The Truly Exotic Interview

Interview with Truly Exotic
October 2012

1. How did you get involved in property?
 Ok! Promise you won’t laugh…………….I attended one of Henry Kaye’s property investment seminars in the early 2000s!!!! That was my first exposure to property. I ended up paying the course over 2-3 years in installments. However, it truly inspired me despite all the negative publicity surrounding them, as a result I had property in the back of my mind even when I was doing non property related jobs

2. What is your property investment philosophy/strategy (CF, CG, renos, houses, flats, buy and hold, develop, flip, wrap, etc)?
 I believe everyone’s strategy should change with time and circumstances. Strategies should be updated and modified to suit your lifestyle, goals and inspirations. At present my strategy is a combination of CG, Joint Ventures and development . Im not too keen on flipping as its very expensive, if the figures stack up, then its great but lining the pockets of the agent/government while you do the hard work doesn’t really appeal to me!

3. What is your IP / property story so far?
 It took me literally years to buy my first IP. My first mistake was to listen to my mother who said the market was going crash by 40% very soon. Over 10 years later and she is still saying it. Putting that aside my first attempt at an IP I got gazumped by an overambitious agent which was a blessing in disguise as I put those funds into a business, which gave me better returns and far more learning…..and stress. I was literally telling my family and friends while popping open the champagne when the agent called me with the bad news!
 After I regained my shattered confidence and with the support of my friends (especially a few Somersoft friends, some of which I’ve never met or even spoken to), I have managed to purchase multiple IPs per year on average at a steady rate. As my knowledge and experience has increased, I have often been purchasing unseen in other states and have a good relationship with many agents around the country. My recent ventures have seen me get involved in renovations, joint ventures and development, with hopefully more to come!

4. Is there a story of a really good IP that you would be prepared to share with us?
 They have all been pretty good, I have enjoyed all of them and have learnt something new each time. I guess the one that I missed out on the first time which was a blessing in disguise

5. Is there a story of a really bad (or not so good) IP that you would be prepared to share with us?
 Are you ready!
There was one transaction which the following occurred
- Unsatisfactory Valuation x 2, therefore finance refusal
- Being unable to settle because the security being used was in the wrong name,
- 6 week delayed settlement with penalty interest
- Bank sending the wrong documents to the wrong state
- Having the copper water pipes stolen a few days before settlement, filing an insurance claim, to have the air conditioner stolen a few days later
- Ordering in a kitchen to have it delivered for pick up, to receive a call a day before saying that it was damaged and they were ordering a new one from overseas, and it would be a 3 month wait, where the nearest other shop was 2 hours drive away
- Building a new concrete floor, attaching it to the drain hole, and to find out that there was no actual pipe being connected to it, and having to destroy the entire base
- Spilling paint in a rental car literally within 5 mins from hiring it from the rental company
- Telling the tradesperson “We are going to dispose of this blind only” to be interpreted as “We are going to dispose of all but THIS blind”. Only 1 hour was required to create havoc
- Falling off the roof and ending up with 2 nails almost stuck in me
- The rest I have removed from my memory

6. Do you invest in other asset classes (shares, commodities, businesses, managed funds, cash, forex, etc)?

 I no longer hold shares due to cashflow requirements, however the past 10 years, has seen me start a few businesses, which is where most of the cash ended up in.

7. What criteria do you use when selecting a property to purchase and/or renovate?
 I aim to select areas with strong key fundamentals. I try and avoid areas that are dependant on single industries or volatile industries. Once I have narrowed the area down, I look at purchasing undervalue or ones that look a lot worse then what they are (eg cosmetic). I always go for below the true median/average of the area. I usually get quite excited if I see a really bad paint job or graffiti on the walls

8. What structure do you use for your investing?
 A combination of trust and companies.

9. What is your strategy to fund your lifestyle in the future (eg Live off Rent, Live off Equity, Live off something else….)?
 My strategy in the future is to build and live off rent with equity as a bonus or supplement

10. If a budding property investor asked "what are the top 5 things I should do", you would say?
1. Mate, get ready for the most interesting ride of your life!!
2. Do not forget your roots. Take a moment every now and again and look yourself in the mirror and ask yourself “Do I like what I see?”
3. Think with your head, not with your heart
4. Always have a backup plan
5. Set yourself a goal or a series of goals. If you don’t make it, then either you didn’t want it hard enough or the goals were unrealistic

11. And if that same budding investor asked "what things should I avoid", you would say?
1. Don’t jump at every deal, you don’t want a good deal, you want the BEST deal for you
2. Even with the best intentions, your family can be very detrimental to your path to success. Avoid accepting every bit of advice from family members, especially your parents……your mother (sorry, got a bit personal)!
3. Avoid asking a person with an agenda what they think eg Asking a used car salesman, “is this a good car?”
4. If it sounds too good to be true, chances are its not. Buyer Beware!
5. Avoid letting your ego into the equation. There is nothing wrong with being wrong or not knowing.

12. And in a slightly different vein - what would you advise the property investor who maybe has a portfolio of properties, but is at a loss as to how to proceed?
 Unless you are related to Donald Trump, I would assume that an investor who has a significant portfolio knows exactly what they are doing and how to proceed.

13. How important is planning to being a successful investor?
 Absolutely imperative. Planning is a major piece of the jigsaw puzzle. Without planning it is almost like going fishing with the wrong type/size of bait/hook. Planning leads to goal setting and assists you in thinking logically and laterally

14. Do you consider that there is any natural progression for an investor? (eg. From owning a few properties, to owning many, to being a developer, joint ventures, commercials)

 Yes of course! I am a firm believer of starting small, that way you minimize risks. I am at a stage where due to time and resource restraints I try and focus on joint ventures and development/renovations. I eventually hope to be able to be doing large scale developments. Obviously every individual’s natural progression path is different.

15. Do you have any thoughts on the CF vs CG debate or on the issue of metro vs regional, units vs houses?
 Ahhh, the neverending debate! Let me just say CG is not guaranteed. I see CG and CF to be a double pronged attack. If you purchase well, then you will see both at some stage. In particular with my joint ventures, I look for both, but as time passes, I will focus further on the CF aspect. I prefer regional areas as it’s what I started off with and what I know best!!!! I am a firm believe of Land Land Land since day 1, however times are changing where many folk are preferring to live, invest and buy in dwellings with minimal yard. The next couple of years should determine which way the trend will go

16. What do you prefer, fixed or floating interest rates and why?
 Fixed interest rates are a little bit of a catch 22. When you feel like rates have hit bottom, fixed rates are often up to 200 base points above the variable rates which seems a bit pointless. As a result I usually keep mine variable especially if I know there is a chance I will refinance or sell.

17. How important in your life is having a partner and other family members who are “into property”?
 Im still looking for that partner who is “into property” but fortunately for myself, my family are not into property or investment significantly, hence they don’t ask too many questions! Ive made mistakes over time and had I had a “into property” family, I may have not made them, but I sure damn will never make the same one again! But having that knowledgeable support network would be a bonus

18. Finally, where do you see the market at the moment and do you think the current environment is making it harder for newer investors than when you started? Your thoughts on the next 1 year, 5 years, 10 years?
 Each state, price range and submarket has their own characteristics however if anybody could predict the future, then they should be buying lotto tickets and telling me what the numbers are! :)
 I don’t believe the current environment is any harder then previous generations to get started. You have to start somewhere whether it is a shack in an area not even on googlemaps or glamouros Bondi in Sydney.
 I can’t nor am going to try to predict the next 1, 5 or 10 years, however in a world with internet, social media, and reality tv shows, the average property investor needs to be far more careful when analyzing individual deals