How to Get A Return On Equity From A $20M Real Estate Portfolio
Director of Plan Assist, Harry Charalambous, has built an impressive commercial property portfolio worth over $20 million. Growing up with business-oriented parents, you’ll learn how he used his inherited knowledge to create an electrical business that ultimately led him into the property; and smart ways to manufacture equity return in the portfolio so that you can succeed too!
We will follow the natural progression of his career, learn to always be cautious when purchasing property and why investing in commercial property works for him.
A hectic day in Charalambous’ life looks like this.
My day’s split – so we certainly have clients that are searching for properties, so I will oversee that. I’ll check in with our team here that are looking for properties for our clients and ourselves. And just to take a step back on that, we certainly started initially because of doing our own investing and developing and then it just grew into clients wanting us to assist them with theirs.
And so my day is split up between looking for properties for our clients and checking in with our team on that, as well as our property managers. So to check on our approvals that we have running and we’ve been getting approvals for anything from extensions, renovations, granny flats, townhouses and up to blocks of home units for our clients. Then also checking in with the finance team on any finance for purchases, as well as construction loans – because of what we’re doing, we have a real focus and expertise in the construction loan area.
Your day sounds pretty full packed a lot – in managing as well. A Lot of following up with things, making sure that things run smoothly, especially in a business like yours. There’s a lot that’s involved isn’t there!
I try and certainly try and get a balance, and we’ve got to have a situation where I have quiet time and locked out time where I’m not answering any messages, or taking any calls and that sort of thing because you need time to focus on the next transaction that we want to do as well. So you certainly have to have that space otherwise I find you can get too caught up in the doing and not enough in the creating and the planning – which is equally as important as the doing of the current transactions you have going.
As the director of his business, Charalambous says that there are smart ways to manufacture your return on equity in property portfolio, which is what his clients take away from his services.
I am one of the directors of Plan Assist Property Team and we currently run a business which is geared for helping property investors to purchase properties, as well as develop those with a real focus on manufacturing equity in your investments.
I think particularly for your Sydney listeners, they’ve had a pretty good run over the last few years and obviously different parts of Australia have done reasonably well, all at different stages in the property cycle. However, what we do find is that by manufacturing some equity, it just takes you away from the reliance on growth and we use growth as a bonus and we certainly want to be buying in areas and buying at the right time in the property cycle. However, if we can use that and couple it with some manufactured equity strategies, it can really spur on the portfolio and the investment to much greater heights and much faster.
He describes himself as both aggressive and conservative when it comes to practising strategies for property investing – both for clients and himself.
I believe I have some aggressive strategies that we implement conservatively if that makes sense. So our strategies are a little bit creative, a little bit outside the box. However, at the same time, we need to look at those quite conservatively to make sure that we’ve been dotting the I’s and cross the t’s before going into the transactions.
Growing up in Sydney, Charalambous has fond memories of his parents running a fish and chips shop.
Initially, the early years were in the inner west of Sydney. We had a couple of different places where we were living and schooling. So I started off in the Ashfield and Concord area. So at the time, probably 60s and 70s, living in those areas fairly middle class I suppose you’d want to call them. We were a typical migrant background, with my parents having at that point in time fish shops that they were running – the fish and chip shops that are probably typical for the migrants of that era.
In the late 70s, we moved to Turramurra, also in Sydney but a very different feel. You know much bigger blocks of land, much leafier aspect and outlook and a different feel, different demographics.
The state of Ashfield, Concord and Turramurra has altered much since then with aspects such as the style of housing and the property values.
The Ashfield, Concord area has probably gone from being in those years more of a lower to middle class, too gentrified now and it is the land values and the property values now have immensely changed. They’re in much greater demand and probably a lot more favourable than they were in those years. So it’s changed immensely. And certainly, the style of housing in those areas have changed, again typically in those years where we had lots of bungalows and post-war bungalows. But a lot of those now, it’s much higher density. We’ve had with zoning changes and governments wanting to create more housing, much higher densities in those areas of the inner west of Sydney.
As we move to Turramurra which is more on the North Shore of Sydney, the blocks were bigger in those days and still are bigger today. The council in that area is probably more stringent on maintaining the vibe and feel of the place. There’s still much bigger blocks in that location. The feel is probably more family to mid to late teens that would be in the family because of the schooling in the area – lots of very good private schools throughout the North Shore of Sydney and lots of good public schools too and it tends to attract families to that area, predominantly for the schooling.
With his parents’ knowledge as business owners, he applied that knowledge in creating his own electrical business and developing his understanding of property investing.
I only ever knew of my parents having their own business. So to me, that was a natural progression. It was just what they did and what I did when I left school and I left school at the age of 15.
I went on to do an electrical apprenticeship, then by the age of 19, I was running my own electrical business. And I had that business till I was 35 and that gave me a really good grounding on the property, on renovating and actually how that worked and I did a lot of investing during those years – investing, renovating and selling. Again typical for the migrants of that era, my parents were buying property, running their business, saving their money throughout that time – hence my progression into that. I actually bought my first property at the age of 18 whilst I was still an apprentice electrician and that’s very much influenced by my parents and watching what they did.
After leaving the electrical business, Charalambous became involved with investing in property through a program. Everything developed organically from there as he met his business partner and set up his company, Plan Assist.
I got out of the electrical business in 2003, after having it 16-17 years. Then I actually had a year off and I was doing a little bit of property investing on my own at the time. I actually got involved in a program that was geared towards investors and showing people how to invest.
By 2004-2005, I was actually helping run and facilitate that program of teaching investors and it was just a natural progression for me. I actually met my current business partner at one of those programs – he had a finance background and we started doing some property transactions together.
From there we actually put his finance business and what I was doing together and set up Plan Assist in 2005 and it just grew from there. We kept getting more and more calls for what we were doing and we started by purely doing finance and a little bit of project management and then people started asking us to acquire the properties for them. So we started doing the acquisition, then about five years ago we found that we were struggling with trying to keep the building side of things flowing consistently, so we actually added a building company to ours as well about 5 years ago. So it’s all grown naturally and as the demand has required as well.
It was also probably a little bit of meeting a frustration – a little bit sometimes with our clients’ frustration in not being able to source properties and sometimes was our own frustration in not being able to source consultants, or builders, or things that we needed. Then we were meeting our own frustration and we were solving a frustration for our clients too.
Having saved for some years while he was an apprentice electrician, he decided to buy his first investment property in the heart of Sydney. This property was eventually sold and profits were used to purchase more properties.
I was an apprentice, that was in 1984. So I would have been a third-year apprentice at the time and I’d literally been saving for three years. It just sort of felt like that was the next natural step – that was a huge influence on my property investing journey and it was certainly encouraging me to get out there and buy something. I think at the time I had a grand total saving of about $20 000. So I went out to see what I could do with that money – $20 000 was a lot of money in 1984.
I was going to say, even today $20 000 is still a lot of money.
However, I’m not sure $20 000 would buy you a lot in the inner west of Sydney today!
But I went out and started looking and what I found was a property in Auburn, so pretty much the geographical heart of Sydney as it is today. I bought a fairly typical three-bedroom, single fronted home in Auburn on a standard block for the area, which was quite small – probably 400 or 450 square metres at the time – and purchased that for $59 000. I used my $20 000 to make up a 20% deposit, plus some stamp duties, plus some legal fees.
Then I think my $20 000 was all spent and that property I actually kept for quite some time, had it rented out for the whole time and really did some renovations. Initially, I certainly was doing those renovations myself, myself and Helen – Helen is my wife and I met her in 1987 – so I owned property already. However as tenants were moving out, we would go in there and give it a coat of paint, or when it was time for a new kitchen we’d organise a new kitchen – buying flat-pack kitchens or buying those out of kitchen showrooms that were no longer needed – and doing the renovations ourselves. We kept that property until 1995-1996, we sold it for $142 000 and went on to buy other properties with those funds. But I think initially it was at a $59 000 purchase, had a rental of $80 a week. It was quite modest at the time, but it certainly served us well.
Charalambous has continued to add to his property portfolio over the years, with around 12 in total, through commercial investments.
We’ve actually sold quite a few down just during the last few years because we felt the timing was right and currently a lot of our funds are now shifted into a commercial property. So we’re probably more focused on commercial and on our transactions that we’re doing. We’re doing some property options – which we may talk about a bit later – we have done quite a few of those and continue to do those.
But on the commercial side of things, there would be probably 12 to 14 at that sort of stage. But a couple of offers in there are one or two at the moment that we’re selling as well. I’m actually just working on a couple too with some rezonings, working with the council on some rezonings and packaging those for development and redevelopment.
He discusses the reason behind selling his residential properties and focusing on commercial property, saying that it came down to greater opportunities.
We were finding with the residential the returns were so much lower and we actually had a few that had some good opportunities for some rezonings and getting some DAs. And we did that and sold them, but we just found the opportunities were better in the commercial sphere. Again as I mentioned, just manufacturing that equity. So that’s where we’ve shifted at the current time.
These opportunities include improved rental returns and the freedom to make changes to the properties.
The rental return is far greater. We’re finding that because of the development upside of what we’re doing in our ongoing equity and manufactured equity is also a lot greater. Because of the level of we’re talking commercial properties – probably the value of $20 million depending on valuations and the like – we can make a difference to those quite substantially pretty easily. We can increase zonings, or increase floor space ratios, or increase rents in our commercial leases. For instance, we’ve always got annual locked-in rental increases that just go on every year. And this is increasing our bottom line month ongoing basis, without needing to worry about getting the phone calls from your commercial tenants asking for taps, washers and blocked toilets, for blown globes bulbs and that sort of stuff, you just don’t get it. They just deal with it themselves.
Yeah. The beauty of commercial is that everything is all managed by them, that we don’t have to worry about money issues, it’s just collecting their rent.
So we’ve got a lot into the commercial and into some cash investments as well that we just want to see exactly what this market is going to do with where we’re sitting with interest rates and where we’re sitting with the marketplace. We are seeing some opportunities coming back to the residential market. But I feel it’ll probably still be 12 months before I’ll be comfortable to get back into some of the residential staff. We’ve just seen things start to level off a little bit at the moment and again probably a bit more opportunistic, so I’m just looking for a couple of more opportunities that we’ll jump into there.
I suppose some of the residentials that we do, with what they are, I still consider them their commercial transactions even though we may be holding residential property. We may amalgamate two or three neighbouring properties and do DAs for townhouses, or lots of apartments, and they’re what I consider very much commercial transactions even though they’re on residential land.
Charalambous talks about one of his worst investing moments, which has taught him to be cautious with his investments.
Essentially I’m very grateful for my time in the industry and that starts from when I was doing my apprenticeship because it taught me a lot about the property market. And then my investments, again for whatever reason, I consider it very lucky to have generated what we have done out of the property sector. But one thing that I’m really clear on and one thing that I always share with people, particularly if I am presenting on stage, is that I’ll tell people that there are always risks and only ever invest what you’re prepared to risk. It’s just you do need to be very, very careful.
So some of our transactions, if I were to share some of those, went not necessarily the way we wanted them to. We actually worked on a site that was in Northwest Sydney in Kenthurst in the Hills district of Sydney, where we were looking to do a subdivision and we were working with the council on doing that. Everything complied, landslides were right, the zoning was right when we purchased this property. Then by the time we submitted the DA with the council, they had actually changed their minimum lot size. And it was a real issue for us. So we were suddenly holding a block of land that we purchased, it was a block of land with the house on it, that we’d purchased with the intention of subdividing it on selling and then we were told by the council that that block did no longer comply for a subdivision. So it was a major issue for us.
They generally will give notice, but it depends on where they’re at in their planning process. So unfortunately with this one, their planning process was quite a way down the track and they gazetted it after we’d bought it. However we hadn’t lodged our DA yet – had our development application been lodged with the council, it may have been a different outcome for us.
Overcoming that, he was forced to sell and learn the important lesson of always conducting due diligence and considering all of the possible outcomes beforehand.
We ended up doing some work to the existing home and there was certainly a possibility for a second dwelling on the house, which we did. And what that did was recoup some of the funds, however, we couldn’t subdivide. So those two dwellings had to sell, had to stay on one title and probably, in the end, I think we still lost about $115 000 overall on that project. And at the time it hurt. That would have been 2002-2003. So we probably weren’t helped in the Sydney market by the fact that 2003 was the top of the market. So we had to get out because we could see the market was going the wrong way.
The lesson from that for us was always about understanding that we purchased this property to do a subdivision, hence now why we’re a lot more careful going into our transactions and we will just about always set up some form of a due diligence period or some form of an option, to give us the time to be able to do our due diligence with council – get some answers from council and our consultants – on what is possible.
To give you an example on that, there is one on the market today, a residential block which we believe is subdivisible. We certainly haven’t purchased it, haven’t even put an offer in, but it’s currently with our town planner to make sure that we can do what we want to do before we submit any offers. So yeah, you’ve got to be very careful. A lot of people just feel that it’s a big block, or someone’s done it next door, or someone’s done it around the corner, or I’ve done it before. Doesn’t mean that you can do it today.
The moment where everything fell into place was when he created a formula that he was able to apply to multiple transactions, with great success. He considers these as win-win situations for both himself and the vendors looking to sell.
We’ve done joint ventures with people. for instance, that have sites that are either subdivisible or you can do multi-dwelling housing on it and we actually go in and work with an owner to unlock that potential. And we’ve done several where we’ve had a property where you can build two dwellings on and we will go in and do that.
The a-ha moment came in where we were looking for a property, looking to do subdivisions and we couldn’t really get the feasibility to work. Then all of a sudden we went in and started talking to the owners and in this particular instance what happened was, I went into an open home and the agent had to leave. And literally we got there and the owner had just arrived home. However I knew the agent and they said, ‘Is it OK? We’ve got to go,’ and I said, ‘Yeah I’ll just have a look round the outside.’ As I was just finishing up, the owner turned up back home, then I started talking to the owner. I asked her what she wanted to do when she moved out. She said, ‘Look, really I want to stay in the area. However, I’m just looking for a small home.’
The a-ha moment as if she wants to stay in the area and it’s only for a smaller home and I feel like I could build two on this block, why doesn’t she keep one of these? And so we worked with her and actually built two, she kept one and we kept one.
However, we actually created a recipe of these and said, ‘Well if this works and people like it, why don’t we do more of them?’ We’ve gone on to do 10 or 12 of these now with owners and one of them we actually built four homes and did a profit split. These worked really well and what I like about them is that they’re repeatable, so I can have a formula that I work to. We can tick the boxes. We know what land size we need. We know what the sales are going to be. We can control our construction cost and we minimise our risk – really important to minimise that risk. And learning from that previous experience that I mentioned to you in these examples, I don’t ever buy that land – in fact, I’m never the owner of the property, I just build the dwellings, the owner keeps one, we sell one and we take our profit.
The two properties, from our point of view, were about an $850 000 or $900 000 investment into that deal. So we invested $900 000 and we came out with $1.8 million. We made $280 000 in profit, she’s moved into a brand new home with $250 000 dollars more than what she was in two years ago and it’s in the same location.
Invest $900,000 To Generate $1.18 Million: Harry Charalambous
Beginning to grow his portfolio from the age of 18, Charalambous found that ‘barbeque talk’ with well-meaning loved ones spawned insecurities which held him back initially.
I actually found that quite a simple process, other than having the dollars to actually go and purchase.
What happens is though when you’re 18 and you’re single, when you do your investing and you buy a property that’s all going well, as you start to get a little bit older and start listening to what other people are telling you, you start getting concerned about what if things don’t go well. The fear kicks in the little voice kick in. The doubt kicks in. I think it’s also what I call – and you may have heard the term before – the barbeque talk here. Getting concerned about what if I succeed in this? What happens then? What if my mates don’t like it, or what if the extended family don’t like it and all that. That brings out the fear and judgement kicks in.
And I think that’s where you’ve got to be a bit more careful with the internal dialogue, as to why you’re creating what you’re creating, why you’re creating your property portfolio. I actually believe that your ‘why’ will be 80% of your success and if your ‘why’ is pure because of wanting to create money, then I think you’re losing something along the way. It’s a real issue. But if I look at my mission, which really is now all about helping others turn their dreams into reality, the ‘why’ is just ongoing and when I get a phone call every day from someone that wants my assistance when I get an email from someone that says, ‘Hey can you help me?’ To me, that’s all about our mission.
However, you’ve got to understand that some of these investments were done where we were having 12, 15, 16 and 17% interest rates and the fear comes in – it’s a very different time. So I think that there’s a point there and I call in a lot of my clients, because I do some coaching with some clients, and I call it the growing pains of your portfolio.
He also shares having a strong support system is founded, first and foremost, on the family. But it’s also important for him to find trustworthy people in the industry to provide help when needed.
Definitely the biggest influence was my dad in particular, certainly both my parents and just watching the way they did things – probably with much less education, much less technical knowledge and skill – but watching the portfolio of properties that mum and dad built during those times, that was a huge influence on me. Certainly, it moulded both my investing journey, as well as my business journey and me personally.
To be able to see the values that may hold, because you hear a lot of people talk about the property industry; there’s this person and there’s that person and they do the wrong thing by you. Well, I know that the people I’ve come across in the industry, whether they be real estate agents, whether they be consultants, whether they be builders, we’ve come across some great people and we’ve built a lifetime of friends.
So I think if you’re going to seek out some mentors, just seek out those that resonate for you and for your values. The biggest thing is you’ve got to have similar values, otherwise, if your mentor is suggesting you go left but your gut instinct is to go right, it’s going to be an internal dialogue that doesn’t work for you. So you just sort out mentors that have the same values as you do.
Through this network of people, Charalambous has learned to start small and then build on that.
Some of the things that have stuck with me is to keep it simple, start small without trying to change the world and recreate the wheel with your first transactions – just get the learnings, the learning is really important. I’ve seen people that come into their first property deal and may have a home, or it may even be before they’ve bought their own home and they’re looking to do their first property purchase and they’re looking for that first purchase to be their retirement fund. Just start small.
Treat your investing journey like you do your business journey. So I started as an apprentice and I ran a four-year apprenticeship, then when I get into the property industry I see that as another apprenticeship, you’ve got to learn from that. It’s valuable to be able to do that.
And I suppose what I shared earlier, a lot of people believe that their journey is all because of them. I think it’s really all about your team and the mentors and the people around you. Have a look at the people that you’re surrounding yourself with, make sure your goals are what you want them to be. If someone said to me what would I do differently, it’s probably going to start earlier and set bigger goals. But other than that, there’s probably not a lot of change.
Strategies which Charalambous has used successfully in the past have become a rinse and repeat formula over time, which have allowed him to manufacture equity.
The two main strategies we would run and have run is our joint ventures and our property options – we run them hand in hand.
The example I used in the previous podcast was where we turned up to the open home and the owner turned up just as I was leaving and we had a chat about what her needs were. So we actually took out an option to purchase the property, we took out a 12-month option. We paid her a fee to secure the property or to take that property off the market for 12 months and she retained that fee, even if we didn’t proceed with our purchase. What that option does is give us the time to do our due diligence, but two because we had 12 months on this particular one it actually gave us the time to do our DA and get our approvals, which in that case was going to be two new dwellings. So by the time we got to the end of the 12 months, we had our approvals in place, which meant that we could get our property valued based on building two new dwellings. So it was now a property that had approval for two new dwellings, as [opposed] to a property with just one house on it.
We actually got an increased valuation before we even purchased the property, as from our point of view it de-risks the transaction it makes. It means that we’re able to pay the owner in a lot of cases a little bit more because we’re not having to pay holding costs for the 12 months. If you imagine paying rates a bit lower right now, but in a lot of cases you’re paying 6, 8 and 10% holding costs, then you get a lot more as opposed to just paying. We could pay the owner an extra 3-4% on their asking price, however, we haven’t had to outlay that money until we’ve got our DA approvals. So it’s a huge difference.
But for an owner who is looking to sell, why would she agree to this deal and be willing to wait for 12 months before she could move?
When it came time to exercise our option and purchase her property, what we agreed with her was that rather than purchasing the property and building the two homes.
We were actually just going to build the two homes on the land and she’d keep one and we’d keep one, now to give you some numbers on this so that the listeners can understand, her home was actually on the market in St Ives in Sydney for $895 000. We offered to pay her $900 000 and we wanted a 12-month option, so we paid her a 2% option fee. So 2% of $900 000 is $18 000.
So we paid her $18 000, we’ve got this property off the market for 12 months and we can buy $900 000 by the end of the 12 months. We got a valuation on the property and it came in at a million and fifty. So our bank, if we wanted to buy, would have lent us the money based on a million and fifty purchase price, on that value.
But what we did was we went back to her and said, ‘We can buy this now. We’ll build the two homes, make a profit and everyone’s happy. Or if you like, we’ll build two homes, you keep one and we’ll keep one.’ And she went on that path. Now she may not have and we were happy to buy it, but she did go down that path where we then turned that option into a joint venture.
We built those two homes; on completion, one was worth a little bit more than the other. One was $1.15 million and the other was $1.1 million. She stayed in the $1.15 million, so she went from a property she was selling for $895 000 two years later because obviously it took about a year to build it. So two years later, she’s in a brand new home in the same location with $1.15 million that’s cost her nothing to build. We sold the other property for $1.18 million.
The two properties, from our point of view, were about an $850 000 or $900 000 investment into that deal. So we invested $900 000 and we came out with $1.8 million. We made $280 000 in profit, she’s moved into a brand new home with $250 000 dollars more than what she was in two years ago and it’s in the same location.
And it’s her own land as well, so she didn’t really have to maintain her address.
She kept the same address. One thing she did need to do is move out while we were building. In her case, she moved in with her daughter. She was happy and that’s a typical example of how we’d go from an option to a joint venture.
Now we’ve done somewhere at the end of our option period, we just exercise the option and buy them and do the building ourselves. We’ve done others where we’ve actually gone straight into a joint venture and never done an option. We’ve just gone straight in and explained the joint venture to the owners and done a joint venture with them, with the intention that they were going to stay there.
When exercising property options, Charalambous maintains relationships with his clients in order to create win-win situations which in turn, develops more connections with future clients.
We actually had a property that took an option. It was actually a bigger property, $2 million purchase price, it was a $20 000 option fee. What we did was we got an approval to build five dwellings on that property and the owner just wanted to sell. When we went in to look at this property the first time, the owner was getting offers between $1.8 million to $1.9 million. However, there were people that were just coming in to buy the property and buy it outright.
I actually had a meeting directly with the owner and the agents in the area got to know us quite well, so they were very happy for me to go in and sit down with the agent and the owner and have a meeting. The owner kept saying to me that he really wanted $2 million. He repeated that several times and the thing is, you have to listen to what people are saying. I think a lot of people forget that we were all born with two ears and one mouth! So you should be listening twice as much as you speak. And a lot of people did want to keep talking. But I listened and this guy kept saying that he wanted $2 million.
So, in the end, I said I’d come back to him with an offer and it was all about building this offer so that I could get him $2 million. We got almost two years under option on this property, we were paying him $2 million – in fact, we got 21 months in the end under option for $2 million. We were paying him $2 million when he gave a $20 000 option fee. This was in March when I was meeting with him, and he told me that his daughter was in Year 11 so I knew that he would want to keep some stability for his daughter until she finished her HSC a year and a half later. So I suggested to him that we would let him stay in the home for a year and a half and not disturb his daughter till the end of that time. He gets his $2 million and that gives us the time to get all our approvals in place.
With a vendor who was really happy with this deal, what other opportunities did Charalambous find?
It gave him the certainty that he was going to get his $2 million at the end, it meant that he could go looking for a property and in fact, when he was buying a property he wanted and bought acreage when he was buying a property. He actually asked me to go and have a look at the property for him and give him my thoughts. I was back three months and I was very able to do it. We built a relationship and all this is about relationships.
When you heard me talk about mentors and now about doing these joint ventures and speaking to the owners directly, working out what you don’t want, seeing if we can’t always deliver. Sometimes if people have an unrealistic expectation and we can’t live up to it, we’ve got to walk away. But all this is about relationships and with that $20 000 option fee that I paid him, I actually paid that in instalments – I think it was $5 000 every three months or something, for the first 12 months to give him his $20 000. Every three months, I’d go around and knock on the door and I’d have a check for $5 000 for him. So by the time the three months rolled around and I’d knock on the door, he was very excited because Harry was turning up with $5 000. He got comfortable with the fact that I was turning up and I was giving him money as I told him I would, then we’d sit down and have a cup of tea or a cup of coffee and a bit of afternoon tea together. But we built a relationship so that he trusted what we were doing. This whole industry is relationships.
Some of these people that we’ve done joint ventures with, I now get phone calls from their friends and family and all their neighbours saying, ‘Oh look you worked with my neighbour, or you worked with my friend, or I’ve been referred by this person. We’d be interested in doing something similar.’
So what was the outcome for him in this deal from a small outlay of around $20,000?
We actually settled it at $2 million and we were going to build the five dwellings, but at the last minute, we got an offer from someone else.
They came in with the DA approval that we had for the five dwellings, they bought our option and they paid us, or they paid for the whole property, $2.4-$2.5 million. And what that meant was the owner got his $2 million and we got the $425 000.
With such a developed strategy, Charalambous was able to implement it through outsourcing other professionals to help with the aspects which he didn’t enjoy doing. Now his negotiating on transactions whilst driving home.
We’re now in a business where we do our own DAs, that’s quite a simple process for us. However initially, we were outsourcing all that. We were just going to town planners, going to our architects and working out how to do it. So certainly a lot of it can be outsourced and when I started doing it, I was doing some of this whilst I was still running my previous business. So again I’m suggesting that people start slowly and start small.
I got an email from one of my clients yesterday who I actually had done a little bit of mentoring with and he said, ‘I’ve got someone that’s ready to do a joint venture with me. Can you assist me with getting the initial documentation in place?’ So doing the joint venture documentation and a Heads of Agreement and things like that. So he’s off doing his own thing. In fact, he’s an architect that helped design the dwellings. However he knows when to ask for assistance – so if you’ve got the skill inside doing the designs, just get assistance in putting the agreements in place. If you understand legal and you know how to do the agreements, however, you just need some skill in design, just outsource that piece. Stick to what you’re good at. Stick to what you enjoy doing and outsource the others.
It’s a bit like some people with investment properties who like to manage it themselves, other people get a property manager. It’s the same thing. Just stick to the bits you enjoy doing. That’s really important to me. For instance, in our business, I don’t do the accounts. It’s not what I enjoy doing and the person that does the accounts enjoys doing it and I’m really grateful that I have people that enjoy it. I enjoy being out there getting out there, talking to people, finding out what people’s needs are and seeing if we can meet them.
For Charalambous, his found what he really enjoys doing. Though how do you attract these type of transactions day in day out?
A lot of time people say, ‘You create these transactions.’ I don’t actually believe I create them, I believe I’m just putting myself in a position where I’m attracting them. So you’ve got to get clear about your goals, you’ve got to be clear about what you’re looking for and you’ve got to take the action now. Initially for us, as I mentioned, we were out there looking at open homes, talking to agents on a regular basis. Because we did a lot of these joint ventures incurring great councils so through Terramar we’re on and lives through that area, we actually did it in the local paper, the North Shore Times, which is the most widely read paper in this area. We did 10 000 leaflets, put them in every newspaper that went out and we got four times as an insert with one of our brochures, then we outlaid a little bit of money. However, from those brochures, we were getting calls off them for the next six months. People kept those brochures and then called us. So it’s about taking the action.
We went around and looked for the blocks that we thought were suitable, did letterbox drops again and people pinned our brochure up on their fridge and just kept calling us. Now, you may not want to walk the streets and just get someone to deliver them for you – it depends what works for you and how serious you are about it. Some people don’t want to do that, some people are happy just to buy a couple of investment properties and have them grow for them.
But as I mentioned at the start, I wanted to manufacture some equity and I wanted to accelerate the portfolio a lot quicker. The commercial sites that we’re involved in have got the potential far over this residential stuff. I really enjoy it because it helps me to help others. But the commercial things; I’m negotiating on some sales at the moment and I negotiated one where I increased the sale price of one of them by $1 million whilst I was driving home, in a negotiation in the car on my way home.
As his portfolio has grown, he has favoured investing in commercial properties rather than residential as it has turned out to be more beneficial in the long term.
Initially, when we started our business, we wanted to find somewhere where we could run the business. However, we said, ‘If we’re going to do that, let’s have that be something that we can add some value to.’ We went out and actually just driving down the highway in Turramurra, we saw a ‘For Sale’ sign and it was on a property where I happened to know the owner. The reason why I knew him was that a few years earlier, I had done electrical work for him on a shop that he owned which used to be a takeaway.
So I literally went and knocked on his door and I said, ‘Hey Bill, how are you going?’ and we had a bit of a discussion. I said, ‘Look, I see you’re selling your property,’ and he said, ‘Yes I am.’ I said, ‘I’m looking to buy property in the area.’ So we had a discussion and it probably took us a week to 10 days and a bit of turning and throwing, then we came to an agreement on buying his property. We then arranged to get access during settlement, we had a three-month settlement, we agreed on price. During those three months, we went in and refurbished the property. He was actually running a business downstairs and living in a unit apartment above the business. We got rid of the stairs, closed the flooring, renovated top and bottom. We ran our office upstairs and we’ve had a tenant downstairs since the very first day in 2005 when we bought the property.
And what has changed since Charalambous bought this property?
That’s been great from a cash flow point of view and we’ve actually since gone on to buy properties on both sides of this as well and we amalgamated it to become its own development site. However the difference is what we bought was a shop with an office above, but the intention was that we knew we could work with the Council on getting the rezoning done. And in the time that we’ve owned this, it’s gone from being what’s known as shop-top housing to being commercial zoning with a six-story height limit. So this property has gone from having a value of a purchase price of $820 000 to today, looking at being sold for somewhere in the vicinity of $4 million. And it’s probably more than that. We’ve run our business from it for the last 10 or 12 years.
We did a renovation in 2005, but where the value-added has come in is because of the rezoning that we’ve worked with Council to get on six stories, then amalgamated it with next door and now on-selling it to someone that wants to actually develop it and do the six stories. That is really minimizing my risk from just having one tenant down there that are basically paid the mortgage since 2005. However, when we sell it, we’ll end up with a 400% growth.
For Charalambous, the ultimate goal in the majority of these projects is to create equity by adding value.
I suppose simplistically the biggest upside comes in increasing your density and to keep it simple so people can understand that, it’s just increasing the density. So if you go from something which is a single residential, being able to do a subdivision there, increasing the density from something that was only two stories to something that is now a zone for six stories. It’s also gone from a floor space ratio of 1:1, which means if you’ve got a block of land which is a 1 000 square metres in size, then you can build 1 000 square metres of the building. We re-zone this from 1:1 to 2:1 which means we’ve got thousands of square metres of land; we can build 2 000 square metres of the building. Obviously that’s over multi-stories, not on the ground. So the increased density is where you make your manufactured equity. It’s always about the increased density. So whether that is floor space ratios, extra stories or subdivisions, it’s always the same outcome. Generally, increased densities equal increased equity.
Talking about personal habits, Charalambous believes the one that has contributed the most to his success is investing time into his day.
I mentioned in the previous podcast about blocking time out for myself and some quiet time. My business partner often talks about the times where success is created the most is actually when I go on holidays because what happens is you get that time and you come back with a clear head. You come back with an open mind and you’re able to think a bit clearer.
The way I do that day to day is every morning, 365 days of the year, my alarm clock goes off at 4:50 am and I’m normally out of bed than out the door by about 5:10 am, 5:15 am. Between 5:15 am and 6:15 am I have one hour to go for a walk and I’ll be listening to my podcasts, I could be listening to a motivational speaker. But it’s my time. It’s whatever I choose to do during that one hour on my walk. So I start the day with my exercise, with some quiet time and also with some sort of motivational – it could be something of interest or motivation to me.
And people ask, ‘How do you get so much done?’ If you add one hour a day to your day, giving you 365 hours a year extra, that’s actually nine 40 hour weeks extra that you get over a one year period – which is equivalent to two extra months.
So that one hour of quiet time to me made a huge difference. On the odd occasion if I miss it, my wife knows and by the afternoon she says, ‘You’d better go for a walk, you’re getting grumpy.’
He shares with us some of the motivational speakers he listens to during this one hour of his day.
A lot of the motivational speakers that you would hear out there, certainly guys like Bob Proctor, I like from a motivational point of view. Brian Tracy is great business-wise. Most of your listeners I imagine would have heard and listened to some of the Tony Robbins stuff, they’re just classics. I think they are timeless messages that have got so much to teach us and the more you listen to them, if people want to drill down a little bit deeper into their own personal habits, guys like Wayne Dyer and Deepak Chopra are really good from a personal point of view.
If you wish to connect with Charalambous and learn more from him about his strategy and how he can help you, then visit
I’m happy for them to call but they can certainly have a bit of a look at our website which is planassist.com.au and email me directly and just mention your name, mentioned Tyrone and that you heard me on the podcast.
My email address is [email protected] I’d love to love to hear from you and if there’s anything that people have taken or any questions that people have got, please share them. That would be great.
This episode was produced by Alex Cooper with narrations and interviews conducted by Tyrone Shum.