Secrets
Of
Property
Millionaires
Exposed!
Dale Beaumont
With Colin B. Fragar & Foreword By Simon Baker
Disclaimer
All the information, techniques, skills and concepts contained within this publication are of the nature of general comment only, and are not in any way recommended as individual advice. The intent is to offer a variety of information to provide a wider range of choices now and in the future, recognising that we all have widely diverse circumstances and viewpoints. Should any reader choose to make use of the information contained herein, this is their decision, and the contributors (and their companies), authors and publishers do not assume any responsibilities whatsoever under any conditions or circumstances. It is recommended that the reader obtain their own independent advice.
First Edition 2005
Reprinted 2006
This second edition published in 2007
Copyright © 2005 Dream Express International Pty Ltd
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission from the publisher.
National Library of Australia
Cataloguing-in-Publication entry:
Beaumont, Dale.
Secrets of property millionaires exposed!
2nd ed.
ISBN 9780980308716 (pbk.).
1. Real estate investment - Anecdotes. 2. Acquisition of property - Planning. I. Title. (Series: Secrets exposed).
332.6324
Published by Dream Express Publishing
A division of Dream Express International Pty Ltd
PO Box 567, Crows Nest, NSW 1585 Australia
Email: info@SecretsExposed.com.au
Website: www.SecretsExposed.com.au
Distributed in Australia by Gary Allen
For further information about orders:
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Editing by Simone Tregeagle [simone@inkcommunications.com.au]
Cover design by Jay Beaumont [www.thecreativehouse.com]
Illustrations by Grant Tulloch [info@secretsexposed.com.au]
[www.mcphersonsprinting.com.au]
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Acknowledgments
As with any major project, there are a number of very special people who contributed to making this book happen, so we’d like to take a short moment to say, ‘Thank You’.
To the 16 exceptional property investors featured in this book, thank you again for being a part of this project and taking the time to update your material for this very special second edition. It has been wonderful to get to know each of you personally over these last two years and discover your strategies for achieving greater personal and financial success.
To each of our parents, Paul and Chrissy Beaumont and Max and Wendy Fragar, for all of your support and home-cooked meals over the many, many days of compiling the content for this book. And to Emma Lyons, Neil Murphy, Simone Tregeagle and Kerrin Medenyak for all your efforts to bring this second edition to life.
To Jay Beaumont (Dale’s brother) for designing the book covers, to Bookhouse in Sydney who continue to do such excellent typesetting and to Robert Stapelfeldt – thanks for everything you’ve contributed to the success of the ‘Secrets Exposed!’ series.
Next, to the team at Sure Fire Marketing. Thanks for all your efforts with the ongoing development of the ‘Secrets Exposed!’ website. We really value your work.
Thanks to all the staff at Gary Allen (our wonderful distributors) and each and every sales rep that has helped to get these books into the stores – we greatly appreciate the work you do.
And finally, to tens of thousands of readers that have supported the ‘Secrets Exposed!’ series – a very heartfelt thanks. May the words from our books continue to inspire and guide your way!
Praise for Secrets of Property Millionaires Exposed
“It’s always EASIER, CHEAPER and FASTER to learn from someone who’s successfully achieved what you’d like to do. This book is invaluable to you if you have an interest in real estate because it allows you to consider and evaluate which approach to property wealth might best suit you.”
Hans Jakobi – Australia’s Wealth Coach® Professional Investor, International Best-Selling Author, Educator
“This book is a must-read for anybody who is serious about investing. It gives you a snapshot into the lives of the people who’ve made it and teaches you many new strategies to realise your dream even sooner.”
Liliane Harb – Aspiring Real Estate Investor
“As a financial planner, I’m always advising my clients to educate themselves about the various facets of asset protection, investing and creating wealth. This book is one of the most comprehensive guides to property I’ve seen. Highly recommended!”
Randall Yip – Senior Financial Planner, Phillips Dean Brickwood
“I’m just starting out in property. This book has given me an excellent opportunity to achieve my goals, without having to make the major mistakes that the property greats have before me.”
Spencer Ferreira – Business Student
“In my industry I see so many people with all the technical information about property investing, yet who never seem to take any action. This book gives you the motivational spark needed to get moving. A great read!”
Mike Small – Finance Broker, X Inc.
“After reading Secrets of Property Millionaires Exposed it becomes very clear how simple and easy property investing is and the importance of understanding which investment strategy is best for you.”
Andrew Melhem – Architect and Property Investor
“With a wife and two kids to provide for, I want to make good financial decisions. Great to see a book that asks the questions you have always wanted to ask a millionaire. Inspirational!”
Simon DeGaris – Property Valuer
“This was an absolutely amazing book and a valuable tool for anyone else looking to get involved in property investing. It’s easy to read and outlines the practical steps of what to do. But best of all, the information is from people that have already done it and now have great wealth.”
Elizabeth Goodman – Business Owner and Property Investor
“My wife and I started investing in property some time ago with just one property. But last year we branched out to where we now own four properties. These were purchased as positive cash flow properties to supplement our superannuation in our retirement. This book gave us some great ideas to go on to greater heights.”
Dr. John Millar – Property Investor
“As a town planner, I’ve been associated with property development for over 40 years. This book succeeds in demystifying the principles of development and investing, by bringing to us the basic lessons learnt from experienced, down-to-earth practitioners. Well done.”
Max Fragar – National Councillor, Planning Institute Australia
Contents
Preface
If I were in your position right now I’d be wondering if I really needed to read this section. However, if this is the first ‘Secrets Exposed!’ book that you’ve read, could I ask you to please resist the temptation to skip ahead, as I’d like to briefly share with you why this book has been created and how you can best use it to impact your life.
When I was growing up I heard somewhere that there are two ways to live your life: the first is through ‘trial and error’ and the second is through ‘other people’s experience’. At the time I dismissed it as just another one of those sayings that sounds good, but doesn’t make much sense. Then, like most teenagers I finished school with stars in my eyes thinking, ‘This is great! My education is over – no more books, no more lectures, no more people telling me what to do’. How wrong I was. After a few months of bouncing around, not quite sure of what to do next, I stumbled across the idea of personal development and started to hear concepts such as:
• Formal education will earn you a living, but self-education will make you a fortune.
• Work harder on yourself than you do on your job.
• You will be the same person five years from now, except for the people you meet and the books you read.
• Don’t wish that your job were easier, wish that you were better.
• You are your own greatest asset, so you must invest in yourself.
Since November 2000, I have been totally committed to becoming my own most valuable asset. After attending hundreds of seminars, listening to thousands of hours of CDs and reading shelves of books, I have discovered that the people who truly succeed aren’t any smarter, better looking or harder working than anyone else – they just think differently and have learnt to incorporate different values into their lives.
I am now in the very fortunate position of being able to travel internationally to present personal development seminars to teenagers and I am often asked, ‘What is the one thing you need to know to be successful?’ My answer is always the same: ‘The one thing that you need to know is that there is not one thing that you need to know to be successful’. I’ve learnt that success is multifaceted and that mastering one principle of success or area of your life isn’t going to take you to the top – the more you master, the more successful you will become. But if I did have to identify one of the most important success strategies, it would be this: ‘Find out what successful people do and do the same thing until you get the same results’.
That’s what this book is all about. The only difference is, instead of you going out and finding successful people, we’ve brought them to you.
You see, whatever you want in life, whatever you are shooting for, chances are that someone else is already living it. They have already invested years of their life and probably hundreds of thousands of dollars, they’ve made lots of mistakes, learnt from them and eventually succeeded. So why would you want to waste your own time, money and effort through ‘trial and error’ when you can fast-track your success by learning from ‘someone else’s experience’? As Sir Isaac Newton said, ‘If I have seen further it is because I have been standing on the shoulders of giants’.
Every time you pick up a book, attend a seminar or interview a successful person, you are compressing years of life experience into a few hours. With any of the ‘Secrets Exposed’ books, you can multiply that by between twelve and seventeen people and you’re looking at around 250+ years of experience and wisdom ready and waiting for you. It won’t prevent you from making mistakes of your own, far from it, but it will help you to make more calculated and purposeful decisions, rather than big, misguided and ignorant ones.
There is no shortage of information about how to achieve proficiency or even greatness in any area of life these days. Go to any bookstore or library and you’ll find the shelves sagging with titles from experts, all with their own theories and ways of doing things. But what I have discovered is lacking in almost all of these books is INSPIRATION. What’s missing is role models and mentors – the stories of people we can all look up to. People who started out exactly like you – with a dream in their hearts and with all the same fears and insecurities. Given the choice between reading a textbook or a dozen success stories about people who have actually done something, I’d take the success stories any day of the week. I’m not saying that theoretical information isn’t important, of course it is, but having presented hundreds of talks to all different types of audiences, I can confidently say that it’s always the stories that move people. It’s the whole, “If he or she did it, then so can I” that gets inside people’s hearts. When we’re inspired we get motivated and then we take positive action which leads to results.
The ‘Secrets Exposed’ books are not intended to be a one-stop-shop. They are an introduction to the wealth of knowledge available to you and to some of the real success stories of people who have reached the top in their chosen field of endeavour. That’s why at the back of each book you will find most of the contributors’ contact details and some of their other products and services that are available to help you continue your journey.
So, how did the whole idea for the ‘Secrets Exposed’ books come about?
Well, in 1998, when I was around seventeen, my nan gave me a copy of a book titled Collective Wisdom, by Brett Kelly. In it were transcripts of face-to-face interviews with a whole lot of prominent Australian personalities. And it was a fantastic read. Since then I have seen a handful of random ‘success story’ books, but the challenge I find with most of them is that they are either transcripts of interviews, that never really make complete sense in the printed form, or they are written by writers who paraphrase someone else’s story. The result tends to be a diluted message that doesn’t really allow you to get a sense of the individual’s personality or character.
In around 2001 I read my first Chicken Soup for the Soul book and realised that there were dozens and dozens of related titles designed to meet the needs of different people’s areas of interest. I thought that was pretty neat.
It wasn’t until January 2004 that the ‘Secrets Exposed’ idea boiled over. I was in my hotel room in Singapore relaxing after six straight days of presenting to hundreds of teenagers. I was reflecting on the ideas that had been shared with them. One of the most important was to seek out those who have already achieved what you want and ask them lots of questions. I was plagued by the thought that only a small percentage would act on that very valuable advice and that most would never take the step due to a lack of confidence, fear of rejection or an inability to contact the people they needed.
That’s when it hit me...’What if I could find the people and put together a number of books covering a range of different areas?’ I knew it would take a lot of effort, so for the next three days, I sat in my hotel room and developed the basis of an entire system to make it happen.
Based on my experience with other books, I decided that these books had to be non-time specific and be written (not spoken) by the people themselves. This way the answers would be planned and well thought-out, providing richer content and more interesting reading. I also wanted to make sure that there was an even balance between practical ‘how to’ information and inspirational stories that gave an insight into the highs and lows of people’s real journeys. I also wanted to ensure that a percentage of every book sold was donated to a charity relating to the nature of that particular book.
When I arrived home I got into action. However, between working out of a tiny one-bedroom flat and trying to manage two other demanding businesses, my plans were a little slow in the beginning and I had to be resourceful. So I bought a plastic tub and turned the boot of my car into a mobile office! Anytime I could find a spare hour or two, I’d park myself at the gym or a nearby coffee shop and make calls from my mobile phone.
Putting these books together has been both time-consuming and demanding, but it has also been a real privilege for me to have the opportunity to work with each of the people involved in the various books. Thank you, to each of you, for making it possible!
Well, I think you’ve heard enough from me. Now it’s time for you to discover for yourself the wonderful wisdom contained in these pages. I hope that you enjoy the read as much as we’ve enjoyed putting it together. And who knows, maybe one day we will be reading your story?
Dream Big!
Dale Beaumont
Creator of the ‘Secrets Exposed’ Series
Sydney, Australia
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In this 1 hour 43 minute recorded interview, author Dale Beaumont intimately shares the inner workings of the ‘Secrets Exposed’ series. Discover in greater details how he came up with the idea, how he managed to secure personal interviews with over 200 of the countries most successful people and what he believes are some of the most important business and life principles from each of the books in the series.
Simply visit the web page below and follow the directions to listen to or download the entire interview direct to your Notebook or PC.
Foreword
In any undertaking, no matter how large or small, success is often attributed to three key areas: a great strategy, a strong focus on execution and a manic passion to make it happen. It doesn’t matter whether you are multi-million dollar company or a property investor – identifying a great strategy and executing it with passion is what gives you the greatest chance of success.
A well thought-out strategy provides a clear direction. It should articulate what the objectives are, what resources it requires and how much value it can create. Side-by-side with strategy is execution. Successful undertaking focus on ensuring that they apply the right resources, that they constantly measure progress and are not distracted. And the ‘x- factor’ that ties it all together is passion. Sometimes even a mediocre strategy and sub-optimal execution can be overcome by the sheer passion to make it happen.
At realestate.com.au, we have followed this simple approach. In 2001 we put in place a simple growth strategy and then focused our entire team on its execution. We had a single-minded commitment to the achievement of our plan and we made sure that we invested the right level of resources to make it happen. The result is that over the past four years we have turned a business with a market capitalisation of $8 million into one with a market capitalisation of $180 million. We have increased our revenues eightfold and have become profitable.
In this book you will find many more examples of successful property investors who have taken this same approach. Each has spent time developing the specific property investment strategies, and each has then passionately focused their efforts on execution, with some amazing results.
The authors, Dale and Colin, have created this book using the same methodology – they established a clear vision and passionately executed that vision in the development of a book that is full of tips and techniques for any property investor.
I hope that this book helps you to create your own property investment vision and that the stories and experiences of those who have tread the path before you encourage you to passionately follow that vision through to becoming a property investment millionaire yourself.
Simon Baker
Chief Executive Officer
Introduction
Now, more than ever before, people want to create wealth. Not just a few extra dollars each month, but enough to provide the genuine financial freedom to live the life and lifestyle they truly desire.
For the last few decades there has been a raging debate on the best method, strategy or approach to achieve this freedom, and in many ways it’s property investing that is at the forefront of this debate. Go to any bookshop and you’ll find the shelves sagging with hundreds of wealth creation books, the majority of which are about property.
Over recent years the flood of information has brought with it a new wave of high-gloss marketeers and property spruikers, leaving people more confused and overwhelmed than ever. That’s the reason why we decided to write this book. In the beginning our plan was very simple, ‘Find the most successful people in property we could, ask them how they did it and put it in a form that would be accessible to anyone’.
In December 2005 we released Secrets of Property Millionaires Exposed! and it soon became an Australian best seller. Now, some 19 months later, we felt the need to update the content of the book to make sure that it is still cutting edge and reflective of what is happening in today’s market. In addition, we decided to add two all-new chapters – providing even more content-rich information and examples to help you realise your dreams.
So now in Secrets of Property Millionaires Exposed! (2nd Edition) we have an amazing group of 16 highly successful real estate investors who are eager and ready to share their experiences and pass on what they’ve learnt. Many of them have created portfolios worth tens of millions and are now prominent teachers and educators – helping thousands of people achieve their goals of financial freedom. However, before you go diving into it, there are a few other important points we’d like to share with you.
First, this is like no other book – you aren’t going to be reading about one person’s strategy or approach. You are going to be reading all of them: positive cash flow, negative gearing, renovations, joint ventures, subdivision, property development and vendor financing, to name just a few. Each of the contributors will present their path and reason for pursuing it, empowering you with the information you need to develop your own personal goals and game plan. This information alone can save you thousands of dollars by assisting you in making much smarter decisions.
Second, there is something for everyone in this book. Whether you are a sophisticated investor looking for a new edge, or an aspiring investor looking to get started, you’ll find dozens, if not hundreds of great ideas. Our recommendation is that you read this book once right through, then re-read it again marking all of your favourite points with a highlighter pen.
Third, please know that this book is by no means a one-stop-shop. Once you have defined your goals and developed your approach, we would encourage you to seek more information, that’s why at the back of the book we have included the websites of each contributor. You’ll find that many of them have their own books and information products, which we endorse and encourage you to investigate further.
Fourth, to further assist you in your own endeavours, a number of contributors have also very generously offered valuable gifts to all of our readers. To receive them, all you need to do is visit the specified website and then follow the steps to download the bonus gifts – absolutely free.
Finally, remember it’s what you do after you read this book that is going to determine its real value to you. So, go out there, apply what you’ve learnt and when you reach a goal – no matter how big or small – let us know so we can share your success story.
Enjoy!
Dale Beaumont and Colin B. Fragar
Email: info@SecretsExposed.com.au
See The Possibility
Craig Turnbull
“Buy the best quality property, in the best location you can reasonably afford and never, ever sell it.”
Profile
Craig Turnbull
Craig Turnbull was born in Fremantle, Western Australia, in 1963. As one of four children in a family that struggled to make ends meet, he learnt the value of money early in life and grew up with a keen desire to become wealthy. In 1982, he read the first BRW Rich 200 List and discovered that most of Australia’s wealthiest people either made or held their wealth in property. He began his real estate investment career at the age of nineteen and was a millionaire by the age of 28.
Craig had many early successes in property investment, followed by several setbacks. But rather than treat these as negative events, he readjusted his approach and turned them into the learning opportunities that have led him to become known as a ‘property guru’. Craig discovered that he had a talent for sharing his property investment experiences, and in 2001 began his education company Property Millionaire Pty Ltd. Since then, he has taught thousands of people how to create wealth through real estate. Over the years the company has expanded into a boutique financial services group offering mentoring programs, finance broking and wealth planning – it is now known as Aspire Organisation.
Craig is the author of four national best-selling property investment books: It’s Easy to Invest in Property, It’s Easy to be a Property Millionaire, Unlimited Cashflow – It’s Easy to Make Money in Property and Millionaire in Training. He is also an international keynote speaker on property investment and success motivation.
Craig lives in Perth with his partner and shares his weekends with his two sons. When he is not working, you’ll find him looking at property, at the beach or indulging his passion for travel.
Why did you decide to start investing in property?
I come from a family of four children and even though both of my parents worked very hard, it always seemed to me that money was a struggle; my desire to be rich stemmed from this. In 1982, when I was in my late teens, I read the first ever BRW Rich List and realised that most of the people on the list had either built their fortune or held the majority of their wealth in property – so I reasoned, if it was good enough for the richest people in the country, then why not me?
What do you love about property?
Property is one of my passions. It’s something that most people are comfortable with and to own your own home is the ‘Great Australian Dream’. Property is solid; it’s real and you can drive past it – every day if you want to!
Historically, property has steadily increased in value. It doesn’t increase every year, as we know it moves in cycles, but over time it always moves upward. Another great thing is that it produces a steady weekly income that grows each year. It is relatively stable and probably the lowest risk of all investments – just ask the banks which asset class they will lend the most money against! Anyone can own it and you don’t have to be ultra-rich.
It’s also easy to add value to your property to increase wealth, which is a major advantage over share ownership. I’ll give you an example: given a roller and a big tin of paint, do you think you could add value to your ANZ shares by going on down to their head office and giving it a fresh coat of paint? Probably not! Yet, apply the same coat of paint to a property you have just bought and chances are that your equity will increase because you have increased the desirability of the home and therefore its value. I have never known a property to drop in value by half or even to nothing overnight, as can be the case with the share market. Even if the building were to be destroyed, it could always be rebuilt through insurance, and even if you are uninsured, there is always the land which has a residual value.
“To become wealthy through property, you must have a belief and a positive expectation that you can achieve your goal.”
In my opinion, property, when carefully selected, financed and managed is the best investment that the average person can make.
What was your very first investment property and what did you have to do to get it?
I bought my very first investment property when I was nineteen. It was an old home that had been divided into four small bed-sitter units. It was priced at $65,000 and was in an area that had great long-term potential for capital growth. What attracted me most were the four lots of rent. At the time I was working in a mining town, so I asked my parents to have a look at the property for me. It turned out that it was at the back of a large block and four more units had been built at the front of the block. My folks liked the look of the property so I bought it, sight unseen, and my parents bought the four units at the front for around $30,000 each. It proved to be a fantastic investment; recently the whole property was sold for $750,000 after being owned by my family for around twenty years.
I struggled with the bank to buy the property. I was only nineteen years old, I had only been in my job for three months and I’d never used credit before. On top of that, I only had $4,000 saved and the bank wanted a 10% deposit, plus costs, which meant I needed $8,000. For several days I was scared that my fledgling property career was over, until I started thinking outside the square; I borrowed the $4,000 as a personal loan from another bank and went back to the first bank and got my loan approved.
What is the single most important lesson you’ve learnt about property investing?
Throughout my investing career I have experimented with all kinds of crazy and interesting ways to make money from property and I’ve managed to do as many things right as I have done wrong! There was no one offering the types of books, courses and education that are available today when I started out – I did it the hard way. Over time, I realised that it really could be much simpler and I developed a rule, my ‘Golden Rule for Property’: buy the best quality property, in the best location you can reasonably afford and never, ever sell it. It’s a simple enough statement in itself, but rules don’t make you rich.
To become wealthy through property (or any other type of investing for that matter), you must have a belief and a positive expectation that you can achieve your goal. Any kind of success begins with a belief in what it is that you can achieve, followed by an unshakeable commitment and a plan of action to carry out your belief.
What advice would you give to someone who wants to get started in property investing?
It’s so easy to go out and buy property. Really! Yet so many people fail to make any preparations or plans for what they want to achieve. They just open up the newspaper on a Saturday morning, wave their finger over the suburb they want to live in, bang it down onto the page and go out and buy the property that their finger landed on. Sadly, this approach is more the norm than the exception.
The first thing you must do as a new property investor is make a plan. This should include details such as whether you are planning to invest for capital growth or income, whether you will be buying new or old houses or units, and whether you will be using short-term strategies like renovating or flipping, or if you are happier just operating on a buy-and-hold basis.
“...when I realised that I was responsible for everything that happened, my income and wealth grew proportionately.”
The easiest way to create your plan is to first clearly envisage your ultimate outcome and the time period within which you plan to achieve it. For example, your goal might be to become a property millionaire within ten years. Then, work backwards to where you are today, filling in the steps along the way that will get you to your outcome.
The bottom line is, don’t start investing without a plan!
What were some of the challenges you had to overcome on the journey to achieving your financial goals?
I’ve had so many! At times it seemed to me that the universe was constantly coming up with things to test how badly I really wanted to succeed and be wealthy. When I first started, I was constantly told, ‘you’re too young’, or, ‘no, I am not submitting that low offer’, or, ‘sorry, we can’t lend you any more money’. Coming up with the monthly repayments, especially when rates were due and at tax time, was very difficult for me. In the early days I knew very little about how to manage my cash flow and I hadn’t yet realised that property could actually provide you with an income in some circumstances. I just bought everything I could hoping it would go up in value.
By far the biggest challenge was overcoming my own beliefs about what I could achieve. My self-worth was constantly telling me that all of this investing stuff was a bit unreal and besides, who was I to think that I could get rich? Once I learnt that becoming wealthy was really possible, and more importantly, understood that it was possible for me, I began to grow as a person. And when I realised that I was responsible for everything that happened, my income and wealth grew proportionately.
If you had to start again with nothing, what would you do?
I have a great answer for this one because I really did have to start again with nothing. After I lost my money I spent a lot of time trying to figure out what went wrong. I realised that what had happened was entirely due to two of the most powerful motivators in the world: fear and greed. I spent a couple of years blaming everyone else for what had happened to me, but the day I accepted responsibility for my actions was the day that my life changed for the better.
The next step was deciding where it was I wanted to go from there; in other words, what my outcome would be. I set new goals so I had something to aim for; these were my ‘whys’, my reasons for getting up early and staying up late. I re-evaluated my strategy and made a new plan, which included getting some extra education in business and real estate. Part of my plan was to implement some property strategies that did not require a lot of money, since I didn’t have any. They included the ‘flip’, which is a ‘buy low and sell high quickly’ technique that can generate fast cash and I planned to use the profit generated to fund renovation projects, which have the capacity to add value quickly. I also planned to use my research skills to put together great renovation and development deals, for which I could bring in other investors with capital. To balance things out, I put decent deposits on long-term ‘buy-and-hold’ deals so that my cash flow would be neutral at worst. The last thing I did was commit to taking persistent and constant action toward the achievement of my goals.
You are well-acquainted with just about every property investment strategy, is any one really better than another?
There are so many ways to make money from real estate, such as renovating, flipping, developing, positive cash flow, negative gearing, and buy-and-hold, to name just a few. And there are just as many people out there telling you that the way they favour investing in property is the only way to go. That concerns me because what they are really saying is that everyone is the same in their financial goals, knowledge, income, age, time availability, cash, equity and so on. But if you have no cash and no borrowing capacity, how can a negative gearing strategy work for you? If you have a high income with plenty of cash and not much time, then a long-term buy-and-hold strategy with negative gearing might suit you. People who have a lot of time commitments may be at a disadvantage in time-intensive strategies like renovating. And people who want to get into property development need a lot of knowledge, planning and research skills.
Each strategy has its own strengths and weaknesses. It is imperative that you choose one, or possibly two strategies that you can become very, very good at and make your wealth grow that way. I found that trying to use too many strategies split my focus and I ended up causing myself some grief.
What is ‘flipping’ and what does it involve?
The ‘flip’ is a fun little strategy that anyone can use to make money in real estate. It’s fun because you don’t need any money, you don’t (necessarily) have to qualify for a bank loan and it can generate lots of cash very quickly. Interested? I thought so... read on.
The essence of a flip is remarkably simple: buy low and sell high, quickly. Translating this into real estate language, you must buy property well under market value and resell it quickly at a slight discount to what is on offer in the open market. It’s not rocket science but the reason it’s not done more often is because people don’t think it can be done. People think that surely no one will sell a property for less than it is worth – which is absolutely and totally incorrect. Vendors sell below value every day as their circumstances change due to marriage, birth, death, illness, job loss or transfer. To find suitable properties to flip, you must ask, and you must make lots and lots of offers. To find the prince, you must kiss a lot of frogs, right? Be prepared to submit lots of offers before one gets accepted. This takes a determined effort, a lot of discipline and a very thick skin.
What makes a flip work is having a buyer ready to take the property from you before you actually buy it. With the correct set up, theoretically, you can own the property for just a few minutes before your pre-arranged buyer purchases it from you. All you get is one big, fat cheque!
Do you recommend new or old property?
Each has its benefits and drawbacks. Which is better comes down to what’s most appropriate based on your preferred property investment strategy.
To summarise the main points: new property is probably more appealing to tenants, it will have higher rental returns, higher depreciation benefits, lower maintenance costs and it will be years before it suffers from economic obsolescence. On the flip side, it will usually cost you more than old property, you can’t add value to it by renovating (it’s new) and it is unlikely that you’ll be able to negotiate much off the price. Old property is mostly cheaper, often located in established areas close to amenities, and value can be added quickly. On the downside are higher maintenance costs which means lower cash flow, lower depreciation benefits, usually lower rents and out-dated design.
What are some of the techniques that real estate agents use to persuade inexperienced buyers?
There are so many techniques used to persuade people to buy. As a licensed real estate agent myself, and having had around twenty years’ experience, I have had the benefit of numerous sales training programs and have learnt techniques from the best (and worst) salespeople.
“I found that trying to use too many strategies split my focus and I ended up causing myself some grief.”
A clever agent will line up the properties he or she wants to show in a specific order. The first will be terrible, the second a bit better and the third just right. If the buyer shows any interest, the first thing agents are taught to do is prey on the purchaser’s fear of missing out by saying something like, ‘There is another buyer’. Usually, this is enough to panic most people into doing something. If not, there are other sales closes such as the ‘Benjamin Franklin’, where the agent helps the buyer to list the positives of the property and then keeps quiet while the purchaser struggles to find the negatives after having thought of all the good things first. Another good one is when the buyer asks if something they see is included, such as a dishwasher. The agent writes it down on the offer and says something like, ‘Let’s see if we can get it for you’. I have lost count of the number of dishwashers that have been sold with houses attached!
The smartest thing you can do as a buyer is to be aware of the agents’ techniques and understand that they are just doing what they are trained to do – that is to help you make a decision, you just need to be sure that it’s the right one for you.
What are some of your favourite negotiation techniques when buying property?
I have used a lot of different techniques throughout my investment career. The most common is the ‘low-ball’, which is low price, high deposit, short settlement. This is used when there is a hint of time-pressure on the vendor. The ‘first and final’ is just like the low-ball except that you short-circuit the back-and-forth negotiation process by making one take-it or leave-it offer. The ‘full price’ is used when you are sure that the property is underpriced or that you can get some creative terms, such as a long settlement period. Finally, there is the ‘over-price’ offer. Use this one with caution, as it is only successful when you can add value really quickly and if the vendor will offer you some vendor finance that will allow you flexibility on repayments.
The key to negotiating successfully is understanding your vendor’s situation so that you can design an offer with a win-win outcome. What would the point be in offering full price on a property with a twelve-month settlement if the bank is coming next week to take the property back?
What is the scariest thing that has happened to you in your property career?
In hindsight, this story is probably one of the funniest from early in my career, although it was more of a fright at the time!
I was driving past a property on a busy road leading into the city, when I noticed a ‘For Sale’ sign at the front which was leaning over and about to fall onto the dirt. My bargain radar began to beep so I turned the corner and circled back, pulling up into the driveway. Right away I could see that the property needed work and clearly no money had been spent on it recently. I purchased it for $46,000, down from the original asking price of $59,000. I didn’t bother with an internal inspection and although I knew there were tenants, I had not met them.
After I settled on the property, I arrived planning to introduce myself to the tenant – the person who was going to help me pay for my new house. I knocked on the door and was greeted with a growling, ‘Jus’ a minute’, followed by some loud banging and hammering. A short while later the door swung open and standing before me was the biggest man I had ever seen; he was wearing a leather vest, had tattooed arms the size of tree trunks, smelled like three-month-old tuna and held a can of beer in one hand and a greasy spanner in the other.
My tenant, the bikie, had just finished stripping his Harley Davidson in my lounge room. It was at this point in my investment career that I made the decision to always employ a professional property manager rather than handle the management myself!
“I have lost count of the number of dishwashers that have been sold with houses attached!”
What do you think are the most common mistakes that new investors make?
There’s a section in my book, It’s Easy to be a Property Millionaire, called ‘10 Most Common Mistakes’. Some of them are: lack of a plan, not enough research, being emotional instead of analytical, being impatient, inappropriate financing and choosing the wrong property.
Another mistake that many new investors make, which most affects their ability to keep on their investment path, is paying too much for their first property. Not buying at a discount means you miss out on instant equity and as a result you either have to wait around for the property to increase in value or you have to renovate quickly in order to add value.
If anyone can succeed in property no matter what their current financial circumstances are, what do you think holds people back from becoming property millionaires?
In a word, belief.
I’ve written three books on property investing: It’s Easy to Invest in Property, which is an introduction; It’s Easy to be a Property Millionaire, which is a national best-seller; and a more advanced book that was originally titled It’s Easy to be a Property Multi-Millionaire. This book sold well, but not nearly as well as the ‘Millionaire’ book, despite it containing far more powerful information and enough knowledge to enable a person to work for themselves as a full-time property investor. After doing some market research, I discovered that people weren’t buying it because the title scared them; they just could not believe that they could ever become multimillionaires. The ‘Millionaire’ book suffers a little from this too.
People look at where they are today and project forward in one huge jump to what, for many, is the ultimate target – millionaire status. But for most people, that jump looks too huge, so they don’t start the journey. They remain in their own comfort zone, which will see them living on a pension or in relative poverty later in life.
Interestingly, we changed the name of the multi-millionaire book to Unlimited Cashflow – It’s Easy to Make Money in Property – and guess what? Sales took off, even though the book was otherwise unchanged. Perception is reality.
What do you say to people who think it is too late for them to get into the market?
It’s never too late. I often speak to people at seminars and on the radio who think at age 55 they are on the downward slope and way too old. That’s just not true. People are living so much longer these days and we will need assets that grow in value and income to look after us when we stop working, so why not make a start?
“You cannot deal with any kind of fear by running from it, ignoring it or trying to rationalise it away. You must confront it head-on.”
Legend has it that Colonel Sanders started KFC when he was 65 years old, right after getting his first pension cheque and deciding that it just wasn’t enough. His determination and desire for more changed the eating habits of the world and made him a wealthy man. What if he had given up, or not started, just because someone told him he was too old?
The other thing people say to me about missing out is when property has been going up and they think that the moment they buy it will go down. So they wait for prices to drop before they step up and commit to owning property. This really comes down to a basic fear. Even if you do pay top dollar for a property at the peak of the market and it comes down in price, historically, over time, prices come back and exceed their previous highs. Property can be very forgiving over time.
What common fears do people have about property investing, and how can you overcome them?
Without doubt, the biggest obstacle that most of us will meet on our journey is coming face-to-face with our own fears. We have so many fears drummed into us from the time that we are just small children – our fears of snakes, the dark, the unknown and the dentist are all very real when we are small (and for some of us, when we are large too!) – it’s no wonder that so many people just won’t do what needs to be done.
The two main fears that you will face on your wealth journey are the fear of failure and the fear of success.
The fear of failure can absolutely paralyse. Deal with it by understanding that there is only one kind of failure and that is the failure to participate. If you are out there doing what you need to do to get whatever it is that you want, it doesn’t matter how many times you get a ‘no’ or a result that is not what you expected. Anthony Robbins says, ‘There are no failures, only outcomes’. Look at this fear coldly and analytically. If you completely screw up and lose everything, will you go to gaol? Probably not. If you started from nothing, what have you really lost?
The fear of success can be even more devastating than the fear of failure. What if you are out there hunting down great deals, making money and living the life of your dreams? All of a sudden, you are not meeting the expectations of others and you are no longer ‘normal’ – if normal means arriving at retirement at age 65 broke and on a pension, then I choose not to be normal.
You cannot deal with any kind of fear by running from it, ignoring it or trying to rationalise it away. You must confront it head-on. Break down your fear piece-by-piece and deal with it one chunk at a time.
Apart from real estate, are there any other asset classes that you invest in?
In my early twenties all I ever thought about was property and I probably had about 95% of my net wealth stored there. I didn’t know much about shares or business, so to me they were too risky.
After having learnt that property can go down as well as up, I learnt about the benefits of spreading my investments across different asset classes. I also learnt that while property is strong, it does have its weaknesses that shares can make up for. If you take a look at the BRW Rich List you’ll find that there are many people who have made significant wealth through their own businesses or by acquiring a large amount of stock in other companies. I now invest about 50% of my total wealth in real estate, 30% in businesses (including what I do at Aspire) and short term property investments through developing and refurbishing. The final 20% is held in cash, shares and options, which are fairly liquid and the options generate significant income each month. This spread is ideal for me at this time in my life. Yours will vary dramatically according to your individual risk profile, age and of course, what you like to put your money into.
“The future belongs to those who see the possibilities before they become obvious.”
Are there any significant quotes that you live your life by?
There are many, in fact I could probably fill a book with them. I spend a great deal of time soaking up all the wisdom I can from people like Jim Rohn and Anthony Robbins. I read extensively and often copy down sayings that catch my attention. Often I find that a saying might not mean much to me until I am ready and open to understanding the message within the words, so having them recorded means I can go back and review them when I am looking for inspiration.
One of the quotes I like is made up from other speakers, with a little of my own wisdom added in, ‘Life is what you make it, never miss anything. It is in your dreams that your life begins’. This quote is all about being responsible for your life, learning from the past, living in the now and planning for the future.
What do you see as the major investment opportunities over the next ten to twenty years?
It’s my opinion that we will see some dramatic changes in demographics in the coming years. Smaller household sizes will mean that people want fewer bedrooms and larger living areas. There will be high demand for well-located property (near lifestyle and entertainment facilities) on smaller, low-maintenance blocks. I’ve seen a continuing trend back to inner city living by people who are selling their homes in the suburbs and choosing to be where the action is, in a secure environment that they can lock up and leave when they go travelling.
On the flip side, there will be another shift from capital cities to coastal towns and centres. This move started 30 years ago on the Gold Coast in Queensland and continues today, particularly along the eastern seaboard of Australia. Prices in those areas will keep moving upward. And it’s not just the retirees making the move; more than 80% of people moving to the coast are under the age of 50. These are people who are more mobile, willing to telecommute and many have been frozen out of the big city home ownership markets.
Security will be another big issue and I see the coming of planned estates that are walled with entry gates and 24-hour security. You’ll need a pass to get in and out of these places and I guarantee that demand for these ‘safe’ suburbs will be high.
One of my favourite sayings is, ‘The future belongs to those who see the possibilities before they become obvious’. I have just given you a look at future trends that will richly reward those who supply the market. What will you do with this information?
What are some of your plans or goals for the next five years?
From a business perspective my company, Aspire Organisation, successfully operates in investment education – we have books, CDs and various home-study packs offering different levels of property investment learning. We also conduct seminars nationally, empowering thousands with the knowledge and belief to make sound investing decisions. Our property, mortgage broking, wealth planning and wealth coaching services are changing lives across Australia. And we have exciting plans backed by an extraordinary business culture that allow us to inspire and empower people on a global scale.
On a personal level, I plan to release more books, continue to speak nationally and internationally, become involved in more property developments, and spend time travelling the world with my partner. I want to continue to contribute in a way that makes a massive difference.
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Michael Yardney
Boom Or Slump
“Most developers I come across have the wrong mind-set... They buy, add value and sell – killing the goose that lays the golden egg. When you sell, someone else now owns the property and gets all the benefit of the long-term capital gain. My suggested strategy is to buy, add value and refinance.”
Profile
Michael Yardney
Michael Yardney was born in Haifa, Israel, in 1952 and came to Australia in 1956 as the son of working-class parents. From a young age Michael decided that he wanted to avoid financial struggles in his own future by becoming wealthy. He began studying wealthy people and soon learnt that property investing was the ideal means through which to achieve his goals. At the age of twenty, he borrowed $2,000 from the bank and bought his first investment property for $18,000.
Over the years Michael built a multimillion-dollar property portfolio, while working a full-time job and fathering four children. He began by investing in residential and commercial properties and in the 1980s became involved in property renovation and development.
He is the founder of the Metropole Group of Companies, which is considered one of Melbourne’s leading independent property consultancies. Over the years the team at Metropole has bought, sold, advised on, invested in, built and project managed hundreds of millions of dollars worth of property, creating wealth for their clients.
Michael publishes Australia’s leading investment property e-magazine, Property Investment Update and is the author of the best-selling book, How to Grow a Multi-Million Dollar Property Portfolio – in your spare time. He is a sought-after speaker at property conferences in Australia and South East Asia and as a property commentator his opinions are often printed in publications such as The Bulletin, Money, Australian Property Investor, Wealth Creator, The Age and The Australian.
Michael lives in Brighton East, Melbourne, with his wife Pamela, who is also a partner in Metropole Properties. On the weekends they share their time with Michael’s four children, Pam’s two children and their grandchildren.
When he is not travelling around the country presenting at seminars, Michael enjoys spending his time watching movies, reading and writing.