Property investing extraordinaire Chris Gray rejoins the Property Investory podcast today for an in-depth learning experience of his ‘too simple’ strategy that has garnered him millions of dollars and 14 properties in his portfolio.
Gray will discuss the most important steps of his strategy, such as purchasing in a limited supply area, where prices are always rising, and never going more than 20% of the median price.
This buy-and-hold strategy is favoured by many guests of Property Investory. But each one uses it slightly differently.
Stay tuned to hear exactly how Gray uses his strategy.
Let’s start off with, in 60 seconds or less, what do you do in any given day?
It changes day by day, and that’s basically how I wanted my life.
Mondays, I’m always recovering and doing Sky news. Then, the other days, quite often it can be in boats, supercars, choppers, having meetings. I just love meeting people and learning stuff. Part of my time speaking to clients as well and putting deals together, but pretty much every day is completely different.
That’s Chris Gray, accountant and property investor from Your Empire who semi-retired at the age of 31.
I basically started investing at 22, and semi-retired out of Deloitte, the accounting firm, at 31. I then basically started teaching people what I’d done, because everyone said, how come you managed to retire early?
In this episode, a man known as a mix of a lifestyle guru and number cruncher used the property to fund a living that gives him more choice and flexibility than most dream of.
He is the host of Your Property Empire on Sky News Business Channel, is the Property Expert on Channel 9′s MyHome TV and a Financial Judge on Channel 10s The Renovators.
I spent a lot of my time doing media on TV and radio and magazines, I guess, just teaching every day Australian through the professionals how to invest in property and how to have more of a money mindset.
Gray says he’s quite a contrarian and doesn’t follow the norm. He’s got a reasonably sizable company, with no offices and technically no staff. Ideally, he wanted every day to be different spending a lot of his time networking and learning. His involvement in various entrepreneurs’ groups and travels overseas about a week each month living an amazing lifestyle.
The overriding thing about me is more about the lifestyle. I’ve always stood up and pretty well known for having the lifestyle of playing with all these toys and not having to work for a living, and I guess that’s where I’ve got a lot of followers because some people aspire to have that kind of lifestyle as well. But the basis of everything is, I make all my money from properties. So, even though I’ve got a business, the majority of my money I actually make from earning my properties and the properties increasing. I guess I’m also known as being a bit of a contrarian. My philosophy on money is the complete opposite to most other people. To give you some examples. I’ve got, say, 14 properties roughly worth about $15 million, mainly in Sydney and some over in the UK, but I still don’t own my own home.
Contrarian indeed. Gray and his family don’t own their home to live in. With a property portfolio of $15 million in today’s currency, he chooses to rent and this is where he challenges traditional thinking…
I’ve got a wife. I’ve got two kids that’s seven and eight that are at school. We’ve got a traditional family unit, but we don’t aspire to own our own home, and if we did own our own home, then we’d never pay a cent off it.
So, having that contrarian mindset is all part of this wealth creation thing, that if you want supersonic cars and boats and choppers and big houses and the rest of it, sure you can just go and buy them, but there are a lot cleverer ways of doing that, like renting or syndicated ownership or buying secondhand cars rather than brand-new. I guess it all comes together, but the ultimate basis is, yeah, the wealth creation is through the property.
Instead of going to school, concentrate on their university studies and then follow a career ladder, he shares the reasons why he did the opposite to what most people do.
I just did things differently because I thought people create money from wages and then get into wealth creation to try and then build wealth. I kind of did it in reverse, and I thought, why not concentrate on building wealth straightaway? So, in Deloitte, they found it really hard to motivate me, because I wasn’t motivated by money like most other people, or bonuses, because I was making so much money from property. If they paid me a $5,000 or $10,000 bonus, it didn’t make any difference. This is the problem is, especially the people that are really up at the top end of the ladder. They just do not have any time whatsoever to concentrate on personal finance. So, sure, they’ve got a paid off home.
Sure, they’ve got money in the bank and money in super, but it’s nothing compared to what they could have if they actually just leveraged it, even 50% of something. So, that’s why one of the chapters in my book is, it’s called, it’s not about what you earn. It’s what you do with your money that counts because I saw some really, almost PAs that had four or five properties and they had more than the partners that were earning maybe half a million, a million bucks because the PA knew that she was going to be poor because she may be only earned $50,000 or $60,000. So, she knew she had to work harder on personal wealth. Whereas someone on a high income may automatically assume they can be wealthy and they can get lazy on their wealth creation.
Wealth creation through the property is not new at all. Gray says if you want to live a big lifestyle, it is about being creative and finding cleverer ways to achieve this and that is what he’s done with the family home.
What I worked out then is, if you buy, say like Monopoly, all of those greenhouses, all those million-dollar Bondi two-bedroom units with parking, lots of people want those. So the rent return is pretty high. Normally, it’s around 4 or 5%, but then I worked out that $5 or $10 million homes, not many people can afford to rent them, because anyone that can afford to rent them would always buy, because there’s the perception that only poor people rent. So, what I worked out about 10 years ago is, whatever I could afford to buy, I could rent somewhere three or four times more expensive for the same kind of money. So, that’s why I don’t rent my own home these days, because I can rent something very expensive that’s only got a year at 1 or 2%, but then all of my properties I rent out and get a 4 or five percent.
That’s how he can live in expensive houses, drive supercars, boats, choppers…
I used the equity in one of those to buy a Porsche. Again, the thought process with that was, was that I couldn’t afford a Porsche on a three-year car loan. But I could afford a secondhand Porsche on a 30-year mortgage by effectively pulling equity out and using the equity to buy the Porsche.
And give back on charitable causes as well:
Back in about 2008, I climbed Kilimanjaro, and it was $50,000 each, which obviously is a lot of money. It’s mainly a donation to charity, but the kind of people that would go to that are people that can afford to raise $50,000 or write a check for $50,000. Again, a lot of time, people say that your wealth will be the average of 10 people that are closest to you that you hang around, and that’s what I do is, I hang around entrepreneurs and wealthy people and they hang around, fly me up mountains and in super-cars and car days and boat days and things like that. That’s where my target audience is, which is good fun.
Which is fantastic. They’re also your clients and also close friends as well?
Yes. Typically, I’m lucky enough now I only work with people I want to work with. If I don’t like people, then I won’t work with them. So, typically there’s not that much difference between the friend and the client, because if I’m going to work together, then I need to get on with them and I need to like them. I guess a lot of people become friends to start and then they learn what I do and then they say, well, my expertise is in shares or is in business or something else. So, can you help me with a property portfolio? Then, obviously, I help them as a friend and as a client as well.
Gray’s written a number of books, one in particular on mindset, and another similar to Tim Ferriss’ Four Hour Workweek.
Exactly, so when Tim wrote the book, ‘The 4-Hour Workweek’, about a year before I’d actually written a book called ‘How to Turn Your Weekdays into Weekends’. So, how to work two days a week and have five days off versus the other way around.
He says Ferris’ books were much more popular.
Much better title and a much better book, and he sold millions of copies, so…but I guess the mindset’s pretty much the same. Again, you’re going through his book, I guess I’ve done a lot of those things in terms of outsourcing, have virtual assistants or personal assistants, and basically just trying to find the cleverer way of doing stuff, rather than doing things traditionally. Almost like Robert Kiyosaki days of Rich Dad, Poor Dad. It’s the old traditional way of, go to school, get a good job, go to university, all that kind of stuff. It’s not the way we do things these days. There’s nothing wrong with doing it that way, but there are sometimes some smarter ways of doing stuff.
You’ve just heard about a man who’s used the property to fund a living that gives him more choice and flexibility than most dream of. Gray explains his childhood was the catalyst into the property.
So I grew up back in North London and I finished school at 18, got a job as a courier in London. I just loved driving. Even though I didn’t earn any money, I think I actually was more in debt after I finished working than I was when I started, but I guess how I got into the property was, I came to Australia backpacking for three or four months. Had absolutely no money, lived in a backpacker’s in Manley Beach in Sydney. Even though I had no money and I worked seven days a week, you could still go to the beach for five or six hours, do a day’s work, and then still go out drinking. It’s just an amazing lifestyle. So, even if you have no money, you’d have an amazing lifestyle in Australia. I went back to the UK and my mum actually gave me a curfew, and she said, you’ve got to be back by midnight. I said, mum, look, I’ve travelled all the way around the world, surely I can get back from the local pub. But she said, it’s my house, my rules, and you’ve got to be back by midnight. That was the catalyst because I’ve seen what it was like to leave home and to be in better places. So, that was my catalyst to push me into the property, whereas I guess a lot of my friends hadn’t had that backpacking experience and hadn’t seen what it was like to have your own apartment or to live outside from home. I guess they didn’t have the same catalyst that I did.
He came from a wealthy family and with the help of his parents, they gave him a good head start in the property.
My dad was a heart physician. My mum was a nurse. They were very much into a church in the community. They were very non-materialistic. Obviously, I came from a pretty wealthy family, because my dad was a doctor or a high-income family. But they never had an interest in those material kind of things. They gave us a good head start with property. We had a property deposit.
So, at 22, I earned 10,000 pounds. So, about $20,000-$25,000 Aussie, and I had a deposit, I think of about 10,000 pounds in those days. Basically, I just worked the numbers. I looked at what I could afford, which is normally three times your income. So, I could afford a 30,000 or 40,000-pound place, which even in those days was a pretty rundown, crappy one-bedroom unit. I then started looking at three-bedroom houses in the best part of town, even though I couldn’t afford them, and I fell in love with that kind of things. I basically set myself a goal and said, right, I want this property.
It was one for 100,000 pounds and basically, long story short, what I worked out is, first of all, I could buy that for 80,000 because the guy was pretty keen to sell, and I wasn’t involved in the chain. So, it was a first home buy it was quite attractive because you could basically settle on the property within five or six weeks. So, it’s nice and clean. I basically went to the bank and through my dad’s guarantee I said, look, If I buy a 30,000 or 40,000-pound place, I’m going to be mortgaged for life. I’m going to have no money. I can’t afford to go out. Whereas if I can afford to get a 7 times mortgage and get a three-bedroom house, I can rent two rooms out to two mates. In those days, the rents were around 10 or 12%, and that would actually pay the whole of my mortgage off so I could actually live for free. I then took it to my dad as more of a business case to say, look, Dad, I need your help, if you can. I’m not after your money. I just need to try and get a guarantee to the bank because the three-bedroom house is going to be free, whereas the one-bedroom unit is going to cost me a fortune.
I’ve just had this mentality. My skill base is very much, I look at normal problems. I translate it into basic numbers, and the basic numbers tell me a different story to what the emotional choice that our parents and our grandparents and society tell us what to do.
After he bought the first property at 22 and then another property one year later, he took a break for 5 years before he moved to Australia.
At 27, I qualified as an accountant and that got me residency for Australia. So, I basically jumped on the next boat and came to Australia and immigrated at 27.
Gray worked for a dotcom in 2000 and experienced first hand what it was like to work 80 hours, six days a week.
Even though I enjoyed it, it was young people, we went from 10 people to about 130 within a few months
I was working six days a week and then sleeping on the seventh. I made some money through the dotcom, but basically, after the GFC came about and obviously the shares all collapsed, I then said, well, I don’t care how much money I earn. I’m not enjoying the Australian weekends and the lifestyle and the rest of it. That’s when I said, well, to me life isn’t purely about money, and I want to live the life, and this is what I came to Australia for. So, that’s when I left and then I started actually into recruitment and got into Deloitte through recruitment, interviewing CFOs. That’s when I really learnt that you’ve got to live the life, and I met so many unhappy people that hated their jobs through kind of recruitment and interviewing people, that that’s when I really learnt there’s more to life than just working and money.
Yeah, you mentioned in your book that you interviewed quite a number of CFOs and very high net worth type of people and also very high cash flow people, or high salary I should say. I think to the numbers of over 1,000, and you discovered there were a quite a lot of people who had a lot of income but were very time-poor. Can you elaborate a little bit more on that, and how something like that inspired you to look into property as well?
Sure. So basically, in my recruitment role then, I used to have to try and find the candidates. So I had to find financial controllers and the finance directors to put into some of Deloitte’s clusters as a recruitment firm. So, I basically had to interview 10 people a week. That wasn’t too time performing on me, but over two years, then that’s 100 weeks. So, that’s about 1,000 people that I interviewed. Most of these guys could do their jobs. They were very successful people. So, more the interview process was more getting to know about them personally and quite often, we’d talk about money and houses and all the rest of it, because I had a personal interest around that. This is the thing that I learnt was, a lot of the people I’ve met that were suddenly in their 40s, 50s, and 60s, they were struggling to get contracting jobs because they were competing against a 30-year-old backpacker from the UK or islands that was maybe getting $30 or $40 an hour, and they were arguing, look, I’m a CFO, I used to be on $200,000, $300,000, $400,000 and maybe $100 or $200 an hour. So, I’m a bargain to a firm that wants to hire these people.
I learnt the very ageist workplace in Australia and probably the same in the UK in that a lot of these companies, they would rather get the fresh flood in at $30 or $40, even if someone with 40 years experience would do the same job and maybe do it better because they wanted to mould the young people and train them. Whereas someone that’s done something for 40 years is maybe more set in their ways. So, I suddenly thought, an accounting job is a job for life, but I suddenly turned around and realized it wasn’t. So, suddenly, a lot of these people that had their big, expensive homes in Mosman, they had kids at private school, they might have a wife out shopping or at the gym all day, expensive cars, overseas holidays, and suddenly these guys were battling to get $30 or $40 an hour at the same time. That’s when, over that period of two years, I realized that I definitely didn’t want a career. At the same time, I think I was earning about $80,000, so $60,000 after tax.
Gray shares when he purchased his 3rd property and what happened.
So, I guess it was really just when I came to Australia at 27, then I needed to buy a property to live in, because that was always the done thing. So, I guess I then just started building up from there. Again, it just kind of happened by chance in away. I wasn’t aspiring to be a big property investor, but I guess I bought the first one in ’99 for $360,00 in Coogee. Everyone said it’s all going to collapse after the Olympics. You’re absolutely mad. Now, that property is worth $1.1 or $1.2 or something. Then, for some reason, I was going to buy another one in Tamarama and I think maybe I’ve just started sort of accumulating stuff and rather than selling it, just refinance it and then buy the next one. Again, I don’t think it really hit me until about 30 or 31, until I actually kind of gave up work, and that’s maybe a year before I gave up work. I just happened to be doing something, and it just fell into place in away. So, it wasn’t necessarily a really defined goal that I set in my 20s and 30s.
And that’s when his properties began to rise in value each year.
The property market was really booming. This was about 2003, 2004. So, I had six properties all rising by 100,000 a year for a couple of years. So, I was making $600,000 a year from property investing doing nothing and paying no tax on it, and earning $60,000 from Deloitte. And this is where the whole puzzle came together. If I can earn $600,000 for doing nothing versus $60,000 for working a 40-hour week, then I’d rather take the $600,000.
It’s his wealth-building strategy that he believes works.
Of course, that’s a no brainer, I think any person in their right mind would definitely take this.
I’m not a great accountant, but I was good enough accountant to work that one out.
Yes, I think that’s a no brainer, for most people anyway.
With a property portfolio that was growing steadily, I asked him what his portfolio is worth in today’s market.
So I’ve got say 14 properties, worth roughly about $15 million.
Though, he points out it was not all smooth sailing to get the 14 properties he currently owns.
My biggest issue that I’ve had with investing is, I invest too much. For most people, they don’t get off their backsides and do anything. I’ve always been too far the other way. In the UK, you could get into debt at 18. I got into debt at 17. My debts got just bigger and bigger. Again, you’re taking on that first mortgage of seven times your income versus three times. So, my mortgage repayments were more than my wages before tax, let alone after tax. So, I’ve always got used to debt from an early age. But, look, in probably the late ‘90s, maybe early 2000s, I was probably almost in negative equity because I was highly geared, maybe 90 or 100% geared anyway, and then the market kind of fell off a bit. So, it’s 50-50 whether my properties would have actually paid off my debt. Again, you’re going to see the accountants and getting all the good advice that I got, and from people like Angus Raine from Raine and Horne, and he was a very, very generous guy that gave me a lot of his time to help me. A lot of these guys said, look, Chris, you’ve got to hang onto your portfolio.
If you sell your portfolio, you’re going to end up with no assets and you’ll still have some debt and you’ll never be able to repay that debt. Whereas, whether you beg, borrow, or steal, or obviously maybe not steal, but get five jobs and just hang on. Because I think at the time, I had about $3.5 million in property, and all you’d need is to get 10% growth and you suddenly make $350,000 and suddenly all your problems are over. So, I think in the age from probably 30 to 40, there was various different times when I’d really pushed the limit massively of down to probably my last $10 or $100 or something like that. I was almost wishing on heart attacks to claim on my insurance and hopefully survive the heart attack to then get the payout so I’d get myself out of a rut. It was very, very tough. At times, I’ve had years of sleepless nights. This is the downside. It’s not all positive, and a lot of the speakers people say, oh, it’s so easy, and it feels easy in hindsight, but at the time—it’s all my doing, and I did it knowingly, and I was willing to take those risks to then have the upside when the market did move. Look, there was a lot of sleepless nights and a lot of stress and stuff like that, because I was pushing the limits beyond what most other people would do.
Then there were many “aha” moments for Gray, allowing him to achieve the success he has today.
Yes so, probably the biggest one—I guess there’s lots of little ones along the way. For me, it went from owning that first property, I remember coming down the stairs and I’d had nothing in the house whatsoever because I had no money, no furniture, but I had a 100-pound IKEA futon mattress and a case of warm beers. In the UK, we used to drink warm beers. So, you didn’t even need the fridge, just room temperature beers was fine. That was one of my proudest moments.
I think refinancing the Porsche again was another massive one. I didn’t know what I’d done. I didn’t know about refinancing and I did a joint venture with my dad. I didn’t know joint ventures were, but I did one. I just do logical things and then I’ve learnt what others called afterwards.
I think the day I retired from Deloitte, and I sent an email to everyone saying, I’m retiring. I’m no longer going to be on this email list, again, a very, very proud moment.
You got to wake up and say, hey I have got an amazing life. Today, I’m sitting in my, I guess, home office looking at the Opera House and the Harbor Bridge, thinking, I never, ever thought I could have this kind of lifestyle if I looked back 20 or 30 years into my kind of late teens and early 20s. I’d have no dream, and a purple Lamborghini downstairs and the boats on the harbour and all of these kind of things. It just sits there and it’s just normal stuff now. You’ve still got to pinch yourself, I guess, in away.
Very nice, very nice.
Many people have asked, what is his logic in buying all these luxury stuff that he will never pay off?
With the Porsche thing, then, a lot of people said, yes, but you’re using debt to finance luxury goods for depreciating assets, which is true. But if my property’s gone from 80,000 to 100,000, and I’ve made 20,000, a lot of people would sell that and then go and buy a 20,000-pound car. And they think they’ve made 20,000 and that’s good, but then they haven’t got an asset. Whereas by access, and I think I borrowed 10,000 or 15,000 pounds, then I still kept that 100,000 property, which then grew to 110,000 and 120,000. So, I was still making that. Even if I sold it at any time, at least I still have the equity there. So, I wasn’t chewing up too much equity, but the main thing was, I still kept the appreciating asset, and that was going up by more than the depreciating asset, or the car. It was actually going down.
So, therefore, your asset was making more money than your depreciating liability, which obviously, makes more sense. Even if you sold your Porsche that was holding a value, you’ll still get money back anyway in the cost or the coverage of your asset will be able to pay that off eventually.
Exactly. So, I think this is a really strong point to make is, I’m very much a believer in rewarding yourself as you go. So, I got into massive debt at 22 and at 24, and I think at 24, when I bought the second property, I then refinanced and then bought the Porsche. It’s to reward yourself. So, sure, I hadn’t worked physically hard, but I worked mentally hard to suddenly have two assets that were worth maybe 200,000 pounds in the UK then, at 24. Why not then take some money off the table at the same time as well? Don’t take it all out. Don’t squander it all. But there’s a bit of a balance in between.
Having balance is key when building a property portfolio and Gray says you’ve got to enjoy the journey. He admits he hasn’t reached the top of the mountain just yet and has many goals he’s yet to accomplish.
I guess my next goal is really just having enough of a buffer. I’m probably about 60% geared on my portfolio, and I guess I really wanted to get down to about 50 to then have 30% of buffer, ideally in cash so that no matter what happened with interest rates rising, or if I completely stop work and didn’t have any income coming in, then I kind of wanted enough cash for maybe 10 or 15 years that I didn’t have to worry about, no matter what. Look, if interest rates did suddenly double to 10 or 12%, then my cash flow position would be massively changed. I think I’d still be fine, because in my book, I still work on interest rates at 7, 8, and 9%, so I do stress test myself. I’d just rather have a lot more excess buffer, excess cash, just to count through anything that might happen in the future. That’s the next thing on my to-do list, which is again part of a journey that will probably take another one or two years or something like that.
Wow. That’s very exciting, actually, to actually be able to do that. I think a lot of people strive to get to where you are, especially when you’ve got a portfolio $15 million on 14 properties. It’s actually a stretch goal to able to achieve something like that.
Yeah. Part of its greed. Say the market goes up 10%, so I make, say $1.5 million. If I can give 80%, then I can maybe pull $1.2 million out in cash, subject to serviceability. Now, it would be very tempting to go and buy another $5 million worth of property with that, in order to gear that million up by 80%. What I’ve learned is, it’s whether you’ve got $10, $20, $30, $40 million. After you get to a certain point, you don’t really do much more with the money. It is then quite often agreed on thing or just a tally score against someone else. So I would rather have $15 million in property and $5 million in cash than have $20 million in property and no cash in the bank. Because if interest rates are for the market crashes or all of these things which I don’t think are going to happen, then that whole house of cards could all fall down like dominoes, and then suddenly you’re left with nothing. I’m trying not to be greedy and trying to be grateful for what I’ve got and trying to be more conservative to then say, no, look, I’d rather have the $15 million and build up a couple of million in spare equity or spare cash than constantly trying to be $20 million or $30 million or $40 million.
Because say my car is, it was a three-quarter of a million-dollar Lamborghini. I bought it for eight or nine years old for $250,000. It’s now worth maybe $300,000-$350,000. So, it’s actually come up the curve, and there’s almost starting to increase now. Sure, I’d love the latest Aventador, which is $1 million for a convertible. I can afford to buy one, but I can’t justify one. So, if I really kept pushing myself, sure I could afford a brand-new car and I could afford a much better place to live and a brand-new boat or something like that. But the incremental satisfaction you get from going from a 10-year-old car to a brand-new one is very, very small. Maybe you’re in a $5 million home, or $7 or $10 million. Again, it doesn’t really change. It changes massively from a half-million-dollar home to a million or a half-million to $2 million, but the difference between the $5 and the $7 million home doesn’t make that much difference. Again, it’s just trying to learn from these other people to say, if you constantly keep pushing the limits, at some point, it’s all going to crack and something’s going to go wrong.
Moving forward into the future, this is what Gray is really excited about now…
So I just try to find new things to go and do, so one of the organizations I’m involved in is called The Entrepreneurs Organization, and there’s about 12,000 of us worldwide. You basically need to be the founder of a business, turning over at least $1 million, and there are a few other criteria. I’ve probably changed about two-thirds of my friends a few years ago to just hang out with a lot of these guys, because were a lot of friends before were typical employees and they did their 8:00 to late, and then they go home and watch TV and have their meat and two veg at home, and then spend time with the family. With a lot of these entrepreneurs, there are no rules, especially when you go overseas. A lot of them, the Asian families are the third generation so they might have billion-dollar companies. Whether you turn over a billion or a million, you’re all equal around the table, and this is a big philosophy of the organization, and there’s no judgement. There’s no ego.
So, I travel around a lot of Asia and around the rest of the world just seeing these other guys all learning off each other. We’ve all got different things to teach each other. I just love the learning now. I’ve spent a lot of time, not so much reading books, but just listening to speakers and listening to people that have actually done stuff. I go to countries that I’ve never even heard of, like Komodo, where the Komodo Dragons are, which is an island in Indonesia. And to various places in China, I’ve never even heard of. So, I think we’re off to Mexico in March and then Seoul and then Fukuoka in Japan. So, I’m travelling to all these amazing places, meeting lots of amazing people, and I’m just learning new things. That’s what I strive for these days, is just to meet interesting people, learn things that I haven’t even thought of, and come up with other ideas of things I can put on my bucket list and go off and enjoy it.
If you suddenly bought 10 or 20 properties and the market turns or you’re in trouble for 5 or 10%, then that can be a lot of money, and it’s not a thing that you can ever get from having a job.
Gray’s Strategy That’s Too Simple For Most Clever People: Learn the Secrets of Building a Roman Empire in Property Investing
If you were in his shoes and the property market did turn south, what would you do?
My mindset was pretty closed like most people’s. My dad was a heart physician, studied at Cambridge University. So, he was very much an academic and decided that we should go to school, ideally go to university, get proper jobs and things like that. So, I was going to be an employee for life, and I just happened to go down a different type of journey. I guess I was quite rebellious as a kid. If I was told to do something, I’d always do the opposite, even if I wanted to do it. So, suddenly 10, 12 years later then, ended up being unemployed or self-unemployed retired or whatever you want to call it. Then, more of an entrepreneur these days.
He had to adopt a different mindset when he starting buying investment properties.
I think the main thing with mindset is more that anything is possible and really there aren’t any rules. If people tell you that there are rules, then there’s always a different way. Ultimately, it all comes down to your why. Now, being an accountant or an ex-accountant, I’m very numbers-focused, and I’m not into this airy-fairy kind of seminars where you dream and draw pictures and the rest of it. In hindsight, I know this is one of the most important things. You’re the biggest thing is, what is the reason you’re doing this for? Because it’s going to be a tough road, and it’s going to be a long journey. It’s not going to be overnight, and there’s going to be some pretty tough hard times that will really test you. This is when your why is strong enough, then that’ll get you through things. If you’ve got to ring 10 banks or 50 banks or 100 banks, then you’ll go through that, because failure isn’t an option. Not repaying a loan and becoming bankrupt or something isn’t an option. You’ve got to repay all your loans. So, you will beg, borrow, or steal, or have five or 10 jobs to be able to do that. That’s when you need an open mindset to say, okay, I’ll keep going down this way. It’s not working. What are the other options? How can I go and do it? Rather than accept the no, it’s, how can I go and do it?
Yeah, definitely. Having the resilience to be able to push through and persevere without giving in, because a lot of people will end up giving in. Either they sell the property or they just, as you said, don’t pay it and lose it through the bank, which is not a good thing as well. It’s definitely having that resilience to push through and changing that mindset to go, okay, nope. I’ve got to do it. Whatever it takes, I’ve got to be able to push through this whole problem or issue that I’ve just put myself into.
It depends how hard you push yourself, because if you just buy one additional property and if it doesn’t go right, sure you can sell it and hopefully things will be okay with the bank, and it’s not a big deal. But if you suddenly bought 10 or 20 properties and the market turns or you’re in trouble for 5 or 10%, then that can be a lot of money, and it’s not a thing that you can ever get from having a job. Sometimes, you’ve got to push through. I remember hearing Aussie John Symond. He said I couldn’t get a job at McDonald’s to solve my financial problems. I had to do it big or nothing, or effectively fail. It’s really putting you in your position where there is no choice, where you’ve got to make it work.
Gray believes in educating yourself before investing into the property and his a true believer that most courses are good, though what you pay for is what you get.
I’ve done multiple courses over the last 10 or 15 years, and a lot of them are probably not around these days, because quite often the speakers might be around for a few years, and they morph into something else or their business changes, I guess just like my business. I started off mentoring, I think at about 32, 33. I did that for a few years. Then now, we just do the buyer’s agents business.
My thought is, I think all the courses are good. Sure, some are free, some are $1,000, some might be $5,000 or $10,000, or even $50,000. They’re all good, and do what you can afford. You can’t do them all at the same time, but my thinking about doing one course a year and start off with the free ones and move to the paid ones. A general thought is, you get what you pay for. If you go to a free course, you’re probably going to be sold lots of other things, but there’s still lots of great information there.
If you’re paying a few thousand for a course, then the chances are you’re going to get more value out of that, because you paid good money. People are only going to give information up. For someone like me, I didn’t go and speak for a few hundred dollars. If someone really wants my time, it’s hundreds or thousands of dollars. If you really do want those experts, then you’ve effectively got to pay for them. Some people say, how do you know who’s good and who’s bad? I say, look. Even if someone’s just got out of prison, I think it’s worth learning from them because you can learn how maybe they did the wrong thing or how they ripped someone off or how they bent the rules or whatever else. Obviously, I’m not going to advocate anyone ever does anything illegal or stretches the boundaries too much. But it’s more a case of, learn how these other people got ripped off so you can then go and counteract that so you don’t get ripped off.
One thing that he advocates when investing in the property and a big tip for everyone is to get an independent bank valuation. He explains why…
Probably one of the biggest things I learned from the first course I did, which I advocate all the time now, is getting an independent bank valuation.
Whenever buy property anywhere in the world, if you go to a completely independent valuer, and probably pay them $500, I’m not talking about giving a $25 online one, I’m talking about getting a full inspection. That value has then got an insurance policy that, if it was ever proved that the property you bought wasn’t worth what you paid for it, effectively you could sue the valuer. It’s not to have a property investing strategy based on suing people, but a value, if he’s putting his balls on the line about things, he’s not going to lie over it because he can get sued, and their policies are very, very expensive. That’s almost a guarantee that you’re never going to overpay for a property. But the reality is, most people will try and save that $500 and they won’t go and do it.
He says a lot of people don’t take this into consideration and that’s what makes a big difference between a successful investor and an amateur.
We buy the same types of properties in the same areas all the time. We know our market very, very well because we’ve been in it for 10 or 20 years. But every single time we buy, we go and get an independent valuation for $550, a building inspection for $440, and a strata inspection for $250. So, we pay $1,250 before we even consider putting an offer in. Whereas Joe Public that hasn’t got the knowledge, they virtually never use any of those services.
Over the years, Gray has been coached by various mentors helping him grow his property empire. But nowadays he seeks the best professionals he can find and bring them onto his show to share the knowledge with others as well.
I’ve used lots of mentors over the years, and I think you grow out of them at times. There’s quite often no mentor for life, but you use them for different amounts. I hire the very best professionals I can. A lot of the professionals that I use might charge $1,000 an hour, and they work with some of the top firms. A lot of the entrepreneurs I speak to through The Entrepreneurs Organization, which I mentioned in the previous interview, and a lot of those, it’s almost no cost. We’re part of a club or an organization that’s all self-helping. We discuss things together. People like Anthony Bell from Bell Partners, who is John McGraw’s accountant, he’s always been very good to me because he understands the locals in suburbs and Sydney markets that I invest in, because he’s invested there as well and he spends a lot of time with the agents. Again, people like Charles Tarbey, John Panoff, a lot of these people I get on my show now.
This is quite a good thing in that in the old days, 15 years ago, I would look up to these people and I was very, very grateful they’d even give me five minutes of their time. Whereas now, a lot of these people, because I do Sky Business and I can get them on as guests, a lot of the time when I wanted to meet people, I’d just say, hey, do you want to come on my show and share your experiences? And I’m almost not thinking of the viewer. I’m thinking of me. What stuff do I want to learn from these guys? I can ask as many questions as I want. Of course, it’s of interest to the viewers as well, because obviously, they’ve got a similar thing that they’re trying to achieve at the same time. Suddenly, I can almost be like an equal to these guys, and we’ve got their mobile numbers and we can talk to them and ring them pretty much anytime we want because I get them on TV. I give them exposure. I can help get them out to my parts as well. It’s more of a two-way relationship now, rather than paying them specifically for some of their advice.
It’s absolutely a win-win situation, and by doing that, I think everyone all appreciates it, because not only are you helping them leverage and giving them exposure, you’re also learning, or want to ask questions that you don’t know about, and you’re able to get them on the show as well to be able to share that with your viewers as well. It’s absolutely win-win.
That’s the whole idea with property investing or business. It’s about creating win-win solutions that everyone wins and then there’s a reason for everyone to be involved in it. Another firm that I spent a lot of time with is, well I used to work at Deloitte, so I’m a client at Deloitte Private. Now, a lot of people think that the big four accounting firm, that’s a global company and billionaires and stuff like that. But quite often, their fees aren’t that different to a second-tier firm. Where a lot of their clients might be a half-billionaire or a billionaire, when they’ve already spent the money trying to work out structures of how to hold their billion dollars and what entities to put them in is, if they’ve already worked it out for the billionaire, and the billionaires paid them the big fees, it’s very easy for them to translate it to little old me that’s only worth $10 or $15 million.
He says the best advice he’s received is to pay for advice.
I can access that same knowledge bank, but for a fraction of the cost. I now don’t really worry or I don’t necessarily know how much I’m paying for advice because the main thing is to get the right advice. Whether I’m paying $100 an hour or $1,000, in the grand scheme of things, it doesn’t actually matter at all.
Quite often, what I say is, our parents’ generation, they try to get wealthy by saving money. All our parents said, look after the pennies, the pennies looks after the pounds. But if you only earn $100,000 and you pay tax on that, you’re only going to increase your wealth by maybe $60,000 or $70,000, because that’s all you earn. Whereas I think the new generation where thinking is to say, you’ve got to spend money to make money. The same is with the buyer’s agent service that we have. We charge, say, two per cent. So, on a million dollars we charge $20,000. But we might buy a property for $1 million rather than pay $1.1 million or a $1 million and $50,000 at auction. In our parents’ mind, on my business, they’d say, save the $20,000 because you can do it yourself, which sure, people can do. But a clever CEO or high net worth would say, I’d rather buy it for $1 million and pay you $20,000 because then I’ve paid $1 million and $20,000 rather than do it myself, waste all my time, maybe make a mistake, and still pay $1 million and $50,000 or $1.1 at auction. In some people’s minds, the negative sceptics, they’ll be saying, no, I want to save the money. Whereas in the entrepreneur or the wealth creator’s mind it’s, no, I’ve spent money, but that’s making me maybe four or five times more money.
Coming up after the break Gray will reveal the nuts-and-bolts of his investment strategy, how he applied that strategy to real-world situations
It’s kind of too simple for most clever people. Most people are trying to out-think it, trying to think it’s something special, that there must be some hidden secret
and I ask him how anyone who is buying their first property can afford to buy a house in Sydney when the median price is around million dollars?
It is pretty tough, but it was tough 20 or 30 years ago when I started, as well. You’ve got to do different things. It’s maybe getting four or five jobs to build your deposit. It’s maybe doing with a brother or sister to share your serviceability.
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With Gray owning 14 properties worth a total of 15 million dollars, I asked him how he achieved this and what his strategy was.
My strategy, I quite often say is, it’s so basic. It’s kind of too simple for most clever people. Most people are trying to outthink it, trying to think it’s something special, that there must be some hidden secret that I’m not telling them or someone else isn’t telling them. Basically, the bottom line is, I bought properties and I waited. I guess the main thing I’ve done is, I’ve always bought blue chip. Right from buying in the UK when I was 22, my thought process was, if I rent these properties to young professionals, they’ve generally got well-paid jobs. They don’t want to lose those jobs, so they’re always going to pay the rent. If they end up trouble, they’ve generally got wealthy parents and generally in those areas, there is no—I guess, quite often there’s a limited supply of properties. So, they’re in built-up areas. There are lots of young professionals that can afford to rent them. Generally, that lack of supply and increasing demand, that basic economics pushes prices up. Obviously, now at say, 45, so I’ve spent the last 10 or 12 years interviewing people on TV, reading hundreds of books, speaking to thousands and thousands of people.
Sure, I know a hell of a lot now compared to what I knew 23 years ago, but the main thing of my portfolio is, it’s all the same. These days, I don’t buy in the CBD because I think there’s no limited supply. You can keep building all these American towers. So, I’m typically going five to 15 Ks from the main capital city, Sydney. I’m in the eastern beaches, the north shore, the inner west. That’s all the areas where there’s three-story high limits. You can’t physically any more properties, lots of young professionals can afford to live there. I think prices continue to rise and I’ve been trying to time the markets. I think even when the markets slow, it generally slows down rather than goes down. So, property’s always more expensive tomorrow in these median-priced areas. That’s the other thing I’m buying, median price, so within 20% of the median price. So, roughly $900,000 to $1.2 for a two-bedroom unit in those areas. I just keep accumulating. I pull the equity out, as soon as I’ve got enough for another deposit, then I buy another one and I just wait. It’s pretty much as simple as that.
I challenged this strategy though. For a person wanting to get their first property, most can’t afford to buy one in Sydney that currently averages around a million dollars. So how do they get into the market firstly?
It is pretty tough, but it was tough 20 or 30 years ago when I started, as well. You’ve got to do different things. It’s maybe getting four or five jobs to build your deposit. It’s maybe doing with a brother or sister to share your serviceability. It’s maybe working with a parent on a guarantee or to use some of the equity that quite often they’ve got. Basically, the bottom line is, if there’s a will, there’s away. There’s always a way of getting in there. If you can’t afford a $500,000 or a million-dollar property, buy $100,000 one. Buy something way out west or in a different state. Do your research and get the best property location you can and use that equity to then build up. I think one of the issues with, I guess, the youth of today, if I can sound old and sound like one of my parents or something like that is, people expect to be able to buy a two-bedroom in Bondi when they’re 20 years old. Now, Bondi’s the best, or the most expensive, suburb. You can’t expect when you’re 20 years old. It’s something that you’ve just got to build on. Even if you’re not into property, buy some shares. Now, we’re looking at a new product next year which is called fractional ownerships. So, even if you had $50,000, say, or some savings towards $50,000 there’s this new product now where you might be able to buy 1/20th of a Bondi property, and at least it gets you in the market. I think there really is no excuses these days. You’ve just gotta want it enough and do whatever it takes to get in there.
He explains further what this type of new product is and how it works.
It’s a fairly new thing these days, and the philosophy comes from, say if you had a million dollars, you wouldn’t necessarily buy a $1 million of one share. So, why buy $1 million of one property? You buy little bits. There are different pros and cons and stuff like that. It’s not quite such an easy thing, but in essence, yeah. They might split it into 10,000 shares of that $1 million property. Effectively, you can then, with your $5,000 or $10,000 then buy a part of that, but rather than own, say, 30 at $100,000, rather than buy $100,000 property and own it yourself that’s in the middle of Woop Woop that you’ve got no idea if it will ever grow in value. You might prefer to get 10% of a Bondi property. Sure, you might not get as much leverage. You might not have any control over it. Sure, there might be a few more costs of getting in, but is it better to have 10% of a blue-chip property than 100% of one that’s absolutely rubbish in the middle of nowhere? Some people will make a lot of money from buying those $100,000 ones, and there are other people that will say, no. I’d just rather a percentage of a blue-chip one. There’s just more and more options these days, and you need to work out and find someone that can truthfully tell you the real pros and cons of that strategy to work out if it’s the right strategy for you.
Gray says everyone has different goals and there’s no one right strategy
The main thing, and I guess it’s almost a disclaimer with this kind of interviews is, there is no one right strategy. Just because I do something, it doesn’t make it right for all the other people in the audience. It might be 50% or 90% or 10%, it depends on who you are. It’s very much a case of, look at the strategies. Work out the pros and the cons of them. Then, go to some decent advisors that you’re actually paying for advice, because if you’re not paying for them, effectively they’re biased, and they’re going to sell you something that they get a commission on. You’ve got to go to independent financial advisors or accountants or mortgage brokers to then work out, is it the right thing for you? If it is, then go ahead and make a move and do something.
A personal habit Gray shares that have led him to success is to constantly push himself to learn.
I guess the biggest thing is, I’m constantly pushing to learn and constantly pushing to invest. I’ve spent a lot of money in networking and socializing and going to meetings and learning seminars and things like that, to just always be looking for want the next thing is, or to make sure that there’s nothing that I’m missing. It’s even for me, and I think I’m a reasonable expert in what I do, but I still don’t get too complacent to think that maybe there’s something I’m missing. One of the things I’ve done is, I advertise or I’ve shared what my wealth is, how much efforts I’ve got, how much money I make sure. Even my P&Ls, almost, in the media and across lots of friends and advisors. It’s not to go and boast to say, this is how much money I’ve got, but I want to people to question what I was doing and why I was doing it. Initially, a lot of financial advisors would say, I wouldn’t be investing in property. It’s not liquid.
All these complaints, and the rest of it. I’ve learned all the counterarguments to all of those different things. I’m probably 99% confident of what I’m doing now because I’ve pretty much put it out there and heard all the counterarguments that I could possibly get. Whereas I think a typical person, they don’t tell anyone what they earn for a living. They don’t tell them what they’ve got in their bank and what their strategy is. I think it’s very hard to become an expert at something if you don’t talk about it. Say if you take sports. If you want to get better at sports, people have coaches and they share and they go to the gym and they have personal trainers because if someone else has done something, they can then hopefully put them on a better path. That’s the whole thing with wealth is, if you don’t talk about money, you don’t share it, there’s no way you’re going to get very clever at this because you’re only going to learn at your own learning pace rather than someone that’s maybe 20 years ahead of you.
Yeah. That’s very important. It’s very interesting that we apply and have coaches for sports, but a lot of us don’t have coaches for wealth creation or property investing, because it is pretty much a journey. If you want to improve on anything, you’ve got to really find and seek mentoring or help from others and seek the right professionals to help you grow your wealth base, as well. I think that’s a really good point that you’ve put out there, as well, and it’s great that you do share all your wealth and your assets base and put that out in the media so that people can learn from you. Not necessarily to boast, as you said, but to actually learn and be inspired to go on a journey, and if the strategy that you’re teaching every one of us is something that people resonate with, then definitely go ahead and apply that strategy as well. I guess to wrap up this podcast as well, is there a book that you would recommend or currently listening to, to share with the listeners?
Obviously, the best book in the world is The Effortless Empire, which I wrote back in 2004. I think there’s a lot of really good books out there, and I would almost just go and buy them all. If you haven’t got the money, go to the library. Books are the cheapest thing. They’re $20 or $30 or something like that, and they really do give you a lot of information. One of the things is, some people are obviously trying to make money from books. So, they might have a series of 10 books, and they drip feed you stuff all the way through because then they want you to get the next book and the next book and the next book. One thing I did with my book is, I think I’ve sold something like 60,000 or 70,000 copies, but never really actually sold one.
We just give them all away, because what I thought for my book is, I want to tell everyone everything there is to know about property all in one book because effectively, otherwise I’m going to get lots of people coming to me wanting two or three hours of my time and I can’t afford all of that time to go and give to people. If I give them the book for completely free and tell them everything there is need to know, the ones that are never going to buy my services or want to invest somewhere else or don’t believe in the buyer’s agents model, they’ll take the book, they’ll get all the information. They can go somewhere else. Whereas the ones that do believe in it, then they’ll say, hey Chris, that’s great. I’ve got three or four questions, and then we’re good to go. I’ve actually put all the information in my book of everything I think I know, and it’s a bit of a summarized form because I wasn’t trying to sell a series of 10 books.
And obviously, I’ve got a bias to read my book, but I think it’s a great book to give you the overall summary of positive cash flow versus negative geared and all the rest of it. Then, if you decide you want to follow a different specialty like you want to do buy, renovate, and flip, go and then get the 10 books on buy, renovate, and flip. Or positive cash flow properties, or negatively geared or off the plan. I think there’s so much stuff out there that again, there really is no excuse for people not to go there, and I think the libraries have legally got to have a copy of every single book that’s around. So, even if you’ve got no money, as long as you can afford a library ticket, then that’s all the information that you need.
Thanks to the great advice of our guest today, I’m sure many of you have learnt a great deal about creating wealth through property. Do you have more questions for Chris Gray? Or do you wish to connect with him? If so …
The easiest way is just to go YourEmpire.com.au. If you can’t remember that, if you can remember my name, Chris Gray, just Google that and it should come up straight away. Pretty much everything we do, we give away. Apart from the buyer’s agent service. There are lots of videos. My latest book is called The Effortless Empire, and that’s the book that tells you how to get that $5 or $10 million of value of property and really retire big time. The first book was called Go for Your Life, How to Turn your Weekdays into Weekends. That again, you can get through, if you’ve gone to our newsletter, you can get a download of that as well. That was really how I bought my first six properties and retired at the age of 31. So, it’s all the numbers to do with that first property. It’s that three-bedroom house, three-bedroom unit. How I got my Porsche, how I did my next joint venture with my dad to get property two, three, four, five, and six, and then how I actually retired out of work. All the information’s there, and pretty simple read. I don’t know any big words, so it’s very easy reading.