podcast

4 properties by 24 – how to build a portfolio without sacrificing fun, travel or food

By Vivienne Kelly
Mitchell Shad on The Smart Property Investment Show
148

Sick of stories of successful young investors who only made it by living at home, never travelling or only eating tinned tuna for four years? This investor reveals how he’s building up wealth through property whilst not missing out on life’s luxuries.

Mitchell Shad hasn’t even hit a quarter of a century yet, but he’s amassed a four-property portfolio.

How did he do it? What strategy did he use? Where did he buy, and why? Is he really having his cake and eating it too? What can investors of all ages learn from Mitchell's successes? 

All these questions and many more – including whether or not he plans on “being minted” – are answered on this episode of The Smart Property Investment Show.

Make sure you never miss an episode by subscribing to us now on iTunes.

 

Transcript 

Introduction: Welcome to the Smart Property Investment Show with your host Phil Tarrant.

Phil Tarrant: Good day, Phil Tarrant, here, editor of Small Property Investment. Thanks for tuning in to the show. I'm joined by my regular co-host, Vivienne Kelly. Viv, how you going?

Vivienne Kelly: I'm good, thanks, Phil. How are you?

Phil Tarrant: I’m not too bad at all. We did a podcast recently when we were chatting with a young Gen Y-er, a Millennial, or I don't know what you would call them.

Vivienne Kelly: Gen-Y will do.

Phil Tarrant: We'll stick with Gen-Y. Stephanie is a really good, ambitious, impressive young lady who is investing in properties. She's got how many properties, Viv?

Vivienne Kelly: She's got seven at the moment. She's twenty-five. I think she's twenty-six in a matter of days.

Phil Tarrant: Twenty-six.

Vivienne Kelly: She wants to get 22 properties before she hits the big 3-0, so she's definitely going to have to ramp up her rate of acquisition over the next few years.

Phil Tarrant: It's funny. In that podcast, we had quite an interesting discussion around some of the challenges, some of the trials and tribulations of Gen-Ys in today's modern market and even yesterday, I was watching the television and this debate is sort of ongoing and I'm reading stuff in the papers now saying that, most Gen-Ys will never own property or you need save up for 10 years now in order to get enough for a deposit to be a property owner.

Vivienne Kelly: Yes, I think the Gen-Y debate may be the new negative gearing debate. Maybe it's just never going to go away. I think there are very strong arguments on both sides. Stephanie’s obviously proving that it is possible, but I don't think that that means that there are no issues surrounding Generation Y and the property ladder.

Phil Tarrant: Yes, I think it's all about affordability and it’s also, I think it's a lot about education and I think a lot of Gen-Ys ... I feel the Gen-Y pain. I'm a Gen-Xer, but I sort of get the challenges, to actually get into property considering wage growth versus property growth. It's quite disparate right now and you need to be saving for quite some time, but that said, anyone can get into property, I believe, as long as you can highlight to a bank, that you have serviceability, you earn enough income, you can service a mortgage. It doesn't matter who you are. Whether you're a 21-year-old or a 61-year-old, you can get into property and you can do that, Viv, by thinking about things a little bit differently.

A lot of Gen-Ys think property investment is owning a million-dollar property five kilometres from the CBD and yes, that's probably not going to happen. I think a lot of Gen-Y’s problem is they think their first home is going to be their ideal home or their dream home and I think it's about setting expectations and understanding what your goals are.

With that as a basic preamble, I guess today, Mitchell Shad, we’ve asked him in. He's a young bloke, he's 24-years- old and he's a guy who I think is representative of opportunities for Gen-Ys today. Fair call?

Vivienne Kelly: Yes, definitely. I mean, Mitchell, as you said, he's 24. He's got four properties and he's doing that term that's becoming more and more prevalent which is rent-vesting, so he obviously can afford property, but maybe not where he wants to live, so he's renting where he wants to live, but starting to build up that wealth through property and get on the property ladder by buying elsewhere. So he's a great example of that alternative strategy of getting started.

Phil Tarrant: It is. Well, let's ask him some questions. Mitchell, how you going, mate?

Mitchell Shad: Good, Phil. How are you?

Phil Tarrant: All right. Are you okay with Mitch?

Mitchell Shad: That's fine.

Phil Tarrant: Good, ‘cause I always shorten things. Thanks for coming in. You just heard what we're chatting about with Gen-Ys and stuff. You probably hear it all, yourselves. How many of your ... You're twenty-four years old, right? A young bloke. How many of your mates own four properties?

Mitchell Shad: None. It's a big argument that comes around even in social settings for us at the moment, too. Because there's a lot in the media about it and how it's becoming impossible for younger people to buy property, but I think you hit the nail on the head before when you mentioned everyone sort of sees property as buying that home to live in, that the million-home within the CBD range. If you look and take it from a long-term point of view, there's easy ways to get in the market. First of all, just get your foot in the door and work up from there.

Phil Tarrant: You work in finance, right? You're a mortgage broker?

Mitchell Shad: Yes. That's right.

Phil Tarrant: How long you been doing that for?

Mitchell Shad: About three years.

Phil Tarrant: Okay. Do you have a university degree? Did you go to uni or anything?

Mitchell Shad: Yes, Bachelor of Commerce.

Phil Tarrant: Formal education, Bachelor of Commerce, and then become a mortgage broker?

Mitchell Shad: Yes.

Phil Tarrant: Cool. You see a lot of people and you see how they are creating wealth through property, so you get a bit of inside view on the benefits of investing in property. We talk about why invest in property a lot on the show. I guess we could start with that. What's your goals in investing in property?

Mitchell Shad: It's all about, obviously, security in the future. I think it's quite obvious that property is a long-term game. You're not going to get in and out of property in a year or so and make millions of dollars. It's not the way it works. I see it is a conservative way to do it, but a more sure way to build wealth as well.

You look at the history of property growth and property prices and in every area, as long as you're investing with the key principles in terms of schools, education, jobs and you know what you're doing there, I think there's always a good opportunity for growth in a property. It just depends on how long you're willing to wait and how long you're willing to see it out. But I think it's a good entry point to get in and there's not a huge down payment to get into property. I think, obviously, if we're looking at expensive properties, there is, but if you're looking at sort of the lighter market, it's not. I think over the long-term, there's a lot of wealth to be built, so I think it's a great way to do it.

Phil Tarrant: So for you, it's wealth creation. Is what you're playing?

Mitchell Shad: Yes.

Phil Tarrant: Okay, so you're thinking about your retirement now at 24?

Mitchell Shad: Absolutely, yes.

Phil Tarrant: Okay. Going back to my original question, are you mates thinking about retirement?

Mitchell Shad: I dare say not.

Phil Tarrant: What makes you different?

Mitchell Shad: I've come from a very financial family. My Dad was an accountant. My brother did the same degree as me. It's just always been in the back of my head and doing the degree and just always having that brain on me, it's just always been a thing.

I've looked to the future, I've lived for tomorrow which I think is massively important and I don't know whether the other guys that are around my age have that same upbringing or that same sort of ideas in the back of their head. I think a lot of them are thinking about travel and different things, enjoying life, not working too hard, but at the day, I can do that in sort of 10, 20 years’ time, once I've worked hard now.

Vivienne Kelly: Speaking of enjoying life, Mitchell, this is a discussion that we had with Stephanie back on Episode 43 towards the end of September. You said that you're living for tomorrow. Do you think that you'll come to regret that later? Do you feel like you're missing out on anything? What have you sacrificed and how do you think that sort of plays off in terms of sacrificing something today for a better tomorrow?

Mitchell Shad: Yes, it's always in the back of my head and a lot of people do ask me that. End of the day, I've been to the US for six weeks. I've been to a lot of different countries around the world for different holidays. Working full-time doesn't stop me from doing that. In fact, working full-time and investing and having a bit of money allows me to do it better even now. I'm just not able to go do that six, 12-month trip overseas and backpack around the world which, yes, is a sacrifice, but I don't see it as a massive sacrifice.

I think my enjoyment in life comes from knowing that my future is going to be secured and those sort of trips that the three- or four-week trips I can have every now and then will let me experience the world as well. I see it as a sacrifice, but it's definitely a sacrifice I'm willing to make.

Vivienne Kelly: You're just not eating tuna out of a can on the floor with no furniture?

Mitchell Shad: No, not at all. Not at all. I’ve probably made it sound a bit bad. Not that at all. The questions I get are more about how I can't go and do a year abroad or I'm locked into a job, locked into these properties. I can't just get up and leave my job – which I don't think is really what anyone should be thinking about or considering doing anyway. It's just more of a sensible way to enjoy myself now and absolutely, there's no sacrifices from a general wellbeing point of view. It's not like that at all. Generally, properties, good properties will cover themselves. It’s more just about getting that foot in the door.

Phil Tarrant: So it sounds like you’re having your cake and eating it too right?

Mitchell Shad: Ideally, yea. Absolutely.

Phil Tarrant: Do you want to be absolutely minted? Is that the goal?

Mitchell Shad: I think the first goal is to sort of be secure and have my family accounted for and have enough money not to be worrying about where the next pay cheque is going to come from. Yes, there's always in the back of my mind, as well, there's always that push to really want to have it all and be able to put some money into things I know are good things and put money into things I know will grow as well in terms of businesses and things, but to do that and have a base to do that I need to have obviously built that up. Yes, it's not the primary goal, but definitely one of them.

Phil Tarrant: If you do everything right along the way, that's probably the result of it?

Mitchell Shad: Yes. That's right.

Phil Tarrant: Do you have an actual, tangible goal though? Do you have someone that says, by the age of 30, I want this many properties worth this much money or by 40, I want this? Have you sort of written that down or have you thought about that?

Mitchell Shad: Yes, I have. There was actually an article done in the AFR a couple years ago and it was, 'Ten Properties by Thirty,' which obviously, is on track at the moment, but as I go along obviously things keep coming up and there's expenses that come along with property that you need to take into account. That's why the way you invest and what you invest in is very important to getting to a goal like that.

Phil Tarrant: Okay. Let's have a chat about that because our listeners really love hearing about the makeup of people's portfolios. You've got four properties.

Mitchell Shad: Yes.

Phil Tarrant: Let's run through them really quickly. What's the first one? Where's it at?

Mitchell Shad: The first one's in Riverwood, just down south-west of Sydney.

Phil Tarrant: Okay, Riverwood. What'd you buy it for?

Mitchell Shad: I bought it for $650,000.

Phil Tarrant: $650,000.

Mitchell Shad: Yes.

Phil Tarrant: That was your first property?

Mitchell Shad: Yes, that was with my sister though, so jointly.

Phil Tarrant: So, jointly. What's it worth now?

Mitchell Shad: It's worth about $940,000 now. That was the last valuation done.

Phil Tarrant: $940,000 When did you buy it at $650,000?

Mitchell Shad: That was 2011, I think.

Phil Tarrant: Okay.

Mitchell Shad: Or 2012 maybe.

Phil Tarrant: Okay. You’ve done well out of that. At $650,000, property in Riverwood, is that sort of near the train station? A newer-type of build-type place?

Mitchell Shad: Yes, it was a new-ish. I think about 10-years’ old.

Phil Tarrant: Yes.

Mitchell Shad: It was a townhouse.

Phil Tarrant: Yes.

Mitchell Shad: Yes. It's about a five-minute walk from the train station.

Phil Tarrant: Yes.

Mitchell Shad: School's very close by as well as the supermarket close by. It ticked all the boxes.

Phil Tarrant: Second property?

Mitchell Shad: Second property is up in Townsville.

Phil Tarrant: Okay.

Mitchell Shad: In north Queensland. That was only about $250,000 and I bought that through a property agent.

Phil Tarrant: Okay.

Mitchell Shad: It's a townhouse, as well, two-bed townhouse which obviously, you think of a two-bed townhouse in Sydney and you won’t get it for anywhere near $250,000. So that's been a bit flat. I only bought that about two or three years ago now. It’s been a bit flat but I expect it will hit its straps in the next few years.

Phil Tarrant: What's sort of valuation would you get on it now?

Mitchell Shad: I would leave it at $250,000.

Phil Tarrant: You’d leave it at $250,000? Okay. I like that. Realistic. That's good. The third property you bought?

Mitchell Shad: That's in Windsor, just outside Brisbane.

Phil Tarrant: Okay.

Mitchell Shad: That was bought for $325,000.

Phil Tarrant: Yes.

Mitchell Shad: It's worth about $360,000 now.

Phil Tarrant: Okay.

Mitchell Shad: It's a little two-bed apartment.

Phil Tarrant: You've been on that for a year or so?

Mitchell Shad: Yes, I bought that last April.

Phil Tarrant: Okay. Year and a bit. Your most recent purchase?

Mitchell Shad: Actually, was about three weeks ago. It was in Penshurst down in south of Sydney, again.

Phil Tarrant: Okay. It's not far from Riverwood, really?

Mitchell Shad: That's right, yes. That was $571,000 for a two-bed apartment.

Phil Tarrant: You sort of bought that at market value or did you get a good deal on it?

Mitchell Shad: No, I think I got a good deal. Actually, there was an agreed price for $591,000 a few weeks before I actually came in and bought it.

Phil Tarrant: Okay.

Mitchell Shad: Something happened with the finance and with moving out. There was something to do with the owner didn't want to move out at the time the buyer wanted to move in, so that actually fell through and the agent told me that and showed me that and I had negotiated down to $571,000 knowing that. Got a lot of potential to develop as well, a lot of internal renovation that can be done. Very, very simple things that will really drive it up.

Phil Tarrant: So you reckon the val’s around $590,000?

Mitchell Shad: Yes, I think it would. That was an automated valuation done at $591,000 on that one.

Phil Tarrant: Okay, that's pretty good. You have a bit of equity in your portfolio already?

Mitchell Shad: Yes.

Phil Tarrant: You've got sort of between $300,000 and $400,000?

Mitchell Shad: Riverwood was actually my little cash cow, so I used that to buy the last three.

Phil Tarrant: Okay, so you pulled equity out of that?

Mitchell Shad: Pulled equity out, yep.

Phil Tarrant: What's your sort of portfolio LVR now, do you reckon?

Mitchell Shad: It'd be about 85% at the moment.

Phil Tarrant: 85%, so for our listeners, LVR, if you're not familiar with the term, it means loan-to-value ratio. That is the size of the debt versus of the value of the asset, so 85%, some people would say it was sort of on the high side. Some people would say you're very risk averse – some people think it should be at 95%, so it's all about where you sit. My portfolio sits about 65%, 67%, but it sort of fluctuates depending if I'm pulling equity out. It can go up and down and stuff like that.

So you’ve gone New South Wales, so Riverwood, so southwest Sydney. Townsville, up in Queensland. Windsor in Brissy and then back to Sydney. So your most recent one in Sydney. Why did you invest in these particular properties? In these areas?

Mitchell Shad: The Townsville one it was bought reasonably soon after the Riverwood one, so I just wanted to get in again and I really wanted to diversify.

Phil Tarrant: Yes.

Mitchell Shad: Obviously, the right property works, markets can go out at different times and there was a lot of talk about Sydney being at its top, being at its peak and people have been talking about that for a few years now. What to believe and what not to believe, but I always wanted to be smart about it and make sure I wasn’t putting all of my eggs in one basket. So, north Queensland and also, Brisbane itself, I'd heard and I'd read a lot about that being the next place to move. So, waiting for that to happen.

Phil Tarrant: Okay. Have you located those properties yourself? You said that the Townsville place you found via an agent.

Mitchell Shad: Yes, that was through a buyer's agent. That Windsor place was by myself and Penshurst was by myself.

Phil Tarrant: Penshurst by yourself. How did you go about identifying these properties? Talk us through the cycle of going, "Okay, I'm ready to buy again." What did you do from that point?

Mitchell Shad: The first part was, it's just Domain. It's as simple as going on Domain and searching for the sort of price range I'm looking at in the vague area that I'm looking to buy in. Once a property comes up in a particular suburb, I'd then go and research that suburb directly. At work, being a broker at Smartmove, we've got access to RP Data reports. We've got access to a lot of research about these different areas, so I look at the median prices in the area. I look at what's in the area. I look at the schools, the supermarkets, the jobs, the education, everything that's there. There's about four or five different boxes I like to tick. I think that's the potential, that's the growth, that's where it's going to come from if people are able to live there and are able to survive there and work there and I think there's always going to be demand for those properties and that's obviously going to drive the price.

Vivienne Kelly: Mitchell, I think it's interesting with the Penshurst property that you sort of got at $571,000, when originally it had been almost sold for $590,000 – and you mentioned that was kind of because you became aware of things falling apart and you could meet what the vendor wanted more easily than the other prospective buyer.

What would your advice to other investors be to sort of capitalise on those deals? Because often you can get properties a bit cheaper if you do meet them halfway with contract terms or with settlement terms or whatever. That can be where you can really save money, but not all people know how to find those deals and get in there.

Mitchell Shad: Yes. Look, it's really important to see, to know, to understand the vendor's position. The vendor in this case needed to sell because they needed to move into another property and settle another property and that's a massive one. If the vendor is in a position where they have to sell and the buyers there a little few and far between, then you've got the power in that negotiation which is really, really important. How you know that, I guess, is talking to agent, looking at reports of when the property was bought. Little things like that can help you know that – I feel that knowing that’s a goldmine. Knowing there's a timeline on the other end. Having the power in negotiations is always what you're kind of looking for. And at the end of the day, you just need to think about it from the vendor's point of view. If you can pick it up for $10,000 or $15,000 cheaper – for them to avoid all the stress of having to worry about not making a settlement or having to worry about not selling the property at all.

As much as a vendor can plan on a buyer's emotions, I think the buyer can play on the vendor's emotions at the same time in that way and it's just all about their situation. It’s a bit harder when they're not forced to sell, they're not in a hurry to sell, but I think in that situation, it’s really, really where some money can be made.

Vivienne Kelly: Phil, you've had that before, haven't you? Where you've negotiated on contracts and settlement terms to sort make sure that you're the buyer that gets across the line?

Phil Tarrant: Yes, absolutely. I use a really good buyer's agent, the guys at Right Property and they do a lot of this work for me, but when you're negotiating for property, you can arm yourself with so many different things that you can negotiate on.

Obviously, you start with the price and then once you get to a price, you'll get to a point where neither people move either way. Then you can start negotiating on other terms associated, whether it's if you can offer a delayed settlement or quicker settlement that might be something you can negotiate on. You can negotiate on early access.

You can negotiate on a lot of things, so I think don’t context any negotiation or frame any negotiation on ‘I have to haggle on price’. If you can be flexible in other ways, you can often get a lower price, but you can still meet the needs of the vendor, so be smart about it. That's really good.

You're a PAYG employee, right? You get a payslip and a salary a month, right?

Mitchell Shad: Yes.

Phil Tarrant: Do you do your own mortgages?

Mitchell Shad: Yes.

Phil Tarrant: Are the all with the same lender or did you mix them up?

Mitchell Shad: Yes, all with CBA.

Phil Tarrant: Okay, you did it with CBA? With CBA, you can get up to about a million bucks for those guys in debt before it starts getting harder.

Mitchell Shad: Yes.

Phil Tarrant: Was that one of the reasons why you thought ‘I'll go with CBA and put most of it in there’? Or was there any particular reason why you chose that lender?

Mitchell Shad: Well, I worked for CBA before I was a broker. I know that shouldn't matter, but it does because I know the systems very well. I know the products really well and for me, the rate although important, is not the first and foremost what I look for.

Phil Tarrant: Yes.

Mitchell Shad: Knowing how I can change to interest-only very quickly or knowing how I can manage offset accounts and different things is really important to me. The CBA also know all my financials. They've got my salary coming into their accounts and they've got all my loans sitting on record, whereas other lenders can put emphasis on existing debts that aren't with them. They can add buffers to the repayments which reduce what you can borrow. Little things like that – where I thought CBA had everything there, it was just much easier to go through and get things done quickly and that's what I needed. I think like both of you were saying, when you're in a position where you're negotiating on a property, having something ready to go and being able to make an offer and a serious offer very quickly can win you that property in a lot of situations.

Phil Tarrant: Yes, that's a good point. You've chosen CBA and it could be any lender, but because you've probably banked with CBA for quite some time, they have all your records of the inflows and outflows of cash in and out of your account. It's got to make their assessment, the serviceability assessment of you a lot easier.

Do you think there's anything else as a young bloke or as a young girl, how do you paint the best picture of yourself to a potential lender, so they'll give you the first mortgage, but then go on and give you three more? Is there any tips you've got in that regard?

Mitchell Shad: Absolutely. I mean, unsecured debt is a real loser in terms of painting a good picture of yourself to a lender. Someone who's seen to have not a lot of saving, but a lot of credit card or a lot of personal loan debt, automatically, lenders aren't silly – they're looking at that and thinking, "Well, hang on. How is this person going to afford a property if they've got all this debt and they're not able to save any money?" That's a massive thing. I don't have any credit cards which is a big thing and I've got all savings. I don't have any personal loans. I don't want to ever get in that situation again. I mean, everyone can have a basic credit card and I'm not talking credit card with a $10,000 limit with nothing owing. I'm talking about credit cards maxed out with missed payments and personal loans with big balances on them with several different lenders. It can just paint a really bad picture, which is the opposite of what you want. Just having that cash savings. Showing that you've got the ability to save even if you're a showing a regular debit from your account, labelled ‘savings’ which goes to a separate account. You can show them that account that says it's savings.

I think that's a massive thing, especially for a younger person because a big worry with the lenders with someone who might be 18 or 19 looking to buy their property is how are they going to afford it? Are they going to be relying on Mom and Dad? They're obviously not going to have a huge employment history, so they need to see something else. They need to see something to show motivation to save and to pay a property off.

Phil Tarrant: A lot of those things are universal whether you're young or old, the fact that you've got the same – you want to paint the best picture you possibly can to a lender, so if there's a whole bunch of unsecured debt and car loans and multiple credit cards with multiple lenders and stuff, it doesn't look very good.

Mitchell Shad: Absolutely.

Phil Tarrant: It doesn’t look very good. So, do you think as you keep buying you'll stay with the same lender for as long as you can?

Mitchell Shad: Yes, while they suit what I need to do. There might be a point where affordability gets a bit tight and I'm meant to look elsewhere and that's the advantage of being a broker. I've got that ability to look elsewhere and find a solution.

Phil Tarrant: Yes.

Mitchell Shad: But while they're still able to give me the money I need, I don't see any reason to leave them.

Phil Tarrant: Okay. That's smart.

With the plans of your portfolio moving forward, I don't know how much money you earn, but you're a salaried employee. I imagine the makeup of your income is part commission or bonus?

Mitchell Shad: Yes.

Phil Tarrant: Is it lumpy or is it pretty standard?

Mitchell Shad: It's an upward trajectory when you’re a broker because of the trail side of things.

Phil Tarrant: Okay, that's a good picture for the banks, right?

Mitchell Shad: Great picture, yes.

Phil Tarrant: That's really good. As you grow your portfolio, and the plan is to grow the portfolio, where's the next property do you think?

Mitchell Shad: Well, I've just bought, I think, it'll be next year. I really want to build. I know a lot of aggressive investors will say, "Go to 90 per cent, 90 per cent-plus," but I want to be in a position where I've got a bit of room, I've got a bit of a buffer to move if I need. I can pull out equity as a buffer if I need it, so I prefer to be around that 80 per cent mark if I can, so I'd probably look to wait a year, build up a bit more cash when the commissions start to really come through in potentially mid to late next year.

Phil Tarrant: That's good. Your portfolio as it sits right now gross, before tax, is it positively or negatively geared?

Mitchell Shad: It's about even. I'd say if anything, negatively geared.

Phil Tarrant: Okay.

Mitchell Shad: There's a little bit of a loss coming through which is a good thing. It's not a bad thing and it allows me to keep my cash on the side and go and rent somewhere, so I think it's a good thing that it is negatively geared.

Phil Tarrant: Yes, with the effect of once your accountant gets hold of everything and does everything, you're going to get some tax benefit out of it come tax time, right? Negative gearing?

Mitchell Shad: Absolutely, yes.

Phil Tarrant: The point there is to have a good accountant. Does your Dad do your accounts?

Mitchell Shad: He does.

Phil Tarrant: I thought you were going to say that.

Vivienne Kelly: Mitchell, you've painted a pretty positive picture so far, but has anything gone wrong along the way? Any sort of nightmare stories or anything that you've maybe done wrong or any opportunities that you've missed?

Mitchell Shad: You look back at properties you've bought and you think maybe if I had bought in a different area, I could have done a bit better on this one and there is some very stagnant, a couple of stagnant properties. One of them in particular up in Townsville has been a bit stagnant lately. It affects you in the back of your mind, but that's the whole point of diversification. You're not going to have every property in your portfolio moving up at the same time, so it's really important to keep that focus and to keep that calmness about you when that does happen because it's not a loss until you liquidate the property, until you sell it. In terms of nightmare stories, not so far and I hope it really stays that way, but expecting and I'm ready for it if it does happen. That's the nature of investing and it can happen, but if you invest well it minimises that risk.

Vivienne Kelly: And you've had stable tenants? No really long vacancies or anything like that?

Mitchell Shad: Absolutely. That comes down to those key drivers I was talking about with employment and schools and shops. A tenant's going to be happy there. If I'm happy to live there, a tenant would be as well, so they've all been rented pretty well the whole time.

Phil Tarrant: You have a property manager look after all your stuff?

Mitchell Shad: All of them.

Phil Tarrant: All of them. Why do you do that?

Mitchell Shad: To be honest, with work, work's pretty full on and I just don't want to have that hassle. Again, it's for me, it’s a tax deduction anyway, so that property management fee comes out and it's all tax-deductible, so you get a bit back and for the time I could spend writing one or two more loans, it covers that anyway, so I feel like it's not worth the hassle and the stress.

Phil Tarrant: I'm the same, yes. All that hassle. I don't have the time and inclination. I don't want to fix people's washers or chase rents or whatever. My time's better spent. It's $20 an hour jobs that you shouldn't be doing. You should be doing the high value stuff.

So if we go back in time and catch yourself at 2011 when you started investing, what would you say to yourself that, do this differently with all your years of experience now?

Mitchell Shad: I'd probably say to myself just to make sure you're looking at everything really properly. I think the first couple, I may have just jumped in maybe a little too early, a little bit earlier than I should have.

Phil Tarrant: Yes.

Mitchell Shad: I'd always say make sure you do your research and you know what you're signing up for, you know what you're getting into because a bad decision can affect your ability to keep going as well. Not saying that any of gone too bad just yet, but I'd always make sure that I'm doing my own research not listening to anyone in particular. Doing your own research and being comfortable within yourself.

Phil Tarrant: That's good. We're running out of time, Viv.

Vivienne Kelly: We always are, Phil.

Phil Tarrant: Absolutely. Normally, I'd sort of give my synopsis on the chat and say ‘This is what I've taken out of it’. I just got all this information, here's the key points that I've got from it. I think you should do it, Viv, because you're a Gen-Yer. You guys are a similar age and similar situation, so, if you were sitting at home and if you were thinking about getting property, irrespective of age, what would you take from this chat?

Vivienne Kelly: What I like about Mitchell’s story is that he concedes that he has made some sacrifices and is living for tomorrow, but he's not painting a picture of someone who's sitting at home on the floor eating one can of tuna a day and missing out on beers with his mates. He's still getting to go ...

Phil Tarrant: Is that the perception though? Do most Gen-Ys think that it's ... ?

Vivienne Kelly: Well, I don't want to disparage my Generation because I am totally Team Gen Y, but I think the stories of some successful people are, "I didn't travel. I didn't do anything", so it's very easy of us to then be like, "I had a great time in Europe. I don't want to give that back. I don't want to not go out to the pub with everyone. I don't want to not know what the world is like. I don't want to work in a job that I hate." It's very easy to dismiss those successful people and think, "Well, they're having such a boring life and they're definitely going to regret it when they’re 40."

That's what I like about Mitchell, is he's 24, he's got four properties, he's got a good job that he enjoys and that he's succeeding at. He's building a portfolio. He's thinking about retirement, but he's still going traveling. He still can take breaks. He still can go to the pub with his mates. He's not going without and I think that that's the most important thing here is he's planning for tomorrow, but living for today and for tomorrow and I think that that's really great and probably a bit more appealing than tuna and pineapple slices or whatever it may be.

Phil Tarrant: Do you reckon any sort of Gen-Yer – you probably see people as a mortgage broker that come in earning $40,000 a year, right? $45,000? Who are looking to invest in property, right? If someone rocks up and they've been in a job for a couple years and they say, "I want to get a mortgage. I want to buy an investment property. I'm happy to live at home with my Mom and Dad on a $45,000, $50,000 salary." You can typically make it work, can't you?

Mitchell Shad: Absolutely, you can.

Phil Tarrant: Everyone can do this.

Mitchell Shad: Everyone can do it. The deposit I think for the first ones is the harder part. The affordability, because we've got so much access to different banks, we've got the ability to find that solution. But I think having that money to start with is probably where a lot of people fall, but I think that just comes down to where your entry point in the market is. You don't have to go and buy a million-dollar property first up. You can look at $200,000 or $250,000 but just look for something smart and hopefully that will move for you a little bit and you can run from there.

Phil Tarrant: It's about not building up massive credit card debt, massive personal loan debt. If you've got that driving it down, so you can get to a point where you can start saving money so you can get into it. It's about saving, Viv.

Mitchell Shad: Absolutely.

Vivienne Kelly: It is. Or asking for a pay rise, Phil.

Phil Tarrant: Yes. Absolutely. If you want to start investing in property, tap up your boss for a pay rise. Just do it the right way.

Cool. Anything else?

Vivienne Kelly: No, I think that was the main takeaway. I mean, one of Mitchell’s properties, he got for $250,000, so look, the deposit for that wouldn't have been massive by any means compared to some sort of Sydney property prices at the moment, so again, it's about broadening your horizons and not just looking at inner-city Sydney and thinking, "Oh, that's out of my price range, therefore I'm out of the game." Australia is a massive, massive country. There's lots of places to buy.

Phil Tarrant: There is and your first home isn't your dream home.

Vivienne Kelly: It's not your forever home.

Phil Tarrant: Your forever home. That’s the word I’m looking for. My first property was $190,000 or something like that. Financed it at 90 per cent. Cost me $20,000 and I had a property with deposits and all this sort of stuff.

Vivienne Kelly: Good chat.

Phil Tarrant: Yes. Look, mate, keep in touch. Let us know how you're going.

Mitchell Shad: Thanks for having me in, Phil. Appreciate it.

Phil Tarrant: Obviously, you'd advocate for having a mortgage broker?

Mitchell Shad: Absolutely.

Vivienne Kelly: You'd hope so.

Phil Tarrant: You'd think so, wouldn't you? If our listeners, irrespective of whether they’re a Gen-Y or a Gen-Xer or whoever, they're looking to buying property, how would you go out and find a good mortgage broker? What would be your first step? Your first tip to do that?

Mitchell Shad: I think speaking to family and friends is a massive one. Everyone's bought a property. A lot of people have used mortgage brokers. Speaking to someone that they trust is a massive thing. That's how we work at Smartmove. We don't advertise. It's all family and friends and all word of mouth, so we can have that personal touch.

A mortgage broker at the end of the day is going to find you a solution where a bank directly may not be able to do, and there's no cost to go to a mortgage broker. There's no downside, I don't feel.

Yes, just someone you trust is really important though. Someone you can really speak to and get the best out of and that's how we try to look at it Smartmove. It's really about the client and putting them first and getting the solution for them.

Phil Tarrant: Cool. Good. Alright. Thanks for coming in.

Mitchell Shad: Thanks, Phil.

Phil Tarrant: See you soon. Viv.

Vivienne Kelly: Thanks, Phil.

Phil Tarrant: Remember to check us out: smartpropertyinvestment.com.au. We're on all the social stuff, Facebook, Twitter. You can follow me on Twitter @PhillipTarrant. If you've got any questions for us, and please do send them in, we've been getting heaps of them and we will answer them: [email protected]. Is there anything else I missed, Viv?

Vivienne Kelly: No, they can also e-mail us if they want to come on the show because as much as we do get an inbox full of questions, not always an inbox of people putting themselves forward to come on the show, so if you're interested in coming in and having a chat just let us know.

Phil Tarrant: It's pretty easy, right, Mitch?

Mitchell Shad: Yes, absolutely. Very comfortable in here.

Phil Tarrant: Thanks for tuning in everyone. We'll see you next week. Bye.

 

Listen to other instalments of The Smart Property Investment Show:
Episode 52: Will property prices fall? When? And by how much? What investors need to know
Episode 51: SPECIAL EPISODE: SPI team reveals all the financial details of its portfolio
Episode 50: 8 properties by 25: Former housing commission kid reveals how he changed his life and created wealth
Episode 49: How to build a sophisticated multi-property portfolio
Episode 48: ‘From just $2,000 in my pocket to 6 properties’
Episode 47: The SPI Show answers more listener questions: Special episode
Episode 45: Special guest Mark Bouris on what really makes property prices rise and when to invest
Episode 44: ‘11 properties by 31, now I’m stuck: What’s next?’
Episode 43: 22 properties by 30: Can Generation Ys build massive portfolios?
Episode 42: SPECIAL EPISODE: All your burning property investment questions answered
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