyone that I ever knew. 

Yeah. 

So I don't answer that question anymore and it's not because I'm hiding, it's just because I think it's not my badge of honour, it's not my identity anymore; it's not who I am. But what I can say to you is that in the run-up to the GFC I had 767 properties and I got completely beaten up. Then on the back of that, got divorced and lost most of what I had. And that's worse than the money that I lost because it's just money - I didn't start with any money. So I really lost everything. If you think about it, it's just ego, but I lost time and lost lots of time in having to deal with that period in my life. And it was really a happy, happy time. Frankly, I'm lucky I survived.

So what do I have now? I have a beautiful mum remarried. I have a beautiful wife. We have a fantastic family environment. I have a daughter that I got for a two for one deal when I married my wife. So I have a daughter who's with us full time and my son is with us half the time. And I take him off to school and drop him off and I'm a full-time dad on that week. My wife and I run a handful of properly-related businesses as I mentioned before, we have a decent sized property portfolio and we have a really specific plan about how we go about living our life.

Because at the end of the day, the purpose behind building a property portfolio is to cement our lifestyle goals.

If I used my failure as a way to cement that, again in the GFC I could have sold up a number of times, paid out all the debt and never had to think about working again. And I had a particular friend of mine say what I do that I didn't really like on reflection that I really understood what he was saying was a bit cryptic. Maybe he was trying to be nice, but he didn't get it. But I was just like at the crease playing cricket, they didn't get me out so I just kept going and I kind of didn't necessarily have a purpose in mind. I mean what was it going to be 167 that 267? And often when people say those numbers, I've just put it out there, this made the number up.

Like if you can find out what you actually really want in life and then start to convert the maths, then you know that's a good way in. From a residential strategy perspective, I can offer a really simple way to do that: if you think you want $100,000 in retirement or $200,000 dollars in retirement, or whatever that figure might be, then assume that on a property portfolio you're going to get a 5% gross return. So if you want $300,000 worth of income a year, then you'll probably get about $6 million worth of income in real estate. So go buy $12 billion of the income at real estate in the right areas, hold it for 10 years, wait for it to double in value, sell after payout.

A personal habit that Grisman believes has contributed to his success in property is being able to push harder to achieve something than anyone else.

I think biologically I'm pretty lucky, you know maths is a strong suit and I can see it in my son too, he's got a very high IQ and he just gets maths. That's why I talk about the birth lottery - you can think you're as smart as you like, but ultimately most of it wasn't your doing. You’ve just got to try and do the best that you can with who you are.

So the personal traits, look I watched my dad never stop and it's a trait that I have to tone down on myself. I definitely can easily work through the whole weekend and push too hard. So I think I'd say that with most people, I think that their best trait is also their biggest negative. And for me it definitely is my biggest trait, I can push hard, I can push harder than anyone that I've met. But that definitely isn't easy for me at times. And you know they can be on a personal front but it can also be a property investment program. 

So how has he been able to overcome his best trait morphing into his worst trait?

Sadly, I’ve got to say I think making enormous stuff-ups. And in Australia, I don't know where it comes from if it's the tall poppy syndrome or what it is, but we just don't embrace failure enough. And the only way you're going to learn and improve is by trying things. If you think that you're going to nail everything that you do, you’re just living in la-la land. Now I struggle with failure just like anyone, but we have to embrace it.

So I think that I’ve got balance because I've had some epic failures in my whole life - a failed marriage, you know the GFC was an absolute disaster for me, I lost lots of time, I lost lots of money and I wouldn't wish what I went through on anybody. And yet it is probably the single most impactful thing in my lifestyle right now because it gave me great perspective, it helps me keep in check. The ability to push way too hard really on my own.

I appreciate you sharing that because it is so important because it's so easy to see how successful people have achieved such great success. But until you actually step behind the curve and find out what they've gone through a lot of adversity like you have, it really puts things into perspective. And that's why it's so important to learn from people like yourself as well.

You can have some fun with that too. I mean I get people who I literally wouldn't get through all week with three or four phone calls, someone looking for some advice on something I do, some consulting on projects and I’ve greatly helped about 40 people buy their first house. And I helped build duplexes and that sort of stuff and that gets me off. But someone will ring me up and they say they’re wanting to do this and I'll say to them, ‘Why?’ and they don't know. And I go, ‘What are you doing for them?’ And so I think that if they can just do it and that's why they're really doing it.

In some cases, like you know, it might be a friend he's got four businesses and he's taking up the fifth one already. He really like needs some extra money, you're bored, you've got nothing to do and sometimes we just don't stop and ask ourselves those questions. And often I think that if we did we'd be much happier in life. And I'm not preaching here, I still get it wrong every day. But it's good to be doing it more than I used to do, that's for sure.

A lot of property investors are aware of their ‘why’ when starting out, but Grisman says that it’s also a question of ‘what’.

By the way on property, I think the second question is what? I did a little bit of a video series on this that I shared with our clients and staff, particularly our property management business friends who want to invest in a consulting group. And the first bit is the ‘why’ - why are you doing it? You get your kind of mental strategy about what you're going to do, and the second bit is the ‘what’. So it's just circumstances, ‘Well OK, you want to renovate a house, you’re not going to pick up a hammer if you don’t know how to walk.’

It's how to organise a team of tradespeople, or do you have enough equity, or do you have enough cash flow, or more importantly most of the time, do you have enough time? So you can answer you're ‘why’ in your walk. Then I reckon when you're making your property decision, you're literally down to a handful of things to decide between, rather than a really wide number of options.

So if he were to meet himself from 10 years ago, what would he say?

Go surfing more seriously. I'm going to only have surfed in a picture here for anyone that doesn't surf. It's just the ultimate activity outside of things we might do at home and you get to exercise, you don't sweat because you're in the ocean, you're sitting in the biggest energy source on the planet is the ocean. What is it, 70% of the ocean is covered in water and your bodies are made up of 70% water. Tell me that's not a huge coincidence! And you get to meditate while you're out there - and it's pretty hard to think about too much in the surf when you're analysing waves sitting on the bank or the reef and which way the tide is coming and where the other surfers are sitting in the water. You know you’ve got to be on the job and yet you're not thinking about too much.

For the next five years, Grisman is excited about continuing to help people.

I get a lot out of helping people to do stuff, you know normally the win is for us as we get to manage their property. It's not exactly a great financial remuneration but it's really satisfying to help people. But I thought for a long time that property for me was about the money and certainly in my younger days the ego and all that sort of stuff. But we haven't even touched on some of the bigger projects that I've done professionally, you know two-storey buildings and shopping centres, towns and those sorts of things I get off on long after the money's gone. Being able to hang my hat on those projects my kids are sick of hearing about how fast I go. I designed that for a doctor or I did a deal to put the tenants in place or whatever it might be. I like creating things. So I think if you analyse your traits when you're younger and for me, I used to like drawing and kind of building cubby houses out of the cushions on the couch; I would just like to create stuff. I think all of us like to create stuff a bit more than we maybe give ourselves time for in most of our lives.

So if you ask me what I'm most excited about, like I enjoy creating homes for people to live in, I like repurposing commercial buildings and older residential buildings and stuff. I find it really satisfying. If you do it, you're absolutely going to stuff up all the time. Like just yesterday, I was in a house - an old house I’m renovating - and I said during the project in a bathroom. And then I turn up on cyber sheet of the walls and I go, ‘I just wanted to put it there, for now, I think I've probably only done that 50 times in terms of renovation. What were you thinking?’ It's got to go over there but in the scheme of things that doesn’t really matter. 

If you want to connect with Grisman and find out more about his mindset and strategy, you can contact him via email or social media.

You can reach out through most of the social media like Facebook and LinkedIn and stuff, but my email address is [email protected] My mobile’s 0413 037 0 if you’ve got a question. Ring me up and try to be nice and have thought about it before if you ring me up and badger me. Or I've got a website which I’m just actually playing around with at the moment. It’s not so under construction to not know where it is but it's just keithgrisman.com.au, which has just got a bunch of what I’ve probably done on project sites, a little story and a summary, ‘The Good, The Bad and The Ugly’ about some of the stuff. So you might find some useful information in there. There's no selling in there so it's all free info.

This episode was produced by Andrew Faleafaga with narrations and interviews conducted by Tyrone Shum.

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