James Paver is a very successful property developer and managing director of development, investment and services firm in the Sydney real estate market, Avenor. He established his company in 2016 and has been gradually growing his business and helping deliver projects in partnership with their investors.
Join us in this episode of Property Investory to hear about his experiences traveling across Europe, the incredible story of how he juggled serving in the army and also university, how he was able to land a highly sought after job straight after university, a current project that he is working on with a client, how he started his own business, and much much more!
When They Started
Properties in Portfolio
Over 10 Projects
How To Gain More Experience In Property Developing
James Paver has quickly built his company over the past 4 years and is a leader in helping investors find the best deals available and delivering projects in partnership with them Sydney real estate.
In this episode of Property Investory we are continuing our chat with James Paver and delving into how he minimises risk when working on large projects, how he was able to kickstart his company in landing big projects, what the next 12 months can mean for his firm, and much much more!
Resources and Links Mentioned
Note: Some of the resources may be affiliate links meaning I receive a commission (at no extra cost to you) if you use that link to make a purchase.
"It's definitely a lot of hard work but I think it’s being able to find the right balance in that work."
Henry Ledingham is the founder and development manager of +Ethos. His company helps their clients with residential property development in QLD real estate market. Ledingham had worked in the commercial construction industry for 10 years and is now using the skills he learned there in the property development space and helping build successful portfolios for his clients.
Come with us as we learn about the property journey of Henry Ledingham, we delve into the unique situation that he and his wife found themselves in, we discuss his time working in the commercial construction industry, we learn about why it took him some time to start his property journey, we find out about his transition from commercial into property development, and much much more!
'This development stuff is pretty closely aligned to what I do in my day job in construction. I'm just managing people and processes. That point there was like a light bulb moment.' Henry Ledingham
We find out what a typical day looks like for Ledingham.
I love to get up early. So, I'm up at 5 a.m., grab a coffee—and I live right next door to a park. So, I go and take my coffee, sit on the steps of my house and look out over the park because it's just an awesome setting to see a bit of a sunrise and, you know, get the sounds of the morning happening around me.
I've started journaling, so I sit down, do a bit of journaling—work out my goals for the day, do some gratitude work. And then I also do a bit of reading. So, it's not necessarily reading relating directly to property development, but just more sort of personal interest stuff. I then start into the day at about six o'clock. And I focus on big tasks that I can get chunked away—but, basically, tasks that I call ‘tasks that make my money needle move’.
So, I heard that phrase from someone else. And it's basically just knuckling down on those tasks and getting them sorted before the distractions of the day. Come in at nine o'clock, switch the phone off, put it on airplane mode, and then make some calls to consultants. Or, if I need to visit a project site, I'll duck out and have a look around the site, speak to the guys.
And then, I love exercising, and I'm really into weight training and a bit of powerlifting as well. So, about mid-morning, [I] try and get a weight session in, and then after that, come back a bit more administrative work, lunch, maybe try and read again for another half an hour and wind down the day with some admin items that don't really need too much creativity. And shut down by about five o'clock and catch up with my partner and find out about her day and decompress a little bit.
Ledingham fills us in on what his wife does for a career and the interesting times they find themselves in.
She works—and it's probably a very topical subject at the moment. She works and is currently still employed by Virgin. So, she's cabin crew; we're going through a really interesting time where she just does domestic fights and has had some shifts—but then, you know, maybe 10% of the amount of shifts she was getting before. And we are literally just sort of rolling through day by day with the news we found out yesterday that they've gone into administration.
With all of the troubles that Virgin have found themself in recently, we get an update on the impact it is having on his wife and himself.
It's been very interesting—like we've moved in together just this year and we've essentially been living out of each other's pockets since the start of the year. So, it's brought us closer together. It's definitely hard for her and also myself, not knowing, you know, what the next day holds in terms of her employment. So, it's one of those things where it's just you play each day as it comes and just be grateful for the things that you do have.
I think, you know, trying to predict the future and trying to, you know, work out all the scenarios—sometimes it doesn't necessarily help in that situation. So, she's studying law as well, so, you know, last year and, you know, looking to sort of branch out into that as well—which, you know, takes the pressure off the Virgin workload I guess.
From Being A Small Town Boy To Becoming A Big City Guy
We delve further into Ledingham’s background and he talks to us about what his upbringing was like.
I had a really lovely childhood, and it was kind of unique in terms of some other people's childhoods I guess. So, I grew up on farms in New South Wales, northern New South Wales, around Moree and Tamworth. And when we lived down there, they were cattle and grain farms. My family were farmers and came from a long line of farmers.
We then moved up to central Queensland near a place called Longreach. So, just to give a better idea where that is—that's about 700 kilometres inland from Rockhampton. So, it's really sort of in the centre and isolated. So, I was born in the country and then, at about age 10, moved up to central Queensland. So, that brought along some, you know, awesome opportunities, but then also some challenges as well. Our closest town was one hour away. And that was just a very small town where there was a supermarket and a post office and that's about it.
And then the city, in inverted commas, closest to us, was three hours away. And that's where you'd literally, you know, plan weeks ahead to go to the big city of Longreach to stock up on all your food and if you needed clothes to go there. So, heaps of awesome experiences. We had floods while we were up there, so we literally got flooded into our property and couldn't get any food or supplies in. And when it sort of got to the point of getting a little bit, you know, desperate we actually had a plane for us, some supplies in, so we had to get out on a big paddock of ours—it was really flat—and slash all the grass down so the plane could land.
Yes, so many things that we experienced out there, which sort of set me up and being able to, I guess, take on any challenge that came my way. Because once you go through those things, everything else generally pales in comparison. So really, really enjoyed it.
Ledingham shares with us the differences between his time schooling when he was in NSW compared to when he moved to the remote area in Queensland.
When we were in New South Wales, just going to a normal day, school—and that was awesome. But then, when we moved to central Queensland, we're obviously very isolated. And the school that was closest to us was three hours away, so we couldn't travel there and back in a day. So, all of the kids in that area did ‘School of the Air’. So, that's what I did. And essentially that was where the curriculum is given to you or given to us. And we engaged a teacher—or we used the term governess back then—and that teacher would come and live with us on the property. And Monday to Friday, they would take us through the curriculum for the distance education school. And for about one hour each day, we would dial in and chat with our teachers and fellow classmates.
But this is back when there was no internet, so it was by a UHF radio. So, it was sort of the old, you know, push-to-talk technology and only one person could talk at a time otherwise you couldn't hear the other person. We had some pretty interesting experiences with that. And you know, you could go sit down in your classroom and do four hours worth of work, and then, in your lunch break, jump on your motorbike and go for a ride and then be back in the classroom. It was awesome.
How big was the class that he was in and did he have any siblings with him?
At that time I was just doing school with my brother, so we literally had sort of a separate, I guess you'd call it an outbuilding or a cottage that was our school classroom. And me and my brother would be there and our teacher. And when we stepped inside that building, that was class time, and when we stepped out that was farm fun time. And the school that we were part of that was based three hours away. That was a school of about 300 that was made up of lots of, you know, kids from the local farming community where everyone was isolated in the same position.
After going through the education system as a child, we find out whether he took on further studies or jumped straight into the workforce.
We moved back at the end of the central Queensland experience back into northern New South Wales. And I finished my high schooling at a boarding school there from that point. I have three brothers in my family, and we all made individual decisions, but sort of the consensus among us was that we didn't really want to continue the farming lifestyle. It's a pretty hard lifestyle, and you've really got to have it in your blood to push through with it.
So, at that point, I wanted to continue my studies. And I went to the University of New South Wales in Sydney, and I started studying construction management there. And that basically, set up the next phase of my life where I was living and studying in Sydney. Coming from, you know, the rural background, that was a massive change—just being in the city and surrounded by so many people and working out how it all operated. It was definitely interesting.
From that point, I studied for my Bachelor of Construction Management and then started off on a career with a commercial builder, a tier one commercial builder.
Taking On Commercial Building Projects
Before moving back up to Brisbane, Ledingham talks about the short period after moving back to NSW.
I was there for about 10 years, and I finished study that took about four years. And then I started working for a commercial builder that was based in Sydney. As I started working for them, they had a project that was based down in Jervis Bay. And it was a project that needed people onsite to be based on-site and not in the office. So, as sort of a young contracts administrator back then, I thought that was an awesome adventure to be part of. So, I stuck my hand up and volunteered to go down.
They were based on-site and that was a fantastic experience. I essentially lived and worked down in Jervis Bay, which is about three hours south of Sydney. And my partner at the time was living in Sydney. So, on the weekends I'd drive back and stay in Sydney, or if the weather was, if it was summertime, we would spend it down in Jervis Bay. Because if anyone has been down there, it's like a lovely national park area with beaches that have got like super white sand, and it's great in the summertime.
So what, what year was that when you went down to Jarvis Bay to work?
That would have been about 2006, I think it was. So, I spent time down there, about three or four years. And then I decided to move to a different commercial builder, just to get a bit of a different experience. They had an opportunity up in Brisbane and it was just a 3-month contract up in Brisbane. And then the idea was to come back to Sydney.
And I went up to Brisbane, completed the project up up here, fell in love with the city and the lifestyle. And they had picked up more business. So, I decided to put my hand up and stay up here. And then that's what led to the next, you know, sort of 10 years of my life.
Ledingham explains some of the work and the projects he was working on for the commercial builder.
There's lots of different tiers of commercial builders. But I guess the easiest way to think of it is they generally build commercial buildings. So, it might be a big distribution centre. It might be data centres. It might be restaurants, banks, office space. And the work I was doing was essentially project management towards the middle and the back end of March.
We are with the commercial builders. So, the work involved our estimating team winning a project. And I would get past essentially a set of construction plans and a budget that we had to build it for and get introduced to the client. And then from that point on, me and Martin had to tender and procure the project—so, engage all the trades. We had to come up with a construction program that...met all of the clients milestones.
And then we had to physically coordinate and construct that project and, all the way, keeping the client up to date and, yeah, working with them. So, there's lots of things that I was able to have the pleasure to build in my time in the industry—like built data centres for TV stations, gyms, banks, office spaces, medical centres.
There's so much variety I found in that industry. It wasn't just sort of building the same product over and over. And that's what I found that my personality really locked on. Like the physical sort of the tangibility that came out at the end of it and I could, you know, I work on a project for X amount of months. And at the end, I could see and touch a product that really is satisfying to me.
He had essentially become a project manager, and we find out how this position came about for him within the business.
It's a process, and it's not necessarily quick. But essentially the common pathway is you start generally in sort of a contracts administrator—or contracts coordinator position, some companies call it. So, you're essentially on the paperwork side there. You keep track of budgets. You're engaging contractors. And while at that point you may not have the experience and the knowledge on how to physically construct things, you are laying the paperwork—the financial and the administrative.
The pathway I took was I wanted to get out on site and experience things physically. So, I worked as a site manager. So, in essence, you kind of deal with trades face-to-face. You're working with them to solve problems or questions that you come up with day to day. You focus on safety at that point as well and controlling and managing safety onsite. And then from there, you can kind of switch back into a more office-based role, in that of like a project engineer—or I went to a project manager. And that's sort of [the] way you, essentially you, right after you know, after the client has engaged some of their consultants and, and given you the concept design. That's when you take over and bring it to fruition.
So, I think that's why I have found it pretty easy to transition from commercial construction to development because all of the processes and the people that I speak to day to day in the construction world, it's the same. It's just a different subject matter in the development world. Now, you know, my chosen product is just land subdivision. But you know, I'm still coordinating designs. I'm still managing trades. I'm still focused on providing the end product, [with] the best quality and also [in] the quickest time frame.
So, it has been a relatively easy switch from that point of view. But then it's required a bit of a change in mindset because there's definitely different specialties that you need to be looking for in the two different worlds, I guess.
On Commercial Developments And Joint Ventures
We delve into the concept of joint ventures and what Ledingham is mainly looking for in a partner.
The sort of quick evolution of my development is that my first development was my funds and mate's funds. So, we joint-ventured together and one of us brought the cash. That was my mate. And I brought the serviceability. So, I purchased the property and shared our time to manage it from that point. At that point I was still working in my full-time job. And obviously, I could only borrow so much from the bank. And there was a ceiling on that.
The next evolution was discovering sort of true joint ventures, no money down projects. And that's where Matt Jones helped me out. Like he spoke about on a previous one of your episodes with his joint venture boot camps. I attended one of those and really, sort of, it opened my eyes that I didn't have to basically buy one property or do one project that reached the limit of my serviceability. If I found other profitable projects, I could approach other people, see if they wanted to joint venture with me and use more experience to manage that. And then it would benefit, you know, myself as well as the other joint venture partner. So, that really took the capital ceiling off my mindset at that point and, from then, evolved into stopping my full-time work and [going into] developing full-time.
And you're right, my approach at the moment is to essentially acquire sites, partner with investors or joint venture partners and turnkey development, and manage the whole process.
His property investing journey has been a mix of developments and a buy-and-hold strategy.
I have purchased properties to buy and hold. And, I guess, the full backstory of my property journey is that that's how I started in property. I would probably say I'm a very late bloomer because, you know, I'm 37 now, and I only bought my first property when I was 33. Before that point I was aware of property but wasn't educated in it. And I just didn't really have a drive to investigate it.
But then, I purchased a PPR that I lived in that was the first property. It was a purchase, which I thought at the time was great. It was an uneducated purchase. And the intent for that purchase was that I would live in it, renovate it, and then essentially get it revalued and see if there was any uplift—or maybe rent it out as an investment property as a long-term hold. That's because my research and education at that point was inadequate.
I had a very tough conversation with my accountant at the time. I sort of explained to him my strategy that I saw for that property. And he had done a lot of property development and investment. And after I told him the nuts and bolts of it, he said, ‘No, I don't think you've selected correctly. That property is not really going to do anything for you. You know, it may be neutrally geared, but it's not really going to grow in value too much. The cash flow is not going to be great. It's essentially just going to be a limit or a handbrake on your portfolio and your serviceability’.
And for me, hearing that, you know, after I'd gone through the effort of purchasing it—and I did a renovation on the bathroom and the kitchen and put sort of two weeks worth of blood, sweat and tears into it—, that was like a slap in the face. But I, sort of, I mulled over it for a couple of days, what the accountant said. He was essentially saying just offload and sell it and, you know, select a better property next time. So, I swallowed my pride and did that. And I'm grateful that I did take his advice because I then started getting myself educated. And it started initially as just getting educated in the buy-and-hold space.
And then, part way through that education where I was going to seminars, listening to podcasts and getting some mentoring, I stumbled on the world of development and I thought, ‘This development stuff is pretty closely aligned to what I do in my day job in construction. I'm just managing people and processes’. That point there was like a light-bulb moment. I was like, ‘This is interesting to me. It's really exciting’—but it also is me being able to leverage a skill that I have. And from that point on, I was just focused on getting educated, tooled up and skilled up for development.
So, it was two steps forward in property initially, one step back, and then onwards from there.
We discuss his first property and the details of what happened to it since he purchased it.
Sold that—and it was the right call. To give context on why it was the wrong purchase: It was a three-bedroom unit, you know, sort of a six-pack—so, the garage underneath and living area up top. And I picked an area—it was in Coorparoo in Brisbane. And at the time of purchase, there was a big development down at Coorparoo called Coorparoo Square that was in construction and about to come online. And right when I had finished my renovations and was going to either put my property back on the market or rent it out, I found out I was competing with some brand new finished apartments that were, you know, a much better location than mine.
So, that's the kind of research that I missed out on in that initial purchase and didn't sort of scope out, you know, how my product is going to compare against what else is coming online in the area.
Would he consider that to be one of his worst property investing moments?
I'd say that that's one of them. The bitter pill to swallow in that one was twofold in the sense that, you know, I had got a decision that I thought was right—I had got that wrong or it just didn't align with my strategy. And then the other point was in a monetary sense, like I spent two weeks of physical labor doing the renovation and then I also piled about $20,000 worth of materials and fixtures and fittings into it. And that was essentially for nothing. I managed to get out of that property and sell it for essentially what I went into it with. But the additional labour and cost I put into it wasn't realised because it was competing with a brand new product down the road.
So, that was a really good lesson to learn—that I essentially overcapitalised on a product that no one wanted, or if they did want it, they would just go and buy it new.
How You Can Find Property Deals Like An Expert Investor With Henry Ledingham
The global pandemic of COVID-19 had a massive impact on a lot of people, and we find out about the effect it had on Ledingham.
I had another one, and that was a sort of a more recent one, which I wouldn't say is my worst investing moment, but it was definitely a stressful one. And it occurred around this pandemic that we're experiencing of COVID-19. I essentially had a project that I was going to settle on, and it was leading up to settlement day. And at that point, I had gone unconditional on my finance because all of the signs with this lender were good. I believed that, you know, it's a profitable project and there was no reason for them to not fund the deal.
But as news of the pandemic spread and gathered momentum and the media hysteria built, that lender essentially pulled out on their finance offer. They said the market for them specifically is too uncertain and [said] ‘We won't be able to fund your purchase’.
So, at that point, that was a real shock. And I was in a position where the vendor for the property wasn't very willing to offer extensions if I got a small extension. But essentially, I had to settle on the property somehow. So, it kicked me into another gear. I overcame that and was able to settle by sort of hustling and just working day and night with other lenders to get the situation sorted.
But the lesson learned was, you know, that in terms of the risks out of left field, you know, I guess, everyone thought that a pandemic was maybe not even on anyone's radar at that point, but it was realised. In my instance, it became an issue and I had to deal with it.
So, I think, while it was super stressful at the time, it's something that I'll remember for the rest of my life. Like, I will have lots of either protections in my contracts now to deal with pandemics where we can essentially activate those conditions and ask for longer extensions. But that was a real lesson.
The Importance Of Applying The Best Strategy For Different Property Challenges
We delve into how he was able to eventually settle the property and why it was done this way.
To give a bit more explanation around that: That project, I was in a position where I was buying it with the DA, and I had been working on it for a couple of months. And I had put a significant amount of my own money into the project. So, if I wasn't able to settle on that project, what happens? With the DA, it stays with the land. So, essentially the owner of the land, if I didn't settle, would retain the benefit of the DA and my money that, you know, had assisted getting that DA would've benefited the owner. And so, all of my work would have been for nothing. And in the REIQ purchase contracts or the Queensland land purchase contracts, there's provisions for delay in the contract.
The remedy mechanism in there is for the contract to be terminated. And that's exactly what I didn't want to happen. Like I needed an extension so I could source an alternative lender. And everything in the contract was essentially saying, ‘Well, this has happened so you can terminate’. I was at a point where I was like, ‘No, I don't want to terminate’. I must continue this contract. I need to extend it because of these acts of nature being the pandemic that have occurred. So, what I was losing by that financier pulling out—that was a financier that was going to lend 70%. So, there was essentially, you know, a chunk of money. I had 30% equity and the 70% lender had pulled out.
So, I then had to scramble to find another lender. And in that environment, it's still occurring now, I guess, the lenders are ratcheting back their LVRs. So, you know, I found a lender, and they were able to do 65% LVR. So, I had to reach out to some of my investing partners and increase my equity position through the assistance of my investors.
The second issue I came up with, once I had locked down the new lender that will come in and assist, was that for this development—it’s a nine lot subdivision—, you need to get commercial valuations. And I had one done with the previous lender, but that commercial valuation was only directed to the previous lender. And when I asked for the valuation to be assigned to this new incoming lender, they wouldn't do it.
They wouldn't assign it. And that was essentially because that value is a risk position. They had valued it before the pandemic started, and they were being told by their professional indemnity insurers ‘Don't assign any valuations’ or ‘Don't do any new development valuations’. So, then the search became—I'd found a lender but they needed the commercial valuation, and I had been granted an extension of two weeks.
So, I essentially needed to get a new commercial valuation done and then loan documents, drafted and created, signed—all done in two weeks. So, the challenge then became, ‘Okay, we've got the lender, now let's find a valuer that is comfortable to visit the site, do the due diligence, do the report and reassure it, you know, within a week so that I could leave the other week for the loan documentation to be drafted and issued and executed’. So, it was sort of a challenge a minute.
But, you know, through the process of going into solicitor's offices on weekends, printing stuff, running to the bank, we got it done, and we managed to settle on the properties. And now, the project is secure and the DA's there. And it's, you know, an awesome project. But there was a big learning from what occurred with the pandemic, which I'll take for the rest of my development career.
We dive into his subdivision. And we discuss the changing market during this time and whether he can get a good return on investment.
My general approach, if I'm looking at sites that are raw sites with no DA on them and I will have to obtain the DA myself, I will only proceed on sites that have a 20% or plus profit margin. With this site, you already had a DA. So, the planning risk element had been removed. It was already approved. We knew there was nine months, and we just had to basically deal with the construction cost risk and the sales risk. So, that's a 15% profit project, and I think I wouldn't want to go lower than that if purchasing a site of that scale with a DA.
The timeframe for the project—it's a 12-month project, and at the moment, it's just starting. So, we foresee that, there's definitely, in the next couple of months, there's going to be reduced consumer-sentiment. And anything that's going to be marketed in that period will have to be competitively marketed.
But I believe that in six to eight months, things will be back to, maybe not where they were before, but people at least will know where they're sitting with their employment. They will know where their finances are heading and the routines, just the daily returns of what we can and can't do, will be well-defined. So, I think it will smooth out. And that's why I believed in that project. It wasn't a project that, you know, needed to be constructed and sold this month or next month. Like, there was a long time frame until sales and settlements needed to be bought on the market.
On Right Perspectives, Property Options And Subdivisions
We’ve heard about one of his worst investing moments and now we find out the moment where everything changed for the better...
I would say that would be it. It was more that my mindset—up until about sort of four years ago—was a PAYG employee. Like, I'd always had a boss, and I've always worked for someone. And I don't know why, but I just hadn't ever considered that I couldn't do something that was wholly and solely of my own creation. And, you know, I couldn't work for myself doing something that I loved.
But as you know, four years ago, as those sort of light bulbs started to switch on, I'd say that was my biggest light-bulb moment or aha moment where it was like, ‘Okay, you've worked for other people and, being a company man up until this point, have a crack at something of your own. Because that way, it can be wholly and solely yours. Your effort that you put in should correlate directly to the effort that comes out. And you can craft something that is to your standard and to your liking’.
So, I'll tell you that was the biggest one, followed closely by, well, this property development stuff is my path to going out on my own and being my own boss.
Ledingham explains his mindset when he was starting up his property development business and how he wanted to gradually phase into it.
I kind of structured it to phase it in. So, my first project I did, which was a six-lot subdivision, I was fully employed in a day job. So, I essentially ran that project in the evenings. Like when I get home, after a day of work, I'd have dinner and then, sort of, punch out two to four hours worth of work in the evenings and then on weekends as well.
As I got that one almost completed, then I bought a second six-lot subdivision online—and I was still working full time. But then, I knew I needed to have some guidance and some assistance with making the transition. So, I started looking around for mentors and essentially linked up with an awesome mentor who helped me craft my exit plan from full-time work into full-time development. And it occurred over the period of about a year, year and a half. So, it was a planned process.
With his experience in building the big commercial projects, Ledingham shares why he decided to go down the route of subdivisions rather than the many available options.
I wanted to just start simple and then build from there. I believe that subdivisions are relatively low-risk in the scheme of development because you're not putting a product, a built product, on there that you're having to essentially guess what the market wants to buy. And I understand that there's a lot of research that goes into formulating the products that the market wants.
But at the moment, I just want to keep it simple. Start with land subdivision. Build that process up towards a solid, you know, process. I can essentially fine-tune it. And then once, you know, three, four years down the track, if I believe I'm at a stage where putting a built product on the land is of benefit to me and my investors, then I'll take that step.
But just as part of some of my mentoring, it was hammered into me: Just keep your focus narrow. You know, don't look at all of the shiny options out there in terms of lots of fancy and different development strategies. Just get focused. Get really good at one strategy and then branch out once you've nailed that. So, I also see subdivision as having the benefit of other exit strategies. So, if the land product isn't generating the interest that you need in terms of sales, you can take the next step of adding a built product. And that might be just a normal dwelling. It might be a dual-occupancy dwelling in some councils. It might be a rooming-accommodation dwelling.
But I liked the fact that I was keeping my strategy simple and also my costs low. Like I obviously don't have to get financing and fund building, let's say, six houses before I can start to pay down that. So, that was the sort of two driving things—I guess, simplicity and overall funding.
We learn more about the strategy behind his subdivisions. And Ledingham explains how he is able to find the best deals for his subdivisions.
So, my strategy now, after I have educated myself and learned from a lot of other way more knowledgeable people, is that you need to understand the council area that you're working in. And by understanding that, you know, the zoning of different land, you will know the minimum and maximum requirements of law. You know the density and sizes you can put on land. So, once you have that knowledge, you can assess different sites, and you can get an educated but not conclusive view of what you could do to a piece of land.
And there's lots of different approaches. But, sort of, the one that I took on my first subdivision—to be specific about a project—is that that was a one acre property, and the selling agent knew that it was capable of being subdivided but didn't know how many lots.
From my education at that point, I knew the same—knew it could be subdivided, didn't know how many lots. I had some initial chats with some of my project team and the town planner. They guided me to say, ‘We believe you can do four lots for sure. That's a given, the council zoning and requirements’. And then on that basis, I got the project under my control—or the property, sorry, under my control by putting a purchase contract onto it with a due diligence period.
And then in the due diligence period—that's essentially where you start getting really specific and speaking to the council and finding out what they will generally approve in the case of the subject property. So, that site was in Moreton Bay Regional Council in north Brisbane. And they have an awesome facility where you can book and have a pre-lodgement meeting that you don't have to pay any money for; they're free.
So, all you have to do is book it in and wait about two weeks. And then you can go into council, sit down with them and say, ’This is the property I have. I would like to subdivide it. We're thinking this many lots. What are your thoughts?’. And they'll give you a planning and an engineering view of the development of that site. And they'll give you some written notes to take away from it. And that was the process I did for that, for [that] subdivision, where I got the project, the site under my control in the due diligence period.
I met with the council, and they guided me to say you can subdivide this into six lots. However, if you do want to subdivide it into six lots, you must provide a new piece of council infrastructure in the form of a new road. So, that was the point where the selling agent thought that the site could only have a yield of four lots. But then I discovered I could actually get a yield of six lots—so, a greater profit.
But then, I had to factor in how much it would cost me to build the road. And then that sort of process then takes off, getting your engineering costs nutted out and worked out, and then assessing before your due diligence period ends, whether you are comfortable with the due diligence you've done and whether you're going to proceed with the purchase.
Henry Ledingham Learns From His Experience And Other Investors
There is nothing like having experience. And he talks to us about how his previous life in commercial construction has helped him find deals and understand if they will be profitable.
Depending on what council I'm working in, I really insist on trying to get some consultation with the council and getting their feedback. And it's generally in the form of that pre-lodgement meeting. So, at least, if you go to council with your intention, they can either sort of say, ‘Yes, we will support that’. Generally, they'll give you some feedback as well. I say, ‘Look, we'd support that, but you may have to add this element or you may have to compromise on that element’.
Or, I've had this as well: I've taken sites to council and they've shot it down from the get-go and they've said, ‘No, absolutely not. We're not doing that’. And that's what you need to be aware of. Before you actually get in a position where you go unconditional on a purchase of a property, you can end up settling on a site that is not developable—or, you know, instead of 10 lots, which you imagine you could get, you might only get five.
So, that is my sort of gold standard of due diligence: doing all of the costing and work with my project team, but then also getting council consultation on what they will and won't support. Because at the end of the day, they're the people that will be approving your application and the development.
We expect these successful property investors to have sophisticated ways of getting deals. But sometimes the best deals are right there for everyone, but you just need to know what to look for.
All of my deals, apart from one, so far have just been out there on www.realestate.com.au. So, I had a bit of a misconception when I started educating myself that I must get everything off-market and I need to build up a big network of agents and deal-finders to be able to get a profitable site.
But I was pleasantly surprised by, you know, the sites that I've found so far. Seventy five per cent of them have just been out there, and they have either been sites where people haven't gone to that level of due diligence. Like they haven't sat down with the council and said, ‘Can we do this? I may [have] missed an opportunity’. Or, maybe it's a site where there's some issues that, engineering-wise, someone hasn't been able to solve—whereas the engineering team that I've worked with have been able to solve.
I've only had one project so far where it's come to me essentially off-market. But that is a part of my business where previously I haven't had the time to be able to build up those connections because I was working full-time. But now, I'm starting that process and sort of developing a regular network of agents that hopefully can bring some of those opportunities my way.
Part of that as well with my chosen strategy—so my focus is land subdivision, as I mentioned, but ideally I'm focusing on projects that are between five lots and 20 lots. And I purposely want to attack those projects because I believe that the competition for those kinds of sites is a bit, you know, generally staying away from the splitters and two and three lots of divisions. There seems to be a lot of competition because that's the, I guess, the entry-level development site. And the, you know, people starting development generally start out on those. So, there's a big section of, I guess, you'd call it the beginner development market and looking for those sites.
And then, there's a lot of bigger developers, way more experienced and knowledgeable than me, that are attacking much bigger sites, 50 to a 100 lot sites. But, by me focusing on, you know, just a bulge, the beginner people and below the big boys, I hopefully can get that competitive advantage on the sites that I attack.
Ledingham discusses his property portfolio. And we find out how many subdivisions he has completed over the past few years.
My business has only started this year, so it’s literally only—we're in April now—four months old. So, I've completed four projects today. And this next one, which is a nine-lot subdivision is sort of the next evolution. But that will be the first project with me working in the business full-time.
On 'The Big Why' And The Books And People Who've Made A Mark On His Property Journey
We delve into the motivating factor of the ‘why’ behind choosing the path of property investing.
I have a four-year plan. And the sort of high-level view of that is to help me get to a point with my personal wealth where I don't have to trade my time for money anymore. And the intent of that is so that I can essentially help my friends and family around me. [To] get to the same level of wealth where, you know, if a pandemic hits, then there's no real stress. If you lose your job, then that's cool because you've got, you know, a portfolio or lots of money just as a nest egg in the bank. And the overall intent is, you know, once I can help myself, I help my friends and family. And then after that, the world's my oyster. I can, you know, branch out into any area that I choose.
But that's what I realised over the past four to five years that I was trading my time for money. And a lot of the time was spent working, and I wasn't really having much time to enjoy life. The goal now is to be able to get to the point where I do still work because I love it, but I can spend a greater amount of my time living and helping other people live and enjoy their lives as well.
Ledingham shares with us some of the people that have had the biggest impact on his successful career.
'My strategy now after I have educated myself and learned from a lot of other way more knowledgeable people is that you need to understand the council area that you're working in.'
Matt Jones definitely helped me greatly with joint ventures and [in], sort of, opening myself up to them. I sort of took part in lots of his seminars and education. Someone else who was sort of my most recent mentor is Rob Flux. So, he's based in Brisbane and he runs the Property Developer Network.
So, Rob has monthly meetups in Brisbane that I was attending. And then I reached out to him at the beginning of 2019 when I went. I knew I wanted to sort of leave full-time work. And I asked him if he offered mentoring, and he came back with a course that he has run very successfully and is running still now. It's called the ‘Property Development Formula’. And essentially that course was like a 12-month course that paid mentoring on specific property development strategies and techniques and education.
But then, it also paired another awesome element, which I hadn't really thought of too much before, and it was specific on mindset. So, back then when I did it, Rob was partnering with Tony Meredith, a great coach. And that mentoring over 12 months was essentially lots of, you know—three or four times a month—, focusing on a property-specific mentoring session. And then a mindset session. And those two things sort of built my exit strategy.
That is the real reason that I was able to leave my full-time job when I did. Because without that level of mentoring and that accountability, I believe I would have done it eventually but I wouldn't have done it as soon as I have been able to.
He provides some of his best book recommendations for us.
I read, a couple of years ago, one called, Secrets of the Millionaire Mind. It's by T. Harv Eker. And that was a really powerful book for me in just understanding wealth and how your money mindset or your money or your wealth, sort of, thermostat is created and set. There was nothing really specific about property development in there. But that's a really awesome book just to get a high-level understanding of how your mind works in relation to money and whether you've got a healthy or unhealthy relationship with it.
I read also a book by Steve McKnight, 0 to 130 Properties In 3.5 Years. And although that is sort of more buy-and-hold-investing focused—and it may be a little bit outdated—, the concepts and just the story in there that Steve went through and his success was really inspiring. Like, I read that and went, ‘Wow, this guy has basically charged out and done this all on his own and has been able to make a great success of it’. So, that was really inspiring.
And then one that I've just finished at the moment, which is a bit sort of more business-focused-on-marketing focused is called Sell Like Crazy by Sabri Suby. And that's, sort of, on marketing and digital. And it's something that I had not a great deal of knowledge about before. But it's sort of a one-stop shop in terms of how to approach, you know, marketing and branding and bringing in customers to a new business. So, that's, again, not property development focused, but [it’s] really good for anyone that has their own business.
If he could say anything to his past self from 10 years ago, what would it be?
I would just say open your eyes up to other possibilities—other than being, you know, an employee. Like at that point 10 years ago, I hadn't even really thought about the concept of working for myself. So, I would just say stop thinking about that because there's lots of other opportunities out there for you. And in this day and age, it's getting easier and easier with the information out there for people to do their own thing.
I would also say start finding out about property because I only really started researching and getting my head around property when I was about 33, 34. So, like I would have loved to have gone back in time to when I was 18 and at my first job and just say, ‘Stop and start educating yourself’ back then. Because, as everyone sort of knows that, the time that you're in the market is a massive advantage even if you don't have the means to be doing much in the market at that time, and it just helps a massive amount.
[I would] just say [to myself]: ‘Find out about property and think outside the box in terms of employment. You don't always have to work for someone else.’
How much of your success do you think is due to skill, intelligence and hard work? And how much of it is because of luck?
I think that 90% is skill, hard work and intelligence—that there's always an element of luck. And sometimes that's bad luck. I was thinking about it in the sense of, you know, the pandemic that we've recently experienced. No one really could foresee that. And in most cases, even though there's, you know, short term challenges and hardship, it's only a small percentage. And if you just keep cracking, that skill and hard work and educating yourself and getting more intelligent about what you're doing, that will always overcome it.
So, I'm a big believer that hard work and drive overcomes luck and chance any day of the week.
Matt Khoo is the managing director at ICD Property. His ambition in high school was to study medicine and become a doctor, but after not receiving the required marks, he decided to study property and construction. He soon found himself developing a deep passion for property development and managing a $350 million project in Melbourne, which has influenced him to excel at working with million-dollar projects.
'I think what I really love about property and what sold it for me was the tangibility of it. I think of why I always wanted to be a doctor was that you're helping people and you can see the outcomes of it. And for property it's the same.'
Join us in this episode of Property Investory to hear how Khoo got hands-on experience at JLL before completing his master’s, how he developed his skills as a financier that has ultimately allowed him to be the successful managing director he is today!
We find out what Matt Khoo’s day to day role is as well as the projects he is currently working on.
I'm the managing director at ICD Property. We're an Australian based property development company. So Australian based, but we have projects across four States in Australia. Actually, I should correct myself, three States in Australia. I'm actually kind of thinking of four projects. We've got one in Geelong, but it's not a different state, unfortunately. It's very close and very easy to access. But yeah, so we've got four projects across three States in Australia and also a project in Auckland, New Zealand. Projects are largely mixed use projects. Three of which CBD projects in Melbourne, Sydney and Adelaide. In Melbourne, we've got a close to 600 apartment tower going up on King street and that's just starting construction now. We have a Sydney project, which is a land joint venture with the City Tattersalls Club. 125 year old under 25 year old Tattersalls club. You know, big part of the community there. And a really centralised project sits on Pitt Street, Pitt Street mall. You're from Sydney, so you know.
And it's really exciting. We've achieved stage 1 of the DA on that project, which sees us redeveloping the Tattersalls Club, the commercial space. That’s sort of the first few levels and within the heritage frame fabric as well. And then above that developing a boutique hotel and then above that a residential tower. So it’s a really exciting project, actually we just commenced a design competition phase as of last week. So we'll soon have an architect assigned to it as well for the tower.
Due to the DA process being time-consuming and difficult in Sydney, Khoo explains the process it took for this particular project.
I think my celebrations when we got to stage one of the DA probably says it all. We've had that project since 2014 and it's gone through a number of challenges and hurdles. We actually were knocked back in our first attempt to get the stage one of the DA and then worked really closely with the council to finally get there. So it was not a quick process.
I totally understand. Nothing's quick with council any day, to say the least.
Interestingly, during this challenging time with COVID and all they've looked at how they can actually expedite processes and streamline. And we've seen that we've benefited from a bit of that already. Especially through this stage two process, it usually requires physical models and all that which are very practical with the circumstances. So that's been able to shorten a bit of the timeframe and hopefully, you know, there are other areas that are questioned and challenged and especially because we are wanting to build or bring a lot of stimulus to the economy. The construction industry and development industry is a big part of that. We're talking like nine, 10% of GDP just directly through work sites. And then when you look at the flow on to other consultants and material supplies and all that, you're looking at more like an impact of 40% of the economy. And that's with looking at sort of mining materials, material suppliers, developers. There’s a really wide-spanning sort of impact.
Khoo delves into what a typical day in his life looks like.
In my particular role a lot of my focus is around business strategy, which is definitely ramping up a lot more as the climate and the uncertainty into the near and medium term future. But it's also supporting you know, with the large challenges for our delivery team. So in terms of the development team, identifying big problems and challenges and hurdles but also problem solving with them. I've never liked to take that autonomy and management of that away from them, but being really sort of a standing board, and dealing with those challenges. And we do that sort of as a leadership director group with our development teams at least on a monthly basis, but more frequently as the large challenges arise. I am also a big advocate of getting involved in things that you're passionate with. And for me, I like to get quite involved in new acquisitions and partnering as well. So a lot of our projects, actually all of our projects, are in some form of a partnership. I mentioned it before with the Tattersalls club.
In Adelaide, I didn't get to speak about that before, but with the PPP, it’s in Adelaide over there. And that's a redevelopment of a landmark project central market arcade. And doing it with them and with an (inaudible), which is a large Chinese group basically focusing on the manufacturing, but it also has a really strategic system type relationship.
What does PPP stand for?
It is public-private partnerships, so really working with the government and to develop critical community infrastructure but with a sort of a private aspect of it.
Matt Khoo Shares his Early Beginnings
Before delving into his property journey, Khoo shares a bit about his upbringing.
Born and bred in Melbourne. I haven't moved too far from that. And look, I've definitely toyed with the idea of going overseas and working there and I’ve travelled a fair bit. But you know, got to love Australia, phenomenal. There's a good reason why a number of our cities often get in the top 10 of most livable and most recognised cities. I went to school here as well. Went to a local school, high school and then studied at Melbourne university so really haven’t moved too far.
He reflects on his time at Melbourne University and talks about his field of study.
I studied a Bachelor of property and construction which they don't have in the system now, it’s moved to an undergrad system, so I'm a bit older. I had a bachelor in construction and then commerce and then later on I came back to study my master’s in finance.
He goes on to share whether he gained first hand experience before returning to university to complete his master’s.
As part of the property and construction course, the requirement was actually to get industry experience before you graduated. And that was really insightful. Gave me a lot of understanding about the practical elements of my course while studying it. I actually worked at Jones Lang LaSalle and did research consulting, that really helped to understand the sort of macro elements that impact the property industry. Also an understanding of our clients who were investors and developers and what they really cared about.
Khoo explains the job description he fell under for this kind of position and how he was hired.
It was a kind of a mixer, I was very fortunate to get a full time role there. So I got a lot of experience and then kind of moved my final two years of my studies into part-time. And so I found that to be really valuable. And so yeah, they treated me as full time, I guess in the first year, essentially.
How long were you there for?
I think it was about three years in total.
He delves into the kind of experience he gained from working in a large development company.
It was a phenomenal base to start with because it wasn't a specific transactional role in that, you know, if you're doing leasing and property management or something, you learn a lot about that particular part of property. Working in research and in particular the consulting part. You have specifically tailored investment development questions that want to be answered. And they stem from everything around the macro and micro economics of property and the fundamentals that drive property investment development decisions. all the way through to actually doing feasibilities and understanding, you know, like what values are and how to make decisions from that. So it really gave me a great appreciation and understanding of the real world decisions in property investment and development.
He looks back on the kind of projects he worked on during this period of time.
One that was really interesting, it didn't actually end up going ahead because of the GFC, that was around the time when I was working there and it was actually a Dubai group that was exploring what is now Melbourne quarter. There’s a large development that sits on the edge of Melbourne CBD and Docklands and they had this grand vision of essentially doing the tallest tower in Melbourne and comprising all luxury sectors of residential and retail and commercial and hotel. And being able to then explore the study of luxury residential, and back then there wasn't much apartment development even in the CBD to consider. So when you're doing a study, you’re generally trying to benchmark other examples, that's your sort of way of knowing it is feasible, it’s like how a valuer would look at other properties to see if this stacks up to that value.
It was really interesting because there wasn't much around in Melbourne. So you kind of have to look globally and look at what best practice is and take a view then of how Melbourne could evolve. And yeah, 10 years down the track with Sydney and Melbourne, you're seeing a lot of residential development in the CBD. More and more the apartments are becoming bigger and you're seeing people accept luxury living and family living in the CBD. It's really interesting to see how that practice has evolved.
To be honest, I can’t say that my parents had any influence in my endeavours into the property and my endeavours probably are a little haphazard and I'll explain all that. So, my parents, my dad has always been investing in shares. Not so much on the properties base. Probably all they've ever owned is their house. And so I never really was exposed to property investment from an early age. And funnily enough in high school, I actually always wanted to be studying medicine and I got to year 12, didn't get the grades to get into medicine. And so I didn't really have a backup option, to be honest. I kind of was like, oh, that's what I've always wanted to do and now I don't know what to do.
I kind of went at it quite logically and I thought well I have decent grades and I could probably do a double degree in commerce and business sounds like, you know, the obvious choice and what should I marry that with? Because I don't want to waste my grades, I should probably do a double degree. That’s an Asian mentality from my parents. And I looked at all the options available to me and came to property construction and I was like, well, I get that, it's tangible. It makes sense. I can see how I would utilise it. And I think probably the thing that sold it for me was I was looking at the Forbes 100 or the 100 rich list and I realised 75% of those people made their money through property.
I'm not saying that's the way you should pick your future career and university courses. Definitely not an advocate for that. But I think as haphazard as it was when I got to university I realised I actually was really interested and really passionate about property. And I think that's how you should probably choose your university course. Do something that you're passionate about. I think what I really love about the property and what sold it for me was the tangibility of it. I think of why I always wanted to be a doctor was that you're helping people and you can see the outcomes of it. And for the property, it's the same. Like you turn something from something to make it better. Obviously my mindset back then was about making money, but actually, you know, better is about how you are influencing and impacting the community and those around.
He reflects on how his life would have been different if he had studied medicine and became a doctor.
It's funny because outside of my work at ICD, I do some personal development but you know, developments are quite capital intensive, so I actually do those with a couple of friends from university and from high school. Both of them are dentists. So I guess you don't necessarily need to study property or even be working in the field to get into it. What is very handy, is in a medical field, those who are practitioners they're very favourable in terms of finances. That's very handy, having good cash flow is important.
Khoo goes on to share where he went to after his time at JLL.
I actually was made redundant, that was how I left. But another thing that I reflect on is the positives, it is a very uncertain time for a lot of people right now. People are losing their jobs. And it's really challenging. I think it's important to know that there are positives. You've got to have a positive mindset to approach every challenge. And the redundancy gave me an opportunity to reflect on where I was at that time. What I really wanted to gain greater knowledge in was actually finance. I had a lot of understanding about macroeconomics and how to look at the fundamentals of property and how that influences specific assets and developments, but actually going through development, I needed a great understanding of finance. And I went back and studied, I was fortunate enough to get a job with a bank as well at the time and navigated my way and eventually got into the property development and investment lending space within the bank.
He explains how long this journey was before he started working for ICD Property.
In total about probably six to seven years all up. And then how I actually got into ICD was...so ICD has been set up by an old school friend of mine and his family. The Mai family and you know, we would catch up when I was working at ANZ in their property division there. And he wanted to understand how to navigate and approach finances for ICD’s first development project in Collingwood. And I wanted to understand more from him, like how they would go about purchasing sites and developing them. So we had a win-win relationship, mutual and beneficial relationship. And one day he called me up and asked me about a particular site in Melbourne CBD and how he would go and approach it from a financier’s perspective.
I sort of explained it and Michael then said, look I actually want you to come over and develop this model. And that was my opportunity, but at the same time I'd never actively managed a development before. So in my own sort of words, I said no to Michael in my own different language because I was like, look, I really care about you. I care about your company. I don't want to come in and make a mess of it. But this is something that Michael has instilled in me is you have to have a lot of faith in people and their capabilities and if you do that, like it's self fulfilling in a sense. And so he had a lot of trust, a lot of faith in me.
He said, look I think you know with your experience as a consultant to developers and investors, and as a financier as well. Taking all that skill and knowledge, you can apply it to development management. And he was really right, having that framework, a structure to approach things, it was surprising that it was really efficient and a useful way of developing or managing a project. And so that that project ended up being an extremely successful one for us. It was the EQ tower project in Melbourne CBD, 633 apartments, $350 million project. And it won multiple awards. We managed to secure an institutional joint venture partner out of China. It was our first international project. So from many angles, it was a huge success both for the company and for myself personally.
As the successful managing director was dealing with a hefty amount of money for this development project, he goes on to talk about the extensive process of putting the deal together.
With that particular project, the family that I work for, the Mai family, they do have a substantial amount of wealth. Personally for myself I don’t think I’d be able to do a large project like that, it is very capital intensive. A lot of that is upfront. And so we did have that backing behind us. But there were a lot of milestones along the way that needed to be achieved. One thing that was important for us was the terms in which we secured the project or the site. So we had 18 months of settlement terms that enabled us to secure our DA in that timeframe and in Melbourne at that time we were able to secure that in five months. So that was a really quick process that really helped achieve all the other outcomes. So we were able to secure a builder, finance from a local bank as well for debt and our joint venture partner. As well as sell out all the apartments before we even started construction. So the day we settled, we pretty much started construction, so 18 months.
He talks more about the joint venture partner with the Chinese company and how much they invested in the project.
Breaking it down to the capital stack, you have your equity component which ICD and this joint venture partner contributed. And thinking about it, that was roughly 30% of the total build cost. And then the financier that the bank, or the senior lender in that instance, provided the remaining 70%. But the split was roughly 50% between us and the joint venture partner.
Is that where your expertise working in the finance industry was able to help contribute towards putting this deal together?
Definitely, I guess structuring a deal with the joint venture partner as well as knowing how to approach the bank to make sure we had all the information right and the project at the right stage to achieve the finance. Because it was obviously a very large amount of debt. Certain things like ensuring that all of our pre-sales or firstly that our design was correct. Banks don't usually support below 40 or 50 square metre apartments. The apartments were structured the right way with good natural light and all the other things that are important from a financier's perspective. Making sure that, you know, the sales rates were within the market range. Making sure that we had also got a good mix of local and overseas buyers as well. That we contracted with a tier-one builder. And that we as ourselves and our joint venture partner were considered a strong sponsor. So all those things are key to what a financier is going to look at. Sponsor, builder, and structuring and all of that. I think that's where I was able to bring that skillset from being on the financier’s side to know exactly what they would consider important.
Khoo shares where he mainly learnt these finance skills that he has developed over time.
Theoretically you do learn bits and pieces of it at university. Practice makes perfect and I think I definitely let up like 95% of it through work experience both in terms of the feasibilities and expectations on returns from when I was at JLL. But in terms of the more detailed understanding of how to assess a good project, how to de-risk it and all that was through finance and through working at ANZ.
Everything You Need to Know About Property Development
The Courage to Purchase his First Property
Aside from investing in property development, Matt Khoo delves into the very first property he purchased.
The first property was the apartment, which my wife and I purchased when we got married. And the thinking behind it was right, we want something with all the amenities around it that we would use. And also one that we could possibly see as an investment long term once we moved out into our family home. And it's funny, at that stage of your life, what your interests are very much determines what the house looks like or the property that you purchased. And then now being in a family home, you never sort of see yourself in that.
But just trying to reflect on the emotions of it, it's really quite daunting actually. When we knew we liked the property, we were very nervous to go to auction. And so we ended up making an offer beforehand. And I think when you make offers beforehand it's obviously to a point where the vendor will be satisfied. Also the agent is advising, you know, ‘you're not going to get a better offer than in an auction’. So you do pay. In my mind, especially if the vendor isn't desperate, you pay sort of top dollar or at least sort of that market. But as a buyer I think you also really want a property that gives you that certainty.
Did you purchase that property in the Melbourne CBD and how long ago was that roughly?
It wasn't Melbourne CBD. It was actually South Yarra, which is in the middle. But close to the city, and that was in 2010.
After purchasing his first property and working in finance, he goes on to share at what stage he jumped into property development.
I was already working at ICD probably for a couple of years. My first personal development actually came through one of my friends, who was already doing development and he wanted a partner to explore, you know, more complicated types of development than just the simple tenors, which he was doing a fair bit of. And so I came on board and we explored it and did a whole bunch of feasibilities and other considerations and ultimately we landed at the conclusion that we could do all that, but actually doing the 10 houses, the simple form was going to be easier to secure finance, lower risk to sell, lower risk and less capital to develop, to build. And the returns were actually stronger as well. So I was like, look I get you want to do this, maybe you're kind of bored of doing the simple stuff, but actually it looks like doing the simple stuff is better for you on many perspectives. And that started our relationship in partnership to develop together. And you know, now I've done four or five of those simple types of townhouses and it's just a good one to have on the side. I get probably a little bit more involved in design elements and stuff. Whereas in ICD, you know, we've got architects who are the experts in that. And you've got a lot of helping hands.
Khoo shares how many townhouses he was developing with his partner at the time.
Most of the sites, or the projects, are generally about three to five townhouses. So really simple. We're talking about buying a residential block, you know typically 700 plus square metres, corners are the best. And then usually north facing with a sort of a vertical direction, if that makes sense. But obviously it depends on the zoning and planning restrictions on a particular site. But yeah, generally that's the sort of size.
700 square metres is a small size. How many can you actually fit on there? I guess it depends on the council too, but how many can you fit on a block like that?
Between three to five.
If you get a 700 square metre block in Sydney, most of the time, depending on which council, most you could do is a duplex. They wouldn't even allow you to build that many on there, which is really interesting. I guess it's depending on the council, depending on location.
Even in the short time that I’ve been developing the councils have changed their regulations. So you do find that what you possibly could have done a few years ago is probably not possible now. And that's around trying to restrict the density in some of the suburbs.
He goes on to reveal some of his worst investing moments and the lessons he learnt.
A big risk for a lot of smaller developments, actually a risk for any development, is around the builder. We've actually had a builder fall over on one of our projects and we're still completing that project now probably a year after we'd like to have completed it. So that has a real material impact on your outcomes. And sort of reflecting on how we could have mitigated against that. I think it's really important to do a greater assessment that you're looking to engage. And I think making sure you understand their financial capacity and cash flow, you know, builders rely heavily on cash flow and when they are in trouble, they start to turn the tap off from their subcontractors and then you get issues there. So digging into that, whether you are asking the subcontractors, whether you are looking out for any court or you know claims against the builder online, and understanding how much work they've got on. A lot of builders that go broke are generally ones that are looking to grow really quickly. They have too much debt. As we want to keep doing the same thing, as we talked about before, like it's hard to stuff up something, you know really well.
He reflects on the process for choosing this builder for the particular project and when he realised things were not going right.
I think that we probably prioritised as an investment, we prioritised price. But also prioritised a gut feeling, they seemed like a good builder. They're very organised, very structured. But probably didn't ask the right questions or we didn't ask the right questions around the capacity and any sort of bubbling issues going on in the company.
I guess that happens when we're going through the whole process as well, due diligence, we try our best but sometimes it doesn't hit the mark.
On the face of it, I think people can dress things up really nicely. It seems okay. But yeah, you do need to dig in further.
He goes on to share some of the moments where everything just clicked for him.
For me, I had a lot of doubt in my capabilities going into ICD and when we were able to secure that joint venture partner, an institutional group and a $30 billion company based out of China listed on the stock exchange there. To invest into our project that I was managing, it to me gave a lot of validity that I'm doing something okay. And I think the lesson that I learnt from that is there is no right or wrong way to develop projects. I guess you just have to find your own logic and make sure that your fundamentals make sense. For me, I drew a lot on how a financier would approach property development. I also, where I didn't know what was the best way of doing things, I benchmarked the best out there. So I looked at what other people were doing globally, locally. And I was like, well if they did it and it works, just copy it.
He further explains how he has been able to put these large property developments together.
It doesn't matter what scale it is because even sometimes the individual smaller projects, you're talking big capital, for anyone, for myself included. Their big decisions and it's easy to focus on the downside. The what if and the negative rhetoric that goes with that. And it's often that, which really holds you back from making crucial decisions and sort of helping you propel forward. I think something I learnt from both Michael who is my boss and his father who's had a lot of experience running a large company, you can't get rid of all risks.
Otherwise you might as well just put your money in the bank or wherever else you can possibly make some risk-free money.
But if you can satisfy yourself that you're comfortable with the worst case scenario, the exit strategy, if things don't work out with your decision then you can sleep at night. So if you know that, and go okay, I'm going to buy this site and I'm going to develop it, but if the feasibility doesn't stack up or the market turns, whatever it is, I can sell this site and possibly lose a hundred thousand or $200,000, then you can live with that, then you can remove the stress. And I think that's a critical part about making decisions, and sleeping at night.
Having the Right Strategy is Key to Success
He talks about the sort of strategy he and his team implement to ensure they reach a certain stage in the developing process.
It's worth having more than one scenario. If you think that everything's going to go this way, then you're going to be in for a rude shock. But generally we'll run probably three scenarios. A base case, a target and a worst case or a stress case. And really the focus is more on the base and the stress, like what do we want to achieve and see is realistically possible. And you know, what if we get delays or things cost more than they should and all that sort of stuff. So that’s the process and then really our decisions would be based on, what's the return we're getting from the base case? Yep, we're satisfied with that. Like that's a good use of our money. And then the stress case is like, okay, what's going to happen if it's the worst case scenario, are we going to lose money? Are we going to have enough money? All those sorts of considerations and then where we're comfortable with that and have the mitigants in place to ensure that is the worst case that's going to happen, but also less likely than it could if we didn't mitigate against it.
Due to the current unforeseen climate, he goes on to explain how the changing environment has impacted some of his projects.
I'll probably use the most, not controversial, but one that I think has been impacted the most from this. And I would say that Adelaide project because we were in the very early phases of that, it's good and it's bad. I wouldn’t say bad even, it's good in that we haven't got everything rigidly in place. It's a development of a 16,000 square metres office. It's close to 10,000 square metres of retail space. It's got a hotel in there. And it's got residential. So if I was to say if we're completing that project now in the state of the market, retail is shot, offices have challenges on the horizon. The hotel hasn't been operating for, you know, the cost of the world. And I think the latest reports, international travel is going to not go back to normal until 2023.
There are a lot of headwinds for a project like that, that's in design, in the sense that we need to consider and work within a very uncertain framework. What is the office going to look like at the end of this? Like is the new normal meaning that people don't work in office spaces anymore. I don't think that's the case, but how much is it going to change and how do we build into that? And we've done part of that by restructuring the way the office is designed. So we were originally going to have two towers. Now we're combining them with a central core, which enables you to have two separate areas still. So there's a lot of flexibility in the sizes and spaces. Or we could have a large contiguous space of two and a half thousand square metres.
That's one element of it. I guess with the office as well, in this challenging time we want to create positivity and we'd like to work with the government, various bodies to potentially firm up demand in that, so I know that there's a number of government apartments as well as sort of groups associated with government that are looking for space. They want this development to go up and go out quickly. That's another way of sort of supporting it. So I'm looking at those areas for office. For retail, retail is a big one, everyone's now gotten used to online. How does that change the retail space? And I think it was already heading in that direction, just probably a bit slower than it has now. So I think the fundamental retail is really making an interactive entertainment focus space. Like it's not just about buying your goods because we can buy our goods. You've got a supplementary source for that. But how do you make it something that is not replaceable.
Khoo delves more into his Adelaide project, and whether they are focused more on residential units as it is predominantly commercial and office space.
It does have close to 300 apartments in there. And you know, that's another area to explore as well. There's a sort of rising trend towards build to rent development. So in terms of mitigating potential residential sales risks, you could look at, and the focus on the build to rent is around yield and yield is stronger in Adelaide than they would be in Sydney and Melbourne. So that's another thing to sort of explore and all these things. You can start to see with a more complex project, there's a lot of things to consider in the current environment.
He shares with us exactly how he manages all of these projects and how he empowers his team to ensure they get things done.
With the team, we've set up a system where the team has full empowerment and it's then up for them to come to us when they need support. Because we are on regular touch points. I should say like me and the leadership team, we get regular updates from the guys on things that matter. They leave us out on the very specific details that are going on. But we get to understand the key drivers, the things that are fundamentally going to impact the value of a project. And that's probably like a good lesson learnt for those out there, is that you can focus on the colour of a tap, or something small like that, you know, a tile that's $30 versus another tile that’s $28 or something like that. But if you take a step back and look at things that are going to make more difference, they're more fulfilling I think, and you know, it gets bogged down. And they're obviously going to make a greater impact. So it might seem like I know a lot about the project. I think if you asked me the details of things, I would struggle for sure. But in terms of going back to your question, managing it, having good people around you that you can trust is key.
The Meaningful Reason Behind the 'Why'
With his impressive achievements as the managing director for ICD, he delves into his biggest why for doing what he does.
I can't say that I started off with the why, when I started working at ICD, but it's definitely evolved, especially now in this leadership role at ICD, I've realised the importance of the why, the why drives everything. If you don't have a reason for doing what you do, you'll fizzle and burn out because you won't have that drive. If I was to sum it up in one sentence as a personal why, for me, I want to do stuff that’s going to make my kids proud of what their dad's been able to achieve. And having that really deep, meaningful reason for doing something I think is really important and I'm sharing that with the team. I realised that it's not an isolated thing.
Everyone that works at ICD has a really deep, purposeful reason for developing what we do. And we don't want to develop things purely just to make money. The important aspect is a commercial as a corporation. But we've actually got a motto, that we want to develop buildings that stand the test of time, beautiful buildings that stand the test of time. What that really speaks to and captures for all of us is this idea of passion. You know, you're doing something you're passionate about. It's developing that sustainability from an investment perspective, from a community perspective. So you're delivering an end product that you know is good for the people you're developing for. That feeling of, yep, I've done something good for our purchases. We're not shortchanging them. They're going to get a great investment themselves. They're going to get great enjoyment out of the product that we've created for them and for our staff as a stakeholder themselves. You know, that sense of pride. We developed a landmark project that I can be proud of, that I can showcase to my family and friends and say I was involved in that. That’s the why.
On the Matter of Educating Oneself
He goes on to talk about the kinds of resources that have helped him along his journey.
Podcasts are great, but there is one book I’d say, and it's not even a property book. It's Benjamin Graham's Intelligent Investor. What I learnt from that was...and that's a book that Warren Buffet often refers to. I think Warren Buffett is probably an important influencer in the way I go about looking at investments. One thing is, and this is why I don't go into shares, is understand what you invest in. Know to the core, the fundamentals of what you're investing in and that it makes sense to you. And anytime I've lost money is investing in shares off people's recommendations, so that to me is really important.
Know what you're investing in and make sure that you're investing in good value, buy at the right time and the right property, so the core. But outside of reading, there are podcasts. Mine are mainly around leadership rather than so much on the property side of things. But EntreLeadership is a podcast that has been really useful for me. And that's more around actually interactions and leading staff. Because as I mentioned before, like how do you manage all this? Actually for me now, in the way I go about running the business is around how I can interact with and influence staff, and influence consultants and stuff. I guess on a smaller scale it is still important, treat people well and you'll be rewarded with dedication, loyalty, and results.
I think structuring things to do that is key, so EntreLeadership is one. Actually at work, we've aligned with a group called Performance Shift, with Kirk Peterson. He comes in and again, it's more around self management and team interaction management. From a property side of things, I look up to Michael who is my boss and his father as well who runs like a conglomerate and really understands the fundamentals around property on a global scale. And there are some really wise people outside in the property industry. One is the head of EG Funds management, Adam Geha. Every time I talk to him, I think I get wiser.
And then there's other people that I've come across, my ex boss at ANZ, I still keep in touch with him a lot, Adrian Blake. He's phenomenal at knowing the property industry and trends and all that sort of stuff. So I think like whenever you find people that really inspire you and motivate you and also give you great insight, you have got to hold onto those people.
If he had some time to reflect on his past self 10 years ago, we find out what he would have said to himself.
10 years ago would have probably been smack bang when I got made redundant. So that would be the perfect time to impart some wisdom. The positive attitude is very important in life. You can look at anything half full or half empty and you will achieve a lot more if you're positive about any situation at all. I guess it's sort of a guiding point, I would say that to my former self. I also feel like I got into property development on my own part a lot later. I definitely thought about it earlier, sort of around 10 years ago, but never took the dive into it. It took a friend of mine to influence and persuade me into it. But if I was able to speak to my former self, I would say just give it a go. The worst thing that can happen is you lose your money and you get a really good lesson in life.
What's interesting as well, you mentioned back in 2010 was when you first purchased your first property, which was that apartment. That's around that same time, wasn’t it?
The timing, not sure whether it was before or after. I have a feeling I got made redundant before then I got a new job and then purchased the property. Because it was late 2010 when we purchased the property. But I think I recovered pretty quickly out of it.
He looks forward to the future, where he shares what is happening for him in the upcoming five years.
Last year, we picked up all these amazing projects. The one in Adelaide, the one in Melbourne and Sydney, and the Auckland project. I'm really excited to be doing those projects and over the next five years, that's what's going to come to fruition as well as the one in Melbourne, which will be completed at that time. And I’m really excited about what's installed for us in the next year or two. There's a lot of uncertainty, but I think once we settle down on these other big projects, I'm really keen for our team to be purchasing and getting involved in more projects.
Last question for you is how much of your success is due to your skill intelligence and hard work and how much of it is because of luck?
That's a good question. Well I’m a dad, I don't think of myself as very skillful, mainly hard work. My thinking around luck is you make your own luck. You’ve got opportunities, everyone's got opportunities in their life, it's what you make out of them. So you want to call that luck, something just drops in front of you, you got to pick it up. And so I would say 90% hard work. And I don't see hard work as a negative either. The hard work is enjoyable when you get the outcome. I think then five, or 10% is skill.
Julie Wyatt is a renovation coach intelligent investing who is also a single mother and part-time nurse. She became a nurse straight out of high school which ultimately changed her life perception, and she carried this with her in her later years when she finally dove into property investment, a passion she had always been interested in but had never taken that first step.
Join us in this episode of Property Investory to hear how Wyatt won a property mentoring competition where she was able to learn from the best of the best, how she got herself out of bankruptcy and how she fell in love with renovating and intelligent that could ultimately inspire you!
'I think many nurses make great property investors. Many women make property great property investors.'
We find out what Julie Wyatt does and what her job description is, where she proves she is the ultimate multitasker.
I'm a property and renovation coach and I'm also a registered nurse and I still work part time because I really enjoy my nursing. I've kind of let a lot of it go, but my main focus now is my property renovation business. So it's a busy life that I have.
She delves into what a typical day in her life looks like.
I split my time between working at my business as a property and renovation coach here in Perth in WA. And I also work for a mining company up in a remote Northwest of WA. So I'm split between property and nursing, which is a great mix, I reckon.
With a hectic workload, she explains how she manages the time to do it all.
It's fairly structured. So I work a set roster so that when I'm at work, I'm at work, but my time when I'm at home is spent doing things that I really love, which is investing in property and renovating, which is my first love. So it's certainly busy, but you know, it's an easy thing to fit everything in once you become organised and structured in your day.
She explains the kind of schedule she has in between nursing and her business.
Eight days a month I work and the rest of the rest of the month I basically work from Perth, which is awesome. So I share a job with another nurse, which is fantastic. And I'm very lucky that I've got a very flexible employer that allows that sort of working arrangement, which is awesome.
I've had a few nurses on the podcast and it's really interesting how with nursing, it involves a lot of empathy and communication, because you're dealing with patients and this is essential in the property business because it is all about people. It ties in very well. And that's why I think a lot of nurses are very successful at what they do in terms of property investing.
I'd have to agree with you Tyrone. And I think many nurses make great property investors. Many women make property great property investors. I think mainly because of the life skills that nursing teaches you, really allows you to listen to what a vendor is saying for example, and read between the lines and just see what's really going on. One of the things that I have really honed in my journey is being able to understand what's the issue for the vendor. Why are they selling the property in the state that it's in? And being able to come up with a win-win often. Not everyone has that skill and I think it's really important in investing and certainly in renovating.
Julie Shares Her Life Experiences
Before discovering her love for property, Julie Wyatt shares a bit about her upbringing.
I grew up in a military family, so my dad was in the air force so we've kind of moved all over the place. And I guess that again has taught me really well because you start in a school and then two years later you’re moving to a different one, so I became very shy, which I was initially, but also you just adapt to a changing situation. So I was all over Australia, also in Singapore. So yeah, it was quite an interesting background. My dad actually got out of the air force when, when I hit 13, so I had a bit more stability going into high school. But yeah, it is what it is. It's one of those interesting environments where you learn a lot as you go along.
That's very interesting. Do you remember how many different places you went to before the age of 13?
Probably about seven or eight schools in my primary school years and kindergarten and stuff. So, yeah, a lot. I can't remember the exact amount, but you know, that's the life in the military. You move when they tell you to move and your family just has to go along with it basically.
As her father was in the air force, she goes on to explain the kinds of duties her father had.
It was more in supply in doing logistics and stuff like that, but still a very necessary occupation. I think he actually really enjoyed it in the military. He never really found something he enjoyed more after he left. So I guess it's a lifestyle thing. And he stayed there for a long time.
As Julie Wyatt was finally able to settle down at the age of 13, she talks a bit about her schooling years.
Nothing very interesting in my schooling to be really honest. As soon as I started high school, I finished year 12, finished my TA as it was called then, and then went straight into nursing as a fresh faced 18 year old. So they didn't have nursing through universities back then, so I'm showing my age here big time. But yeah, so learning on the job basically and learning very quickly, so really important life skills at 18, like laying out dead people, dealing with trauma. You just get thrown in straight in the deep end. But again, important lessons for later in life I reckon.
As she was confronted with intense experiences whilst working as a nurse, she shares how it changed her life perception.
I think it made me grow up very quickly, certainly. And also I think you really learn important life skills. Like how to talk to people, how to interact with people. And as I said, because I've been changing schools so much when I was younger, I was really quite shy. And you just can't be when you're having to help people with massive issues when they're sick, you know? So it really taught me to grow up and to learn how to actually interact with people and speak to their relatives, speak to their loved ones, all that sort of stuff. So again, I'm very thankful for that because not everyone gets an opportunity to do that, at such a young age as well.
Did you continue on to do nursing from there or did you actually switch into something else?
I became a registered nurse after doing the required training, but I didn't stay put in one place. I kind of was a little bit bored just saying in a hospital. So I went bush, basically I went real remote and just had lots of opportunities to do some amazing stuff that I would never have got a chance to do if I'd stayed in a Perth hospital, just being a ward nurse. So working in rural areas in remote communities. I actually became a flight nurse for Royal Flying Doctor Service in Port Hedland and that was an amazing experience. So, you know, when you take that step out of your comfort zone and go to remote communities, which a lot of nurses probably wouldn't do because they'd be scared or they're not sure if they can cope or whatever, then all of these doors are open. From Royal Flying Doctor service, I went to working offshore in oil and gas and then into mining. So for a nurse in an open mine site, it's not that usual sort of progression career progression that you would normally get. So I've been very, very fortunate that I've had the ability to experience so many different things. So taking that step as an 18 year old, getting exposed to a lot of different things and then just going outside of your comfort zone. It's been amazing.
How many years have you been a registered nurse for since then?
Oh, Tyrone. You're going to ask me that? That's going to make me look really old. 35 years I've been doing that, so it's a long time. But hey, some of the people that I've started nursing with have become my closest friends and we've been friends as we started at 18 year olds all that time ago. So yeah, it's really interesting. That sort of seemed like yesterday, you know?
Julie Wyatt discusses if nursing was always the path she wanted to follow, or if she was interested to explore other options.
Always wanting to do different things I think are really part of the reason I got into property at such a late age. Like I didn't start investing until I was 40. I think there's a couple of reasons for that, but mainly I was married to the wrong person who just wouldn't, wasn't interested in it. I thought it was a perfect opportunity, you know, good income, where we were living and stuff like that. And he's just like ‘no, no, no, we can't do that. No, we're not gonna do that’. So I think that held me back and I went along with it clearly, but you know I always wanted to start investing. Property really resonated with me as an investing strategy. So it wasn't until I became divorced that I went okay, right now we go, this is what we're going to do. So, you know, I probably saw it a lot later than a lot of people, but it was a steep learning curve. It was starting in the forties and a little bit of time to make up, you know.
Despite diving into property in her later years, she shares what else may have influenced her interest in property investment.
My earliest memories of me running around after my granddad and my dad who are both self-taught carpenters, very handy. Like I grew up learning handyman or handy person skills. So I always loved that sort of thing. So I think that's why I really gravitated towards renovating, I was always a tomboy. I was always like hey, I want to be outside helping them. And I think having that sort of background, like if it's something you love then you obviously have a passion for it. So I only have them to thank for that influence. And I think that has really followed me through so once I started doing my own renovations, I was also able to do a lot more than I thought possible. And if I didn't know something, I would advise someone to teach me or I would learn or I would YouTube it or whatever it took to find out how to actually do a task. So I think that's been a great influence as I was growing up, certainly.
Being A Single Mom In Her Property Journey
After realising her passion for property, Wyatt delves into the first property she purchased.
That's probably the beginning of the story for me. I ended up divorcing the person I was with for a while, 20 years actually. So I found myself newly divorced and I was the sole carer for my little girl, she was only 16. We're in a remote area up in Port Hedland and I thought, wow, okay. So I always wanted to learn about property, this is a really good time for me to start doing that. Scary but good because I can remember going through the process of the divorce, so we actually owned a house together, so I was waiting for the proceeds of the sale of that house. And that takes forever as you know, if you've gone through something like that. And I remember looking at my little girl thinking, wow this is actually it.
I have to make some decisions now. They're going to be the right decisions for her and for me. So it really hit me in the face where I thought, wow. I don't know anything about investing. I have no clue, but I need to find out. So I actually entered a competition, didn't even think much about it. Just wrote, I think you had to put in 50 words or less why you thought it would benefit you to be on a mentoring tour for 12 months for a property mentor. And I thought, oh yeah, that sounds good, I need to know. I've got a small amount of money coming to me. I really need to learn as much as I can. So I entered it. It didn't think anything more about it. And then about three weeks later I got a phone call and they said to me, ‘we picked you, we want you to come over to the Sunshine Coast next weekend and start this whole process’.
I'm like, oh my God. It really floored me. I had no clue. I didn't know what to do. Of course, as you do, go and ask the opinion of people around you and they were like, ‘sounds like a scam’ or ‘oh no it sounds too hard. You shouldn't go’. And I thought, no, I really want to do this. So I did and made it happen. I had my own business, I had my daughter and everything to try and organise, but I jumped on the plane, went over there and it literally changed my life. That whole experience was amazing, and pushed me completely out of my comfort zone. I ended up working for 12 months with a very good female property guru who challenged me in every way.
I mean I always had a good income because I've always worked, but I had nothing behind me. So I was a single mum with all the responsibility of my daughter and nothing much to show for 20 years of marriage. So in the 12 to 18 months that followed, I developed, it ended up being about one point $8 million worth of property. And doing lots of things that I had never done before, including renovations. I started with renovations, but also the ability to do this quickly using joint ventures, using strata titling you know, lots of different things that I have never been exposed to. So it really did push me in my comfort zone and so to say, thinking about doing property one minute into actually doing it and going from not even knowing how to write a contract out to, you know, dealing, doing joint ventures with people I didn't know particularly well, it is something that pushes your comfort zone, but it's the only way to grow. So yeah, it was just a massive year for me. A massive year and a half actually. So that's what got me started and I've been doing it ever since. I love it.
Wow, that's amazing. Were there any other candidates that were selected or were you the only one a part of that whole process?
No, there were seven women from around Australia selected, so I was the WA person. So I got to know those seven women very well, we became very good friends. I still keep in touch with them now. That was 10 to 15 years ago now.
I don't hear very often of these kinds of competitions. I wonder why she did it, do you know why she did that?
She was working with another lady and they were kind of a mindset coach and a property coach and they wanted to see whether they could take seven women and teach them a lot of stuff in a year. And they certainly did. It was amazing. I don't know that it's ever been done again, but I just consider myself very lucky to have had the opportunity to do it. Yeah, it was just something that I did as a one off, I think.
The renovation coach talks about the structure of the program and the activities involved over the course of 18 months.
It was the initial kind of weekend that I went to the Sunshine Coast, where I was put in front of 500 women, the audience, to talk about my journey and also you know, who I was and all that sort of stuff. And then four times during that 12 months, they would meet up at various places for the weekend, so they had like a weekend seminar and you'd have to go up and show the projects that you've been working on or what you've been doing. And so it was really good. So people got to know your story and about your journey. And then we used to just keep in touch with the mentor by phone, we'd hook up every week. And we also had the ability to ring if we found a really good deal and just run through the numbers with them and make sure that they were happy with what we were doing. So it was an amazing opportunity in that regard. So you knew that you were pretty much doing stuff that was going to work and that the numbers worked out, et cetera. And I think the thing that taught me the most was that having a mentor is amazing and just taking all the guess work out, is this a good deal? Is it not? Teaching you how to find good deals and how to back yourself and all those things.
Was there a cost to that as well besides your time?
That's a really amazing opportunity. What did you take away from that and what was the particular strategy that you followed?
At the end they had like a finale weekend and you know, all of us got to show what we'd achieved in the 12 months and all of us did really well. Not just myself, all the other girls as well. Then we had the opportunity to continue on with the mentor, obviously paying what you would normally pay, et cetera. But I think during that whole year there were other people that had participated in a paid program. So we were just the lucky ones that won ours for nothing. But I think, you know, the greatest thing that I took away from it is that it's the network, the power of people, having positive people around you, having people you can ring and just bounce ideas off, so you don't feel like you're doing it on your own.
I think that's the biggest thing I got out of it. I mean, it was an amazing signing year and we had lots of stuff happen and lots of fun things, lots of not so fun things. But that's the roller coaster of renovating and property right? It was just one of those things you just learn, you learn very quickly that things don't always go the right way that they think that they're going to go. You know what I mean? I suppose having that support of other people around you just made it such an amazing time and I still look back on it now and think that year changed my life and not just in terms of property. It changed my mindset. It changed my belief in myself and my ability to think, yeah, I actually am a good person and I'm doing stuff that I love. You know, all of that. Because I think each and every one of us has their baggage from their history and stuff and sometimes it's not so easy to move past those things and actually change your mindset and believe that you can do these things.
After developing a good mindset, Julie Wyatt delves into how she has managed to build her property portfolio.
I've clocked up my 11th renovation. So in that first 12 to 18 months I didn't do just renovations I learnt a whole heap of other stuff as well. But like I said before, I gravitated straight back to renovating because I just get a buzz out of turning a really crappy old, horrible looking house into something beautiful. And I think that's the guts of it. And to be able to make money out of that is a bonus. But I really enjoy the process. It's a little crazy I suppose, but it's one of those things where I did a lot of things, but renovating I think is a strategy for me that works well because I just understand it. I've got to feel it. You go into a property and just get a feel for it and you can see, no matter how ugly it looks right now, you can do something with it. So I guess you know, since I started that course, really renovation has been my main strategy.
Out of all those renovations, have you kept all of those properties or have you bought and sold them?The last three we've kept, the ones previous to that we sold. The main reason being is that the Perth market or WA market has been challenging for the last couple of years. So what we would have normally flipped for a profit, we've kept, and we've actually put all of the three properties onto Airbnb and basically just increased our cash flow because the market at the moment is a challenge, and we wouldn't have been able to sell them for a profit. So it's best to keep a hold of them. And Airbnb has been amazing. So it's just a really good strategy and just makes lots of sense in lots of ways. And our guests love staying in a newly renovated place. They really love it, so it's worked really well. Sometimes it's a matter of changing the way things in the property cycle and the property market are going. So never say that you can't do well in a downmarket, but Airbnb has certainly proved to us that we, you know, we've done very well and it's just a good strategy and we will change our strategies depending on what's going on at the time. So yeah, that's been a really good thing for us.
With all the properties she has renovated, she shares one of her worst property moments and the lesson she learnt from it.
I'd love to be able to say that I've just been successful the whole time and everything's been wonderful. You know, life is life and sometimes I've made some monumental mistakes and this one was one of them. I think after I finished the course initially with my mentor, I think I got a bit too smart, and that's just not the word, but also a bit cocky, I think, and probably thought I could do everything and take on too much. So I ended up for some reason, I have no idea what my thought process was at the time, but I bought a business and I thought, great, so I'll put a second mortgage on one of the properties to enable me to go into the sort of business, blah, blah, blah. Very long story cut short was it was around the time of the GFC.
The business didn't go so well and the banks don't like you putting second mortgages on the properties. So really not a smart idea. At the end of the day, I ended with the banks just buying and selling my properties. So that was a bit sad and I ended up being in part 10 bankruptcy. So basically the difference between a part 10 bankruptcy and a normal bankruptcy is that you pay back all your debtors, which I did. So that was to enable me to sleep at night because I think it's the right thing to do. So at the time it was a pretty horrendous process. I ended up also with a relationship breakdown around the same time. So everything as it does, was a monumental lesson for me and something that I really actually am very grateful for now, but you know, just shows that not everyone's perfect.
We don't always get it right and even going through that process and kind of the stigma of a bankruptcy and stuff like that. I got bad advice as well, which didn't help. But really, I think it's really important in these times to take responsibility for what's happened and to use it as learning, which I absolutely did. And I was actually able to turn that around quite quickly. You know, it takes a long time for all that stuff to be sorted and after a year, or I think it was probably into my second year post bankruptcy, then I started being able to invest again, just not on my own behalf, but using people with tools and stuff like that. So it wasn't a fun time. I didn't enjoy the experience, but I'll tell you what, it taught me a hell of a lot.
I suppose it proves that even the most successful investors, when you start talking to them they have all been through stressful situations like that. And that's when they get their greatest aha moments or their greatest learnings from. So yeah, I learnt a hell of a lot and you know, I could have actually at the time gone, ah, you know, property is really not for me. I'm just unlucky or everything is against me and I could think I'm never going to do it again and all that. And I would never think like that, but I could've, I could've just walked away and said this is just not for me, but there's something inside of you that says, no, I just made a bad decision. And you know, you can turn it around and you can move on. And that's exactly what happened. So it was a huge learning curve, shall I say.
Were you also still working as a nurse while you were running this business?
Yes, I haven't actually stopped working as a nurse, there must be something a little odd with me, but hey I actually enjoy it. I enjoy what I do. I always wanted to sort of keep doing that. So all of the money that I've made out of property has been on a part time basis. So I've always been able to juggle the two. I always remember my daughter will never forgive me. I remember when we were living in Port Hedland and I was renovating, I think it was my second or third house, I can't remember now. And it was a school night, so she's asleep on the floor in the middle of the lounge room. There's no furniture because I'm renovating this house and I'm finishing the painting and it was like one o'clock in the morning or some stupid time. And the poor girl's asleep on the floor in a sort of bundle of rags. And I'm thinking, god, I'm such a terrible mother. What am I doing here? But I've got to finish the painting before tomorrow because I had no time. So I don't know if anyone could relate to that, but oh man, you know, you just have to make it work. So we did.
Wow. And I wonder what your daughter says now when she looks back at it.
She goes, ‘you were so cruel to me’. But she knows the stuff that she learnt in the process is pretty amazing as well.
Renovating 11 Properties with Julie Wyatt
You don't just become a renovator, you become a problem solver. And I think if you have the ability to do that and think on your feet and back yourself, then that's my biggest why.
Despite experiencing obstacles along her property investing journey, Julie Wyatt talks about the moments where everything just clicked.
It sounds very negative to talk about your worst investing moment and mine was fairly major, but there's been some amazing stuff as well. And I think the thing that stands out for me the most is working very closely with my very first mentor. And then, you know, just learning the basics for me, that was huge. So how to put a property under contract, I didn't even know that, I had to ring her and say ‘what do I do?’. And she's like, ‘oh geez, Julie, come on, get a contract and put a price on’. And I said, ‘what if I don't have it?’. Because literally with the first property I bought, I had no money. I was waiting for my divorce settlement and I needed $43,000 which doesn't sound like a huge amount now, but for me it was huge.
I needed to borrow that off someone because I needed to pay a deposit and you know, get the ball rolling, put things under contract. And I remember the conversation with her and she said, ‘I'm not going to do this for you. You need to actually think outside the square on this. I know you don't have any money right now and you want this property, so what are you going to do about it?’. And I went, Oh, okay, I actually have to do it, so what am I going to do here? So I came up with a plan. I had a very good friend who had some money. And so again, this was completely out of my comfort zone. So I rang him and I said, ‘would you lend me $40,000 as soon as I get my payment for my divorce? I will pay the money back’.
And he said, ‘absolutely, no brainer’. And I went, oh my God, why didn’t I ask him a long time before instead of putting myself under all this pressure and what ifs and you know, but really when you think about it, there's skin in the game here, right? I had to actually think outside the square. I had to borrow some money and now I really had to make this work. I was like, this is not my money anymore and I actually borrowed off someone, and I need to pay them back with interest, blah blah blah. So you know, for me, this was huge. I'd never asked anyone for anything. I was a very independent person. So for me it was also like how else am I going to get this going? It was really hard. And then once I got that property and kept the ball rolling it became easier to talk to people about financial stuff.
I didn't, I wasn't so self conscious about it. I thought, I'm good at this. I'm good at finding deals. People are trusting my judgement that the numbers are adding up. I was good at putting joint ventures together. I was good at all of the on the ground stuff. So joint venture partners are quite happy to work with bankers. I had the mentor to back me up as well, but also could do it all the nuts and bolts day to day stuff. So all of those things were you know, when you're on a roll and things just move, you know that is going in the right direction.
Working On Property Renovations
After having immense support from her mentor, she goes on to explain how her strategy led her into renovating.
Where I learnt to renovate was somewhere that you would probably not even think of the market being important. But when I started my journey, it was just the start of the mining boom in Pilbara. So the house prices in the area I was were really low when I first started. So I started taking out ridiculous price houses, you know, $50,000, $55,000-$60,000 for a house. And you know, doing renovation in a slick suburb in Sydney and doing a renovation in downtown Port Hedland are very different. So I really had to learn the strategy about a targeted renovation. Not overcapitalising working out what your target buyer is going to be after. So these are the things I learnt really quickly and then how to do it on a budget. That's really important. As I said, doing a lot of stuff yourself is also important.
But also just basically learning and what's going to make you the money? How can you do it quickly? And making lots of mistakes as I did, some renovations weren’t pretty in the early days but hey, you know, if you can buy a house with 50 or $60,000 and then sell it for three or $400,000, why wouldn't you? That was just how crazy it was in that time. So always I suppose part of the renovations is targeting it towards where your end goal is, and buying well, and doing a budget renovation that doesn’t cost you an awful lot that looks amazing, they’re robably the three key things that I have figured out how to make money and how to make it fast. And then when you go to a different market like I'm in now, who is your end buyer going to be and who is going to want it? So if it's for a family, what are you going to do differently? You know, all those sorts of things are really practical. So renovating with your environment in mind is really important. And then also styling and staging the property at the end, right, all the stuff that you learn as you're going along.
As her strategy encouraged her to be quite hands on, she reflects on other strategies and if she would have done things differently.
I got better at that because I got older, and my hands aren't so great anymore. I've had to get better at standing back and going, okay well I can actually pay someone this much money and I can do it this much quicker. So, you know, common sense says if you're going to be the overseer or the project manager of your renovation, then that’s the strategy we've been using probably the last 12 months, which was disappointing because I actually really like getting in and getting dirty. But hey it's quicker and faster and makes more sense and we've got a good team now so we know that we can call on experts to come do the plumbing or you know, we've got a good bunch of tradies who we know will do a good job and they want to work for us. So that makes a huge difference. And I don't feel like I'm just handing over control to someone else, I always am very much involved, but you know, it makes more sense and you can get things done a lot quicker if you're not doing it yourself.
The only challenge that we all face is, and this happens with every single industry, is to actually get time in for the tradies to get the work done. You can't always know, it's just a juggling act, especially when you do have good tradies, but at the same time you've got to manage our time and their time together to get things done.
Well that's the thing that I found the most working with the clients that I've worked with is having a plan is paramount. It just astounds me how many people, and I've got a very good friend here, whose husband is one of the worst at this. When she went to the football a couple of years ago, he just got in there with a sledgehammer and just bashed down a wall that was inside their lounge room and then just left it and she's like, ‘what are you doing? Where was the plan here?’. You can't just smash a wall down and then just go, ‘oh well what are we going to do now?’. And I see that a lot where people have just gone full hell bent in with a sledge hammer and then gone, Right, so that's not there anymore.
Now what are we going to do? And it just astounds me how that is a really common thing. Like there's no planning and you still see these people renovating after 10 years and you're like, wow. You can do a targeted renovation in six weeks, you know with a plan and having your tradies all sorted and all of that, which is what we do, but we can see the flip side of that where people have just gone ‘oh it sounded like a great idea just to knock that out. And then I don't quite know what I'm going to do now’. You just shake your head and go, wow, okay.
As she has completed 11 renovations throughout her journey, she talks about the types of work she does on properties.
I guess my bread and butter renovations are cosmetic. Cosmetic is just much easier. I haven't really gone into structural stuff mainly because you can do and have so much fun with cosmetic and move on quickly. And going back to what I was saying before, when you walk into a property and other people would be scared off by it, that's usually a good sign that you're onto a winner. Some of the local agents here ring me when there's a hoarder's house or there's a...what did I look at the other day? Ex drug laboratory type house, I mean all those houses that have been taken back by the banks and you see the way that some people live and you think, wow, but you know, it happens.
One house that I bought up in Port Hedland, it was a rate default property, so the person had just stopped paying their rates, and the counselor just wanted to get rid of it. And the bank, they just wanted it gone. So I bought it, I think it was about $60,000 I had to pay for it. But when, when I looked at it, it had this god awful cactus right out the front, right up to the roof line. There were snakes in the grass out the back. The whole house had been trashed. It was just dreadful. And lots of people that I knew had looked at the house and just went ‘nah’. But I bought it and I thought, you know for $60,000, you know, you buy it as is and you have to deal with whatever you deal with. So I was a little bit adventurous which I suppose was a bit silly maybe, but it taught me a lot hey, you just got to make it work.
What happened with that particular property, what was the outcome?
That was a property, I think it was my second or third property and I was also running a business up in Port Hedland for BHP at the time, and I bought it and I renovated all the inside of it. And I had a friend in Margaret River that was also part of this mentoring property group that I was in. And she said, ‘oh, I'll buy it off you’. Because the cash flow was crazy up there, we were getting ridiculous rental income from properties. So I think I sold it to her about $145,000, so I still made some good money out of it. I think I only put $20,000 into the renovation on a credit card and then I sold it to her and then she finished it off. So it's one of those ones where I just had to juggle too many balls and I thought, well if she wants to finish it, I’ll keep moving on with another one that I was doing. So yeah, it was interesting and I think she still got that. So the income out of the property isn't so great anymore because the mining boom has stopped and things returned to normal as they do in mining towns.
Julie Wyatt goes on to share a bit about her most recent renovation.
We live down South of Perth at the moment. We did one in Shoalwater, which is right on the beach, it’s a lovely place, bought this house and it had been on the market for about nine months. It was a divorce settle, a divorce situation. And they were pretty happy to negotiate, so got the house for a good price, so we paid $520,000 for it, but it was in a great state of disrepair. So it was a wooden house, which is different to a lot of houses down here, but it had a lot of things, I don't know if you've heard of Dolf de Roos, but his strategy is always buy a house that you can add value to and that has multiple streams of income possible. So when I looked at this house, I went, okay. So it's got a guest house attached to it.
It had a spa, it had a heap of stuff. And I thought this could be beautiful again. So we took our time with this one because we were both working at stuff. So I think it took us about six months to renovate it. Again, just cosmetic, but it just came up beautifully. And then we got it revalued for $640,000, and it was in the middle, this was a couple of years back now, but it was, you know, the market down here is terrible. So to make an equity gain of 70 or $80,000 was pretty good.
Even at that price point, $640,000, where was it located? Is it near the water or something?
Yes, very close to the water. But it's also a very big property and it's unique. So again, there's pluses and minuses of doing that. Sometimes it's hard to value a property like that because there's not a lot of other properties that are the same in the area. But again, that was just cosmetic. This was just paint, new kitchen, new bathroom, but it just made a huge difference to the overall look of the property. And I think the valuers could see that it's changed the streetscape as well, so it's quite interesting. We had that as a feature in Your Property Investment magazine, which was interesting. And lots of people said, ‘oh, you can't make an equity gain in Perth’. Of course you can, of course you can. I'm just thinking about it the right way and going about it as strategic renovation.
As it was a cosmetic renovation, she dives into the details about how much she spent on that particular property.
We probably spent a bit more than we should have, but we justified it as you do because we're living in it. So we spent about 50 to $53,000 on it. But it was like I said, it was all cedar woods, so everything had to be sealed and stained and then the painters took a long time to paint all the outside and inside. So there's a fair bit of cost in all of that. But having it done professionally made a huge difference, and because we’re living in it, it's a PPR. We wanted to spend that extra money, have a nice kitchen, you know, have all the things that we wanted in the property. So it was a good equity gain and it allowed us to then go ahead and purchase other properties as well.
Due to her impressive portfolio, Julie Wyatt delves into her biggest why for doing property renovations.
I love it, simple as it is. I mean it is hey, you have to be crazy to renovate and just ask any renovator. I think if you don't enjoy doing it then don't, it's one of those things, and you touched on this before, they don't always go smoothly and often old houses can throw the biggest curve balls as well. You don't just become a renovator, you become a problem solver. And I think if you have the ability to do that and think on your feet and back yourself, then that's my biggest why. I love turning old houses into beautiful places to live. But also the upside to that is that you can make a very good income from doing that. And you can teach your kids to do the same. And that's part of the reasons why I've started coaching.
Because I had so many people come and ask me, they could see how successful we've been. And they're like, ‘oh, how do you do that?’. Or you know, ‘how do you start? What do you do?’. So when you know that there's a lot of people that are interested, and when you've got things like The Block and all these property shows out there that make it look so easy, it's real easy when you've got a team or tradies working behind the scenes. It's not real, but you know, when people see the money that's generated and stuff, they go, ‘oh, so I could do that’. Well, you need to educate yourself. It's not something you can just snap your fingers and pick up. But if you spend the time and educate yourself, then there's no reason why you can't do this stuff.
I guess that's why I used to...my business coach will probably tell me off for saying this, but I used to go to people's houses and just spend hours in there talking about what they could do and the best prices, you know, to target if they wanted to increase their selling price or the equity or whatever. And I thought well it’s just because I love doing it. And then I thought, well people are asking me lots of questions, obviously there’s interest out there. So that's kind of how I got into this. I think if I can impact and help other people and help them from a place...if they're in the place that I was in when I started, then that's going to be a good thing. Because it's scary when you're on your own and you're a single parent. And you're going, I want to have a great future for my child but how do I go about that? And you can make bad investment decisions if you don't have the education behind you. So that's the reason why I'm doing this stuff because I really, really love it.
Always admiring her talented mentor who she was able to learn from in the beginning of her property journey, she talks about other resources that have helped her along the way.
I think being with that mentor for the first year really opened my eyes to the fact that whenever I do something that I've never done before, I want someone who's done that before. So I wanted to build a business coach, so I have a business coach. And I believe mindset is very important, so I regularly go to mindset type events. I have a friend that runs retreats in Bali where we spend three days just on mindset. It sounds so trivial, but it's so important. And I think if you don't spend the time on those things, then you're not growing. You know what I mean? So I've invested in lots and lots and lots of money and time learning from learning different strategies with people and I’m working with a property coach at the moment as well.
I never stopped my learning and I think that's really important. I think that's what maybe stopped some people where they don't see investing that money or that time or that commitment as important. But you just can't not do that. I think that's one of the most important things that I've learnt, that I need to be learning because the market's always changing and it's not going to stay static. It's changing again as we speak. So it's one of those things where if I don't know something, then I invest the time and the money to learn that strategy or learn how to do that particular thing, so that's so important.
Developing A 'Never Give Up'Mindset Along The Way
Apart from mentors and mindset events, the renovation coach also shares her book and audio recommendations that have ultimately inspired her.
'You don't just become a renovator, you become a problem solver. And I think if you have the ability to do that and think on your feet and back yourself, then that's my biggest why.'
I like listening to your podcast, there's so many different people on there, it's amazing. So podcasts and obviously the media is very good. But the book that I reckon started everything, started making me question everything in my life was The 7 Habits of Highly Effective People by Stephen Covey. That was before I started properly investing, but when I read that book I went wow. I think it started my self development guide, you know what I mean? Like self improvement, you start thinking differently. And of course there's so many different authors out there. Any of the books by Dymphna Boholt, who was my first mentor are amazing. There's so many. I can't even, I can't reel them all off now, but just being part of those communities as well, being in a property of networks and communities where people who are like minded, sit and talk about stuff and band ideas around, I think all of those things are valuable. I don't get so much time to read, which annoys me. Probably audio books are the way to go.
Throughout her property investing journey, Julie Wyatt reflects on the best advice she has received.
I had some pretty harsh advice, like my initial mentor, she just gave me a hard time, I needed that though. I really needed someone to not be nice with me, but to be real with me. And she would always used to say things like, ‘never, ever give up. Don't give up. Why would you give up when you are that close to succeeding?’. You know, you don't want to do a certain thing but find a way to do it. And the second thing is to invest in yourself. Always invest in yourself. And it's false economy not to, seriously. If you don't know a particular bit of knowledge, to not invest in yourself is denying you access to greater knowledge, greater doability of everything, you know. So they’re the two things of advice that mentors have given me and holding you accountable, whether that'd be with a mentor, with your family members or with a group with like minded people. I think when you are part of those sorts of organisations or you have that sort of setup it just makes so much sense and it makes you successful. Really, it does.
I love that bit of advice never, ever give up because it's too easy to just throw in the towel and walk off when it's not working, but you need to keep persisting.
Yeah, absolutely. But lots of people do. And I think a lot of people have asked me, you know, you've heard my story and you've heard that things always haven't gone the way that I expected them to. And I could have walked away when I had the unfortunate incident with the bankruptcy. But I thought, no, I'm not going to walk away because that would be like a waste of 10 years of my life. It's crazy, I don't want to throw away all that knowledge because I have so much knowledge that I know that I can succeed at this. I just have to do it differently. So your mindset, like I know a lot of property investors and I know a lot of them don't actually think too much about this. They think, oh yeah, that's all ‘gobbledygook’. And you know, woo woo stuff, but seriously, it's so important.
If the renovation expert had some time to reflect on her past self 10 years ago, we find out what she would have said to herself.
I would say to her, educate yourself. Absolutely. And believe in yourself. Because I don't think I did back then. That was the biggest problem for me, I wasn’t. I wasn't thinking that perhaps the way that I think now. I would say it is possible and I would say just start, don't keep analysing, don't keep procrastinating. It is what it is, get in the start, get the basics right and do it. And lots of people that I talk to every day, they never kind of moved past that point. They say ‘I'd love to be able to do what you do’. And ‘I'd love to be able to just renovate a room in my house’. And I’m like well, it's not that hard. You just got to have a plan and then move forward and a lot of people just get stuck down in the details and it's sad because it's quite a simple process. If you follow the plan, follow the budget and you just get in there and do it, you know?
She looks forward to the future, where she shares what is happening for her in the upcoming five years.
I'm really excited because I think our business is growing in terms of investing. So we’re now starting to work with investors and owners even doing JVs on renovations, so that's really interesting. And I'm loving that because it just opens up new opportunities that perhaps might not have been possible before. And honestly if you’re sort of strung by the banks a little, then there's other ways of doing stuff. So that's something that we're really enjoying at the moment. But also probably from a personal level, I really want to expand my impact on other people. So mentoring, coaching is a fantastic way of doing that. And you're not confined to physical location, which is really exciting. So, you know, I can jump on a call with someone who might be on the other side of the country and you can talk them through a renovation. You can talk them through how to plan, you know, all of the things, all the steps in this process. And that's really exciting for me because I think I'm not constrained by where I live. So that's really exciting. So that's the stuff that I think I'm really wanting to spend more time on and helping women that may have been in a situation I was in is really exciting as well.
Last question for you Julie is how much of your success is due to your skill intelligence and hard work and how much of it is because of luck?
That's a good question. I really don't believe in luck. I'm going, to be honest. I think lots of people say, yeah, luck has so much to do with investing, and I have to disagree. I think I do believe there are times when, you know, in life things do line up and there's like coincidences or those opportunities or whatever. But I certainly absolutely believe that it's only by you intending or making massive differences or massive actions that you will make the most of those opportunities. So it really boils down to...I mean, education is hugely important and having knowledge is absolutely important. But taking action on those two things. Absolutely the difference between success and not a success. So I think to have the guts and the motivation to move forward when there are things that aren't particularly going well also.
I really think that for things to change or for things to move forward, you have to have some skin in the game I like to call it, there's got to be a commitment from you to make the most of that opportunity. And so really when you look at it like it, it kind of doesn't really factor in it at all really. I mean, there's been things in my life where I think I could have gone that direction or I could have gone in this direction. So you look at the situation and you decide whether you want to put yourself out there or not. So yeah, you know, I could have said no to that competition. I could've said no to the whole journey that I went on and I'm so glad I didn't, but you know, some people could say that's luck, I don’t know. I put it out to the universe and guess what happened? So I didn't know how that would all work out, but I had this burning desire to know more about property. So things present themselves when you put yourself out there, I think.
Tam Thorogood, now on her eighth property, has delved into all different kinds of properties. Despite her success today, she still is eager to continue to build up her commercial lease properties portfolio whilst still maintaining close relationships with her tenants. Formerly in the air force, Thorogood learnt many skills and work ethics that she applied to her property investment journey.
Join us on this episode of Property Investory to learn how Tam Thorogood succeeded in the challenging game of commercial real estate and how it could potentially help you on your journey, whether it be residential, commercial or development!
'Just because you do a few sort of good property transactions doesn't mean you know everything. And two, stick to your strategy.'
Tam Thorogood delves into why she became an assistant project manager as well as being a property investor.
I’m part time two and a half days per week and the sort of reason I'm doing that is for a future development of my own properties, I wanted to learn the ropes. I thought that was the best thing to do. So I'm studying a double diploma in construction and project management and landed myself a little, two and a half day a week job.
Thorogood goes on to explain what a typical day in her life looks like.
Any given day, I generally start with either exercise or some sort of meditation and journaling. Then I'll do one or two things. I'll go off to my part-time job and learn the ropes of development or I'll work on my own property management for my commercial portfolio or I'll do a bit of study.
Before learning the ropes about property development, Thorogood shares with us a little bit about her upbringing.
I grew up on the sunshine coast in Queensland, so a really lovely part of the world. I went to school there as well, and I stayed on the coast till I was about 19 years old and then I went and joined the air force for three years, which took me to Sydney and Canberra.
That's fascinating. So you finished school and you went straight into the army, is that what happened? Or did you actually take some time off and do something else?
Look, I had a couple of little jobs. One in a bakery, one in a club, just sort of doing catering and bar work while I sort of decided what it was I wanted to do. Actually, it was the air force I actually ended up going into, so while I was waiting for the process of being accepted, just had a few little jobs that kind of gave me some pocket money. And then got accepted and did three years in the air force.
What was the process involved, was there a similar process where you apply for say a university degree or is it completely different?
There's two ways you can join the forces. One is by being a noncommissioned officer. That's where people who want to do a trade will be trained by the forces. Let's say if you want to be a cook or work in warehousing or be a supplier or to go through a tertiary kind of process that's when you look at becoming an officer and you go into Duntroon in Canberra. So I chose just to go in as a supplier, but there are both options.
As she chose the option to be a supplier, Thorogood elaborates why she made this decision.
It stores warehousing dangerous goods handling. So we supplied the army air force Navy with every part or piece of equipment you could imagine. From a microchip to a piece of plumbing equipment. So that's how it was run back then. Whether it's still like that, I'm not sure. But the warehouse I worked in was 800 meters long.
Oh wow. It sounds like a little mini factory there in the background.
Yeah it was!
So what interested you about the air force? Because I'm sure there were so many other options out there. Why in particular the air force?
It's funny you mentioned that. I think I had a mindset from my family as well. Get a good job, get a stable pay, be set for life. And the air force interested me because I wasn't really an office type person and I knew I could go into the air force doing something that wasn't sort of sitting at a desk.
When was that, what timeline?
25 years ago. I was 20, now I’m 48 years old.
Thorogood explains how she was influenced to get into the air force following high school.
I think from memory they came around and did a talk, like a careers education kind of talk.
Over three years, obviously being in the air force you would have been flying planes. Is that what you were trained to do?
I was supporting the people who flew the planes. Let's run with that.
After her years of training in the air force, Thorogood picked up vital skills and work habits.
It definitely did as a young person set me up with some great work ethics. You know, you showed up every day, you showed up on time, there was a hierarchy, you understood discipline, respect, all those qualities that really help you through as you get older. And it really got me every job I ever really went for. Not only does it look good on your resume, that wasn't the reason I joined the air force, but you know, people do know that you have to have certain standards to last in the air force or any service. So it really served me well and set me up well for ongoing employment and just general decision making in life.
Thorogood had an interest in property investment from a young age, but also had influences from her parents.
I had an interest in property I guess in my early twenties. And to think back on how my parents might have influenced that, they actually used to own and operate pubs. So as a kid I actually grew up in a pub, which in those days the house was attached to the pub. So it was kind of cool, I thought. And every Saturday I would run out around the bar and pick up all the ones in two-cent pieces. So I had a fascination with money from a young age, not necessarily property, but that shifted into property later on when my mum and I had a conversation actually and she told me to become responsible and I didn't really know what that meant, but I figured buying land or buying a house is the responsible thing to do so that's what I did.
After working in the air force, Thorogood found herself in other kinds of jobs before plunging into property investment.
After that, I discharged from the services in Canberra and I saw an ad in the paper just while I was having a morning coffee, which was for PMG. So Postmaster-General, which now we know is Telstra. And of course, I was looking for an outside type work or a physical type of job. And it was for the first intake of female line persons in the history of PMG. So I applied for that and got that job. So for everyone who is listening, what that means is I was the person in the street holding the cable in the exchange, connecting your telephone pole, sort of hanging, putting wires together, that type of thing. So that's where I went to after the forces, and that was really good.
Wow. PMG, honestly, I don't remember that name. I remember telecom Australia.
So that was PMG before telecom, so PMG was included in the Australia post as we know it now, they separated and went to telecom.
Then from telecom, it went through to Telstra. So I spent 13 years in Telstra as we know it now. And that's really where I started my property journey, when I was working for them.
Thorogood shares with us the details inside her Telstra job before making her way into the property investment world.
Now you'd know it as a technician. The person who you know, comes and fixes your broadband, that sort of thing. So did that for about the first seven years and then I just progressed into management. So initially started with a team, then with a team of 25 and then eventually up to 130 staff. I ran the far North of Queensland for a couple of years. So I just progressed through the ranks and they were an awesome company to work for. They’re very supportive in not only paying you well, but training you well and teaching you lots of really good technical things and good management courses. That was a great place for me to flourish and learn how the corporates of the world work.
After 15 years, what happened from there?
I got to the stage where I was able to leave that job to do property renovating full time. So I made the decision myself, and another business partner, decided yep, time to go. So I did that and I was renovating part-time throughout Telstra pretty much my entire career. And then it was time to go. That's how we sort of shifted into full-time property renovating.
PROPERTY INVESTING JOURNEY
Before being the successful property investor she is, Thorogood delves into her first property that gave her a little taste of investing.
When I was 20, I bought a motorbike as you do when you're that age, and my mum said to me, ‘that's ridiculous, be responsible’. Like I said before, I was like, ‘okay, well what does responsible mean?’. All right, I'll buy a house or buy some land. And I had to look around and realize the only thing I could afford was a block of land, which was just where I currently was renting. So I bought that block of land for I think $40,000. And then I thought, this is pretty good, I like this. I sort of kept looking at land and I bought another block for $10,000 because I still couldn't afford a house, but I could afford those two blocks in the hope that they would double as stories were told back in those days: if you hold property, it'll double. And, it did for me, so I sold those two blocks and I bought my first house.
And whereabouts was that?
One block of land was in Coolum Beach. The second block of land was in a really small town outside of Queensland called Boonooroo. And then my first house, gosh, I should remember my first house. It was in Fishermans Paradise down in new South Wales.
So from the sunshine coast down to New South Wales, how come the distance between those two? Was it because you moved to New South Wales for a period of time?
To put a timeline on it, once I was discharged from the forces in Canberra itself and I started working with Telecom, I bought the land back up in the Sunshine Coast because that was kind of my home and I knew the area. I thought that I'd always go back there. And then I was still down obviously in Canberra and in New South Wales and that's when I bought my house down there. So Telstra hosted me around a lot. My strategy was to just buy the worst house I could find in a kind of okay street and I'd renovate it in my spare time.
The Sunshine Coast has always been home for Thorogood, but what was her intention to buy land there?
The intention was the dream of having a block of land in a place that I loved and then in one day I would build on it. That's the thought I was having when I was 20.
Did that come through to reality?
Well, no, I mean I had no strategy at that point. I didn't even think about the vehicle of property to get to wealth. It was just like oh if I work really hard, one day I can come back and I know I'll have this block of land that I've bought and I can hold it forever and at least I'll live back where I love.
That sounds amazing. And you've invested in quite a lot of properties from residential, commercial and land and so forth. In total, how large is your portfolio at this point in time?
Right now my portfolio is eight. That consists of where I live. Three vendor finance, residential units, so I'm the vendor finance person and then the rest of the balance is commercial.
You've also done quite a number of renovations and sold different houses in units. Can you tell us a little bit about how many you've done there?
The first stretch of my property career was buying really poor houses in an okay spot and renovating and pulling out some equity or selling and then moving on. I literally did that for about 15 years and I would have done about 15 properties during that time.
Gosh, that's a lot.
After that, I met up with a friend and we became business partners, we moved into a similar strategy. However, we made sure there was a little bit more value add. What I mean with value add would be we could subdivide that block or demolish the house and maybe put on a duplex as opposed to just a single house. We did about six or seven of those together as well. And that was in that first sort of stage of my property career and after that, the global financial crisis kind of came along and I wasn't financially prepared. So I went back to work and had to think about what strategy might get me a little bit further ahead than that one.
After remembering the GFC, Thorogood shares one of her worst investing moments that she ultimately learned a life lesson from.
The one really big lesson was in the time when we had the boom from mining towns, and everyone was buying up in mining towns and for whatever reason, I thought because I'd been successful in doing some renovations and making money that way that I could just buy any kind of property and it would be fine because I knew what I was doing but that completely wasn't the case. I purchased a property in a small town in WA called Newman and the mining company was going to rent it off me. Now that property purchase wasn't subject to finance. However, I was getting my portfolio revalued so the bank still wanted to do a valuation. The hype in the market had the banks doing desktop valuations back then for whatever reason. And for some lucky reason for me, the ANZ bank drove out and cited that property for me and they gave me a call and they said, ‘have you seen this property?’ And I said, ‘no, I've seen pictures. That's all I've seen’. And he said, ‘well, what are you expecting?’ I said, ‘well, I'm expecting an upmarket demandable with a pool, fully air-conditioned three bedrooms’. And he said, ‘well, that's not what you're getting. There is no pool. There is no air conditioning. It's a demandable sitting on a dirt block’.
And I went, wow. Okay. So that was a very nervous moment for me because the contract was unconditional at that stage. As I said, he was just reevaluating my portfolio. So I kind of went, wow, what am I going to do here? So I rang the person who was selling it to me and we had some pretty interesting conversations. And the upshot of a lot of to and fro was that he ended up buying that back off me. And in this circumstance, a huge lesson of two things. One, just because you do a few sorts of good property transactions doesn't mean you know everything. And two, stick to your strategy.
How did you find this particular property in the first place? Where you thought there was some opportunity.
With the mining boom, if you were looking to invest in trying to get a positive cashflow property really all you had to do is look in a mining town and it was available. We were sort of buying properties that were costing $300,000, you could rent them back to a mining company for $600 a week. So it was right in the middle of the boom.
Despite Thorogood’s bad luck with this particular property, she explains what happened with the valuation.
Thankfully at that time I had enough equity in my portfolio and it was okay, but I didn't want to be left with a property that wasn't worth what I thought it was going to be worth. So I really needed to get out of it, not proceed somehow. And like I said, I ended up selling it back to the guy who I bought it off, thankfully. Otherwise, it'd be a few hundred thousand down the drain. I couldn't see any way forward or any value that property would hold moving forward given the condition of it.
I'm just curious why the person who sold it to you was able to buy it back off you again? Because that's very interesting.
I think he was nervous given that what he'd tried to sell me was not what he had sold me and I'm sure it wasn't his first time. So yeah, I brought out my angry voice. Thankfully I did. It was a really uncertain time and it really was a really big error on my part to buy something since all I did was rely on a photo and just thought that everything would be okay.
Even with the hiccups along her property journey, Thorogood shares the moment where everything clicked for her.
About 10 years ago I did a Rich Dad, Poor Dad in an international investing course I think it was called. It was a nine month course and at the very beginning of that course we had to fill out a very basic assets and liabilities sheet, just a one pager. And as I filled that out, I saw the number that was left at the bottom, which was negative $795 a month. And I was quite shocked because I had a portfolio with a few million dollars and I kind of went, wow, what am I doing if I'm trying to retire from cash flow from property?
And that made a huge difference in the way I looked at my portfolio at that time, which at that point I started selling my properties that were negatively geared because for me, I determined I wanted cash flow and I wanted cash flow from day one. I didn't want to rely on a tax return. I didn't want to rely on depreciation and all the things that go along with that. I wanted it in my pocket from day one.
And the aha moment behind that?
My partner was renting a commercial building and the owner said, ‘hey, anytime you want to buy this building, let me know’. So I said, ‘how about you ask how much they want?’ So we asked the purchase price, I ran some numbers on how much rent we were paying and I looked at the bottom line and I went, if I buy this, my negative $795 goes to positive $1000 per month.
And I just went, ‘Oh my God, what have I been doing all this time?’ I felt like Blind Freddie because the numbers were staring me in the face and I was still choosing to sort of ignore them in the past. Penny dropped. Big time.
What happened next from that aha moment? Where did you go to actually make changes?
I did buy that property. I sold two other residential properties that I had that I couldn't see any way forward to make them positive cash flow. And the three units that I said I had under vendor finance, that was the way I made them positive cash flow. So it's better returns than I get from my commercial properties at the moment. So they were kept because I could make them positive.
Thorogood goes into depth about what exactly is vendor financing and how it works.
It acts kind of like the bank, if you think of it that way. Basically I put those three properties up for sale under the proviso that if someone couldn't get a bank loan for some reason, whether they had defaulted or been bankrupt in the past but they now had a good income, or they'd had a bad credit rating from something really minor, it meant that I would say, okay, I will lend you the money to purchase this property for an interest rate, like a bank's interest rate.
You would probably make a margin on top of the bank rate as well too, would that be the case?
They can. I'm making a margin on mine. Some do, some don't. But in my situation, I make 2% more than what a bank would charge. And you just agree on a current variable rate or a fixed rate. And I also make a full rate on the gap. Now when I say the gap, for example, the property cost $700,000 because I’m selling it to them and we’re settling in the future, I've sold it to them for $1 million. So I'm also earning interest on the $300,000 gap.
As vendor financing deals are not commonly discussed, she explains why she has been involved with them.
I knew my mentors had done it quite a while ago and had mentioned it to me. I agree that it's not something that's common, particularly in Queensland. It is pretty common I'm led to believe in southern States, in Victoria. But I read a book about how to buy a house for a dollar. I think it was.
Oh, by Rick?
Yes, and it has some similar concepts in there and a light bulb came on and I looked into vendor finance and I thought, I'm going to do this. So I did sort of kiss a few toads along the way to get the final person who did take up the property under verifying its terms, but it was well worth it.
How long have you had those three deals on the vendor financing for now?
A little over three years now.
When does it expire?
It's a 30 year loan term. So another 27 years. As long as they don't sell, I'm happy.
Do you see those types of people selling up or they're happy just to continue to look at owning it out? Is that basically the whole idea that they're almost renting to buyers in that sense?
It is similar to rent, to buy it. It was an investor who bought these ones. So I believe the strategy is to buy and hold because it is in a medium-density residential area and it is just three units, single story. So that's his initial plan, whether that changes in the future, who knows. But in the meantime, you know, the longer he hangs on to that, the happier I am.
The Power of Commercial Real Estate Over Residential
PROPERTY INVESTING STRATEGY
Thorogood delves into the details about her different kinds of strategies that have ultimately influenced her property journey.
When I did have the aha moment of negative cash in my pocket as opposed to having positive cash in my pocket, I was highly motivated to change that. With the mindset of investing in property, a lot of the time, well for me, I thought I knew what I was doing it for, but I really didn't have any meat around what that meant. I was just trying to accumulate property. So when I went through the RIch Dad, Poor Dad training course and really got into the numbers, I broke down how much money I needed to replace my income and then how much money I thought I needed to live a comfortable life from assets in property. So I worked really hard to change my portfolio around. Like I said, with the vendor finance units. Buying my partner’s commercial property and then purchasing another three commercial assets. After that, I was very confident of running the numbers, knowing that they would put more money in my pocket from day one than I had before I bought them.
How long did that process take you to get to where you are now?
That's probably been the last six years. And to help me along the way, I learn by doing as opposed to reading. It doesn't work as well for me. So I decided to become a commercial real estate agent so I could get in on the inside. I thought if I'm going to invest in commercial property, I need to know how it works. And the best thing for me to do was to go and become a commercial real estate agent. So while I was accumulating over the past six years, I did that for three years.
As commercial real estate agents are harder to come by, Thorogood tells us what she learned within the role.
No one likes you. It's a tough gig. But my mindset going in was that, you know, for the purpose of learning everything I possibly could about commercial real estate, I wanted to understand what was a good deal and what wasn't a good deal from an agent's point of view from vendors selling. I wanted to observe the owners out there who were leasing properties. Because as you know, in commercial properties, you can do both, which is selling and leasing. So I wanted to see what a good landlord looked like and what landlords who struggled to get tenants looked like. I wanted to understand what made a good asset, which made it desirable for people to want to buy or to want to rent. So over those three years I just really became a student of the commercial market and understanding terminology, yields, what the market wants, what people are prepared to buy. So that was really the main purpose that I did that.
Along the way, did you also make a bit of commercial real estate?
I did. Not a lot. I made enough to feed myself and not struggle too much. But yeah, I made it, I think I made about $50,000 gross along the way, so each year. It was enough to get me by for sure.
Thorogood explains where she was located as a commercial real estate agent.
It was on the sunny coast. I had thought this is what I wanted to do. A year prior I went and knocked on Savills door and I said, ‘I want to be an agent’. And they said, ‘that's great. We'll call you if we've got a spot’. So that didn't happen. So I went and sort of got a job at a local brand just to kind of cut my teeth on. And then once I'd done 12 months with them, I went back and knocked on the door and Savills on the Sunshine Coast, and they gave me a job.
After working in a large company as a commercial real estate agent, Thorogood gives us an insight on what it’s like.
Our Brisbane office did do a lot of very large transactions and I guess we got to see sort of the ins and outs of those happen on the Sunshine Coast. There were a few and far between very large transactions, but there was certainly enough to give me the exposure I needed and have a look at how that all works. You know, corporate brand, how they market, all that sort of thing. So it was definitely eye opening. The one mistake I made was because they are a corporate company, I thought it might be similar to the corporate environment of Telstra, which it wasn't. I forgot I was an agent and every man for himself. I did miss the comradery. It's really dog eat dog. Even when you work in the same office, you would know having been an agent, it's a tough gig.
Thorogood thinks about what she took away from the company and how she applied it to her own portfolio.
Definitely understanding what it means to be a good landlord. Maintaining buildings, putting a little bit of capital back into buildings that become tired, connecting with your tenants on a regular basis, they're in business just like you are. Just doing a set and forget or you know, this terminology of passive income, it's certainly not passive. You certainly have to be engaged and treat it like a business. Those landlords who kept engaged with their tenants, worked with them, heard them, you know, when there are tough times sometimes rather than losing a tenant, the best thing to do is to help them out. Because if you have a vacancy in commercial, as you know, it can be two years if you're in the wrong spot. So I learned that lesson and I've adopted that and it's working very well for me.
When did you purchase your first commercial property to now the fourth commercial property? What was the timeframe?
That would have been in about 2014, 2013 or 2014.
And then you've purchased a total of four commercial properties. When was the last one that you purchased?
The last one was about 18 months ago. I sort of bought three in quick succession and then as I learnt from my mistakes and from being an agent I feel like the next property I chose was a little bit better. I'm looking to purchase a second one right now.
She dives into the details about the type of commercial properties she has purchased, starting off with her first purchase.
The first one was my partner's clinic, so a physio clinic, which is deemed to be medical. So that sort of made me start looking at the types of tenants that I would like or I thought worked best from a long term perspective. And definitely medical is one. The reason being is you generally get a higher rate per square meter, talking a little bit technical now but with the medical fit-outs there's normally extra things like extra hand basins and extra parking so you can get a high rent for that. Also the type of tenant being medical generally has a better financial track record of remaining in business and we are an aging population. So for me, medical was sort of a no brainer. Medical and professional typically are the two types of tenants and the types of buildings that I like to purchase.
This made sense for Thorogood, as it helps with the longevity of the commercial property.
If you haven't provided the fit-out for the tenant and they have as well, generally they're very heavily invested. You get along with the lease, which again if you have a nice long lease and you go to the bank and you're lending, it's far easier to get your finance for that.
What kind of value was it with the first one you purchased? Because often there are misconceptions of commercial, that it costs a lot of money.
That was $285,000.
What kind of return did you get on that? What kind of percentage return?
But obviously with something like that, because it's a business type of loan or commercial loan, you have to put a lot more money up front, as a deposit.
Generally speaking, it's 35%. You can get less. But it's all relative. And what I mean by relative is that your interest rate goes up the more your LVR is. So if you want to put down a 20% deposit, that might be for argument sake of 6% interest rate. If you do 35% it'll be a 4% interest rate. So the more money you can put up, the better. And also the more money you put up, the more choice of lender and terms that you have.
Could we talk a little bit more about the other type of properties? Have they been similar to this one or have they been different for the commercial side?
They have been similar. So I've got a professional office, which has a solicitor in it, it was the next one that we bought. The one after that was another health type allied health being an exercise physiologist. And then the one after that, because I was working in real estate, I actually bought a vacant building in commercial. When buildings aren't tenanted, they can be worth a lot less because there's no one in them. So I saw the opportunity of buying something vacant, knowing I was in the industry, finding a tenant, putting a tenant in and building in some instant equity.
'You're running a business and you need to get the returns that a business deserves otherwise get out of the business.'
Thorogood discusses more about the empty property that she purchased, and where it’s at now.
It stayed empty for 12 months. I did have to do some work on it. And then we got a tenant who took a lease for the whole building. It's quite a large building. It's standalone 330 square meters in the center of town near a train station. And that tenant failed after three months, which was a disappointment. So what we did was re advertise and try and find someone who did what's called an assignment of lease. So basically take their lease over. We were lucky enough to do that for them because they were in financial distress. And now I have a retailer in there who's been there for nearly 12, just under 12 months and going really well.
For how much less did you purchase it off the market?
It was advertised for $580,000 originally. And I quite liked the buildings. I just watched it for a little while because I thought no one would buy that. And then it dropped down to $520,000. And I thought, okay, all right, it's getting a little bit better. And then I went to the agent and I said, ‘I'll give you $440,000’. And they said, ‘no way’. And I said, ‘okay, no problem’. And then two months later they called me in and said, ‘we'll take it’. So now that I have a tenant in it, I guess to give you the difference in what I purchased it for and what it would be worth now it would be about $150,000 difference in equity in that instant equity from now that I'll have a tenant in there.
Even having it vacant for 12 months, that had an increased value of $150,000. It was definitely worthwhile as you said.
But if it was vacant now it would still only be worth what I bought it for. It’s the tenant that adds the value to the property. It's just the way commercial works.
Did you have any issues finding that particular property?
No, I knew I had to buy that with cash and I only could afford to buy one property with cash. That was all the money I had but I knew it would be worth it. So actually right now I'm looking at going to the bank to get that refinanced. It's not quite as easy as residential. They do have stricter terms when it's already a purchased building as opposed to purchasing a building. So once I go through that process I can let you know how it goes.
Due to Thorogood’s multifaceted portfolio, she has adopted multiple strategies and ways of thinking.
I think because I've done a few strategies over a long period of time, really if you just set out what it is you want to do and be very clear about it, break it right down. That was probably an early error that I made that I wished I had done, and also really understand why you're doing it.
Choosing not to go down the residential path, Thorogood explains her reasoning for doing this.
I decided I wanted to invest for certainty. For me, because I didn't enjoy reading a lot, researching what future capital growth might be was quite arduous for me. When I decided to switch to commercial, I knew exactly that it was worth what I paid for. I was either getting income or I wasn't, either had a tenant or I didn't, irrespective, I don't buy anything for capital growth at all. If I get capital growth, that's great, but I purely invest for cash flow. From a residential point of view, I'm sure there are some out there that are, I've just stopped looking for them because it's easier for me and I know the commercial market now. That's the easy way to go and I'll stick with that.
Not only has Thorogood dipped her feet in commercial and residential, she also was inspired to get into development.
The commercial property that I'm holding has development potential. From a long term perspective in seven, eight years, so looking ahead. When I get to that point of knowing that my properties could be developed, what I wanted to achieve and what I'm wanting to achieve now is, I may not necessarily personally develop them myself, but I want to have an idea of how it works. I want to understand the right questions to ask a project manager or a developer or understand how the finance works around development so I can best prepare myself when I get there. Hopefully by then I should know what I'm talking about.
That's smart, especially in gaining that hands on experience from already existing developments and getting that access makes a huge difference, doesn't it?
Yes, I'm on a huge learning curve, so it's awesome. I really do enjoy it. I don't think I'm a developer as such. You got to have a lot of gumption to be a developer and really play a long term game and it costs a lot of money to do those sorts of things, but the rewards are there. But I certainly want to understand the process and I do enjoy the process of learning about it.
Are you living off this passive income at this point in time and that's funding your life? Or are you still building this up to where you want it to meet those goals that you set back at Rich Dad, Poor Dad training?
No, I certainly met those goals that were said at Rich Dad, Poor Dad training. Theoretically I could support myself through the properties that I have now. It's just I want to be busy. I find it enjoyable to still purchase property, look at deals and look at this development stuff. It's interesting. It's quite boring if you just stop everything and be at home. Certainly something I can't see myself doing.
With a strong passion for property, we take a look at Thorogood’s reasoning behind her why.
My why really is for when there ever comes a time that I need to help my family, perhaps looking after my parents is probably one main thing, is that I can afford to do that and then I'll have the time to do that. That was my driving motivation, to make sure I have choices in life where I can best support my own family and friends to a certain extent as well. I've got a close knit group of friends who when they need help I can help them out, with time mainly, without having to worry about where my income is coming from.
Throughout Thorogood’s property journey, there have been some resources and mentors that have inspired her.
Initially I was heavily into Steve McKnight and his programs that were sort of on the residential and flipping, that side of things. When I did shift into commercial, it was quite difficult to find a mentor. I ended up finding one that was in a swimming group that I was in who I would ask to meet for a cup of tea once a month and just try and pick his brain. But still it wasn't enough, which is what I needed to be a commercial agent. So Steve McKnight, Rich Dad, Poor Dad, from a property investing point of view they’re the two main ones that really influenced me.
PERSONAL HABITS AND BOOK SEGMENT
I know Steve's got his own book that he's written, same thing as Robert Kiyosaki as well. Do you have any other books that you could potentially recommend?
I would, I'm an audiobook kind of girl. I would recommend Ego is the Enemy by Ryan Holiday. Really good books for me are to get out of my own way I guess is the best way to put it and also just understand, doing things for yourself. It's your own path and you're not doing it to impress anyone else for any other reason, then what you originally thought you were going to do it for. So it's a really good book for me.
As she takes a look back on her journey, she shares with us the best advice she has received.
You've got time. I'm always in a rush.
I guess that's what happens when you see entrepreneurs and successful business owners and so forth. They're always on the go. Never stop.
Definitely. Less is more. I've got time so less is more. I felt that I had to be busy to be achieving all the time and we all know that's totally not the case.
How have you been able to reduce what you have but also achieve more?
I adopted meditation about four years ago, so that's been a pivotal little act that I do three times a week, that's all I can sort of get it down to. I tried every day, didn't work, but I've now nailed it three times a week. So I'd say that's what has really helped me.
If Thorogood had some time to reflect on her past self 10 years ago, we find out what she would have said to herself.
You're on the right track. Keep going.
What period of time was there uncertainty?
Within the last 10 years, well within the last eight years, I have been very solid. So it was probably before that I'd have a bit of different advice for myself. So in the last 10 years, definitely I would say I'm on the right track. Keep going. It's okay to switch strategies. I'm in the same space, I'm still in property.
She talks about the future, painting the picture of what is happening for her in the upcoming five years.
Acquiring a few more commercial properties is definitely on the cards, very excited about that. I'm very excited about private equity lending in the construction space, so I'm delving into becoming a private equity lender. And then development after that, maybe.
It sounds very exciting. Is there going to be a point where you go, okay, I've reached enough commercial properties in my portfolio, or are you just going to continue to add those on?
I think I'll continue to add those on. They'll just be of a different type potentially.
And the last question I usually ask all my guests on the show is how much of your success is due to your skill intelligence and hard work and how much of it is because of luck.
It's all hard work for me. It's all hard work. I've really had to grind it out and stick with it for sure. There's not much luck for me, unfortunately.
I think that's the thing. You create your own luck and it sounds like that's what you've done successfully.
Definitely. For anyone who thinks it's passive income out there, I've changed that word a long time ago. It's definitely not passive. You're running a business and you need to get the returns that a business deserves otherwise get out of the business.
Nathan Gooley is the co-founder of Yard, an investor, lecturer and finance expert. His company specialises in home lending services and providing simple solutions for finance, mortgages, bridging loans and home loans. Each client is assisted differently depending on their situation.
Tune in to hear about Nathan Gooley’s eventful property investing journey starting from his early days of studying to completing his doctorate to when he was appointed head of a private equity and funds management firm. We find out how he gradually made his way into the property investment world that could ultimately assist you in your own journey!
“The best thing was all of the other banks copied what I did...I felt privileged to have come up with something that others obviously saw value in.” -Nathan Gooley
We find out what Nathan Gooley dedicates his time towards each day, and how his job is driven by his passion for property.
I am a coach and a co-founder of Yard. Yard is a specialized home loan lender and what it does is it provides Australians with fully featured home land products and some extremely competitive interest rates on a day to day basis. What you'll find me typically doing is more or less helping people buy and refinance homes and property across all of Australia, so each state and territory. And where I get my kicks is really out of helping people into their first home and also supporting them in acquiring additional properties. Personally I absolutely love property. And I also really enjoy making the home land experience better for people. And that's where I derive the biggest satisfaction in all of this.
Are you speaking with customers every day as well, while helping them with their loans and their mortgages?
I think it's quite critical to really understand what it is that people want so that you can continuously sort of iterate your strategy, your product set to, you know, stay abreast of changing market dynamics. And things move really quickly, especially in the current environment. By being at the coalface and speaking with customers directly, it does help all of us to have a very solid understanding around their requirements and objectives and how we as a business can go about meeting those.
Prior to growing his company, Gooley shares details about his upbringing in New South Wales.
I'm born and raised in Sydney. I grew up between the inner West and also down in the South of Sydney at different times in my life which was absolutely fantastic. I went to school in both of those regions. I spent my primary school years in the South of Sydney and then my high school years in the inner West. And my father's family are also from the country. So I spent a fair bit of my youth in a country town called Crookwell, which is a really pretty beautiful part of the Southern Tablelands region of New South Wales. It's around two and a half hours sort of Southwest of Sydney, probably about 90 minutes East or Northeast of Canberra. And one little thing about it, it's actually quite elevated above sea level. So what makes it extra special is it typically gets a bit of snow a few times each winter. So for me personally, it was a fantastic sort of little escape to have whilst growing up within a busy, big city.
That's amazing. Just to refresh my memory, isn’t Crookwell the stopping point to get out of Pine Bluff?
Yes it is, your memory serves you very well.
It was originally a gold rush town, so it's quite an old you know, inland Australian colonial town. But it is a very pretty part of the world. There's a lot of sheep and cattle out there that it gets a good amount of rain, so it's very green. It's quite popular for people that are growing potatoes. So a lot of the potatoes that you might sort of consume in Sydney are from that part of New South Wales. And also too, it had the very first windmills. So they were quite ahead of their time in adopting renewable technology.
It seems like you know that area very well. Have you gone back there recently as well?
I was probably there eight weeks ago or so when I went there. And you know, it's one of those places that only slowly changes. It's not like you know, where you go between areas of Sydney and there's remarkable sort of changes in very short periods of time. It's sort of one of those quaint little towns that sort of only slowly evolves over the decades.
Gooley shares how he appreciates the charm of small towns in Australia.
Hopefully one day I'll sort of find a little place like that to retire in because you know that's probably where I'll find my own sort of happiness.
Looking back on his past, Gooley delves into his family and his education.
My dad’s family was on the farm, so it's more his parents and some of my grandparents. But it was good from that perspective to have the two worlds. I was born and raised in Sydney. As a kid, I was pretty into my sports. I really was only academically minded probably until year 12 and realized I needed to sort of kick into gear if I wanted to not have to get a job the following year and I could sort of continue the student lifestyle for a few more years. I sort of turned my attention towards sort of economics and finance at that point in time because I just sort of found a little bit of an interest in it when I was at school, but I always thought that I wanted to be a lawyer and when I left school and I got into university I really devoted quite a bit of time to sort of getting to understand how I could make that reality come true.
I got a job working within the court system of New South Wales, just an administrative type of role. But what it allowed me to realise is that it wasn't for me. So after about 12 months of doing that, I pivoted my life and devoted it to learning more about economics and finance at that point in time, and investing.
That's really fascinating. That was the first year out of school when you worked in a legal firm for 12 months?
That's right. I had an administrative role working for a judge. It was a criminal judge in the Supreme court and it was quite eerie, some of the things that you would have to listen to. And I quite quickly realized that I didn't have the stomach for it first of all. And also the process and the hours that they keep are significantly difficult to maintain over a full career.
Taking an interest in law in his younger years, Gooley explains why he took this direction.
My dad was a lawyer, so I had that as an example. And it was probably sort of some footsteps that I was looking to follow there. And I thought that it might've been a path that I wanted to try. But then I saw finance and it presented an interesting option for me to learn about a different field and essentially that was the path that I took. And I got extremely deep into it, and everything that I read sort of just led me to ask more questions. And I spent a lot of time in university just sort of looking to understand more and more about different components and parts to finance.
I finished my first undergraduate degree and I sort of more or less instantly enrolled in a master's degree. And then I finished that and I felt as though I sort of still hadn't scraped the surface. So then, I'm not sure what I was thinking at the time that I enrolled myself into a doctorate and spent sort of more or less six years undertaking that while I was working full time just so I could really deepen my understanding. I saw education as a way to overcome my lack of years of experience within the market and it certainly did allow me to have, you know, much deeper conversations with extremely experienced people within the industry.
He explains how he changed degrees after realising law was not right for him.
I pivoted into just a straight commerce degree at Sydney University, which was extremely enjoyable at the time.
During that period you continued to go from your undergraduate, to your postgraduate and then your doctorate, that lasted for how long roughly?
The entire period probably went for around 15 years sort of on and off. There's obviously life events, especially when it comes to doing a doctorate. You have significant ups and downs and it's probably one of the most mentally challenging things that you can ever do because it's quite a lonely project, you're on your own the entire time. There's moments where you just take a break from it and you might not touch it for three or four months. And then there's other moments where you're devoting almost every waking hour into whatever it is your project is. And it's a very lonely process doing research like that because you're often tackling a field or you have to tackle a field that no one else has explored at that point in time.
There's no sort of gap in people's understanding, so you've got to find something new. That is a challenge in itself. Then also understanding the process that you need to take in order to answer one because there's a methodology that you need to follow in order to I guess articulate one or finish one, so that was a very long drawn out process. What was quite critical to me was to continue to work at the same time. I was very skeptical of whether or not I'd realize any value from the number of hours that I was devoting to it. So I wanted to make sure that I still kept in the game in terms of the workforce and it was just something outside of work that I was devoting time to broaden my understanding of the field of finance.
As there are many aspects within finance, Gooley shares what he chose to focus on for his doctorate.
I started my doctorate right in the middle of the GFC and I picked an area that was going through significant regulatory change at that point in time. So what I looked at was a space where people were sort of unsure of the ramifications of certain rules and regulations that would come in and how that would translate into norms and practices going forward. So what I did is I devoted a significant amount of time in looking at understanding what those rules were first of all, and then how they would impact people in both Australia and Canada. And I looked at those two countries because they're extremely similar in population, they’re both Commonwealth, in the case of Canada an ex Commonwealth country.
They've got a similar legal system and banking system. They've got five banks, we've got four big banks. So their property market is very similar to ours and their population desire to buy and hold property is very sort of akin to what you find in Australia. So it's quite a good case study to look at when you're looking to understand the consequences of, say, some new rules and laws that were coming in. And what I did was I sort of came up with what I felt was the outcome and then I turned that into a new way of doing things for people. And what I did was I built a new product off the back of that for a bank that I was working for at the time. And I actually won the Australian business award for product innovation off the back of it. And the best thing was all of the other banks actually copied what I did. It was quite a shot in the arm, I felt privileged to have come up with something that others obviously saw value in.
Are you able to delve into a little bit more about this type of product?
The product is a way of readdressing your balance sheet to me. If you're a bank, or a fund manager it’s a way you can utilize my product or my methodology in order to achieve a better result for your portfolio. So it might be an outcome where you would like to generate a higher rate. And because my product works within the current rules framework, it allows an investor to essentially buy the product or for a bank to sell the product. And for the bank it sort of ticks a whole lot of boxes. And as a consequence, they can offer a higher interest rate to an investor. It’s almost like a way of repositioning or restructuring your balance sheet in order to get around or meet the regulations that came in as a consequence of the global financial crisis.
It solved a big problem there by the sounds of it.
It's one of those things where it's quite time dependent and you know, it's there, it's now embedded within the system. Where it has the most application is in the institutional space where large financial institutions are often sort of either investing with one another or in trading with one another. That's where it has the full value. It doesn't sort of make as much sense in the retail or small business category.
Gooley talks more about his employment journey that ultimately led him into the financial markets space.
Whilst I was doing my undergraduate degree, I was working for a sort of a small merchant bank at the time. And that was quite good because I spent a good few years working for that organization and I graduated from university and I thought, you know, I had been offered a new role there. And I spent six months following graduation in that new role and I was actually planning on going traveling and I wanted to sort of pick up and move overseas, it was sort of a path that many of my friends were following. And I didn't want to miss out on that. And I had a friend one day call me up as I'm sort of getting ready to relocate and book flights.
I was already looking into different sorts of trips I could sort of take on my way to an ultimate destination. And my friend from university told me about a role that was going within an area of the company that he was working for. And it had been some time since I'd gone through a job application process. And I spoke to my dad at the time who sort of said, ‘look, you know, your heart is set on moving overseas, that's all good, but why don't you go and speak with them and just get a little bit of interview experience because it might prep you for when you get to wherever you're looking to go’. So I went along and I had an interview.
“The key is for you to have a breadth of options available to you, if you want to be sustainable through all parts of the business cycle.” -Nathan Gooley
I've got invited back for more. And then I ended up sort of being offered the job and I actually took the job and it changed my path at that point. So I ended up sort of pivoting from working for that sort of equities, so fund manager and merchant bank into banking at that point in time. And that's probably the biggest pivot for me because it sort of changed my focus from one area to another.
What’s the difference between the initial role that you were working in compared to the new role? What were the biggest differences?
I was working with equities in the first role and then the second role was working with interest rate products, bonds, other sort of fixed income investments and also debt products. That was the big critical factor. So rather than looking at, you know, different companies on a day to day basis, I was now looking at essentially fixed income securities.
After changing roles, Gooley explains what fixed income securities entails.
Fixed income securities are very basic sense loans and deposits where people sort of either borrow money or lend money to one another. And a really good example, like a loan for example is a bilateral deal. So it's a deal that you strike with as a property investor, you go to your bank and you borrow some money. What big organizations do is instead of borrowing money from other banks, they issue bonds. And so they effectively sell a promise to repay that sum of money at a point in time, in the future. And in return they receive interest payments or coupons from that investor. So effectively I moved from a world which was analyzing sort of companies and investing in companies and trading, say stocks to trading bonds and bank bills.
That is quite a big move and big change. How long were you there for and what kind of things did you do?
Before studying Yard, I'd spent more than 16 years in banking. And I think what the period allowed me to really understand was what traditional lenders did really well and where they fell short. I got to work with some really exceptional people with great minds who ignited my passion for property and finance and probably motivated me to continue my education in my spare time. The fact that I did all of this education, it resulted in me then wanting to teach as well, which is my second job, and my second love that I do on the time and on the side, and what that allows me to do is to work with the next generation of passionate young professionals and also helps me stay on top of the evolving trends that are out there.
And it also broke down a fear that I used to have around public speaking. I used to crippe at the knees when faced with even just a small crowd of people who I needed to present to. So with where I am now, I feel privileged to have had these two roles, which are quite different. Also sort of escape the corporate rat race in a way. And I now get to do two things with a huge degree of flexibility where I truly love what I get to do.
Gooley shares with us the details about his teaching job that brings him great happiness.
I teach finance at the University of Sydney. I've taught a mixture of undergraduate and postgraduate students just within the finance faculty. So anyone that's sort of undertaking an economics or commerce or even like an MBA style program, if they've chosen some sort of finance at some point there's a good chance that I'll have worked with them throughout the course of their studies.
Do you teach there as a lecturer or on a term by term basis?
I teach twice a week. I teach one course each semester. It could be foreign exchange for example, or income or it could be capital markets. And this semester what I'm doing is I'm teaching on a Monday evening and on a Wednesday evening. And I essentially present the same thing twice. And students based upon their timetable, they can come along to either of those two sessions.
Whilst managing a company, working with clients and educating students, Gooley proves he can do it all.
There's quite a big initial fee sort of cost or component where you need to prepare slides. You need to sort of think about your examples. You need to be able to be relevant and have things that are updated to the current environment. Once you've done that, the investment and time has already been done and it's just a matter of staying current and going and presenting it. And then also doing things, administrative things like setting exams and marking assignments and so forth. It's like anything in life, the longer you do it, I guess the easier it gets, you sort of get the hang of it and once you understand that process, it becomes easier for you to juggle with other things.
After working in banking for the last 15 years, Gooley shares his experiences prior to Yard.
Probably the biggest thing for me in starting out or prior to starting, was leading into the roles that I found myself in. I was fortunate enough that at one of the jobs that I had just before I left banking, I got to sit on all of the main product and pricing committees across that bank that I worked for. And what that meant was I got to sit on the home loan committee. So I was one of the few people that sort of got to decide the home loan strategy for that bank. And I also got to sit on the business version of that and then the institutional version and the wealth management version of that.
I had this bird's eye view across the entire organization and it allowed me to really see what was being done well and where things were really falling short. And within any big organization, things become institutionalized and processes touch so many different people. It's very hard to actually change anything, even when there's things that aren't as optimal as what they should be. And also the other big inhibitor is technology. And some of the technology that my old colleagues had to work with and I had to work with, was really archaic. And when you relied upon that, you're quite limited in what you can actually deliver to a customer and how quickly you can turn things around. But leading up to that process I had this exposure and then at the same time, because I was getting this exposure, I had colleagues who are incredibly educated and financially literate in doing whatever it was that they would do, but they would come to me and ask me for advice around property finance.
I found that initially quite strange because these are people who I held and still hold in quite high regard because they know their areas very well. But yet they were perplexed when it came to comparing finance options. And that just made me think that the whole process was just made unnecessarily complicated. If you have extremely smart people who just don't know the best option for them, then something effectively is going wrong. And it was probably those things as well as my own process that I went through. When buying a home for the first time, that sort of made me realize that things could be done better.
Wow. What time frame was that, when did that all happen?
All of this was probably over a period of five years where I was I guess sort of understanding the entire end to end process myself and what I found was, after going through it, you become more acutely aware to it because she's lived through the experience and you get a better understanding for it as a customer. So when you then apply the customer lens, but also the base lens it helps you then sort of understand how things could be potentially done better.
Gooley was encouraged to start his own company and turned his back on moving overseas. He shares with us this journey.
The two options were either invest in more property or start a business and I had a bit of money saved because the objective had always been to buy more property. But then the alternative was potentially get a little bit more freedom for myself and try to tackle a problem that I saw as being a huge opportunity. So effectively when I went through that home land process myself I did find it extremely difficult. It was busy work but it wasn't meaningful work and the entire loan application process just to me felt really inefficient, ancient and it took an eternity. I encountered millions and millions of pages of forms, terms and conditions and legal documents, and I needed to complete all of those manually.
It literally took me weeks going back and forth with the lender tracking down missing paperwork and forms. I don't stress Tyrone, I try to stay pretty relaxed and stress free. But during this moment when you're buying such a big asset, a property asset, it's probably the biggest investment that you make as an individual. I was just stressed the entire time. Whilst I was waiting to know where I stood. Could I borrow them out that I needed? How long was it going to take to get the approval that I required and you know, would there be an issue that popped up at the 11th hour? So it wasn't a pleasant experience that I had. And then when I spoke to friends and family, I realized that I wasn't alone.
What that did was it made me think that through Yard, we could make the home loan application experience better for people. And then just speaking with colleagues, I guess over the last five years that I was in banking really made me realize that the lenders have made things incredibly and unnecessarily complicated. If you go onto a traditional lenders website, you can find 20 to 30 variations of the same thing. Each product has its own flashy brand name. There's different interest rates, there's different fees. It's really not transparent and it just makes comparison almost impossible. And the other thing that I didn't like is, with a traditional lender, everything can be up for negotiation. The fees you pay, the discounts are their standard variable interest rate. I just personally got confused. It defeated me and it can leave a feeling like you've been ripped off and you might not be, but it can leave that feeling that you've just been ripped off.
It’s just not a nice sort of taste. And I think when you strip it all back property finance is pretty basic. And when it's not kept simple, it just becomes harder for people to make an easily informed choice about which option is best for them. So what was clear to me is that people are after both the simplicity and transparency, of course, great rates and unlimited fees too. But the most important thing is, how do you take something that, in its essence is pretty basic, but it's become incredibly complicated for one reason or another. And just reposition that as being something extremely straightforward that just clicks immediately for anyone. And that was the challenge with Yard, and that’s probably what took us the greatest amount of time. How do we take you know, 20 to 30 variations of effectively the same thing and turn it into just four products for consumers. And how do you do that in a way where you can provide people with, you know, a really seamless experience, a really competitive interest rate and give them the ability to just add in as many features as they want.
You must be the next Steve Jobs of Apple, but of finance.
If you look at the Telecom industry, the Telecom industry had this moment too, probably about 15 years ago or so. Remember when you walked into Telstra back in the day and you would sort of walk around the edge of the shop and there'd be 15 people hovering waiting to sort of grab you and you'd sort of walk around and you'd look at handsets and it became almost impossible to understand and compare, say Telstra to Vodafone, Vodafone to Optus or any other carrier at that time. Because everything was packaged up into a 48 month plan, you're paying a different fee for SMS to you know, your sibling or your friend. You had a different amount of calls included on a monthly basis.
It was just impossible to make a comparison. And then amaysim came out with this data only plan. It was like unlimited calls, unlimited text, really simple, really straightforward, just pay us X dollars, some dollars a month and you'll get this amount of data and you know what, let's just do no locking contracts. And it was just very sort of seamless and straightforward and they had this instant success. I think people appreciated that. And Apple’s probably another company that went through that sort of simplification and stripping out all of the complexity that, you know, just sort of builds up over the course of time. And that's what all we want to do is, we just want to be able to give people like four simple choices.
They can have as many features as they want and we give them a really competitive interest rate. And the product that they end up going into is just driven entirely by their objective. You know, do they just want a home loan to buy an owner occupied home or an investment property? Or are they looking to do a knockdown rebuild of a house and land package? And in that case it needs something like a construction loan or are they someone that's looking to, you know, they've seen their dream property come up for sale on the next street and they want a bid at the auction, so they want to buy before they sell their existing home. So they need a bridge. And then there also are a lot of people out there who are looking to purchase property through their superannuation.
For me in the last few years that I was in banking, I saw pretty much most players in the market pull away from SMSF lending. And I'm not sure why that was because property can be such a great asset for anyone to have within their superannuation because property really is a medium to long term play and so is superannuation and given the performance of property over the course of time, it just makes sense for some people to want to be able to put that into their super. And SMSF loans and doing SMSF loans in my view fill that void that the big banks have really stepped away from over the last few years.
PROPERTY INVESTING JOURNEY
After years of discovering what his true passions were, Gooley found himself on his property investing journey.
The reason why I love property over other asset classes is for a number of reasons. I mean to step back though I guess I personally see property as a medium to long term play. And prior to the financial crisis I was working on equities at that point in time and I guess I got caught up with a lot of the euphoria that was playing up at that time around making equity investments and so forth. Like a lot of people at the time you know I was using equities as a way to park my savings whilst I saved for a home deposit.
I got sucked up and like many other people, as I was making decent returns and once the market started selling off, I got quite scared and I liquidated my investments. And at that point in time, my savings definitely took a dent and it took me a little longer to get my home, but it sort of taught me some big learnings. It sort of made me realize that the capital growth just does not come easy. And if you're holding an asset that has experienced significant short term price gains, like I was getting prior to the GFC’s inequities or otherwise you sort of look around and everyone seems to be a star investor. At that point in time, it made me realize that I might want to reanalyze that investment to determine whether I still think those returns are likely to be sustained.
If all things had gone to plan, I probably would have bought my first property a lot earlier than what I did. But I guess because I was sucked into the equities hype I was making equity investments. But I then realized at that point in time the benefits associated with holding property and why I like property over other asset classes is for a number of reasons. And the first is it provides you with a regular cash flow stream like an annuity. So you've got this weekly payment or monthly payment in the form of rants that just comes as long as your property is tenanted. The second thing is that you can take significant gearing or leverage at really cost effective interest rates for when you buy a property. The other thing with properties is that you can make improvements to your property or your land and increase its value and generate this thing called forced equity where you do something to it to make it worth more than what it was worth when you first purchased that.
There are also significant or can be significant taxation advantages through depreciation and interest deductibility as all your listeners will know. And then prices around property have historically been more stable than other asset classes. And then in Australia we've got really good asset protection laws as opposed to other countries. So like the government, there's no risk that the government will come and take what you own here in Australia or another party can come and get access to what you have. And as a consequence people like it and where there is inflation and other favorable demographics as we have here in Australia, you get capital appreciation with property prices. And then down the track property is sort of one of those things that you pay off some of your loan, you can then use or you see the value of your home increase.
You can then use that asset as collateral to get further loan funding. So you can then sort of take equity out of your home or your investment property that you already have and use that as your equity contribution to your next property for something else that you might need to do in the future. It could be as a way to get access to cheap funds to secure an overdraft facility for your business. Like there's a whole range of other things like owning a property that just enables you to have a lot of flexibility down the track. So that's essentially why I got into property. And for me it was also about having a home to live in, that was my ultimate objective. And probably my next property objective will be to I guess as my family continues to grow, upgrade my home to something with a little bit more space. So that's probably the next immediate goal over the next few years is get a home that's a little bit bigger to get access to some more room.
How Co-Founder of Yard Changed the Home Lending Game
With the help of his business partner, Gooley delves into the reasons why he jumped into starting the company, Yard.
When I was in banking, I started to see the opportunity to sort of do something with a group of other people. I started to sort of think about all of the people that I've worked with over my career who I really valued their insights and I'd be prepared to pay them effectively with my own money. And when you sort of apply that test to an individual that you work within a large organization, it sort of can be quite a compliment and if you value their skill set so highly and you'd be prepared to pay them with your own funds.
They are obviously incredibly good people, and professionals to be able to sort of get on board. And you start to sort of think about the types of skill sets that you might need. And what I looked to do was to, I guess see if I could sell the journey to these people and get them to sort of move, take a big risk and move across to a new sort of startup business. How I met Toni, so it was in 2010. Toni was studying at the time and she was studying in the UK and I went over to the UK to undertake a program as a part of my doctorate and Toni was undertaking the same program at the time.
We got to sort of know each other and then I got to see how her career unfolded. And she found herself in a role as a management consultant working for one of the larger US American consulting firms and ended up slotting into the financial services environment. And so by being sort of in and around you know, digital business models, mortgage and lending processes, I saw her as a key skill set to really sort of come in and drive I guess a strategy towards execution. She's an incredible doer and incredibly rational, which has just been important to have around.
The other people that we surrounded ourselves with are I guess our subject matter experts who, you know, are extremely keen to make a fundamental difference within this space so that they're incredibly passionate about providing people with the support that they require when they go about purchasing property. They are incredibly passionate about reducing the waste that you know is within the home loan market at this point in time. And what they want to do is deliver I guess a unique new proposition to the market that fundamentally sort of helps people, you know, both get a better deal and get access to great amounts of funding, but also not stress through the whole process. Whilst they wait to understand where they stand.
As having a good relationship with your business partner is vital for success, Gooley explains how they developed their strong partnership.
Toni and I had the opportunity to work together on a project that she was undertaking at the organization that I was working for when she was working for her firm. And so we've got to sort of see how each other work and we also saw I guess the size and the breadth of the opportunity that was available in terms of addressing, I guess the whole end to end line application process, which you know, is incredibly inefficient and ancient. It's something that has not evolved you know, probably since the 1950s, in all honesty with traditional lenders. And it's right now, I guess in the last sort of 10 years we've had this huge leap in technological advancement.
From our perspective, we both saw that there was a massive opportunity to address the process side of the home loan application for people and property finance for people. The second thing that was quite clear was obviously the complexity that was embedded within the existing products on the market. And you know, we quite like simplicity and we also both didn't like the fact that everything is up for negotiation and it's not quite clear if you're getting the best deal that you can possibly get, even if you do you still feel a bit ripped off. And then the final thing that we just both resonated with is that banks have bank branches which cost lots, millions and millions of dollars to run each year.
They have huge teams of people that are there to run these manual processes, which just adds a lot of cost to the system and consumers sort of have to bear the cost of that inefficiency within the financial services system. So we sort of think by having like a very automated back office model, we can deliver a faster and lower sort of cost product to the market, which is what we've been able to do.
Was it an easy shake of the hand to get this business up and running?
I think we both bring fundamentally different skill sets to the table. Obviously me with my finance and banking background and then Toni with her sort of strategy and operations background and you know, she's a fundamentally good people manager. She's exceptional when it comes to execution and driving towards an outcome. So the easiest thing was agreeing with strategy and then it was sort of quite natural around how we would then, sort of go about executing upon it. And because of the different skill sets that we have, the division of labor between the two of us in those sort of early days was quite clear.
It was just a matter of coming together for a greater cause, then you know, based upon our experience and skill sets, applying ourselves to doing whatever the task was that we needed to nail. This project is like eating an elephant. You just need to do it one bite at a time. And I really think that where we are and where we want to go, we're only sort of through one of the toes at this point in time. And I personally, I would not have been able to do this without her and her skill sets, and also the other members of the team that we have.
PROPERTY INVESTING STRATEGY
Gooley goes on to explain how Yard manages to fund their loans and investors, keeping in mind the safety issues.
To address the safety issue first, first of all like with any learning business, the person that takes the risk is the lender. Because effectively it's our party with our money to provide to an organization or an individual to buy a property. So the risk really is on us and that's probably the first point. How we sort of get our funding...well you can only really get your funding one way because if you think about it, property in Australia is quite expensive. I mean the average home during the last sort of bull run up until 2017, the average house got above a million dollars in Sydney, which is a substantial amount of money.
Now when people need to borrow to fund that asset purchase there, they're obviously taking out large loans. Now the question then becomes, well, that's an awful amount of money. How do we then get access to that funding first of all, but then how do we get access to that funding at a really cheap cost effective rate. And the answer to that is through financial markets and capital markets, and it's actually no different in a way to any other organization that does lending whether it be a bank, building society or credit union. Those companies take deposits. The deposits only make up a very small amount of their balance sheet. And what you saw sort of around 10 or 15 years ago, even the largest banks that only had 50% of their funding came from mum and dad deposits or even less than that to be honest, when it was mum and dad deposits.
And then the way that they supplemented that funding was through wholesale markets. And what we've done is we've gone straight to wholesale markets to acquire out our wholesale funding. And we in turn have very large institutional investors that provide us with our funding. So we can then lend that to our retail customers. No different to any other wholesaler in any other industry. So you could be an importer of packaging products and you import 100,000 sort of cardboard boxes for example. And then you never need to find, or you then as the wholesaler or the distributor then sell those boxes individually. So that's no different to the funding model that all lenders take within Australia, the US, the UK, Canada and so forth.
In terms of say like this wholesale retail type of model, would you have to actually take these funds all upfront as a wholesaler first and then eventually offer them to retail customers, which would be the investors, the mums and dads and so forth over a period of time. Is that kind of how that works? Or do you access those funds only when you need them?
There’s a few different ways of doing it and the right answer when it comes to funding and balance sheet is you need a lot of different options. You can't rely on one. If you do rely on one, that's when things can sort of come stuck for you. Right now there's a lot of financial market volatility caused by COVID-19 and if we didn't have a diversified funding base in terms of who we were getting our funding from, but then also the types of funding that we were using, that's where organizations sort of get into problems. Banks, building societies, credit unions and lenders all fall in the same boat. So the key is for you to have a breadth of options available to you, if you want to be sustainable through all parts of the business cycle. So right now, you know, we're completely open for business. We've got more funding than we could possibly need and it means that we can continue to land our operations and not slow down at all. And so we're in quite a competitive position at the moment because of the diligent and conservative approach that we take to how we find our balance sheet.
He discusses the duration it usually takes for his company to achieve what they offer to people.
There's a few components to it and what we find that it's really driven by the property investor. How quickly can they move or would they like to move? And it depends upon their strategy or what they're looking to do. And usually we've had people come to us you know, at 4pm on a Wednesday saying I need an approval so I can bid on a property by 6pm tonight, so we can turn that stuff around. It takes about 20 minutes to go through our online application process, and that kind of gives us the bulk of the information that we need from an applicant. The next step is then to verify what the applicant has sort of put in the application and make sure that there are no errors and also legally, we need to ensure or we need to get evidence you know, to support what's in the application.
Because what we don't want to do is to provide the wrong type of lending product to someone. So what we then look at to understand is, I guess we do the objectives, the requirements and needs around the home buyer or the home purchaser. And once we've sort of found out and we've got our information together, we then have a credit team that will look through that application and then sort of sign off that, and that's good to go. Then once that application has been approved, the individual can then proceed either to settlement if it's a conditional approval. They then get the comfort that they can go and get in an auction or you know, make an offer on a property or whatever it might be.
For different people it can take different times like for someone that might come to us and say, ‘look, I am looking at buying a property sometime this year and I really want to get a good idea from you guys on how much I can borrow so I can refine my search and narrow down, you know, the areas and the type of property that I can afford to purchase’. So we provide a pre approval. That person goes away, attends the open homes and it could be a few weeks or even months before we hear back from them. And then they re-engage with us and they say, ‘I'm ready to bid on a property, I found a two bedroom unit that I really like. It sort of ticks all my boxes, can I firm up my application?’. And then we then go through that process with them so that they can get the confidence to make an offer. So it just depends. It's really ties to the applicant. We can move as quickly or as slow as anyone would like. And it just comes back to the strategy and the needs of the objectives of the investor.
Gooley strongly believes Yard is more beneficial online, not only for him and his company, but also for the clients.
The reason why we have the online process is that we want to avoid people having to use paper-based forms because that's frustrating, right? We want people to be able to submit an application for a loan from anywhere in the world on any device, right? They could be sitting in a park in Europe on their mobile, and they could submit an application, right? They could be sitting in front of a desktop computer in their office and they can submit an application, and they can do that in around 20 minutes. But what's key though is that you need to recognize that every single property investor has their own story. And the property investing journey is unique to them. Their property preferences are different. Their investment strategies are their own, their cash-flows, their income types and their spending patterns are unique to them.
And there is not one case that looks identical to another. Every individual is different. And as a lender, it's important to really nail what a customer needs and wants today and also in the future. And if we, as a lender, were to send people through a broker or through some sort of offshore call center, we would not get that understanding. So what we have to do is we supplement a digital experience with a really highly skilled team of personal loan consultants and we make that loan consultant the sole point of contact for every single investor all the way through their journey with Yard from the initial touch point to all the way through to like, ‘Hey, my conveyancer is Joe, here’s their phone number. Can you please help me deal with them?’. You know the whole process, it's just one person. And we find that's sort of quite critical in really getting to know the individual and what their objectives are and how we can best sort of help them.
If you didn't do that, you wouldn't know your customer that well. And it sounds like you have had so many conversations and that's fantastic because then you can tailor the best product for the market, which is your customers as well.
Exactly. And also just turn stuff around so much faster, which is what people want.
After settlement, is it just pretty much business as usual if they just start paying the loan and all that? It's not much different, is it?
Once that customer has got their loan, they become a customer of Yard. They still maintain their initial touch points so that person that they've been speaking to all the way along is still there to help them with anything. It could be you know ‘Hey, I got locked out of my internet banking. Can you just sort me out?’, and that person can help them. A whole range of activities. It could be re-issuing with a new statement or it could be hey I've purchased that place from you, for example. I had a customer who had bought an investment property down in Hobart.
I continued to sort of communicate with them and then following the settlement a few months later they sort of started exploring options of consolidating their superannuation. And went down the path of establishing an SMSF trust. And then that resulted in, I guess, you know, helping that person acquire a residential property for their SMSF. So it's important to not just be aware of what the strategy is behind that person today. You can't just then say goodbye and leave everything to them. Otherwise you're truly not helping them for their next objective or their next purchase down the track or, you know, upgrading a home. Or it could be even taking cash out to do some renovations or to buy a car. So like the post settlement, the contact doesn't stop. Like it's sort of quite active through the application process and then sort of post settlement, it's as per the customer really requires.
He goes on to share how important it is to build up long term customer relationships.
“This project is like eating an elephant. You just need to do it one bite at a time.” -Nathan Gooley
You also want to be able to keep confidence in someone. And this is why we want people to have their own sort of personal point of contact. You might really want to move quickly with property and you might see something, and like a lot of savvy investors, they know the value of that asset and they don't want to have to wait as an existing customer, sort of six, seven, eight weeks just to approval. They want to be able to pick up the phone, call their contact and get an understanding of where they stand pretty quickly so they can confidently go and make an approach for that next investment. And so that's what we feel is quite key is, is having that personal individual and that personal touch point that people or our customers can sort of just draw on and use so that if something does change with what they're doing, they can just sort of pick up the phone and have that chat.
After successfully implementing Yard online, Gooley delves into how it all came together.
We have a very experienced chief technology officer who has sort of like a global technology experience with financial services companies and in different markets. And he was sort of quite keen leading the architectural design for our business. Then once we sort of had designed our architecture and all of our security layers which is a huge part of it, we then sort of set about getting that then built. So there's a variety of different components that goes into our technology. You know, it's a combination of both systems that we've constructed ourselves, but also to you know, third party systems.
We sort of buy or license and integrate into what we're doing. Like there's a lot of stuff that, you know it works and it works quite well and it's new and it's nimble. So it's like, well why waste the time and the effort trying to reinvent the wheel you know, license it and integrate it into what we have. So technology is obviously a really big part of our business and will always continue to be one. And I think the approach that you need to take with technology is, what is the problem that you're attempting to solve? And will you as a business, will the feature that you're looking to add create value for your customers and as well for your business? And then the next question becomes, all right, well based on those answers, I want to go down this path. Should I build this technology myself or should I license it or purchase it from a specialist provider?
We take a look at what resources and mentors the investor encountered throughout his property journey.
I get the opportunity now to speak with people from all over Australia day in, day out who are investing in property. And what I can share is that there are so many different ways to make money in property and we see this through what our customers are doing, and different property investors have achieved different things. And in my experience, there's probably no silver bullet and it comes down to your goals and who you are. As you know, one way or one method might be better than another for you. And I think if you want to find a mentor, you probably should've already decided on what it is exactly that you want to achieve through investing in property and you need to work what it is, are you looking at property as a passive investment where you're buying and holding property and if so, you're not needing to do much for that property.
It's easy for you to maintain a lifestyle away from your property. It's quite passive. Alternatively, are you looking to generate some sort of forced equity through a property development? And this can be a really great way to make money through property. But it often takes a lot of work that anyone that's been through that process will appreciate. And you need to draft plans, you need to deal with the council, be regularly onsite and that's much more active. So whichever way you want to go, you should look for a mentor in my opinion, who has either worked on a similar strategy to you or at least on their way to achieving what it is you're setting out to achieve. And honestly this mentor is more likely to be experienced.
Many of the trials and tribulations that you're going to encounter, and what a really good mentor can do, is they can guide you through that, and that does not just apply to property investing, but anything in your life. So you need to sort of work out, where it is that you want to go, and then you solve that and find someone who has gone through it in the past, and can share their experience on what they did, what worked and what didn't, and that will then prepare you for essentially what's to come.
Gooley also shares with us the kinds of things he has read that have inspired him along his journey.
There's some stuff that I'm pretty frequently reading, and these days I kind of really like you know, sort of different series of short podcasts, articles and commentaries. And probably one comes to mind because I was having a read of it this morning, and it's something that I've been reading on and off now for, for probably around two decades, like right from my school days all the way through all of my education or networking life. And it's a website called Mauldin Economics. And it started out as just one guy, John Mauldin. And he started just sort of publishing his thoughts and insights. But he now has around, in my view, really excellent commentators and they are publishing some pretty regular stuff and they write on a variety of investing topics including property economics and other things.
But you know there's a lot of stuff there, they are very quick reads and quick listens. And what it's done is, it just gives me a clear idea of I guess some of the forces that are driving investment markets and also the global economy. And I just find you know, if you are time poor, sometimes shorter reads can provide you with very good degrees of understanding of where things are happening, but also inform your opinion of what will help guide you around what you should or should not do.
Is this some kind of publication that goes up regularly or is it just published on the website?
You can go on the website and you can sign up to the subscription, some sort of distribution list and you can sort of select the topics or the authors that you might like, or they might be writing on stuff that interests you. And it's not everything because there's quite a bit there now. So not everything that's on there is for me and I read this stuff and that sort of is of interest to me and if I don't get time for it then that's fine. But you know, they often also reference other podcasts and other articles and sometimes that's quite cool to get on there and see those other articles, and then that takes you down sort of another path of some pretty cool stuff that you can also tune into.
The intelligent investor looks back on the best advice he has received that has helped him reach his goals.
The best advice that's come to me is probably sort of two fold with the way that I've seen things across, you know, sort of financial markets across different asset markets today. It is that wealth really transitions from the impatient to the patient. If you can be patient in your purchasing, you set yourself up to buy well. If your go ahead decision is clouded, you know, by the motive factors or you do something that's quite hurried. Typically you end up meeting the price of the seller. So if you’re patient throughout the course of time, typically you are the beneficiary of I guess wealth moving to you from someone that is perhaps less patient than you.
I love that. That is very unique. It's sort of simple, like Warren Buffett, patience.
I think I borrowed that from him. But then the other thing is, know your experience, your knowledge and your education. You know, and this is a quote, right? It sort of sets you up for what's ahead in the future and the more that you do today will ultimately deliver you with benefits down the track.
Going back 10 years, Gooley shares what he would have said to his past self.
Probably get organized and become more rational.
Oh, that's a good one. And looking forward to the next five years in your journey, whether it be for Yard and also the property journey side of things, what are you most excited about?
I'm excited for Yard because we've got some huge objectives. And we're obviously looking forward to becoming more of a household name, but just personally, I'm really looking forward to seeing what opportunities make themselves available over the next year or so. Because as I mentioned, as my family grows, I'm going to need to upgrade the family home at some point and then get more space and it's sort of not inconceivable given what's sort of happening around the world for property prices or for there to be some value for patient investors in the property space. And so you know, I'm looking forward to keeping an eye on the market to ultimately make a property play and you know, it’s further over the medium term. It's a longer term.
I totally agree. And there's going to be some opportunities just waiting for the next three to six months, it’s just too early to say anything on what's going to happen.
After the GFC hit, Australia spent some time shoring up their own balance sheets and then once they became more comfortable, where they ended up going was channeling their wealth into property and away from equities. And that's kind of what we then saw over the five years to sort of late 2017 where you had nationwide housing prices going up by 50%. And you know, we saw house prices fall by around 10% between late 2017 and mid 2019. But right now we're not that far away from the peak when they hit, that with everything that's happening, it's not inconceivable for pay prices to retrace again. And for pockets of value to obviously pop up and for any savvy property investor, that's pretty appealing. And if they've got a medium to long term sort of holding period, you know, the ability to take advantage of any sort of pullback in prices that might happen is an ideal time to actually sort of, you know go and purchase something. And personally I probably fall within that category.
How much of your success is due to your skill, intelligence and hard work? And how much of it do you think is because of luck?
I think I think everyone sort of always has a fair amount of luck and I'll say I think that there's a lot of hard work that goes into this and it's probably more hard work than anything else. And you'd need to have a base level of intelligence. And for me personally, I just surround myself with really smart people and then just work really hard.
Garry Harvey a home loan and mortgage broker expert, worked in many different jobs before he found himself in property investment. He worked at McDonald’s, in the car industry and even in the building before he made his way to the mortgage broking business. Despite the discouraging responses from people, Harvey still was determined to enter the investment scene which began by buying his first official property with his wife. His current portfolio holds 32 properties, valuing up to $7 million.
In this episode of Property Investory you will be able to hear how Harvey managed to build up his portfolio despite facing some obstacles and what strategies he uses when buying properties to get the most cash flow. Tune in to hear more!
“I felt early on into the process that the purpose of me doing this is to generate an income later on in my life.” -Garry Harvey
A typical day for Harvey usually revolves around his clients and meetings which keeps him pretty occupied in his business.
My days are pretty varied, but it's a lot of loan applications, strategizing with clients, client meetings. Well, I do talk through, with my clients, about some of their property decisions as well and provide some guidance there. I wouldn't say I would provide advice. It's a pretty strong word in this industry, so it's more around, you know, education and guidance, understanding what they want to try and do and what types of investments might help deliver that. And I think that's the best way for people to learn as well, to be honest. So that’s pretty much my day. I keep pretty busy doing it. And yeah I attend a lot of client meetings, I try to get out and see my clients, in their home or office to provide that level of service.
Harvey believes providing an overwhelming amount of advice can push his clients away, so he focuses on guiding them so they can make their own decisions.
I draw out a lot of things and I do cash flow modeling for people then in a very simplistic way, so they understand it because it's not actually that complicated. But sometimes a big spreadsheet can look a bit daunting, particularly for new investors. So I try to keep it really simple and make sure they understand that at each point.
Prior to working with investors, Harvey shares details about his upbringing, where he lived in different parts of Australia during his younger years.
I grew up in Adelaide. I was born there and spent the first 12 years of my life there, moved around a couple of times. But lived pretty close to the beach, so that was always nice growing up. Then my father got a transfer for work back in 1987, so we came, the whole family moved over to Melbourne and I've been out in the Northeastern suburbs of Melbourne ever since.
Despite living in Melbourne for most of his life, he still has fond memories as a kid in Adelaide.
I was a typical young boy, I guess I loved road and push bikes and skateboards, and hanging out at the beach. But I just remember spending a lot of time down at the water. Which was good. It was interesting. I think about it a little bit, I'd go down to the beach on my own. Probably from the age of eight upwards, you know, and then today when I had my own kids many years ago, you know, I wonder whether I would do that now, it's a bit of a different kind of kind of world perhaps. But yeah, we were always free. Mum always knew where we were and just had a lot of fun, played footy, a little bit of cricket. So a pretty typical young kid, I guess.
Regardless of being away from the beach, Harvey continued to enjoy his life as a kid in Victoria.
I really enjoyed that but that continued when I came to Melbourne. I was fortunate enough to live in a great street. We had lots of teenage kids in the street. It'd be nothing for us to have, you know, a dozen or 15 kids all hanging out in the street after school each day. So yeah, we just had a good environment to grow up in, always something to do.
Harvey reveals how he did not have a strong passion or let alone an interest for school.
Well I was never that interested in school. I kind of just got by to be honest. I didn't really know what direction my life was going to take. After high school, I still remember, I didn't even pick subjects that really had that much of an interest to me. It was kind of bizarre. Yeah, I felt that I probably should finish year 12, but I didn't apply for uni and I was only about one of six or seven, I think in my year that didn't go on to seek a place at uni. But I'd been working from the age of 15, just doing part time jobs. Hospitality and I did some gardening work and things like that. So when I did leave school, I actually ended up working at McDonald's full time for about three or four months.
Because I had been there part-time while at school. And while I was just kind of working out what I wanted to do, they said I could work there full time and that's what I did, really. So I got sick of eating McDonald's cause that's pretty much what we did, most days. But I enjoyed the camaraderie in that job, I met a lot of good people and still get along with those people I worked with back in. That was in the early nineties. They're still friends of mine today. So it was a great place to work and you know, there was a lot of discipline in the store that I worked in and it taught you a good work ethic and I had a lot of fun. So yeah it was really good. I spent probably two years at Maccas, maybe two and a half.
And even back then, were they still calling it Maccas or was that a term that came up more recently? Because I can't remember when that was coined.
Yeah, we used to still call it Maccas yeah, gosh. And then I ended up doing all sorts of jobs. I ended up doing their maintenance work. I remember starting work at two o'clock in the morning, three o'clock in the morning. The maintenance, that's when the maintenance person started to clean all the floors and everything to get the store ready for the next day. So sort of tried to try a bit of everything really.
After working at McDonald’s, Harvey shares what he went on to next.
So then I worked in a factory which was local to where I was living. We were making electronic transformers for the telecommunication sector. So I did that for probably about five years with a little bit of a gap, where I worked in the car industry for a year just to try something different and to get out of the concrete walls of a factory. I didn't really enjoy the car industry that much. I'm glad I did it for a bit of experience, but it wasn't really for me. And then after the five years in a factory, I just had to be outdoors. I'm a bit of an outdoors person. I just said, ‘look, I'm going to get into the building industry’. I had no idea what I was going to do and how it was going to look.
But I remember because at that point in my life I'd borrowed money for a car and borrowed money for a motorbike and you know, everything was fine while I had this steady income coming in. And then when I decided to make that change I basically became a labourer on just a domestic building site. So my salary dropped a lot and I, you know, that reality of, well now I’ve got all this stuff I can't afford, so I kind of dismantled all that, sold it off and just set about learning a whole range of different things in the building industry. Because I just, I love making things and I did it for a couple of years. I travelled overseas in the late nineties for six months with my now wife. We did a bit of a trip around the world and then when I came back and started my own business, I had that business going for about 18 years. I only got rid of it maybe three or four years ago.
PROPERTY INVESTING JOURNEY
We discover what led Harvey to find himself in the mortgage broking business...
I started in 2006 and it was an interesting way into the industry because I was 6 years my property journey at that point. I started in 2000 and the mortgage broker that was helping me at the time said, ‘will you come in for me all the time for money? Why don't I teach you how to do it yourself?’. And I hadn't even thought about it. Well, I mean I was a tradesperson but I wasn't a qualified tradesperson. I just did all sorts of different things. And when he suggested that and he showed me the modeling of the business, it really appealed to me. And I got started that way in our transition probably for about seven or eight years, to be honest. I did both roles part time because at that point in my life, I couldn't afford any dip in my income because of my commitments I'd made as an investor.
So I figured, I knew that building a mortgage business is time, it takes quite a bit of time, particularly to build it the way I wanted to. Just, you know, I don't consider myself a sales person. I just like to help and share information with people. So, you know, the phone doesn't ring off the hook when you first decide to be a mortgage broker. It takes a long time to get the word out there. So I did it part time for a good six or seven years and eventually went full time, I guess maybe four or five years ago.
As Harvey was only mortgage brokering part time, he did have another job to cover his everyday living expenses.
We used to restore brick work on old homes, so periods to old homes, it is a technique called ‘tuckpointing’. So we'd repair that old tuckpointing, which is on the facade of those old period homes. And yeah, so I did that and it was...when I look back, it was quite good because you didn't get a lot of interruptions in that business, you know, we could be on jobs for, you know, weeks, months, so you'd just chip away each day at a section of the brick work. And so, it allowed me time to take phone calls and yeah, if I had to duck out and seek clients during the day, it didn't really inconvenience the way that business ran.
Harvey goes on to explain how he found himself in this type of business and why everything he did was all done by hand.
I was working with a bricklayer. I wanted to learn how to lay bricks. And so I did that for quite a while, maybe a year or more. And apart from laying bricks, he would do this, this tuckpointing, which is basically replacing mortar in a specific way on these period homes. So when he showed me that I had a lot of interest in it and I thought, I could really see myself creating a business doing that. I've got a lot of patience and you certainly needed that with that job, and I had a lot of pride in what I did. So at the end of the day you could look back and see the finished product of what you'd done that day. And anyways, we're working for happy clients too, because they'd come home from work each day and you know, see the improvement to the front of their home. So I kind of just fell into it really. And just had a go.
Harvey explains the steps he encountered to find his way into property investment, as well as the influence of the people he surrounded himself with.
I think my parents were probably a little bit risk-averse when it came to a lot of investment loans. My parents hadn't invested in property. But you know, I'd speak to a lot of people, I’d speak to builders and developers and I’d just hear all this stuff about what they're doing, what's possible, and it just appealed to me. I just felt I had to go and learn this stuff. I didn't know really what it looked like at that point in time. And I had a few close friends where we would talk about stuff and probably inspire each other a little bit. And one of them told me, I still remember the day I bought it, Robert Kiyosaki Rich Dad, Poor Dad. I didn’t read it though I bought the audio and just listened to it in my van.
I just listened to it constantly, just over and over and over. And it really resonated with me, what he spoke about. And then I just set out to try to learn to, you know, build something in the background while I was working. Because I knew that just working as well, I was a laborer in a sense. In my business it was all manual labor. It was only going to get me so far. So I just had this urge to learn that there's got to be another way to try and advance yourself. So yeah, a couple of good friends certainly were encouraging and I know not everyone is. It's quite interesting when you look back, you can get quite excited about what you want to do and you just kind of get shut down a bit by other people.
I just sort of kept close with the people that were encouraging and, and I had listened to this material and I was learning a lot. And then I guess it just gave me the confidence to just start, you know, I, just because there wasn't probably anyone getting this. I was telling my parents what I wanted to do and because I hadn't done it before, they didn't really understand it and couldn't offer me, you know, that encouragement, you know, probably a bit worried about it. But I just had this attitude, came to this world with nothing and I've got nothing to lose. So I just went on this journey I guess of learning and having a go at it, and it took me a little while because I’d often ask people their views and opinions and a lot of it was negative. So I ended up just doing a lot of good in silence to be honest. Like I said, I had a couple of close friends where we'd talk you know, I could chat with. But you know in my greater network, I guess I just couldn't, you know, I felt like I was defending myself all the time. So I just thought, well, you know, bugger it. I'll just keep going.
Harvey goes on to further explain how his parents reacted to what he wanted to do.
I wanted to invest in property and I just think they, you know, it involves borrowing money and they probably, as parents are, they are just looking out for me, you don't want to see yourself get into something you can't deal with. I think it's like most things, if you don't understand it, you can become afraid of it. And you know, just want to keep it a bit distance. So I think it was more of that with my parents and yeah, they certainly didn't put me down about doing it, but they weren't throwing the encouragement around. So, I don't know. I guess I just had this feeling that I just want to go on and learn this and do it and, and yeah, just sort of, you know, set aside what other people were saying. I just kept pretty focused on what I had to do and worked hard and I worked a lot of different jobs and hours and things like that to just make sure I could keep it all together and just back myself in really.
He delves into his property investing journey all the way to the beginning, starting with his first property.
We bought, my now wife and I back then bought our first home in 2000. And we'd come back from our trip around the world in late 1998 and then we'd sort of settled back in for a year. I'd say we had a little bit of money each. I think we had about 25,000 each, you know, as a deposit. I was pretty nervous at that point because I think I hadn't really worked out in my own mind that I wanted to be really involved in real estate. So I was a bit tentative, but my wife was like, ‘no, let's just buy it, let's just buy our first house’. And I'm glad she was pretty pushy on that because we ended up buying a place and it was a duplex.
And so that didn't make me feel really comfortable at the start. I bought my first house, but I'm sharing it with someone else. You know, we're sharing the driveway and the garage and so on. But, you know, eventually I understood what this meant for us, that we bought our own home and we'd also bought investment at the same time. And I was able to modify that property a lot to make it a little bit more separate so we all had our own privacy and I fixed it up a lot, with the skills that I'd been learning in the building industry. And I think it just really motivated me going through that process of you know, what's possible. We had that property or ended up having that property for a while. We sold it, because I ended up subdividing it many years down the track. We sold the first one about 10 years later and then we sold the last, the second one, probably only about four years ago. We ended up holding a portion of that property for a long time. I think as I created, value in that property built up equity and we’re paying the loan down. I just thought we know now's the time to explore the opportunity to start investing on a bigger scale.
Harvey explains why he and his wife decided to buy a duplex for a home.
I think it was a couple of things. It was in our price range in the area that we wanted to live in. And it was a little bit unique. Probably didn't appeal to everyone. And yeah, again, she just said, ‘well look, let's just go. It's not our forever home. Let's buy it’. And I was like, ‘Oh well I don’t want, you know, someone living right next door or sharing the garage and all those sorts of things’. And I probably just was focusing at the time on the wrong areas because I wasn't even really thinking much like an investor, let alone a property owner really at that time. Oh yeah, I almost wanted more of the let's get the nice house and you know, whatever. Whereas she was more, well let's just get into the market, you know and look how good this is now we can rent next door from $150 a week or whatever it was back then. How much is that going to help us? And you know I'm just so glad that she pushed and we ended up proceeding because, you know, in hindsight it worked out to be just fantastic.
We find out a little bit about his portfolio and the current number of properties he has.
I still hold 32 today. One of them is my own home and one of them is a lifestyle property, and then the rest are investments.
Roughly how much would you say that portfolio is worth? Because it's a substantial amount of properties there.
Look, when I tell you the figure, it might surprise you. It's not worth as much as probably what you might see. Because I bought a lot of cheap properties and I'll talk to you about you know, what I did and why I did it.
Now I like to keep tabs on my figures pretty well. So, I've got it currently valued at just over 7 million today, but to help understand why, I bought a lot of my first investment outside of that duplex. I paid 55,000 for it, so I bought a lot of cheap investments and I actually have the ones I'm holding at the moment. So outside of my own property, the most expensive investment property I've ever purchased was $336,000.
I'm assuming a majority of the properties that you purchase have a positive cashflow if that's the case, is that correct to say?
I get really good cash flow out of them. And that’s interesting that you brought that up because it actually was my focus from the start. For a number of reasons. I felt early on into the process that the purpose of me doing this is to generate an income later on in my life.
That's what actually was going to ask. How do you know roughly how much income you're generating from this portfolio?
At the moment the income is about $330,000.
As Harvey has purchased over 30 properties in his life, it’s inevitable to experience a lot of ups and downs. We explore what is one of his worst investing moments were.
I have thought about that and I don't know if I'd say I'd categorize it as anything like a worst experience. I just take everything sort of in my stride. I mean, I've certainly lost money on my investments, many hundreds of thousands of dollars for sure over the years by trying things that weren't that successful. And again, when you reflect on it, I probably didn't have the expertise. I didn't build up my knowledge prior to going into that strategy. Nothing has been a disaster. And I've always, and I guess this is a really important point, I've always made sure my portfolio could handle basically anything that was thrown at me. And a really good point I want to make for the listeners too, is not only in making sure I selected a lot of different properties and different locations to give me some diversity, that to me it was a bit of a risk management strategy.
But I also made sure that I was continuing to grow my income outside of the investments, in my case, my business. So then when things didn't quite go to plan, I had resources I could always draw on. And I always viewed it as a long game. All the little speed humps I'm going to encounter along the way are just that, none of them that can be detrimental to the overall outcome, but we must be in a position to be able to deal with them. So you know, I did development once and I didn't really make any money out of that.
Could you talk about that one? That sounds like a very interesting story. How did you find that development and what happened?
I bought a block of land out in country Victoria in a town and at an old place on it. I think I paid about 80 odd thousand at the time. And I eventually got permits to build four units on it. But that took a long period of time and I was pretty clunky through the process and ultimately didn't do my due diligence enough to understand what the true cost was going to be, what the end value was going to be. And long story short, I was fortunate enough to sell them to the department of housing. The government was at the time looking for more housing and a friend of mine actually, he knew about this. He said, ‘why don't you put your property up for it?’.
Because I was having a bit of trouble with it. I didn't know how I was going to finance the build at the time because if you worked out, you know the value was going to be virtually what I was going to owe. So there was not going to be any equity really in the deal. He said, why don't you tell them to put it up to the department of housing, they might be interested in buying in which they did. So once I had a signed contract for four units, then it was really easy to get the finance from the bank, so we ended up just building them. But look, to be honest, I lost interest in the whole project and I didn't even keep a real good track of the numbers, but I certainly didn't make any money. And you know, I probably would've been underwater, 50 to 100 grand probably throughout the process.
Harvey tells us what initially interested him to jump into this type of deal.
I thought there was...I guess it highlights mind, naivety, reeling and inexperience at the time. I bought a block of land for 80 something thousand, and then I thought, well, you know, I'll build four units and I'll sell them for $250-280,000, and they'd have to be profitable. But you know, I had a bit of a sloping block and throughout the whole planning process we worked out that all the drainage had to go the opposite way to the slope. I said we had to build all these retaining walls and yes, a cost just blew out, so you know a more experienced developer probably would have seen those signs at the start. So, someone who knew what they were doing would have made money, but someone like me who didn't really know what they were doing didn't make money. So it was certainly a good lesson to learn. It hasn't tarnished my view on developing. It's like anything, you just need to understand what you're getting yourself into. And yeah, I just didn't enjoy the process to be honest. You know, money aside, even if I'd told you now, I made $100 000, I'd still say I didn't enjoy the process. It wasn't really my thing.
I guess with that one, is that close to where you were? Or was it sort of a regional town kind of thing?
It was a regional town. So I ended up getting a builder from Melbourne who actually set himself up there for six months while he built them. So they were really well-built, but to be honest, I was so disinterested that I never went to see the finished product. I remember going to the site when it was at lock up and that was the last time. I drove past the site, but that was the last time I went to the site. I just had no interest in it at all, I just wanted to get it finished as quickly as possible and just move on.
After looking at some of his not so great moments in his property investment journey, we turn it around and take a look at his aha moments.
I think the whole journey has been that, and even up until recently. So I set out to, you know, to buy properties that I could afford with a very good rental return, for a number of reasons. Like I said, one of the reasons to generate an income stream later, but it was also what I could afford at the time. I'd only started my business and I wasn't generating huge profits at the time, so I had to focus on what I was able to do. And I deliberately did that rather than worrying about what I couldn't do. And it was, it was great to be able to buy these properties where the cash flow was very good.
It enabled me. Most of them were reasonably cash flow neutral, so I could just keep buying or trying to add value to them where I could to fast track my equity and I’d get the family to come in and invest with me. You know, provide deposits and things so I could move quicker in the process. That turned out to be very good. I also did a lot of investing in the mining sector around Australia, probably around 2004 through 2007. And that worked out to be very good for me and I still pretty much hold all of those properties today. But I managed that risk by buying cheaper properties. And I got to ride that growth boom, both capital growth and rental growth. And you know, a lot of the properties have pulled back a bit now since their peak, but I took all the equity out of them at the peak. So I've been able to in a roundabout way enjoy the fruits of that growth. Rather than, looking at it now and go well what's come off X per cent off its peak and not be able to grab that equity and go and do other things with it. So I'm glad I made that decision.
Which is great, because it sounds like you bought it on the market value and with its positive cash flow, it pretty much pays itself off, so it doesn't even matter if the value hasn’t gone up. It'd be great if it does, but in some sense you've already tapped into equity.
I've already tapped into it. Yeah, you're right. And it's something I think about a lot because the value of my portfolio is not what I'm excited about, but what I am excited about is maximizing the income from it. And also I’ve got a lot of debt to pay off because you know, I'm going to be paying off these loans for probably another good 10 to 15 years, I would say. Which seems like a long time because I started 20 years ago, but I've also enjoyed myself along the way. And that was a very specific thing that we as a family decided because it wasn't just like let's do this and hope we're still here in 30 years to enjoy it. Let's get a good blend of planning for tomorrow, but also taking some of the rewards along the way.
So that was a conscious decision and one that we are very pleased we did. So it means my debt is higher now than what it could have been but yeah, it comes back to what I said earlier about just making sure you're robust and can deal with things and, you know, we manage it very comfortably. We're just on principle and interest repayments on pretty much everything now. And yeah, just on that path now to, you know, using it as part of our income really.
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PROPERTY INVESTING STRATEGY
Harvey goes into the details of the different strategies he chose to focus on that ultimately helped him to buy 32 properties in his portfolio.
I think one of the things that I guess pushed me more in that direction was what Robert Kiyosaki would say about an asset. It's something that puts money in your pocket. So if I'm buying something that's not doing that, then it's not fitting that particular definition of an asset. Now I think the definition is broader than that, but that point really resonated with me. So I thought, well that just makes sense to me. Why don't I buy things that pay me? If
I'm claiming tax deductions, I'm losing money. So that didn't really appeal to me and it would cut me out prematurely on what I could buy. Whereas this strategy...well things have changed a little bit now in the lending landscape. But back then, you know, it enabled me to continue to buy properties and I just became, I guess, more creative, with the sorts of things I did with strategies. I also mentioned at one point I probably had about 12 vendor term contracts in my portfolio, which was a great strategy to just boost my cash flow.
Can you elaborate what vendor terms means for listeners who might not know what that is?
That's when I'd buy a property and sell it to someone that couldn't qualify for finance. So in effect, I became the bank so we would, you know, I'll give you an example. If I bought a property for $300,000, I would then sell it to them at a small margin above my acquisition costs. I might sell it for $350,000 or $400,000 and if I was paying 5% on my interest rate, I'd charge this particular client 7% so I'd make a margin on the rate and then that, you know, full 7% over above my debt. So a lot of those strategies I'd generate $800 to $1000 dollars a month in positive cash flow. So which was looking back, a strategy I'm so pleased I did, because when leading into the GFC, when interest rates were rising it just buffered me, I didn't feel that that pain of rates going from five to 5% to 9% because I had all this surplus income coming through.
It’s a smart strategy when you think about it, because you've factored in that component plus also, you're making a margin. It's almost like you're renting to renting.
And it was a good look. It's pretty much banned now, Australia wide I think. Or it's about to be in the last remaining States where you can do it, but it's just because probably the system was abused a little bit by some investors. But you know, we had some great stories because when you do a vendor terms contract, as I am the original owner of the property, I don't get the growth in the property over and above my predetermined style price. So, there was one that stands out to me where I help these people get into a property. They were on a part nine, so not quite bankrupt, but just prior to that, and had $10,000 as a deposit. So we took that, we put them in a property in a suburb of Melbourne, which was valued at about $300,000 at the time.
And they actually just refinanced that away from about two years ago now. That property would have been worth $600,000. So it also gives me a lot of comfort knowing that I've been able to help that family go from $10,000 to effectively $300,000. But that was there as the head of the transaction and my win was I got surplus cash flow along the way. So if these were put in place correctly and dealt with effectively, then everyone could walk away with a positive outcome.
He further explains his selection process and where he went when it comes to buying properties.
I went all over the place, I did a lot in Victoria. I just tried to select towns that were affordable for me, demonstrated some good yields and I felt I had a future. And yeah, one of the things I do is...if McDonald's had built a store in that town, then they would have a much bigger research budget than I do. So they obviously think there's a future. So that was just a simple thing to go, okay, well big organizations have confidence in this location. You know, so should I.
Harvey affirms that it’s important to model the strategies of brands, and look at the location of where their properties are.
I believe there's going to be growth because you're buying properties that you can't even, you know, you probably couldn't have even bought blocks of land for that value back when I was buying let alone, put a house on it. So I always felt that I was buying below replacement costs. And as long as I felt that the area had a demand for rental and there was, you know, infrastructure and things happening, then it gave me the confidence to proceed. And I just spend a lot of time, you know, I'm probably taking a different approach today. I was more focused on, well, where can I get old and buy anything if it didn't give more than 8%, whereas today I'd probably look to focus more on the location and just the yield and focus a little bit more on the quality of the property than just the yield. So I don't consider it a mistake, but looking back, and I talk about this a lot with my clients. If I showed you some of the photos of the houses I've got, you'd probably look at me and go ‘why the hell did you buy that for?’. But you know, it delivers the outcome that I need.
Whether it be a positive or different route for Harvey, it is all about the learning process for him.
I have done a lot more transactions than I currently have. So I've probably done somewhere between 50 and 60 property purchases and sales. Now my spreadsheet just keeps track of, it's not a sophisticated spreadsheet, but it just keeps track of my current portfolio and so looking back, I've kept data of what I paid and what the rent was at the time and all that sort of stuff. But the purchase price of these properties I currently hold, was 4 million and it's currently valued at seven. So I'm still very comfortable with the growth. That's a 76% growth in the portfolio since I've had it. And that was buying and this drives it home to me now and also to the people I work with.
But I was able to do that, without buying the best investments because I didn't know what I know today and my point of focus was probably just slightly off. So if you can get that sort of performance by not buying the best stuff or what can you do if you focus a little bit better and think more about what you want to buy. But more, you know, like I said previously, the value is not that important to me. It's about the income that's being derived from those assets which will continue to grow. And the regional areas, because the rents are still relatively low compared to capital cities, there's a lot of room for growth. And I see that all the time. Every time a tenant moves out, we often get increases in rates. So I think long term it'll certainly deliver you know, what I set out for it to do.
In hindsight, if you'd took a different direction in today's market and look at say for example Melbourne and Sydney on average properties that are about $1 million, how does one afford to be able to purchase an investment property like $1 million and get the kind of rental returns if you do that kind of strategy nowadays from your point of view?
It doesn't exist. The rental yields, you know a good yield might be considered 3%. So if you're going to buy those types of properties, then you're relying on the investment performing in another way. Because it's not gonna perform from a cash-flow point of view. So you're going to be relying on adding value to it, via renovations or subdivisions or, the property going up in value over time that you can then tap into that either by selling it, or accessing equity. I think you've just gotta be very clear on why you're doing it. I take the view that now I'll still sell some of my properties for various reasons, but I still want to retain, you know, my goal would be to hold in retirement, probably 20 of them and the cash flow modeling on that once I own them is quite attractive.
But I want to sell as few as I can really. Because when I sell, I have to remit the capital gains tax on it, and then I've got to decide where else I'm going to invest that money. So it becomes a little bit inefficient in a sense. Having to buy something and to get any benefit, I would have to sell it rather than trying to buy something that you think you can hold versus forever and live off the rewards of it. So that’s something I think that investors have to think a lot about. I guess we naturally gravitate, when we want to buy, to something that is going to go up in value and yes, that's important. But ask yourself the question, what are you going to do when it's gone up in value? If the return back to you is low, then it's not going to deliver the income that you're going to need later on in life. So then your option is you've got to sell it and then you're going to lose a significant portion of that value through selling costs and tax. And then you've got to decide where you're gonna invest it anyway. So you've got to complete two transactions.
No one wants to do that as well too, because it's just time consuming and costly.
Yes, so this strategy and again, it's just one strategy. It's not the silver bullet in investing, but it's a strategy that I think has a lot of credibility and probably should have more focus put on it. You know, that idea in a general sense of being able to buy an asset that returns good income that you can get, you can pay off and own and live off the income for the remainder of your life.
Harvey shares with us the kind of mindset he has adopted that influences him to buy particular properties and whether or not it has changed over time.
It's relatively the same, to be honest. I never set out to be rich, I wouldn't use that term. I just set out to try and create something that made life a little bit more comfortable at some point in the future. And I still put myself in that category. My investment journey's still got a long way to run but the real gains are made and particularly when you're paying off your debt, the real gains are made in the later years as you know. So my why is to create something that you know, all the neighbors and myself and my wife and to some degree, my kids, to benefit from and enjoy. When we need to you know, we don't rely on any of this income at the moment from the properties.
It all just goes back into servicing the debt and reducing the debt and carrying the costs associated with holding property. I'm 45 and I still want to do work for many years ahead. I enjoy what I do, but I don't need it. But I know that it's going to be there later on. Fast forward 10, 15 years when perhaps I don't want to work as hard or whatever my particular circumstances are that then this can start to take over. So I think the ‘why’ is creating something for later on, is still very relevant today. All these years down the track.
As you mentioned, Robert Kiyosaki's book was very influential on your mindset in terms of looking at assets and liabilities and looking for cash flow, but were there any other resources? Or did you have any local mentors that you sought help with your property development journey?
I did a weekend course early on and it was interesting. I can't even remember the people's name now to be honest. But I chose this weekend course because it wasn't a course where you know, we'll sell you all of our developments. It was a course that you purely just paid to be educated on a whole range of strategies in real estate investing, from a couple of very successful investors. And that was a very key moment in what I did and I took a lot out of it and I guess they gave me the confidence and encouragement from what I've learned and heard to keep pushing forward.
I certainly remember that moment pretty well. And then I also bought in my family a little bit and it's interesting because I invested in a number of these houses that my father had an interest in. So it was interesting to see him come on board after many years watching me. The penny must've dropped for him that, you know, this is a good thing. So I like to do things with others where it makes sense. I'm lucky, I've got a good family on both my side and my wife's side that have been big supporters of what we've done, so they were mentors in a sense by endorsing what we were doing and encouraging us to back ourselves in and putting a lot of trust in us as well.
But I didn't confide in a lot of other people because of what I said earlier where you'd get a lot of negative feedback from people if you showed enthusiasm to want to do something. And if people didn't know, didn't understand then it was easy to just shoot it down rather than encourage it. So I found a lot of confidence and self worth to proceed within, and my close family later on in the journey.
The award-winning property investor shares his recommendations that can impact your journey, and ultimately achieve great success.
Because I just get so absorbed in my life daily, with what I do work wise, I'm not as proactive in looking and educating myself as I probably should or were previously. But what I do say is, it's really important to listen to lots of different information. I'm a big fan of getting all sorts of people's different points of view, you know, what have they done, what's worked, what hasn't worked, what does this strategy look like? There's so many different things and we can get that online, there are various people that talk about things that they do or, you know, property investment magazines. I always found it interesting when I was reading them at times in the past where they would interview other investors and talk about what they'd been able to do.
I found what's really important is just listening to people and then taking that information and forming your own view on what you think is going to work for you, because there's no one way, there's no right way and wrong way. There's lots of different ways to make this work. So figure that out by talking to people and keep coming back. The words I use a lot are manageable and sustainable. Don't try and take on something that isn't going to fit into that category because you could just cause yourself some problems down the track.
Would you say that would be one of the best advice that you have received?
I think those words are what I kind of live by. And I talk a lot with my clients. And also a bit of balance, you know, it's not all about tomorrow. It's okay to reward yourself a little bit along the way. Investing's a long game, and you don't want things to come up in life and whatever you're doing has put you under stress or because you're investing, you contact the family on a holiday. I think you've got to strike a balance there in some way so you can continue to enjoy it the whole way through, so that you can see it through because the real gains are once you've seen the process completed.
In my case, it'll be once I've extinguished most or all of my debt and I can now enjoy the fruits of that work. But I just can't imagine that being a chore for 30 years, it would be horrible. So you've got to get that balance right. And that's different for each of us. And particularly in the strategy that I’ve used, if I had considered it more at the time, I would've started paying the debt off straight away, when I look back at it, I'd be well advanced on where I am. I had a lot of interest only lending from for a very long time in the portfolio. And I still have a couple of interests, I think interest has its place and it's very relevant for investors. But if you've got good cash flow it makes sense to start out to build the equity quicker. It derisks the investment. Even if you're not getting growth, you're building equity. If I reflect back on it, it would have been a strategy I would have employed from day one.
Harvey affirms how important it is to work hard along the journey, whilst at the same time managing a balanced lifestyle.
I had this conversation today with a client who has just bought their first investment property, and we had that discussion about the cash flow model, the interest only versus principal and interest. And I said, ‘look, there's no right or wrong here. I just want you to be really informed about what your options are and you've got to also think about where you're at right now in your life’. And they said, ‘well, you know, I'm really glad you've pointed all this out to us and we know we've got some school fees for the next five odd years with our children. So we can now make an informed decision so that we get a balance that's right for us, that, you know, we're comfortable going interest only, it's important to us’. And I think that's really great that an informed decision has been made, understanding the various options available. I'm a big advocate for that. But often the conversation isn't had so I think the main point is to understand what your options are so then you can decide what's most appropriate and at what time.
Going back 10 years, Harvey shares what he would have said to his past self.
One of the big points I’d say is filter out all the negative noise and influence around you, that can bring people down at times. So back yourself in, be strong, make sure you are not, exposing yourself in a way that's going to be detrimental to you. And have fun, I use that term a lot. This process has got to be fun. Because if it's not you, you'll stop it. It'll just burden you in some way and you will unravel it. So I think, for the most part, I probably did all those things. But encouragement is an important part. And I get a lot of that feedback from the people that I work with and that helps us have the confidence to back ourselves in.
There’s a lot of doubt that comes in and out of our minds, but after we speak to you and you break it down we know what this means, it gives us confidence. So I think that’s a big thing I would've said to myself, make sure you learn about what you're doing and if you decided it's the way to go, then back yourself in and surround yourself with positive people, that's important. The drainers can put a damper on things, that's for sure.
Looking forward to the future, Harvey shares with us what he is most excited about in the next few years.
I am excited about seeing my debt continue to fall. That's quite exciting now. I'll also look forward to, when I want to slow down a little bit as a mortgage broker, I’d like to go and fix up a lot of these houses that I've bought.
So I look forward to doing that as well. And that again will just tie in nicely to my objective of generating good income from them, so once I give them the face lift, that's certainly just going to improve that asset for me, and I look forward to doing that. Because like I said at the start, I love being outdoors and doing things. Being office bound most of the time is very different. And I wouldn't be able to be a mortgage broker for the next 15 years. I reckon in another five years or so,the business model might change a little bit and I like being out and about. So if I can incorporate my portfolio into my lifestyle and go and fix a few of them up a little bit, that's what I'm really looking forward to.
How much of your success is due to your skill, intelligence and hard work? And how much of it do you think is because of luck?
The line I use is, which I'm sure you've heard a lot is, I think you make your own luck. Really, you put yourself in a position to benefit from a potentially positive outcome. So I’ve never used the word luck when I talk. As a general rule, I always like to try and make an informed decision and take responsibility for that decision. And I've had some success, but I've also had some things that haven't gone my way. I'm certainly carrying a few properties at the moment where it would be a little bit easier if I didn’t have them, but I don't consider that bad luck.
I consider that, well, I made a choice at the time to do that. And I made a commitment to myself to be in a position to ride it out and that's what I do. So I equally see the same on that side. You know, if something's going well, will I attribute it more to having a go. None of us have the crystal ball, I think we need to do our research and have some kind of a plan and work on that plan. And as a result, I think you just become lucky over time. So that's probably the best way I can answer that question.
Chris Dimitropoulos is a successful property manager and the found of property management agency, NextGen Property Management. He and his company help investors look after their private and rental properties and take care of all the different aspects that come along with that.
Join us in this episode as we delve into the backstory of Dimitropoulos and hear the amazing story of his journey to Australia, we learn about the motivations behind him deciding to jump into real estate, the role that his parents played in his career, we find out about his amazing aha moments, and much much more!
“Find the right people and use them, just let them do their thing. And you'll probably find that in the long run, the properties that you buy are of better quality.” -Chris Dimitropoulos
We learn a little bit more about what a typical day might look like for someone as busy as Dimitropoulos.
I do quite a few things. I've been lucky, the real estate journey has allowed me to do a few things. So I spend a bit of time with a not-for-profit. So they're looking after disabled people. And I guess a lot of my experiences through real estate and property [inaudible] in their journey or in the NDIS. So I spend quite a lot of time with them. And I've also spent quite a lot of time with my business as I was saying before. And I'm the licensing side of the business. I'm responsible for all aspects of it. I spend a lot of time on social media. I'm quite active on the Facebook group that we've got as an admin, which is all about property. So there's never enough hours in a day, I would say. I wish there was more time. And a lot of it revolves around property and real estate in one way, shape, or form.
Dimitropoulos shares with us what the non-profit organisation that he works for does to help people with special needs.
They're in the disability sector. They've got group homes. And that's the connection to property. So before I got into property management, I was in IT and I was project manager. So when I was looking for a career change I did two things. One is I started my own business and the other things at the same time. I started helping this not for profit organization, which is looking after people living in group homes basically. So a lot of the things to do with property relate to them. They've got tenants, which are people that stay there. And hence the connection.
We learn about the relation between his work with NDIS and whether that relates back to the properties that he works with.
It's completely separate, but they're managing a tenant and managing a person with a disability. It's very similar. So properties need to be looked after and a lot of the logistics are very similar. So that's it, that's an industry that's moving and it's evolving and it's in its infancy, but I've got no doubt the worlds of the residential tenancies and the NDIS tenancies are sort of coming together and there’s a lot of similarities.
Dimitropoulos talks to us about his background and what it was like for him growing up.
I was born here in Sydney. When I was three years old, my parents decided, they were Greek immigrants basically, and they decided they had it made, they sold everything and they went to Greece. And I lived there for the first 15 years of my life and as soon as I turned 18 I couldn't wait to come back. So I've been back since I was 18. I've been back now for about 25 to 30 years. And I guess a lot of my love for real estate has come from that because my parents were some of the first [inaudible] to buy a property in Alexandria in Sydney, they kept their [inaudible] for something like 7,000 pounds or something like that at the time. And after about five years, it had grown to 15,000 pounds.
That's in the 70s we're talking about now. And they sold it. They thought it was, they had it made and it was great. They went overseas and never bought a house. So I grew up basically as a tenant and I've always wanted, this is something that always bothered me. All my friends had their own houses and I didn’t. So I came back and my parents came back straight after me. And one of the first things that I did was, as soon as I finished university and got a job six months later I helped my parents buy an apartment and that was, you know, in three names. And I stayed there until it was sold basically. So this is safety, you know, it's always something that bothered me as well, wanting to get into real estate. So we bought that and my parents are still staying there and I'm forever grateful they've got a home. But that's one of the early influences in my life to go into real estate.
We get to find out what it was like for Dimitropoulos growing up in Greece and what studying there was like for him.
I was always a serial studier. So it was always drilled into me that I had to go to university there. So as a kid going to primary school and high school in Greece and I was an okay student you know, top 10%. But you know, same as most boys, I would say, you know, more interested in sports. I was a basketball player. I love my basketball and I was preferring basketball over studying most of the time I guess. But going into university in Greece is very difficult because places are sort of limited. So I needed to come back. I had like a 90% equivalent ATAR, but I couldn't get into university there but I could here.
So the month after I turned 18 I packed my bags, my parents put me on a plane and I arrived in Sydney and I have to say I arrived in Sydney with about $400 in my pocket. Because my dad was, you know, a taxi driver in Greece, never had a lot of money. So I arrived and he gave me about $400 and put me on a plane. I came here and stayed with you know, an uncle of mine until they arrived as well. So that's how my story starts. You know, I was in Australia, was 18. I went straight to university with very little money but a lot of dreams I guess as people have about going to university and I always wanted to study IT. I was obsessed with IT at the time, so I thought that was the way of the future. And I think that proved to be a good decision actually.
Coming to Australia with only a little bit of money, we find out about the types of jobs he had while he was studying at university.
I've always worked even when I was living in Greece and always here, I've always had the summer job or the weekend job. I've worked in anything you can imagine. I used to drive a truck delivering jukeboxes before the digital music came out. So that was a great idea that someone had. That was about 20 years ago, jukeboxes to parties. That was the main job when I was at uni. So I worked all weekend just to drop off jukeboxes and pick them up in the end. I've always been a hard worker. And I'm just driven to work and do good with money and save and just always try and do the right thing I guess.
I delivered bread for a little while at night. So I would go to uni in the morning. That didn’t last too long because I kept falling asleep in the lecture. So I worked in a secondhand shop at Redfern. They were selling furniture, so I'd worked there as well. Someone had an idea to buy coal in bulk and put it into a small box and sell it, I did that as well. So lots of little things that are, you know anything I guess when you're at uni to just make a little bit of money on the side. And by that stage as well my parents had arrived as well, so I didn't want to be a burden to them as well. I’ve got a brother and sister and they're younger than me and you know, my dad came back and started from nothing again. So I really didn't want to be a burden on my parents. I was trying to help as best I could.
With Dimitropoulos coming back and his parents not far behind him, he tells us about the reasons behind his parents deciding to leave to go back to Greece when he was young.
I think the driving force was my mum, my mum always wanted to go back to be with family and so she persuaded my dad to pack up and go. They would have been here about 10 years before they left. But my mum always wanted to go back and be with her family and we went and rented a house in Greece about 20 metres from where his brothers and sisters were. So there's a strong family theme that I've been brought up with. And I think that's quite, quite important in my upbringing. And quite important with, you know, everything I do now. I think everything was around family, but that started from my mum. It was absolutely no financial decision because it's not that they were multimillionaires to go and retire there.
They're still in their 30s and they went back with no particular skills. You know and actually they're very risk averse as well. So whatever money they got out of selling whatever they had here, they put it in a bank and it slowly disappeared without actually doing anything meaningful. They had an opportunity to start a business. They could have bought a property the first few years, they didn't, and then the money lost its value slowly as the years go by and 15, 20 years later when I was about 18, they didn't really have that much. So it's just a few lessons there as well. But for me about how risk averse you can be and how cash basically isn't really worth a lot as time goes by. So you've got to put it somewhere.
Leaving Australia when he was so young to go to Greece, then coming back at 18, we learned what the driving force was to come back to Australia.
I didn't want to be a burden to my parents, so I was 18. There's not a lot of opportunities there. And that was before all the things happened in Greece as well where you know, the economy tanks, there were no jobs whatsoever, but that was even before that. But I didn't want to be a burden to my parents. I always wanted to come back for as long as I can remember myself. I wanted to go to university, which was going to be impossible to go to in Greece. And it was a lot easier here. So just using my marks. I came back, I translated them and I got accepted to go to the University of Wollongong to study an IT diploma at the time.
After he finished studying at university, we learned about his journey in the workforce and what type of company he worked in..
I went and got a job straight away. I was at IBM and I was the happiest person on earth. And I worked for about six months and within the six months my parents were still renting at the time. And my parents got a letter in the mail from a fund, I think it was called Montgomery fund, which was for people that couldn't afford to buy a property. And the fund, which had something to do with St George, allowed you to buy a percentage of a property. So we had to buy 30% of a property, three bedroom apartment at Lakemba. That’s where we were staying at the time and the fund bought the 70%.
And with the idea that we were like the owners, would pay, take care of all the outgoings and all that, and we had to give the 10% deposit of the 30%, and there was no stamp duty and all of that. And whenever we could buy the rest, we would buy the rest basically. So with all those jobs, I had saved a bit of money and helped put down 10%, it was about $30,000. Then the property was worth about $95,000. It was evaluated at that. We bought the 30%, and we started living in it and that was our house and it was the best thing ever. We had our own house with my brother and my sister and my parents and that was just as I was finishing university and then I finished university, but six months later I was working for IBM and they were offering loans and this kind of loans they had a deal with MLC I think at the time. And we bought the other 70% of the property and that was the first property in three names and it's still in three names. Myself, my dad's and my mom's and I've got it in my portfolio all those years later.
Dimitropoulos goes into more detail about the fund that allowed them to buy their first property and explains in more detail about how it worked.
There was a fund that was called the Montgomery fund. They must've put a few million dollars aside and anybody that wanted to buy their first property and couldn't afford, I guess low income, which was my dad at the time. They would apply for a grant and they could buy whatever percentage they want. So we chose about 30%, I think. So we only had to borrow $30,000 and 10% of that was $3,000. We had to come up with a $5,000 deposit, I guess. And the assumption was it was our house, would pay everything else or you could buy the rest anytime you are ready.
It must've been one of those weird things that governments were doing from time to time. I think it would have been like a state government initiative. I was actually surprised that nobody ever knows about that. But maybe worth looking it up. I think it's called Montgomery fund. I remember going into St George, it had something to do with the St George bank. You'd go into their branch and do the paperwork and everything else through there.
The good thing is that the fund made some money as well because when I finished university six months later, I had another income basically. So I finished university, I got a job, I had another income and then we could apply for our own loan to buy the whole property. So we had to buy this 70%. The property had gone from 95,000 to $120,000 by then. So we had to buy the added value of the property as well. So they made some money too. So that was good for everyone I guess. But it was a good idea, I thought. And I'm surprised I've never heard anything like that.
We learn about what influenced him to actually take the next step to buy his first property.
I guess what happened is I got a job and I wanted to do my first tax return and my accountant said to me at the time, you can save some tax if you buy a property. And I said that's a great idea. I've always wanted to get my own property for, you know, later in life. So I might as well buy a property and said, you know, save a bit of tax at the end of the year. So believe it or not, my accountant who I still have all these years later, he's the one that got me to buy a property, but not for any other reason, but to save some tax. I had no idea what I was doing. For me, it was never about investing. It was more about, you know, safety and saving a bit of tax to begin with.
So I bought the property like you said. And then the next year [inaudible] property, we did the numbers and I got a grand total of $2,000 tax returns in the second year of my job and I thought that was amazing and I thought it was amazing enough to buy another one. And so, you know, then I've got a $4,000 tax for them. And that's how I started my journey through my accountant. In fact, I would say my parents tried to actively discourage me from buying properties. I would say, as I was saying before, they were quite risk averse. One of what the first one, great celebrations, but the second one that started sort of, you know, telling me that I shouldn't be doing this and you know, pay that off and whatever else. But you know, I decided not to listen and just get on and do what I want.
The interesting thing is as well, in all fairness to them and I have to say I love them, they're great support and everything else. And they'll always want the best for me, but it's not that they had made sound financial decisions themselves to be giving others financial advice. So that's the thing, you know, they’re parents, they're all protective and thinking about their kids from a different perspective.
Dimitropoulos has been buying properties since the mid 90s and has 13 properties currently in his portfolio. We hear about what has been his worst investing moment throughout all these years.
I can say a lot of it was before knowledge was out there and people were doing it on their own. I'm not talking about, you know, 50 years ago, I'm talking 10 or 15 years ago, there wasn't that much information out there. So I've made quite a lot of mistakes. I've made some mistakes. For example, I bought an off the plan property in 2010. I wasted a couple of years on that. The lowest moment I must say though there is a happy outcome. But the lowest moment was a few Christmases ago. It would have been three or four years ago. I bought a property in Melbourne and it was on its own title and great little property. Three days before Christmas I go to open up my mail, a letter from a lawyer.
And I have to say that was right after we had done some renovations on my house here. And I was really low on my cash reserves and I'm always big on having lots of buffers. But it was kind of like a vulnerable moment. I opened my mail. And there's a letter from some lawyers in Melbourne saying that the property that I bought a couple of years before was encroaching on the boundary with the property behind. And they were assessing their options. That's what the letter said, but it was very formally written, you know, the letterhead was some very respectable lawyers from Melbourne. So I'm going to be honest and say I panicked. I was very low on cash. All I could think was that, you know lawyers and in court appearances and, you know, tens of thousands of dollars that I didn't have then. And I started questioning, you know, why do I bother with all of that and stuff like that.
Well two hours in when I started to like, you know, calm down a little bit. I remembered that when I bought the property, I had also bought title insurance. I've always been, you know, people might think that I'm crazy, but I'm quite risk averse in all of them. And there's always a method to my madness I guess. But one of the things I really believe in is insurance and I had bought title insurance. I've got title insurance for all the properties though that are on their own title, not for apartments, but I forgot about it. It's one of these things, you get another form, you know, when you get there and the paperwork and you sign it, you pay whatever it is and then off you go. I remember having done that, I went back and opened up all my files and sure enough it was there. I called them. And after Christmas they came back to me formally to say I'm most likely covered by the insurance and it's all good. So then I slept again. You know, that Christmas I did not sleep for three or four days.
I'd be doing the same thing as well. I'd be stressing and thinking, what do you do? Especially on Christmas as well. That's not a very good time to be receiving that.
The timing was perfect. But it was a good ending and it reinforced my views that just buy the insurances and its tax deductible, buy it and forget it. And you never know if you only need it once and then it's a good day. That's been my view. And that even reinforced it, but it was a pretty low moment, I have to say.
You never know when things like title insurance might come in handy and Dimitropoulos explains how you get it.
There's two or three organizations. I don't remember the name of it, but if you search it up, you'll find them. It's called title insurance and basically it says that if at the time of purchasing a property that's all on its own title, you're not aware of any illegal encroachments or anything else, then they'll cover you and every generation that comes after you that inherits the property. From memory it costs about 400 or $500. And that's it. It's basically, it's forever insurance. Then I looked into it and I saw that they had claims up to 100,000 and $150,000. And you know, they've got their own lawyers and all sorts of things. So myself going against the big firm in Melbourne is not the same as them going against them in the end.
I never heard from those lawyers again. And I waited every day to see if they're going to come back to me. And not that I was worried because I knew I'd have the backing of the insurer, but never heard from them again. And I think this is important, I think if anybody listened to this, because in Melbourne there's a 15 year rule that says if an encroachment happened less than 15 years, you're covered, but anything before 15 years, basically it doesn't count. So when I looked into it, it might have been bordering 15 years or maybe 16 or 17 they had built the house that I bought. So it wouldn't have counted anyway. But so if anybody has a similar experience, I'd say don't panic. Look into it. Sometimes lawyers send you letters to scare you and see if you can panic and jump into a remediation and basically, you know, negotiating, give them some money and then move away. It doesn't necessarily mean that they've got grounds to proceed with litigation.
Throughout his many, many years of experience in his property journey, we learn about the moments when he came to the realisation that he was on the right path.
There's two aha moments for me. If I could share. One was, I was saying before I bought a couple of properties to save tax and I was getting those nice tax returns. Then we bought our house to live in and I had a couple of little kids and they needed a backyard. So for five or six years, nothing happened. In about 2010, I had saved my $60,000 deposit and I was ready to go again. And I convinced my wife who was always skeptical about this, that it's okay to buy another one. So I've got this one bedroom property at Kogarah right next to the hospital there. And we bought it about April or May. And then we settled and was rented already. We went away for our first trip in a while.
We hadn't gone anywhere in a while. We went to Hawaii for about four weeks. And about September I went back to the real estate agent that was managing it and I said how's it going? And he said, you'd be pleased to know that you bought it for I think it was $335,000. Then it's gone up to $370,000 now and the year was like 2010. So I said, Oh, that's fantastic. So I went away, we spent about $15,000. And then in that time I actually made $30,000. So hold on, there might be something else in property than just saving tax here. So I came back home and I opened a spreadsheet and I said, I'm curious to see how much that property is costing me. So open up a spreadsheet and I'm putting my rent and all the outgoings.
I even calculated my depreciation and everything else. And it was rented for about $370 a week. So it was immediately positive and positively geared. And I didn't even know. So when I saw at the bottom that I was actually making $500 a year, once I had my tax return. I thought, Oh my God, what's going on here? So the first thing I did was call my wife, have a look at this. And I showed her and I said, we bought this property, we went away, we made $30,000, and it's costing us nothing to hold. Let's do it again. And she looked at the numbers for about a minute. And then she said, okay, let's do it again. And that was the first moment that my wife actually came on the journey with me and both of us saw it in a different light.
So that was my first aha moment. And of course, what did I do? I went and bought another one about two months later. The second aha moment was one I had to go to Melbourne. And mind you, up to that point, I hadn't used any mortgage brokers. I hadn't used any buyer's agents or anything like that. When I went to Melbourne, I had no choice but to use a buyer's agent. And buying a property on my own was quite hard. I have to go to opens and compete with others and put in bids and all sorts of things. So it wasn't easy. It was time consuming. But when I went to Melbourne I had to use a buyer's agent and I used one and I realised that everything is done for you. You don't have to do anything. You pay a bit of money. But at the end of the day, I was ecstatic with the property and I didn’t have to do anything and to realise that maybe using others is the secret here. That's what I did. So these are the two aha moments. One is there's more to investing than saving tax. And the other one was use others because you get better property and you don't have to lift a finger basically.
Chris Dimitropoulos Shares The Secret Ingredient To His Success
We delve into Dimitropoulos’ strategy and the types of properties that he looks for to add to his portfolio.
As I was saying before, I'm really risk-averse, so my strategy is pretty simple. I love to buy property that's close to transport. I love to buy property where jobs are. And I love To buy as close to the Sydney CBD as possible. So all of my Sydney and Melbourne properties are probably within a 10km radius of the CBD and they're all right next to a train station or a tram station or something like that. And that's one part of the puzzle. The other one give it time basically. So I'm not, you know, a materialistic person. When I buy, I buy forever and I hope I never have to sell, even though I might be forced, there's a couple of my properties and they're not my favourites.
I might have to let them go at some point, but I bought for life and I've bought close to where the fundamentals are. And let them do their thing. So I bought the properties in Sydney. I let them go through two cycles. I used the equity to go to Melbourne. All of my Sydney properties are positively geared. All of my Melbourne properties are for growth. So I've got apartments in Sydney and I've got townhouses and land and housing in Melbourne. So the Sydney properties, I help them to maintain my Melbourne properties. And that's the secret, buy where the fundamentals are and let them do their thing for me.
Being in property management himself, we learn about whether he manages the property or if he has someone on the ground helping him out.
I manage the ones in Sydney and I now also manage the ones in Melbourne. So we manage them from here. I've got someone on the ground in Melbourne that holds the keys, but we do everything from here and you know, the world of property management is changing. So I decided to go into property management about five years ago because of so many other people. I wasn't really happy. I thought it's easy and anybody can do it and surely myself, I've got degrees and I've got my masters along the way. And a lot of corporate experience before I thought, how hard can it be? Anybody can do it. But the truth is it's hard. It's hard work but it's changing. And a lot of technology can help. And you can do a lot of things remotely and do a great job if your business is set up to be efficient and all their systems are there. It allows time to do all of those mundane things that really burn property managers out.
So to answer your question, I manage all of my properties myself. Just before Christmas for example, we had two vacancies, two broken leases in Melbourne within two days of each other. We advertised everything from here and I just had the person on the ground to do one [inaudible] rented and I have to say since I took over, my rents are a lot healthier and a lot better because I can see from here and if, for example, one of them managed to get an extra $50 that the previous property, their local property manager wouldn't support me on. So I advertised from here $50 more and both properties are worth a lot more basically than they were previously rented for from the local property manager.
We find out more about his journey from working for IBM to eventually opening up his own property management business.
That was until about five years ago. So I was in project management, you know, started as a software developer, then I moved to project management and program management. Then my last job was a very senior role managing tens of millions of dollars of projects and massive teams of hundreds of people. And that was the thing for me that made me think maybe as demand business because a lot of the skills that I had developed around comms and dealing with people and influencing and all my IT background, these are all good skills to have if you start your own business and if it's a property management business. So I did that until about five years ago. And five years ago I wanted to do something for myself for a change because there is no safety in the corporate world.
And people were getting made redundant left, right, and centre. I did try for a [inaudible] to be honest for myself, but I think if you're good at your job it's a bit, unless you get caught up in some sort of big restructure, if people are keeping you and there's big redundancies in the office because you're good at your job. They need you to continue to do the job. So that's the irony of the corporate world. But I wanted to do something for myself. And there wasn't anything else for me to do there. And I was getting a bit down on my luck and for a couple of years, you know, it was really, I wouldn't say depressed but very close to that. And in those moments, thinking about my portfolio and thinking that I've got to now, like if worst comes to worst, I can probably sell two or three properties and I've got a note and many other people don't have that opportunity. So that kept me going and I was looking to start a business. What do I do? I love real estate. I looked at a couple of things, but I love real estate. So real estate and what suits my personality better. That's property management. So that's how I made the journey. And I started my business then.
I've been building it now on this site for a couple of years. I started building it on the side about two or three years ago. I couldn't, because I still have all those mortgages so it wasn't possible, but I was able to do it on the side. The first thing I did was find someone that would help me. I looked for the best property managers that I could find and was lucky to find someone that I think, and I'm speaking as I landed here, I think this is fantastic. And she’s loyal, she’s organized, her heart's in the right place and we've been building it together basically since. But I do have lots of dreams and plans to build it up. But I don't, you know, necessarily want to do it for the money or anything like that for me. I just love to, you know, I call it my third child. I want to get to a point where, you know, I’ve built something that I'm proud of and help myself manage my own property. So I want to manage other people's properties just the same.
In terms of his property portfolio, we learn about the different ways he is able to manage it and improve it.
I can tell you my rent at the moment. Basically a lot more than I ever got from others. And I'm pushing the envelope. Look, busy, day to day, you never look at these things. But one of the things that I've realised a little while back is that if you don't, as a landlord, that if you don't push the property manager, your property is most likely 10, 20, 30, 50, I've even seen $100 less to where it should be. I think that's the main issue. Generally I can tell you property managers are, I've been reluctant to put the rent up because it's not a lot of money for them. It's a lot of work. Plus it might upset the tenant and the tenant may go or they have to have the hard conversation. So there's a reluctance in the industry to keep up with the rents.
And as a result, I tell everybody that I know to do a quick search online. Have a look at your similar properties and see what they’re renting for. I had a property come to us that was $100 a week less to other properties. The rent hadn't been put up for weeks. He is a busy executive, never cared to look at anything like that. So identical properties in his building were renting for $720 and his was $620 and he hadn't put it up in five years. So that's real money basically. So that's been left on the table.
When you hire people to work on your property you have to put a lot of trust in them to do the job correctly, Dimitropoulos explains how his company provides better service than other property managers in the market.
As a property manager, it's easy to forget. So you've got to build it. You've got to build it into your profit, into your processes. For us, we've got to do inspections every six months and it’s part of our process, we're going to do rent review every six months as well. And I'm not talking about, you know, the formal letters, I'm talking about five properties that are nearby to yours. This is what's happening. It's not that hard, but it keeps everybody on their toes. I want that myself as landlord of my own properties. I open the section and I have a look and see what's happening. And then sometimes you know, you go, okay, it's fine. Or you can see property, you know, the rent moving upwards and you go, okay, well let's just start thinking maybe in six months we'll put it up by five or $10 because if you do it that way, it's not a big deal.
But if I have to pass up on $100 and the interest is at $25, you know, that's what we've been doing. And the risk every time we'd have to manage that up on that example that I gave, we have to manage the rent increase. We have to give them a call and explain with examples why they're still like $70 less, for example, than another property upstairs. And it's okay to pay $20. But you know, it's hard, but if you're doing 5 or $10 and keep you on your toes every six or four months then it's an easier sell and you keep up with the mark.
Dimitropoulos shares with us why the market in Sydney has become more stagnant in recent times.
It's basically over supply. So it's the apartments over supply. That's all over Sydney. With so many apartments, especially in the bigger areas, like, you know, Paramatta or Liverpool, everywhere you see big towers coming up. Rents are stagnating and probably dropping as well. I mean, I've heard of friends going backwards by 10, 20, 30, $40, and I've seen it as well. I've seen rents that went back by $100 somewhere. I mean, you know, people don't see because they look at the averages, so other pockets are fine, other pockets are struggling. If you're in Sydney at the moment, I would say, look after your tenants, you don't want them to go. As Sydney investors, we have to weather the next year or so. So let's be as accommodating as we can. And then, you know, with every cycle you know, we'll come back basically and we'll come back. But for now and just be mindful of it and look after your tenants.
Canterbury and all of those, all of those are struggling at the moment. And you know, I mean, I've got a property that's coming to us to be managed. It's being completed in April and is on Canterbury Road. It's going to go on the market and I'm going to be competing with probably 50 identical properties. So you know what that's going to do to the rent basically. I mean, the good news is it all gets absorbed. There's tenants out there, but the old days of property managers putting an ad out there and living in it and people come, you know, tenants line up and come begging are gone. So we have to work really, really hard to fill vacancies quickly. And you know, for us I was saying before, I've got an IT background, so I'm really big on stats. So I watch statistics to see views of my art. I save every other property, for example, on the suburb that's competing with those to see what they're doing. Are they putting the rents down? How many opens do they hold a week? So, you know, it's basically a dog fight and unless as a property manager you have worked hard to attempt to sort of dedicate yourself, properties can go vacant for weeks.
I have to say for Melbourne as well, it's not the same. So Melbourne, I think they have had the downtimes and rents are picking up in Melbourne. So if anyone is listening from Melbourne, they're in a much better position and they can be a little more aggressive with their rents. I had two vacancies in Melbourne and we rented those on the one opening and we had two or three applications, whereas in Sydney, we'll show to 50 people, you know, to 25 people say, and we might get one and if we chase them and drop the rent a bit, so that's the scenario. So just for fairness, it's not everywhere in Sydney. The quality properties always rent and you don't have to do cap walls for them, so that's it.
That's my advice to investors. When you buy a property, and I made the same mistake before I got into the business, trying to think a little bit about the demographic. And also think about the [inaudible] inhibitors. What are the things that are going to stop the tenant from getting the property? For example, a big thing for me is done by a property that's on the top floor of a building that doesn't have a lift because immediately you cut out all of the older people, anybody that can climb stairs, anybody that's on feet and all of that in a landlord's market, it doesn't matter. But, you know, in a tenant's market, all of those little things make a difference. So quality property that's got certain characteristics. Even at the lowest of times, like Sydney is now all was rent and you always get rents from it.
We dive deeper into property management and discover how he keeps his company competitive.
I have to say there's not a lot of money to be made for the amount of work that goes in. The value in property management is on the rent roll basically. Because that's an asset that can be resold. So that's got a value. But in terms of the fees that you collect and all of that kind of stuff, especially with the competition that there is in Sydney at the moment and the fees, you know, to compete, you have to drop the fees, especially like myself. I don't have a sales department. All we do is property management. Someone like us that don't have properties coming in from the sales department. To compete, I really need to be, you know, mindful of their fees. And that's okay. I mean, I'm a lean business. I'm a startup, everything's optimised. I don't have a big franchise name. But the way that the industry compensates is in quality basically. So fees drop and then quality drops and expectations drop. So there isn't a minimum I should say, but I know some people have like 5000 rental properties. I mean that's worth millions and someone that owns that makes a lot of money but that's not the case with me I guess.
And then I have to say the property managers and I know a lot of people are angry with the property managers and all of that, but I can tell you now that I'm in the industry, it's a lot of hard work. I can also say we'll reveal everything, property managers don't get paid that much. So the basic salary is probably about 60,000 to $80,000 a year. But if you could think of all the work that they do and always on their toes and running around. And to be honest, every time you've got the word management or manager in your title, it's all about dealing with problems. That's what that means. Managing problems. It doesn't mean managing the wins, other people get the wins, you just manage the problems. So the property managers themselves don't get paid very well. The bigger the rent roll, the more money I guess the business makes, but not necessarily the property managers.
Sometimes it is not until you have been in both positions that you can fully understand the work that goes into a certain job.
That's what I would say, as a landlord I never saw that. Now that I also manage properties, I can see it so I can see both sides of the coin. And if you want to have a fair business where you treat everybody with respect and you're fair to the tenants and the landlords, that's the little triangle, property manager, landlord and tenant. If that works in a partnership, then that's the best outcome. Because things will go wrong. But if there's understanding then it works well and that's kind of the philosophy that I've brought in. As a landlord, I’ve always looked out for my tenants because they pay my mortgage and then if I can help them I will. I’m appreciative of them being there and all of that. And in all fairness, a lot of landlords are like that. So the professional landlords don't really care, they fix things, they’re understanding and they look after tenants and then the tenants are expected to respect the property and pay it back basically. So that's the best scenario, but it doesn't happen everywhere.
We hear about what his biggest motivation was for jumping into the property industry and investing.
For me, and I'm not going to talk about the early years, which was all about saving tax. That was silly, but the minute that I understood what it is to be an investor, it was all about safety. When I'm 65 or 70, they're the last 40 years of my life. It's not about, you know, the middle part. I've always assumed it's going to be my accumulation, but I've always wanted to have safety from 60 onwards. I want to be 65 when I retire, I want to have a good life then and then also help my kids as well. So that was the motivation for me. I can't say that, you know, I was thinking that's what I was thinking every day because you get into a frenzy kind of, you know, when I was buying properties, I went from like one every two or three years.
“Every time you've got the word management or manager in your title, it's all about dealing with problems. That's what that means. ” -Chris Dimitropoulos
I need to buy a couple at the same time. Then it became this obsession of buying more. And it's not that I've done the numbers that are needed, you know, 11 or whatever, but I knew the more I could get my hands on, the better we'll be in the long run. So that was my mindset for a long time. So I was completely obsessed with buying property. And what the second aha moment that I talked about was I found a great buyer's agent. And you know, in my view, finding a good buyer's agent is like striking gold, basically equivalent to that. And not only because they find new quality property, but also because they find you quality people, like they come with quality people like the mortgage broker. So up to that stage I was going to the bank and dealing with the bank directly.
And they told me there's no way we can give you any more money. That's it. No more playing these games. So I was stuck, but he was able to put me in contact with a great mortgage broker. And then he unlocked the potential basically. So it was that kind of thing. So finding the right people is absolutely imperative and then trust them, let them do their thing, don't interfere. Because this is another lesson that I would like to share as well. So the first property I used the buyer's agent I found off the internet and they didn't buy me a good property. The property wasn't right. And I can't really blame them.
I think the issue is that I came from Sydney with a mindset of what the property needs to look like and Melbourne is different, it's a different beast. But they bought me the property that I wanted and that was wrong. But that was the lesson for me: find the right expert and let them do their thing. Don't interfere. They're in the business every day. They know more than you. And even me, I mean, property management. And you think I can manage a property, I can make decisions? No, I can't cause I'm not out there everyday looking at property, looking at suburbs, looking at strengths. Looking at how the whole market is going.
Whether he had any mentors throughout his journey or if there were other resources that he leaned on, it came back to the classics.
To be honest, I didn't, and for a long time I was just doing it on my own. I kind of knew it was the right thing, but I had my doubts. Then I started, you know, one day I was in a bookshop and I found some of Mike Yardney’s books. And I thought they were fascinating because they did two things for me. One is they confirmed that I'm not crazy. The second thing that it did is showed me what it all meant and how you would transition from accumulation into getting out of it. What it all means, you know, what does accumulating wealth mean. So I read his books quite religiously over the years and a few others as well, but Mike Yardney’s books stuck in me and I was actually very fortunate to meet him in person last year and it was a great moment.
The other thing is through his books as well, I also went into reading Rich Dad, Poor Dad. And that was an amazing book as well for me. And that was part of the catalyst where I decided that I needed to start my business because of necessity in the corporate world a few years ago. I can't say that I had mentors per se. But it all clicked. It all came and I understood. And then spending time online and reading and stuff like that, that sort of made it all prove that I was on the right track, I guess.
Dimitropoulos shares with us the best piece of advice that he has ever received.
The best advice would be what I was saying before, don't do it alone. So my kids are, my daughter's 18 now, my son's 16, so I'm going to reverse back into being a 16 and 18 year old and trying to sort of relive those early days through them. And my advice through my own experiences and listening to others is to not do it alone because there's only, you know, unless you're in the business, you don't know what you're doing basically. And unless you can devote a time for research, I know some people are, you know, in their research and demographic and stats and ABS and whatever else, but if you're a busy professional, like I was, find the right people and use them, just let them do their thing. And you'll probably find that in the long run the properties that you buy are of better quality.
Some of the most successful people in the world are habitual by nature and live by routine. We learn about some of the habits that have helped him along the way.
I am relentless. I work probably from the minute that I wake up in the morning until one o'clock every night. So I don't stop and I’m relentless and I wake up in the morning with a smile on my face. So you have to be relentless at what you do. If you work hard enough, I think it will come to you. I don't think it has to do with some amazing gifts or whatever. It's just stick to the fundamentals and work hard and it will happen for you. So, I wake up and I think about property and go to sleep and I think the same. My poor wife, who by the way, you know, has nothing to do with property other than listening to me every day. I see her as my sounding board. I talk about it all the time. So you’ve got to be obsessed about it.
So it's like I always constantly talk about it. I'm in church on a Sunday morning and I get a text from my buyer's agent in Melbourne. It's Melbourne Cup weekend and an agent organised an auction on that Sunday. Nobody turned up and said to me, you know, the property that we saw for a good price, they're desperate. The auction just happened and nobody turned up. So do you want it? And I'm texting, you know, hiding my phone in church because I wanted to finish up the deal. So, you know that kind of obsession. So whenever the opportunity is just jump at it basically.
Nothing's given to you in this world. I mean, that's what I've found. And it's only through hard work. There is no silver bullet. I haven't seen anybody and I'm speaking to a lot of investors. And even the most successful ones are, unless you are unrelenting, as in you work hard, it doesn't happen for you. There is no magic bullet for everyone. And if there is and anybody's promising you that, then I'd say run away because that doesn't exist.
There are many things we wish we could go back and tell our younger selves, we find out what Dimitropoulos would say to his past self.
10 years ago I bought that off the plan property. That was 2010. I would have said don’t buy that. Buy two or three, between 2010 and 2012, I suppose to waste those two golden years. But you know, in general, I would've said just go harder. Be more ambitious. Long term you'll be fine. You might get the lows at the end of the cycle but forget about that. Just keep on as soon as you can and buy as many as you can and then they'll be right in the long term. And that's what I would have said. I've wasted that couple of years. I should’ve bought more then.
We find out about what Dimitropoulos is looking forward to achieving in the near future.
To be honest, I'm about to relive this whole thing with my kids. So I'm one of those dads, that's you know, I said before, it's all about family. So my kids, I've been brainwashing them slowly and steadily for 20 years. They both have little deposits. They both have two jobs. I've got a girl and a boy and my girl's 19, and my son is about to turn 17. They both have money on the side. They really want the money and about two to three years they'll be buying their first property and they'll start the journey again. But that's one aspect. The other aspect of course is my business. I’m absolutely proud about building it up from scratch and and all of that and just just looking after my properties through it, but also looking after other people's properties. The next five years will probably be building up my business and also help my kids start on the right foot as well.
Last question I have for you, and this is to really wrap up the whole episode is how much of your success is duty or skill intelligence and how work and how much of it is because of luck?
There's no such thing as luck. And I think it's to do with what I was saying before. I think I was lucky enough for a few things to click in the old days and to jump at the opportunities that are hard and to be relentless about it for a period of 15 years. I think that's what it was. It isn't anything to do with super intelligence or some silver bullets that I've got. Stick to the fundamentals and be patient and I think good things will come.
Entrepreneurs and digital asset investor / experts Matt and Liz Raad not only fell in love with each but fell in love with the digital market that has now become their business. Originally both studying zoology, their interest soon expanded to buying assets, renovating and selling websites where they would double, sometimes even triple in profit.
In this episode of Property Investory you will be able to hear how this passion of theirs came about as well as the initial stages of their success story. You will be able to learn how exactly they managed to generate so much profit just relying on their websites!
“The key to success and what we understood right from the beginning is when you look for a website to buy, you're buying something that's answering a question or solving a problem. And that's the key to making money online, answer questions and solve problems.” -Matt and Liz Raad
Matt and Liz Raad have been buying and selling websites, creating a unique source of income for themselves for the past ten years.
What we spend most of our time on these days is buying and selling websites, we’re online entrepreneurs, but we also do a whole range of investing, but particularly for the last 10 years we've bought and sold websites, online businesses and virtual real estate.
Yeah, we, we look at it as virtual real estate.
The talented couple delve into a typical day in their lives revolving around their online business, to maintain and continue their success.
Well, first of all we're looking for deals of course. So our skill and our talent is valuing things, valuing business in online business. So we're looking through the marketplace all the time to find businesses that are ideally undervalued. That's what we're always looking for. We very much use that property strategy of buying good buy, renovate, and then hold cashflow or sell at a higher price. So we're looking for deals.
I guess our day to day main activities are the renovating side of our websites, if we're working on them with our teams. So basically, what that involves is upgrading or getting new content onto the website in a very simplistic essence. That's basically what we're trying to do when we're renovating these websites.
We’re Improving them and getting more content onto them.
The couple go on to explain how the online business world has significantly changed with time, as websites now are truly valued.
The thing is, what we've seen over the last 10 years Tyrone, and it is really interesting is now when we first started, people didn't really view websites as a true asset. And it's interesting over this journey, definitely now in the year 2020 they are definitely viewed as a highly valuable asset. And even though we refer to it as virtual real estate, people are starting to realize these things have got the same value literally as a physical property or a physical piece of brick or mortar business and particularly in the current environment. So let's say for us and all our clients, anyone online and all our friends who are online, whilst it's challenging times, none of us are feeling the effects of it as much as what you're seeing people out there with PAYG jobs and stuff like that because we all operate online already.
Before plunging into how Matt and Liz Raad found themselves into the real estate world, the two talk about their upbringing.
Well our story is so together because we've been together since we were in our twenties.
It is a very similar story because both of us grew up on farms and I was destined, I guess to be a farmer or something agricultural. But it was interesting back then in 1987 when I finished up school, there was a really bad recession here in Australia and it really hit all us farmers and so I decided no, there's no money in that and went on my own merry way. And then I guess we met. So I moved into Sydney, I left home as soon as I finished year 12, moved into Sydney and my background, what's important what drives me, I came from a very poor background. Even though mum and dad were farmers, dad was a farm manager. We didn't own the farm so we never really had that much money. Things were really tough. I guess in my childhood I remember, well, my family come from working-class backgrounds and you know, rich people looked down on us, that was tough that side. And for me as a kid, what drove me in life and still does to this day was security. I didn't ever want to go back to that background and struggling for money. And I was looking for ways to become wealthy or, or and have money. And so for me, business was the way.
Well, you did version two to start with, because the way we met was both of us were I from the farm as well. And we both did zoology at uni so our actual qualifications are zoologists, very helpful in the world of digital marketing.
We got excellence in red kangaroos, Tyrone. That was what we did our honors in.
And it was actually interestingly how we met because Matt couldn't use computers. He would copy my assignment.
Oh lovely. Oh that's amazing. So when you said that you both were both raised on the farm, was it in New South Wales or in a different state that you both came from originally?
Yeah, I'm from the snowy mountains and Matt is from the Southern Highlands.
What's the difference between the two in terms of the farming and what kind of agriculture did you learn from there or raise up from there?
In my area, there was a lot of orchard. I was near Batlow the little town that actually terribly burnt and it's really, really sad. But lots of orcharding and some propping, but a lot of sheep and cattle.
And for me, I grew up on the world's largest chicken farm and 400 Hereford cattle as well. So that's my background.
That’s so fascinating.
Doing zoology, studying red kangaroos to then business.
So that was the thing, in the end, I think it was more Matt rather than me actually. But he was so driven to do something and we wanted to earn money from being back out in the country. And for most people who graduated from zoology, you need to work. You don't actually work in a zoo. Generally, you do research and you do things, but usually based in a city, or at a university. And that's not how we wanted it to be. We always had to scrounge for money because you had to get grants and it was always a struggle. And so both of us wanted to do something different so we decided, I don't know what took it upon us, but we found this little business and we bought it and learnt from there.
Looking back on their journey, the couple explain why zoology interested them in the first place.
For me, that was pretty easy. I wanted to get into the rural side, either a farmer or become a vet, that was always a classic one back in my days. I just didn't get the marks in school in my HSC and my mum luckily said to me..when I first left school, I actually did a trade-in Sydney on the dockyards in electronics. And what happened there was I wasn't happy because it was, it wasn't nine to five. But they paid for me to go to TAFE and study and I was working on the ships and stuff like that and all looked exciting, but it didn't really interest me. It wasn't my thing. And so I accepted a redundancy payment. I basically had the option to take a redundancy payment and my mum gave me some really good advice. She said, ‘Look, follow your heart. You're young, you're not attached to anything. You've always wanted to go to uni and you want to figure out how to make money. You don't know how to do this yet. So just follow your heart and go to uni’. And that's what I did.
And I didn't get the marks to do anything other than science. And I always had a big interest in zoology. So as a kid growing up on the farm, literally every weekend and every afternoon I was out in the bush looking at animals and trees and things like that. I just absolutely loved it. So I just followed my heart and it worked. Got to meet Liz. It was awesome.
I think I'm the same. I was always fascinated in nature. I loved being outside, I live my life outside. I'm fascinated about how things work and I think that captured me. I just wanted to figure things out and find out more about the world.
After meeting each other, falling in love, and studying zoology, Matt and Liz Raad continued their journey together through business.
We bought a little business.
Basically it was a manufacturing business and you'll find this really interesting. It sounds bizarre, but we followed these bizarre paths in life, realizing now, but we made brush cutter heads. So you know with the snippers when people cut their lawns with the snippers, you know the little plastic heads that go on the end?
Oh yes, yes.
We made those back in the day when Australia still had a manufacturing industry and we didn't realize it but that business was about to go bust and our accountant at the time said ‘this is an okay business’. No one could tell us how to value a business. So we had no idea what we're doing and we bought this with borrowed money and all that sort of stuff and we pretty soon after getting into it, we had no idea, were totally self taught on business.
We had to start reading business books and sales books because we pretty quickly realized we're going to go bankrupt here. And it was a small business and we just got in though. And luckily we read some of the right books, all about sales and where we realized we can turn this thing around real quick if we can just sell heaps cause we knew nothing else about business. So we just had to learn all the classics like Tommy Hopkins, Zig Ziglar, Brian Tracy, and luckily we were able to hold it together and then we built it up. It was hard as it's a manufacturing business and it was unique too, we used to outsource all to the manufacturer, we didn't own all the tooling and everything like that. We just outsourced all that to factories in the Western suburbs of Sydney. And we'd put these heads together and we sent them all off around Australia. And then around the world we'd got into exporting, we became very successful with it and we started supplying big name manufacturers like Honda, Steel and Makita and stuff like that with brush cutter heads.
Wow. Now that's a fascinating story. And since then, how long did it take you to get to that level of success?
We were doing other businesses as well because that one, it was quite leveraged. It was very seasonal. So once we got it going, and that's the other thing we are good at, systemizing, trying stuff, figuring it out and working out what processes work well. And so we only had to really work in that business about six months in a year. And so that's why we were able to start working on other businesses and we started buying all the businesses and renovating them and selling them. And that's what kind of got us into that process of okay, we can buy an asset, add value, and then sell it for more than we bought it for. And so that's what we did. So that was 10 to 15 years.
It was almost exactly 10 years when we sold it. So it looks like an overnight success. It wasn't, it was 10 years. And the other thing that is important leading to our story, we learned running manufacturing businesses is really tricky and same as wholesale import businesses, which is what we also did, because you're always constantly reinvesting every last cent you have into this thing called stock. So you have all your widgets, whatever it is, your product that you physically sell. You have to store it somewhere, you have to stick it. That's your cash bank and it becomes very difficult to manage it. It's harder than a service business or other businesses out there. It's also very lucrative if you get it right. Don't get me wrong, but I think that massively influenced Liz and I in our journey and why we just hooked on to being online. Like ducks to water. It’s so different. Being online to this day we do not touch businesses that involve physical stock because I feel it held us back because we've never had spare cash flow because every last cent would have to go back into the business. Whereas now it's completely different. We're selling just electrons. There's no stock. The cashflow is ours.
Before being the online experts that they are today, Matt and Liz Raad share how they bought their first property.
Oh, that was our own house. So I laugh now gosh because people, first home buyers think what, 500 or $700,000 and our first house was $135,000. We were quite early in our business career as well so we never had much cash flow.
So basically the bank...I won't say I lied to the bank manager to get the loan, but he told me how it works. He said, ‘Matt, you have to show me how much money you want’. I said, well I don't own anything. And he said, can you get a letter from your accountant? I said ‘sure’. And that's how I did it.
And then because I was the director of the company, which had nothing, all the money was tied up in stock and stuff. I just wrote a, I did a PG, a personal guarantee, and also wrote a letter that said to whom it may concern, I state and claim that next year in this financial year I will earn X amount of money. Because I asked the bank manager, what number does that need to be? And he just said, ‘write that down’. And I just signed it. I just took a massive risk and it worked. We won't say what bank that was with and back in those days, lending was a little bit different. Certainly wouldn't get away with that these days, but that's the truth of how we started with property and Liz was luckily really good at property and very passionate about it.
That's awesome. Let's paint the timeline. When was that roughly? Do you remember which year?
That was when we got married? 1998.
We were 23 or something.
When we bought our first property. And then so we did the strategy, where I'm sure a lot of your guests teach this, where we bought our own property, we renovated it, we got it revalued and again spoke to the bank in glowing terms and they let us borrow some money for an investment property and then we bought another flat and renovated that and that worked really well and we've got them cash-flow positive. That's another thing that we should mention that's really influenced our journey. I just realized that we have always been about cash flow because we couldn't ever borrow money easily. We needed cash flow. So back in our day when we were hanging around a lot of property investors and were also hanging around a lot of very successful high net worth business people as well. And they're all telling us you should gear right up and all that sort of thing, but we couldn't and what they would just constantly do is keep gearing up and buying more and more property or more and more businesses. We hit a limit like maybe some of your listeners are. So we had to find properties that would allow us to be more cash flow positive. So we didn't get high growth properties as such that were more cash flow positive. So the rent has basically covered the interest payments.
Coming back to the property that you purchased for investment purposes, that unit, was it somewhere that was local around in Sydney or was that a little bit further.
It was in Wollongong. We ended up selling that one.
And doubled our money.
No, I think we tripled on that one. Because remember that was a high growth time. Renovated it really. We did a full renovation, and bought three other properties.
After having success with their properties, the couple share how many they have bought, sold and renovated in the past.
I haven't actually counted them up. We've gotten quite a few because every house that we own, that we live in, we of course buy and renovate while we live there.
“Then we just got the website to consistently make us anywhere from five to $6,000 a month. And it was just perfect.” -Matt and Liz Raad
Maybe we should give this insight. We always tended to buy, because of Liz and I’s background where we lived, we tended to buy into pretty rough suburbs. S they were cheap houses to get into. But the reason we did that was because we came up with a strategy whereby if you buy a cheap house in a rough suburb, you're always going to get a tenant. So we couldn't afford to not have a tenant in our houses. That was the most important thing. And we needed that high cash flow. So we noticed it in these rough suburbs and for ourselves. We lived in a beautiful place called Redfern back then in its day. And so we were happy to live in rough suburbs. And then we moved out into a rough suburb out in the country. But that was kind of our strategy. So our next big investment ones we bought up in Brisbane. Not saying it was rough in that particular, it was pretty rough.
But then with the next house that we bought. It was a sub dividable block. So I bought it specifically so we could renovate that house, subdivided and build another house. We built, moved into the new house, sold the old house and yeah, so we'd always do things like that. And I'm always looking for things that we can add value to.
The intelligent couple have always focused on an add value strategy, to turn the properties over, to reinvest at capital, and to then move on to the next.
Because we're quite secure, like Matt said at the beginning, we're very security conscious and quite conservative really. So we've always done that kind of strategy and over time I think the consistency of doing that over time means that we built up a lot of wealth. And we haven't taken huge risks.
As Matt and Liz Raad have jumped across many different things throughout their journey, it is inevitable to have some of the worst property experiences, online and offline.
Well actually offline, with our properties. I was happy with all our properties we bought. None of those were a problem. We've not ever had a problem with a resident, like a property investment, touch wood, because we've always been so conservative I guess.
We’ve always had cash flow covered.
With online, probably the biggest mistake we made was well when we first got in. And again, we're very conservative. I mean probably my biggest regret, we didn't buy more sooner, but we were more conservative. So that's how it goes. But probably our biggest mistake was we bought, we got cocky, we thought, ‘yeah we can do this’. And we bought an app at one point in our journey. Because we're used to these websites, they're pretty hands off. We don't really do a lot, day to day. There's not much to be done on these websites.
So we were used to that. And so we bought this app because it makes a lot of money and we thought, cool, awesome opportunity growing really, really fast. But suddenly we had to have a development team, we had to have Apple updates. Instead of going from monthly stuff, we're going to daily active users and, oh man, that was our biggest mistake. Don't get cocky and think that, you know it all when it's, it's kind of like if we bought a heap of residential properties and then suddenly said, eell, we're good at this let's buy a commercial and jump in all guns blazing, that same sort of idea. I think gradually increasing your knowledge and understanding of the marketplace before you jump in and starting small in any marketplace. And that's what we've always done. And I think we should stick to that strategy. I get excited. But yes, we will stick to that strategy.
And, and for us, our personal opinion too is we don't get involved in businesses we stock anymore.
Despite some obstacles along their journey, the couple delve into their amazing aza moment where everything just clicked.
I think, well for me it was that first $1000 check. When I got that first thousand dollar check in the mail, back then, it was in the mail. I said, ‘Oh yes, this works’, it was from ClickBank. The first website, and that was a really good feeling. It's like, okay, yes, this does work. This is going to happen. And that was my kind of confirmation to say, right, yes, we're, we're hitting in the right direction.
And for me it was a site that led to a few other sites and once we were making $2,000 a month, when we bought it, we renovated it. We basically doubled it to $4,000 a month.
And then we just got it to consistently make us anywhere from five to $6,000 a month. And it was just perfect. It was that feeling of being in the flow. And we really didn't touch that site very much at all. From there on in, we just added a little bit of content and our team managed it and it was just effortless. And that's net profit. Every single month we'd make five to six, sometimes $7,000 a month, depending on the time of year. And it's just an affiliate site. There was no stock. And I'd said to Liz, this is awesome. So we were buying other sites, but those particular sites, for me, the flows were the turning moment, because that happened pretty early in our journey.
Gosh, that's amazing.
Yes we kept those sites for many years.
Do you still have those sites or have you sold them off?
We sold them off. But I still look at them, they're still going strong and it was a like a corporate company that bought them. And I look at them and at the time..
Because sometimes you want the cat, it was nice and just opportunistic. We can invest that in something that's going to grow because they weren't going to grow anymore. They were just standing there and being nice cash flow.
But we were the leaders in the niche and I was pretty proud of that too. They were the sites where I learned all about SEO and I just knew that they'd be perfect.
Matt and Liz Raad dive deeper into the first few properties they purchased online, and elaborate on how they found them.
That's a really interesting story because when we first bought those ones, so these days there are marketplaces out there for buying and selling websites. It's an evolved market and you can go to brokers or website brokers and back then there was nothing like that. So we actually bought that site. Because it's a big bit of our story that's missing here, which is listening, I got really good at buying and selling businesses and we became professionals at doing that as business brokers and we're buying and selling them on behalf of high net worth back in Sydney.
Are you talking about physical bricks and mortar businesses?
Physical bricks and mortar businesses and only manufacturing or wholesale import businesses. Because that's our specialty, so we got really good at it. And when we saw what was happening online, basically what Liz said to me was, why the hell are we trying to build websites when we can just do what we've always done in the past for the last 10 years?
Which is just buy, renovate and fix them up. And so Liz, the legend, just treated it like she does with a real estate or with businesses. She started looking around online. This was back in 2009 looking around. Well, where the hell do you buy a website? No one's doing this. And this was before any of these marketplaces like flippers, the big one that didn't even exist back then. So coming back to this awesome website that we bought and fixed up, Liz actually found that on..
Which we do not recommend these days, but we didn't know where else to start. And then we also had a direct approach to people. That's how we came up with all that strategy. But that was the history of that site. So we bought that one on eBay, which is the most unlikely place on the planet for a really good website. And the rest worked from there because Liz already knew how to build websites and she'd already earnt her first thousand dollars online. We were really good at renovating that particular site.
How to be a Website Investor and Managed your Digital Asset
Matt and Liz Raad share how they came to a point in their journey, where they wanted to become business brokers for import and export businesses.
We used to bite off a lot of stuff.
Yes, that's true. But also we were getting to a point I think in our business careers where we wanted to step back from all that management, all that stock, all that stuff. And plus it was around that time too.
I wanted to learn. So I realised very quickly that being a business broker has one incredible advantage. So for me, always being driven about wealth and learning how to be successful in business as an entrepreneur. Because of my background, I didn't know any entrepreneurs or successful business owners, so I didn't know any millionaires whatsoever. So when I moved into Sydney, I learnt this idea that you've got to get out there and network and talk to people.
But back then I was incredibly shy and so working with business owners, I realised that can open up my world. So I got as a business broker, you get to network and hang out with a lot of buyers and sellers of businesses. And of course in particular what's really interesting, at first I thought it would be the sellers who are most interesting because they're obviously successful and these guys in their sixties, they are selling off their businesses. But I realised for every good business that I was representing, there'd be at least a dozen buyers who are all high net worth. So I pretty quickly moved into selling multimillion dollar businesses purely, because I got to learn and hang out with multimillionaires who were interested in buying those businesses. And I got to meet some of my heroes, people that I used to see on the front page of the Financial Review or BRW, which doesn't exist anymore. These are people that I used to look up and read because back then I was reading everything I possibly could about business and I was getting to read all these stories about these amazing Australian entrepreneurs. And then lo and behold, as a business broker, I got to meet them, go negotiate with them. Sometimes we negotiated against them and mainly I did it for a learning experience. It was pretty intense, but it was just was awesome.
Highly paid as well.
Yes, highly paid, when you sell the big ones.
After meeting all these people, you may have also discovered the driving motivation for buying businesses? They would have obviously had some business prior before buying these new ones. What did you learn from them?
Not necessarily, a lot of the buyers were corporates, very wealthy corporates.
They were CEOs of some pretty famous companies here in Australia and really interesting. But the ones that I gravitated to is exactly what Tyrone said, the guys who are already very successful in business and to this day I'm still good friends with a number of them. You just click with certain people and I just learnt so much and they could see that I was so enthusiastic about this stuff and the thing that drove us bringing it right back to our first, I think this carries through in everything we teach these days, is to our first business we made a big mistake, which was we didn't know how to value a business. So what Liz and I love doing, when you'd speak to these high net worth guys, these are entrepreneurs, serial entrepreneurs who would buy multiple businesses, every single one of them.
We would sit down with them and I would get them to take them through with me. How are they valuing this manufacturing business or this wholesale import business? And literally we'd sit down normally at McDonald's before we go into the meeting to visit, because we're out in the Western suburbs. These are businesses manufacturing businesses in the Western suburbs of Sydney. So I'd pick these guys up just like a real estate agent would, sit down with them and then we would go through and they'd teach me how to value a business, how to understand a P, and L, the balance, and what they were prepared to pay. And then I get to watch them and how they negotiate. And that's what our life was. And it was awesome, really good.
How long did you do that for?
About five years I suppose. Well then I became an expert and really well known for valuing these businesses and what to do when people are looking at exiting their business. So then I started advising guys who were selling businesses anywhere from a million up to $20 million. And they'd say, well, what do we do? And I had a big network so I could ring up people who had done big deals and ask for advice and stuff like that. But also more importantly, I had the buyers. People who have literally the money. I remember that I knew no millionaires. You got to think of my background growing up, pretty rough background, no money whatsoever. I can remember the first time I met one of these entrepreneurs and he said he really liked me and he was teaching me.
He said, ‘Matthew, right now I've got $3 million in cash sitting in the bank and I've also got access to more money if I need it through a private network’, because I started working with private equity firms as well, and my jaw nearly hit the ground. I'd never heard someone with that much money sitting in a cash account in the bank. And he said to me ‘that money's going backwards. I cannot afford to have it sitting there in cash’. I'm looking at him going, ‘man, I could, that would be awesome’. That was the first time I was exposed to this idea, that actually cash when there's inflation is bad. And to answer the other question, these guys had to continually keep reinvesting and it was a really big learning lesson for me.
The couple look back at how they found themselves in business broking which eventually led them to where they are today in online businesses.
That was more my doing. I somehow managed to find Corey Rudl. I don't know how I ended up finding that, he was at the internet marketing center and he was a Canadian guy and Rosalind Gardner and they did affiliate marketing way back.
And he wrote an ebook on how to buy cheap second hand cars.
Thinking about how I came across him, I then also heard of Andrew and Daryl Grant and they were doing eBooks. And so that's how I came across Corey.
As we heard about this Canadian guy that was making money in this place called the internet.
PROPERTY INVESTING STRATEGY
Matt and Liz Raad reveal how exactly they do it, how do they make money simply from online properties?
Well, it is as simple as in terms of the strategy. We are longer-term strategists, so we kind of apply all our business knowledge and all the business strategies that we've learned over the years, and we just applied that to online. So, going back to that idea of, you know, I saw Corey Rudel, I saw this affiliate marketing thing, I saw eBooks, we realized the internet is growing. This is a new marketplace and this is somewhere where we need to be. And reasonably quickly after we kind of learned the ropes from people like that, figuring out, okay, how does this all work? Launched our first website. And then it was me saying, do I have to do that again? Why can't we just buy an asset? Why can't we buy something that's already done? And that's the basis of our strategy. Same thing we did with property, the same thing we did with business. Find these websites that are making money on autopilot as much as possible. So making their money from advertising or from eBooks or information or from affiliate programs so we're not holding any stock, we're just recommending people through to places where they can buy specific things. like Amazon. So we partnered with the world's biggest companies like Google and Amazon, big blue-chip companies to sell this stuff basically for commission.
That's very smart because then you don't have to necessarily go out and actually set up the products and hold the stock and become more or less like an eCommerce store, which also has its other risks as well too.
Yes we go to Amazon, have a look and see what's the best selling thing on Amazon and we say ‘let’s promote that’.
As there are endless websites online, the couple discusses how they implement a strategy that enables them to find the particular sites they want.
First of all it was the monetization. So we had to figure out, okay, is it being monetized in a way, making its money in a way that is nice and leveraged for us that we understand. So because my foundation was that sort of affiliate marketing and eBooks strategy, I was looking for sites like that. I understood how they made their money.
And advertising Google AdSense sites.
Yes so first of all monetization. The second thing is that what we're looking for is a system. It's like finding a house that's already been built. So rather than buying off the plan, what we're looking for is a house that's already been built. So we want the website to be built, we want people finding that website.
We want it to be ranking in search engines like Google for specific search terms around that particular topic. So we had a couple of websites recently that were around cars and new cars and what their features were. And so we need to check that that website is actually bringing in that ranking for the right keywords in the search engine. So if someone types in new Mitsubishi, ASX 2000 and whatever, does this website come up in the search engines somewhere. And are people finding this website, and the questions that we ask, the main question we ask when we're filtering through, we're looking for those evergreen niches. The ones where people are always going to be looking up cars, they're always going to be looking up health stuff. They're always going to be searching, health, wealth and happiness is basically our go to places, which is anything to do with your relationships and happiness in that way. Hobbies and passions. So they are easy to understand. You know how it's so much easier to buy a property when you're first starting out. It's much easier to buy the sort of property that you would actually yourself buy. So rather than jumping straight to commercial, maybe you would go buy a little flat, because I understand what that is. I know who would rent it. I understand how to renovate it. So it's a bit easier to do that than maybe a big commercial buy.
Matt and Liz Raad explain how commercial and residential is a completely different game in terms of market, and there are multiple factors that are taken into consideration.
Yeah, same thing. So, you know, there's lots of sites. Like that student who bought a site about trampolines, you know, just reviewing trampolines. And you can imagine when someone wants to buy a trampoline, there's lots of questions you have around buying that trampoline. Is it safe? How big do I need it? What are the best ones? What are the safest ones? What are the most expensive or cheapest ones? What's the best value for money? What are the different brands? There's so many questions and really the key to success and what we understood right from the beginning is when you look for a website to buy, you're buying something that's answering a question or solving a problem. And that's the key to making money online, answer questions and solve problems.
It's that simple. So why aren't many people doing it?
It surprises us actually how many of our students we have to take through that process of ‘remember guys, you've got to get in other people's heads’. What are they looking for? I think that skill of empathy is something that a lot of people don't realize is so important in business that you have to understand other people and understand what's their problem, what are they looking for? How can I help? The whole basis of what we do every day, I think, how can I help someone? How can I make life a bit easier for them? Give them the answer to something they really want to know. And I think if you come at it from that angle, it's a totally different ballgame.
In order to solve people’s problems effectively, the online experts have to determine which sites to buy, by identifying how much value they have.
When you first start out, it's much safer to buy the ones that have profit already, because there are some topics that are difficult to monetize or difficult, you know, styles of websites that are difficult to monetize. So it's much safer if you stick with, in the beginning, sticking with those websites that have easy to understand topics that are proven money makers. And you can do that by buying websites that already have profit because they've proven themselves in the marketplace. You can see that they work and the whole point of buying a website is to bypass all that startup stuff. All the testing and all the, you know, will this work and will it not, is this the right topic and so on. That's all been done.
And we can see that when we do the due diligence on the website. So the way we value it, a starting point, and it's a very rough rule of thumb here, but basically websites are very just like any traditional business asset and it's a return on the monthly profit. So it's a multiplier of the profits. So what we say to beginners, when you start out currently in the market, it's about a 20 times a monthly profit. So if a website's making $1,000 a month, then it will probably sell anywhere around that sort of 15 to $30,000.
Depending how automated it is, how much history it has. Because also of course the value is very much based on how secure this site is, how likely it is to keep making that money into the future.
After buying and selling properties over the years, Matt and Liz Raad share their strategy on building up a portfolio.
“We realized the internet is growing. This is a new marketplace and this is somewhere where we need to be.” -Matt and Liz Raad
I wouldn't actually go on our journey because we've owned a lot of websites and you don't actually need to nowadays. So we've revised our strategy over the years as the market has changed and what we suggest for our students is 10 to 15 good websites is a really nice portfolio. And those websites might be making anywhere from a few hundred dollars a month up to $10,000 a month. But having that, again, you can see where we're very much security oriented. So rather than focusing all our efforts into one big website, we tend to portfolio it. And so we have a whole range of websites making all different amounts per month. And I will still buy small websites. So if it is a $5,000 website that's got $1,000 a month, you wouldn't get that nowadays but you used to, but even, you know, a few hundred dollars a month, but if it's a good buy and I like the niche, I'll still buy it. Because $5,000 in a website is going to return in more than $5,000 in the bank. But yeah, so to give you an idea, we have superfluous websites, we don't really need to have as many.
With having properties online, you don't have to leverage too much yourself. You don't have to go to the bank and borrow 20%, which you need on average and say a property in Sydney is $200,000. You could easily buy $200,000 worth of websites to generate that kind of income.
Yes. The returns at the moment on websites are phenomenal, we haven't seen turn outs like this before. It's a very high growth market as well at the moment. We've seen huge growth over the last 10 years. We value them on monthly profits. So if it's making $1,000 a month, a into 12 times that, so $10,000 for a website making $1,000 a month, then we'd renovate it and our goal is always double it, which we can usually do, often we'll triple it. And so if you double that, you've paid it off in five months and then it's just income.
I do want to point out that we’re experienced, and there's a lot to learn for most people, even for experienced people. So we know a bunch of Seos and we keep saying to them, why are you not buying websites? It's a no brainer. You can do good due diligence, you can see it, you can renovate a site, and you do need experience, like you need to build up your experience. And this is the thing that we're excited about, why we love it compared to when we used to sell bricks and mortar businesses. Minimum buying on a bricks and mortar business for a decent one is $500,000 to a million plus. With websites, we can get people started buying just little $500 websites and sure it's not going to make them money as such, but the learning process, what they go through is exactly what you need to do when you want to start adding zeros to that thousand dollar websites or $50,000 websites or bigger websites.
So the good thing is whilst there's technical stuff to learn to make money online, it's in a small buying price and practice on small sites. Unlike say with property you can't practice on a $5,000 property. It's not possible out there. Well not as far as I'm aware. Whereas with websites, so it's pretty safe, you're not going to hurt yourself in the learning phase. Once you get good at this, then you start as we know it. As you can imagine, you've got to look at a lot of deals to get the good ones. It's not every single day. Although I will say there's a lot more websites out there now and there's a lot more website brokers out there and currently in the current market in particular, you will see a flood of good websites being sold. Property websites will be sold and shared under value over the next six months in my opinion, knocking financial advice. But I think there's going to be some really good opportunities out there.
Having real estate online essentially acts as an insurance, especially during hard financial times when properties are no longer accessible.
Yeah, it's the way it is, the market of the future is online. Like, look at Amazon now. It is just growing because of what's happening in the world right now, the online marketplace is just going to boom even further on the internet, what is it? Internet traffic is up 30% just in the last couple of weeks. This is almost pushing everyone into that online space. So I think we're going to see even more growth coming in the next few years.
Throughout Matt and Liz Raad’s journey, they have developed personal mindsets that have ultimately affected the success of their online businesses.
That's easy for me, my biggest influence in terms of mindset. Just like attitude and things like that...I've done a lot of mindset work on myself over the years since I left home. And when I was in Sydney, since I was 18 years old I realized I had to fix myself up and then becoming an entrepreneur, as a successful entrepreneur, there's a lot of mindset blockages that I had to overcome. So I've read lots and lots of books, but I guess one of my big influences is seriously someone like Arnold Schwarzenegger. Because I looked at him and just really admired him because he started with nothing, absolutely nothing. And he became who he was and incredibly successful in all areas of his life. And he did it purely through the power of his mind, just sheer willpower. And I think that for me, that his journey has helped me enormously.
Have you read his autobiography?
Yes I've read everything. I'm looking at his book right now. There's a poster on my wall and
I've got all his books, everything. Yeah. So I know every little story about Arnold, for the last 25 years.
He was a very big influence on us as well in that, you know, it was a long time ago when we read his books and it was just reinforcing that idea of buying yourself cashflow by yourself, investments that return cash flow don't work too hard. And that, that was something that I think was really important in our journey to the people. They forget that they don't have to work as hard as they are and when they buy themselves an investment or something like that, we see it over and over again. They buy themselves in other jobs. They by themselves work because that's what they know, I think. And so we were always very conscious of the fact that we're buying ourselves an investment and if we're going to grow it and we're going to sell it, are we going to make income from this? And that idea of buying investments, not a job.
Excellent. Do you think that would have been the best advice you've ever received or have you received other advice from other people that you'd like to share?
Well, for me it was to learn how to value a business. And it was from hanging around all those very successful business owners who are back in Sydney and understanding how to value assets and I guess also a big influence for us was Warren Buffet and obviously that's a big part of how he's made his wealth in life. So I guess in terms of the big pivotal mindset shift or the big pivotal thing, the advice that I was given as an entrepreneur was definitely around understanding how to value business and for Liz I would say assets and how to value it. It's been an enormously good money making skill to have for us on our entrepreneurial journey.
Looking back on their journey, it is inevitable to develop personal habits along the way that have contributed to their successes.
I reckon the biggest thing for us is consistency, just every day doing something, no matter what's happening in life especially. That's fine now, but it was back in the days when it was hard. When you felt like giving up, when things weren't working or you didn't have much money. It was at that time where habit was the most valuable because we didn't give up. We always had that bigger picture in our mind and we always showed up.
Well that's the other important part. Atleast what was just touched on, probably even more important than that is having that personal vision. So that's a big thing, we learnt this off Arnold Schwarzenegger, he had a big vision and for us, like we said, the vision then led to the consistency and Arnie always says, and we use this all time reps, reps, reps just turn up, do the stuff the more you don't feel like doing it because it's all feeding back to your vision. So for us, I know my vision, I've looked at it for the last 25 years. It's in my wallet, it's on my Evernote, it's everywhere. We talk about it daily. Our kids know what our vision is and we're constantly tweaking it. And I think that's probably the number one strategy that led to our success. We both luckily have a very strong shared vision and we consistently work to it.
Wow. That is amazing. Would you mind sharing with us that vision because it would inspire a lot of us, including myself.
I mean there's a fair bit to it. It's not like it's one thing because we look at life. Health, wealth and happiness. So we look at our life and for me the vision is actually a lot about the feelings that I want to feel every day. So it's funny, Matt and I are driven slightly differently. So I'm not actually as driven by money as Matt. I didn't have an underprivileged background so money wasn't the massive driver for me. It was more that feeling of freedom, that feeling of being able to do the things that I wanted to do, do the things that inspired and excited me going on adventures feeling joy, moments of joy.
And I know that in order to create that I need to achieve certain things even down onto a daily basis. But I bring those feelings I got, I've designed my life so that I can bring those feelings into today. And I think that was what the connector was for me. Because back when we had nothing and we were really struggling sometimes, it's really hard when you're in that moment, when you're in that situation, the vision seems so far away and so remote that you feel a bit disconnected to it. And even though I knew where we wanted to get to, we wanted that freedom. Those were things as well. I think it was the house we wanted, this particular house, we wanted to live in the bush. We wanted to live amongst wonderful people. There's all those elements of what we wanted.
We wanted to be able to buy the things that we want to buy. I wanted the freedom to be able to go to a shop and not even really care what the price was of whatever it is. So sometimes it's those little things. Because I'm not driven by owning Ferraris or all that sort of stuff. It's more those day to day feelings of freedom and joy. And so I bring that into my life. Even though when we had nothing, we'd still go off into the bush and spend a day just loving our time, like walking together, dreaming together, doing things each day that brought those wonderful feelings. And so we knew we were on the right path.
For me you got to be able to do the uncomfortable things. In everybody's journey, you're going to get uncomfortable. There's going to be stuff that you really don't want to do. But if I can just know that once I've done that, I'm a step closer to where I want to be. No matter how big or small that is, then you'll do it.
My vision is around Arnie, like in that I haven't broken up and I learned this off some of the personal mentors that I had back in Sydney. So I'd break down areas of my life. So how I work, how much money I earn or investments do I have, but how's my daily day look like? How much time do I have to turn up to work for what I want in my family? If we've got young kids how do I want my kids to be? How do I want to turn up in my relationships, relationships with Liz, relationships with kids in my community? So I guess they're the classic goal settings that you read about in all those goals in books, which I've read all of them. And that's how I created it. I've come to kind of call it the master plan, because Arnie had his master plan way back. Not a lot of people know this, but way back when he first landed in America, he had this master plan and he ticked off every single thing. And it's funny now I look back, I just turned 50 at the beginning of this year and when I look back over my master plan from that I set out, I don't know when I was 20 or around that age, I've achieved pretty much 95% of everything that I wrote down. So that's pretty cool. So it works. Setting goals, vision setting works really well.
And that's so great that you could share that with us. Thank you so much for that. Now the last question I have. How much of your success is due to skill, intelligence and hard work and how much of it is because of luck?
I'm that kind of person who believes we create our own luck. So it's, it's definitely skill. It doesn't, I don't think it's necessarily intelligence because I have an academic brain. I don't have a business brain as such and certainly not a sales brain. And so I had to learn a lot of stuff. I did not take the easy path. And I wasn't necessarily automatically, naturally skilled at what we did in business. So I think it's intention and commitment and focus. Discipline.
They’re our keywords, Tyrone. They're written on our wall. There are personal keywords, intention, focus, commitment, consistency. But for me too, I've got to admit for me, I look back at my life now and I've got this from my granddad. I am an optimist and I don't look back at my past, I don't like looking back at my past. And as Arnold is, he's exactly the same. He tends to only live in an hour. Look forward. And I'm the same. But when I did turn 50 I did look back at my past and I realized, man, I am so lucky. But then as Liz would point out, well you make your own luck. And it's funny, I've kind of forgotten my past a little bit of how the hard times and all that sort of stuff happened because I tend to paint it with rose coloured glasses. But like Liz, I think it's down to our consistency and hard work in its time. But I do acknowledge that I have been lucky, but I think I've made my luck.
What is the best way our viewers can reach out to you and find out a bit more about your program as well as your online businesses?
Well you can go and check out where we launched the eBusiness Institute and there is lots more about how we do things and what we do. Or if you want to know if you have a question or anything like that, you can connect with us on Facebook, Matt and Liz Raad and we're happy to help.
And I'd recommend doing a free training, if your listeners want to take this further, we've got free training on our eBusiness Institute. They can go through some online courses there and learn basically the overriding strategy of what we do, of how we buy and renovate the websites
I feel like yeah the next thing, or the next phase of our journey is that we were inspired to help other people achieve this as well and hopefully make it a lot easier, faster even.
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