podcast

How this investor learned from a property blunder

By Tamikah Bretzke
5

On this episode of The Smart Property Investment Show, broker Michael Henry is in the studio to discuss the highs and lows of his investment journey and how he turned a poor property decision into a lesson learned.  

He joins host Phil Tarrant and regular co-host Tim Neary to discuss the importance of researching the market, how to recover from a property blunder and why you don’t need wealth to begin your investment journey.

You'll hear all of this and much, much more on this episode of The Smart Property Investment Show. Tune in now!

 

Full transcript

Phil Tarrant: G'day everyone. I'm Phil Tarrant here – I'm the host of The Smart Property Investment Show. Thanks for tuning in. Joined by my regular co-host Tim Neary. Tim, how you going?

Tim Neary: Good Phil. All good thank you.

Phil Tarrant: Now, it's early ... It's not early anymore, it's middle of January 2017. I didn't really have a break over Christmas so I've been grinding away. I think you sort of had week off.

Tim Neary: I took a weekend. I was away for two weeks, yeah, mate.

Phil Tarrant: Back on deck. This will probably be the first, or maybe the second week, where everyone's back in the office right across the nation. Real estate sales I imagine are starting to pick up a little bit after the Christmas period…

Tim Neary: Getting into that summer season now.

Phil Tarrant: Agents are hustling, looking for listings.

Tim Neary: That's right, yeah.

Phil Tarrant: What are you hearing on the grapevine mate? What's going on in ... For our listeners that don't know, Tim is the editor of Real Estate Business, which is our big platform for real estate agents. He's got his finger on the pulse with the real estate market. What's the buzz around at the moment? Is everyone-

Tim Neary: Mate, what we’re seeing is that the two big issues of 2016 are starting to materialise. 2017, that's the listings issue and the affordability issue. A lot of the agents are getting themselves geared up now for the 2017 season, getting ready for the summer sell. The talk I guess, is around those two issues.

Phil Tarrant: Not enough listings?

Tim Neary: Not enough listings. Listings are down. The affordability issue, housing affordability, particularly in the capitals cities, Sydney and Melbourne, is impacting on people selling, vendors selling their properties. Those are two big issues that are knocking around but the good agents are not getting put off by that.

Phil Tarrant: Yeah. Still doing what they do.

Tim Neary: Still doing what they do.

Phil Tarrant: I guess it's probably an interesting dynamic of our listeners in that there's ... Listings aren't coming onto the market because people don't want to sell. That the reason why?

Tim Neary: That's right, because if they sell and they've got to go somewhere else -

Phil Tarrant: They've got to replace.

Tim Neary: They've got to replace and that's just continually out of reach for them. They're just saying, "Well I'm just going to sit on my hands for a while and not sell and not put my place on the market."

Phil Tarrant: I think also if you look at ... capital city markets but let's take Sydney for example, despite 2016, 2015 they all want everyone talking about a market slowdown, yet Sydney's continued to drive forward, had a great growth over 2016. People are thinking well why do I need to sell? If I've got an asset and I'm in the city market, which I might not be able to get back into if I sell and my property's going up in value, I'll just wait.

Tim Neary: That's it. Yeah. Quite right.

Phil Tarrant: Interesting. For property investors, the city market, the median price is circa one million bucks, so housing affordability is an ongoing dialogue within the media and just pretty much every dinner table or barbecue in Australia about how hard it is to buy property today.

Tim Neary: Yeah mate.

Phil Tarrant: This is something we try to demystify a little but on The Smart Property Investment Show in that everyone can invest in property, whether they want to buy a home or invest in property. We've had some great young talented blokes on this show and girls, who are earning $40,000 bucks a year who have a multi-property portfolio. You know? They're going out there and identifying assets which aren't a million dollars. They're finding stuff for $100- 150- $200,000 dollars.

Tim Neary: It's about knowing where to look.

Phil Tarrant: It is. I don't want to dwell on that today. We've talked a lot about it on the show over 2016, so you can go and check out those things. Our guest today is a property investor, which we like. Michael Henry. Michael how you going?

Michael Henry: I'm good Phil, thanks for having me mate.

Phil Tarrant: Yeah good mate. Sorry to bang on at the start of the podcast around markets, but let's stay on that. We were just chatting off-air before we started this and Michael was saying, long time listener, first time caller or speaker whatever.

Michael Henry: Privilege. Privilege. I feel privileged to be here.

Tim Neary: Participant.

Phil Tarrant: Participant.

Michael Henry: Seeing behind the curtain.

Phil Tarrant: Just before we get going, it's pretty easy right? You connected with us to say, "Hey, I'm an investor, I'd love to get on the show." It's not scary, it's not frightening?

Michael Henry: Not at all. All you investors out there, make contact.

Phil Tarrant: Call in.

Michael Henry: I'm comfy now. I think I'm going to be here more regularly.

Phil Tarrant: Good.

Tim Neary: Good.

Phil Tarrant: Good to have you mate.

Michael Henry: Thank you.

Phil Tarrant: Looking at ... We'll get into your portfolio in a sec, but your mindset around property investing in the markets. I know that you work in the property space, you're a mortgage broker.

Michael Henry: Correct.

Phil Tarrant: Which is a relatively new thing for you. In terms of your education around the markets, how do you keep informed? How do you know what's going on? The quick dialogue we had around housing affordability and that sort of stuff, is that something you care about?

Michael Henry: Big time. Being an investor, I guess it's normal to research, read what interests you. For me magazines and podcasts like yours, and seminars for example, are ways that I connect with people who are doing the same thing in the same space, but also experts who know much more than I do, and I rely on their information to lead me in a direction ... At least for me to form my opinion of where I'm going, what I'm doing, and what seems right and what seems wrong.

Phil Tarrant: You as a property investor, how old are you?

Michael Henry: I'm 36, just turned 36 on the 10th of January, last Tuesday. Happy birthday to me, thank you.

Phil Tarrant: Happy birthday. Yeah, we've got a cake for you outside.

Michael Henry: I knew it. Yes. I saw it out there. I saw it.

Phil Tarrant: How long have you been investing for?

Michael Henry: 10 years.

Phil Tarrant: Okay, so a decade in the game. Talk us though the properties you have. Are they Sydney properties? Are they New South Wales? Are they elsewhere?

Michael Henry: It's a little mix. My wife and I have our portfolio together. We ran them separately, but were married a year ago so now we count them as being a combined portfolio.

Phil Tarrant: Were you investors before you met, or you started investing together?

Michael Henry: I was investing for a while before I met her and she, after hearing me bang on about it to friends, family who are other investors, I think she wanted to get on board and show that she could do something as well. She came on board a little bit later on and started buying her own properties as well.

Phil Tarrant: I was hoping you were going to say that your eyes met across a crowded property investment expo and you fell in love instantly doing that.

Michael Henry: We just looked at each other and said LVR and then we just moved on.

Phil Tarrant: Anyway, we digress. You invest together now so you've built a portfolio, combined portfolio.

Michael Henry: Yes.

Phil Tarrant: How many properties have you got?

Michael Henry: We've got nine at the moment.

Phil Tarrant: Nine?

Michael Henry: We sold one last year and I guess we can get into that later on if it comes up, but nine properties at the moment and spread between Brisbane and Sydney. A couple regional, both New South Wales and Queensland regional.

Phil Tarrant: Let's go through the nine really fast. First property that you guys got?

Michael Henry: Liverpool. That was the first one I bought when I was 26, and as a lot of investors I guess do, you go in there, I was pumped. Gung ho. Went in there without really knowing what I was doing, went to an auction. Like a champion, sat in the front row. Yes! Me, won the property and it had then sort of, "Oh, now what?"

Phil Tarrant: Was that a two bedder apartment?

Michael Henry: No, it was ex-houso in Liverpool.

Phil Tarrant: Ex-houso. That's an industry term we use for housing commission.

Michael Henry: Housing commission. Government housing everybody. Next door to mum and dad so I can't -

Phil Tarrant: You bought next to your mom and dad's joint?

Michael Henry: Yes. We were living housing commission at the time so I'm not against anything. Living next door, saw the sign go up, attended the auction and that was that.

Phil Tarrant: There you go. Did you have a pre-approval?

Michael Henry: I don't think it was pre-approved. I'd went to one bank. One lady that I'd sat down with and said, "Hey, look. This is my situation." I didn't understand any of the jargon. I kind of had an inkling when I left that I had enough to do something and then when I'd made the purchase, the first thing I did was call her and say, "Hey, was that, was that right?" Am I in ... Is this okay?" Luckily enough it was. It worked out pretty well eventually. Snagged it for a good price, $190,000 grand.

Phil Tarrant: For a three bedroom example housing commission house in Liverpool in 2007?

Michael Henry: 2006 yeah.

Phil Tarrant: 2006.

Michael Henry: Yeah.

Phil Tarrant: Okay.

Michael Henry: It was a good price. That was the first one, so that was the first one.

Phil Tarrant: What was your job at the time? What were you doing?

Michael Henry: I've been a broker now for six months but been learning the craft for the last two years I guess. Before that, my whole life was fitness industry.

Phil Tarrant: Okay.

Michael Henry: From out of high school, all the way through, working in gyms. I guess that's another thing for listeners out there that may ... This may interest them. The whole portfolio, because I haven't bought anything in the last 12 months, the whole portfolio was built on under $50,000 grand a year income.

Phil Tarrant: That's impressive. You worked in gyms so did you get a base salary and some commission? Were you a salesman or were you like a personal trainer or something?

Michael Henry: It went through multiple phases but the majority of it, I guess, was a salaried position. I would do some massaging and remedial massage on the side for extra cash. It was an income, so payslips were regular and that made it easy getting finance. Working in low income environment for a long, long time. I just kept on going until I couldn't. I didn't look at it as if it was a barrier because people kept lending me money and I was hungry to buy, so it was almost like a progression of maybe one a year initially.

Phil Tarrant: I guess your girlfriend then, fiancee, now wife, she was working at the same time.

Michael Henry: She was studying.

Phil Tarrant: She was studying?

Michael Henry: She was studying for the majority of it. She was going through uni. She's been a chiropractor for probably I think on about three years now, so she bought her first in 2011 and I was probably up to number maybe six by then. She jumped in about that point.

Once again, until we got married our finances were still quite separate. We didn't live together for much of our relationship. It was, "All right, I'll use my money to keep buying properties," and she was like, "Do you know what? I'm going to buy some property too." Then that's what happened, so she jumped in and bought a couple and showed me and showed everybody that she could do it as well. Even while being a student. The first one she was still a student.

Phil Tarrant: She had a job doing something?

Michael Henry: Yes, she was working as a massage therapist as well.

Phil Tarrant: Okay, yeah. I think the message here Tim is that ... It's a nice book-end to my initial point around housing affordability right? You don't need to be a bazillionaire to be able to invest in property. You were buying property, you've been doing it for a decade. I imagine now your salary's a bit higher as a mortgage broker? Let's hope so.

Michael Henry: It's got some time to grow but yeah, it's better than the gym, for sure.

Phil Tarrant: Yeah. Yeah. You've been able to build a portfolio with nine properties, and I guess the back-end's been combined with your wife and stuff, on $50K or less. It is possible.

Michael Henry: It's possible.

Phil Tarrant: You've probably had to sacrifice a little bit because of that?

Michael Henry: You know what, it's funny when you look at it. I've heard other people in the podcast say the same thing about going out partying, holidaying. We had a chance to do all of it. It was just not overspending when I didn't need to, having the clear goal of the next steps and what I had to do to be ready to do it. Look, I have to be thankful, because we've had a pretty buoyant market and me getting deposits out was purely reliant on -

Phil Tarrant: Equity increases.

Michael Henry: You've got it.

Phil Tarrant: Yeah, yeah. This is connected with a bit ... I don't know Tim if you've seen it? There's a bit of noise recently around ... This housing affordability doesn't go away right?

Tim Neary: Yep, yep.

Phil Tarrant: I've been asked who's KPMG typographer wrote a piece in the Australian attacking, in inverted commas - this was a sort of satirical piece he wrote about baby boomers, but about how the whole housing affordability thing and that, and millennials are continuing to complain about housing affordability. He's going, "Well, they're spending 25 bucks on smashed avocado and, and, and whatever at cafes, right?" Someone else weighed in. I think an executive at one of the second tier banks, it might be a Macquarie guy or something or other, coming in sort of and saying the same things, to stop buying coffees every day and you're going to be able to save money. This comes back to the point of $50,000 grand, it's a good salary. It's not like in a stratosphere, but it's below the average income, right. $79,000 bucks or something or other in Sydney at least, but you've been able to build this portfolio starting out in Liverpool.

Michael Henry: Yeah, so Liverpool was number one. Then I was on the path of educating myself at that point because I really didn't know what I was doing and got into, like most people, you probably get into investing by accident or ... Whether it's crafted or by chance, you send up going down a path, and as a result I thought, okay this is something that I can probably do and want to do, so started educating myself and seeking the help of advisers. The second purchase ... Actually, I'll go back a step. The first thing I did following, I did a renovation, because I got the first homeowners grant. For six months-

Phil Tarrant: You moved in right? Next door to mum and dad?

Michael Henry: Well I still ... I didn't rent it out, but I spent six months tinkering. I'd go from mom's next door, walk across, and paint or gyprock or something.

Phil Tarrant: You satisfied the requirements of the -

Michael Henry: Most definitely. Most definitely. Didn't do anything that wasn't allowed.

Phil Tarrant: Yeah, yeah, of course.

Michael Henry: Renovated over that period of time. Rented it out, and then went and got a val done. I was learning a little bit at the time and reading books and magazines and whatever, got a val done, was able to extract some equity and build a granny flat. This is before the granny flat craze mind you. I don't know if I started it, but it was before the granny flat-

Phil Tarrant: Who suggested that you build a granny flat?

Michael Henry:  It was a combination of speaking with a buyer's agent. As well, I'm pretty confident that I came to the table with the idea, if I remember correctly, because I'd read about it and seen it, but speaking with a buyer's agent at the time, definitely cemented the idea to go ahead. Went back to the same lender, got some money out, and this is how you know it was a long time ago, because the price that was quoted was $34,000.

Phil Tarrant: For a granny flat?

Michael Henry: For a 60 square metre one-bedder, timber frame, blue board, ended up being total cost of about $44,000 grand including driveways and fencing. That's how you know it was ancient.

Phil Tarrant: A while ago.

Michael Henry:  Yes, because now there's a lot of money.

Phil Tarrant: You put that at the back of the block?

Michael Henry: Yes.

Phil Tarrant: It's just a standard block out in Liverpool.

Michael Henry: 600 square metre block. Just under 600.

Phil Tarrant: The existing house had sufficient clearance on one side to be able to put a battle-axe type driveway into it?

Michael Henry: I actually left ... I put a second driveway in that stopped at the front of the house, and then the space between the side fence and the house was the tenant access. There's a footpath access all the way down to the back and the granny flat has let's say the back quarter of the yard.

Phil Tarrant: It's got its own fencing, its own -

Michael Henry: Completely separate. Separate driveways. Separate mailbox and metering and all that sort of thing. Because I was on such a low income, that dual occupancy idea was really, really good for me, because it covered the bills. I was like, "Okay cool. This actually is going all right."

Phil Tarrant: Something to do with your yield. For our listeners, yield is your return. If you've got two assets essentially, on one block, two loans, or did you just top up the-

Michael Henry: Yeah, top up. Just a top up.

Phil Tarrant: Just topped it up. One loan, two incomes. Your yield probably would have been pretty strong?

Michael Henry: If I remember correctly it was somewhere around 12%. It was somewhere around that, at the time. I've tapped back into that property a number of times since, so it's not the same anymore.

Phil Tarrant: You've still got it?

Michael Henry: Yeah, it's my special one. It's my baby.

Phil Tarrant: Is your mum and dad still next door?

Michael Henry: Yeah, still next door. I was there yesterday, had a look over the fence.

Phil Tarrant: Is that still ... I'm quite familiar with Liverpool, I've got family out there, but is that still a mixture now of housing commission and owner occupied or investor?

Michael Henry: Yeah, big time.

Phil Tarrant: Is it all pretty much changed?

Michael Henry: I saw it starting to gentrify before I'd left the area. Even in the street that I lived on and had the property in, you could see young families moving in, knocking down the ... The housing commission houses were all being offloaded at auction. There's still a few there, but most of them were being offloaded and some of them being completely renovated or knocked down and rebuilt. I got a chance to see it gentrify in front of my eyes, and that's when I kind of thought, okay well it was just by chance that I bought this one. It was next door, I didn't even go looking. Was it a bad spot?

Tim Neary: You did well actually, didn't you Michael? When you started out you said you bought it and then you sort of said, "Geez, I don't know ... what am I going to do with it now?" Then you went on, you did the granny flat thing, you tinkered around, you really worked it as you were going.

Michael Henry: As a result ... Second val came in pretty strong, enabled me to buy the second property, which was in Campbelltown and that was via a buyer's agent as well. It was a two bedroom unit in Campbelltown, in Ambervale to be exact.

Phil Tarrant: Okay. I've got a place in Ambervale. What did you pay for that?

Michael Henry: That was 145.

Phil Tarrant: Before we move on, this Liverpool property, you bought for 190?

Michael Henry: 190.

Phil Tarrant: How many times have you drawn equity out of that?

Michael Henry: At least five.

Phil Tarrant: At least five times over a decade? Okay, so it's been equity cow, not a cash cow?

Michael Henry: Yes, exactly.

Phil Tarrant: What do you reckon the val is on that right now?

Michael Henry: I had it valued in September or so. It was 650.

Phil Tarrant: 650. What sort of debt have you got on that? Where's it sit?

Michael Henry: About 400 at the moment.

Phil Tarrant: Okay. Your LVR's ... Quick maths, sort of between 60 and 70%.

Michael Henry: I'll let you take that. That's yours mate.

Phil Tarrant: Okay. That's good. Still moving up in value. So Campbelltown 145, two-bedder.

Michael Henry: Yep. 145. I was still on the renovation drive path at that time and had gone in, done a little bit of work initially, rented it out, was going okay. Then I got stuck in property at one point. I just did it all myself. On YouTube sitting in the corner absolutely devastated, not knowing what I'm doing, watching videos on how to lay new screed in the bathroom and tiling, and it took me literally four weeks to do this full place. It was $7,000 eventually and I had to borrow money off my wife Alex at the time. I was like, "Babe, I'm stuck. Give me some money please." That was also reason or the instigation or the impetus for me to never renovate ever again by myself.

Tim Neary: I was going to say, you learn some lessons along the way. That's one that you learnt wasn't it?

Michael Henry: That was a killer. I mean, same thing. Bought it cheap, rented it out, very little headaches and our last val came in at 315. That was in September, October.

Phil Tarrant: 315, so that's two and a half times the value of it.

Michael Henry: One of those ones you just sit and forget. You look back at your portfolio ten years on, and I think, I should have just bought all Liverpool and Campbelltown.

Phil Tarrant: I know some people that did. They own a half of Liverpool and Campbelltown and absolutely killing it those guys. It goes down to ... We have a lot of people on the show and one of the questions, or one of the questions I normally ask is what's the biggest mistake you've made in property investing? The good guys, pretty much to the letter say, "I wish I'd bought more back then, because I could have, but I didn't for whatever reason it is." Liverpool, Campbelltown a decade ago, it's a good place to guy.

Michael Henry: I'm an advocate of that exact same thought process. When I sit with young clients and go through the story, that's a key point for me. I mean, looking at places that are just well located and are attractive, either because of amenities or infrastructure, these are the things that I look at now and thought, it was such a basic formula, such a basic formula, that I should've – didn't really know at the time to be honest  – but implemented time and time again. As we go through the portfolio even further, it's going to become clear why I say that.

Phil Tarrant: I don't particularly like this terminology where you don't know what you don't know. Back then you don't know, right? It's nice to look back in hindsight and say, "If only I did." As long as you haven't made any horrible mistakes. it's okay to see your biggest mistake is a missed opportunity, rather than something which has devastated you. We had a guy on the show, and he's had 30 -

Tim Neary: 37 I think he said.

Phil Tarrant: 37 properties or something. What was important to him and one of these, the catalyst or the rational for him wanting to come on the show was to talk about procrastination, about how people are ‘gonna’ do stuff and they never get around to it. This is sort linked to that in some way in that you probably could have redlined it a little bit more, but you didn't, but it's not a bad mistake. I say the same thing. I ‘could’ have bought.  When I started buying investment property sort of five, six years ago, I could have done umpteen more properties at that point in time but I didn't. The reason why I didn't was that I was quite new to it and I was busy doing other things and yadda, yadda, yadda. There's always an excuse, but-

Tim Neary: There's a lot of stuff going on.

Phil Tarrant: There's a lot of stuff going on. But I guess the message for our listeners is if you're new to investing it's okay to-

Michael Henry: Get in there.

Phil Tarrant: Get in there. Just get it done.

Tim Neary: That's what I was going to say about Michael, is certainly you get in there. The granny flat thing, now you're telling us that you were on YouTube and you were learning how to do the tiling and-

Michael Henry: Nightmare. Don’t do it guys.

Tim Neary: Just doing it. Don't wait.

Phil Tarrant: Fake it till you make it.

Tim Neary: Yeah, that's it. Anyway…

Phil Tarrant: Campbelltown, 145 now worth 315. Where'd you go after Campbelltown? Ambervale?

Michael Henry: Ambervale. Next one was Muswellbrook.

Phil Tarrant: Muswellbrook. Okay, mining town up in the Hunter Valley.

Michael Henry: Common theme in a lot of us that were purchasing at the time, doesn't matter where you ... If you're listening to podcasts or magazines, it seem like a lot of us in that same period of time bought in very similar places.

So Muswellbrook –  this was a learning one for me, because ... Just going back one step, talking about the redlining. I think that's what got me in trouble a little bit to be honest. If I look back at it, instead of waiting till I was able to buy something strategically, I was like, "Okay-"

Phil Tarrant: Let's go, I’m a genius!

Michael Henry: Yes. "I'm killing it. Let's get some money out, buy something else." Muswellbrook came into the picture and at the time, was my star cash cow, for sure. Purchase price was 105, rented for ... At the peak rented for 340 a week and then everybody knows what happens after that in Muswellbrook, in the Hunter. Everybody knows that ... Everybody knew that the mining boom ended and we ended up in a position where mining towns and the satellite cities surrounding it were affected big time. I still hold the property, I still have it. It rents full time to a local tenant, but the rent has come down to $130 a week.

Phil Tarrant: It went from 340 to 130.

Michael Henry: Now look, I keep this one because it's my education piece. It's the reminder.

Phil Tarrant: If you ever think, you start walking around with your chest pumped out thinking you're the man, you're ... Bring you back down to earth.

Michael Henry: Muswellbrook.

Phil Tarrant: What's the valuation you think, on it now?

Michael Henry: Look, I'll be honest. Nothing's sold in that block for the last three years. I don't even know if I'd be able to sell it. I've inquired a few times because…until the mines pick up again I don't imagine it's going to do anything special. If I remember correctly, when it's fully tenanted it still covers itself. I think it might be neutral at the moment. I was looking at some numbers a couple of weeks ago of when it was really bad and it was obviously costing a little bit of money, but somebody said to me, "Don't think of it ..." You know, along that same idea of, "It's a learning opportunity rather than a mistake." She said, "You just paid for your education," and I was like, "All right, got a ... Gotcha. I'm with you on that."

Phil Tarrant: The thing is Muswellbrook also it's quite flood prone up there, so this is outside the flood prone area?

Michael Henry: Yeah. It's off the ground because it's a unit, so it's -

Phil Tarrant: No real concerns around that?

Michael Henry: No.

Phil Tarrant: I know people who've made mistakes up there in Muswellbrook and similar sort of places where they've got in there at a point in time and they think this thing's going gangbusters and they compromise of some of the tenets of smart buying and thought flood prone stuff thinking it doesn't matter. That's once in a hundred years.

Michael Henry: Once in a hundred…

Phil Tarrant: Anyway. Muswellbrook is an education piece.

Michael Henry: Yes.

Phil Tarrant: After Muswellbrook, where'd you go?

Michael Henry: Kempsey.

Phil Tarrant: Okay. Kempsey. Similar sort of -

Michael Henry: Yeah, similar ... Same thing. My equity gains were starting to thin out a little bit. I tapped into Liverpool a few times, tapped into Campbelltown. For this Kempsey purchase, I remember scraping money out of Muswellbrook and there was nothing, literally next to nothing there. It was in addition to the Campbelltown money I was taking out.

Phil Tarrant: For our listeners that don't know, Kempsey's on the north coast of New South Wales, in between Grafton and Coffs Harbour.

Michael Henry: I normally say it's a little west of Port Macquarie.

Phil Tarrant: Little west of Port Macquarie. Okay.

Michael Henry: That's how I describe it.

Phil Tarrant: Trying to remember my geography.

Michael Henry: Geographically.

Tim Neary: When did you buy it?

Michael Henry: That would have been 2010. 2012 or 11 because Muswellbrook was ‘09. Yeah, it would have been around that point.

Once again I was working at a low income job, so my strategy, my sole focus at the time, was cash flow. 100%. Growth prospects – maybe I didn't understand the market as much either and how the dynamics of markets grow. Key drivers and all these bits and pieces. The purchase of that property, although made a lot of cash, I look back at it before I sold it, because I sold that once just last year, look back at it before then and it didn't move by much at all.

Phil Tarrant: This is the one that you've sold, so what did you pay for it?

Michael Henry: I paid 103, sold it for 102,500. Another lesson learned.

Phil Tarrant: Yeah.

Michael Henry: More education.

Phil Tarrant: Seems to be a bit of a theme here Tim. Okay.

Tim Neary:  Yeah. Where next after Kempsey?

Michael Henry: At that point is ... Well, this is when Alex bought, she bought in Wiley Park so she had a bit more sense than I did. She bought in Wiley Park and -

Phil Tarrant: Wiley Park is a suburb in…

Michael Henry: Bankstown area I guess.

Phil Tarrant: Sydney, Bankstown way.

Michael Henry: Punchbowl-ish...

Phil Tarrant: South west Sydney?

Michael Henry: West, yeah. Yeah.

Phil Tarrant: South west Sydney, yeah.

Michael Henry: That was a 243 purchase and once again, we had everything valued at the same time last year and that came in at 395, so that was a pretty good one,

Phil Tarrant: I would have expected that, so that's a 243-

Michael Henry: Two-bedder unit.

Phil Tarrant: Two-bedder unit. Yeah, okay. After Wiley Park?

Michael Henry: Then I bought in Cairns. I was still on that same path that I was on-

Phil Tarrant: You were still hunting yield.

Michael Henry: I was still hunting yield big time. It hadn't clicked yet. Maybe I'm a little bit slow but it hadn't clicked.

Tim Neary: Are you taking advice on this with buyer's agents then, or are you still doing your research on your own at this stage?

Michael Henry: To be honest I think I was actually probably too heavily invested in a buyer's agent, because ... I was reading and researching but I probably didn't have enough confidence in my own ability at the time.

Tim Neary: Right. You're about four, five year in here?

Michael Henry: Yeah, probably about then. It was really around this time that I was starting to be more concerned about education, because I was looking at where I was going ... This is probably a good time to bring it up. I was looking at where I was going and thinking all right, I'm chasing all this yield and I'm at the point now where my equity is so little that I can't move on to the next. I've either got to sit really, really still and wait for the market to be more buoyant or I've got to create equity by doing some renovations or some development or I've just got to rack up cash from my wages.

Realistically, none of those were an option for me at the time. I thought what am I doing wrong here? How do people continue to buy 5, 10, 15 properties? I'd read magazines at the time and see all these young guys doing the same thing and compare myself to them, and be, "All right, well I've got to do something different." I guess I sat on my hands for a little tiny bit and thought okay, this strategy has to change. This was also when the change of job started to come into my mind. I've got to earn more money, I've got to do something different. The Cairns one was the last one. To be honest, bought Cairns, a year or two continued, I guess a year or so went on ... When I sold Kempsey, that was the last straw. That was when I knew things were ... When it was not performing, that's when it was time.

Cairns, cheap buy, $90,000 grand, was at the bottom of the market, had sold previously for $158,000 and that was three years prior. I thought okay there's a bit of something in this. When the market comes back again, if the dollar goes up, sorry dollar goes down, more tourism comes back into the market. I was like, "All right, this, this might be a good one." It actually did exactly that.

Last val came in at 145. On purchase price, it was achieving somewhere in the vicinity of 12 or 13% return.

Phil Tarrant: What are you getting now?

Michael Henry: That's one ready for 235 I think.

Phil Tarrant: Okay. 235. Your debt?

Michael Henry: It's starting to come ... That one-

Phil Tarrant: You haven't taken any out of this, right? It's equity.

Michael Henry: Nothing. Untouched.

Phil Tarrant: Okay. Did you buy it 90% at 90K or 80%...

Michael Henry: That's was I was going to say about the redlining. I was doing everything at 95, 97 when it was possible. That one was a bit more conservative, 90, but now ... LVR on that is, I think it's about 60%.

Phil Tarrant: You've still got the original debt-

Michael Henry: Yeah.

Phil Tarrant: On the 90K. Okay. Great.

Michael Henry: It's about 70 grand I think, still owing.

Phil Tarrant: Yeah. Cairns, then where'd you go?

Michael Henry: Then I jumped on the Brisbane bandwagon.

Phil Tarrant: Just before you start on Brisbane, what I'd like to point out here to our listeners and it's something that I'm impressed about, because if someone was asking me the same questions about my portfolio, I'd know my numbers, but I know my ... You know you're numbers, right? You'd be surprised how many people you ask them about their portfolio and they ‘sort of’ think this, that and the other. You know you're numbers and it says to me that you're highly invested because you've been involved in-

Michael Henry: Big time.

Phil Tarrant: A lot of decisions.

Michael Henry: Also -

Phil Tarrant: You need to know your numbers. If you don't know your numbers ... You got to know your numbers.

Michael Henry: I think the importance of numbers, now that I'm working in the broking space, is I look at other peoples' numbers all day, look at what people ... How can we tidy that up? Can we reduce that rate? What about the rent here? When I look at my own because ... I guess I'm pretty diligent with the monthly paperwork and my spreadsheets and filling in all my information. When I look at something and I can see I know what X is doing something special with their interest rates, and I look at mine, if they don't compare it gives me the opportunity at least to make a move or make a decision so I feel it pays for me to sort of ...

Phil Tarrant: It gives you confidence or arms you with the information you need to make more decisions moving forward quickly.

Michael Henry: Without a doubt.

Phil Tarrant: The fact that you ... You know the rents, and a testament to our listeners here, Michael hasn't got any paperwork here at all. You know the rent that you're receiving on every single property that you have in your portfolio?

Michael Henry:  would say I'd be within in a couple of dollars on all of them I think.

Phil Tarrant: Yeah.

Michael Henry: Yeah.

Tim Neary: We see that don't we? People come in here with spreadsheets and they've got it all written down. Others come in and they don't know what their ... They're just like, "I don't know what it is, I'll have to find out."

Phil Tarrant: Yeah, let me think.

Tim Neary: As you say, Michael's completely unscripted here.

Michael Henry: Freestyling guys.

Tim Neary: Freestyling yeah.

Phil Tarrant: Yeah. This is-

Tim Neary: Those are numbers, not making it up?

Michael Henry: No, definitely not making it up.

Phil Tarrant: I was thinking about this. I don't live far from the office, it takes me 15 minutes to walk in, and I use that time in the morning just to ... When I'm walking along I just let my mind wander and see where it goes. I was thinking about this morning and I was having this internal dialogue around concentrating on the stuff that you can control. There's so many things you can't control in life, right? There are so many things that you can control in life. You get control of those things in life, you can determine your luck, you can determine your future, you can determine whatever. Where I'm going with this is that I was thinking about numbers and stuff. It was like, if you know your numbers, and I was thinking a business sense. I run a large business, and I sleep better at night I have a lot more confidence if I know exactly what's going on, if I know what the numbers are, and I need to know what the numbers are because then it's whether I need to be concerned or unconcerned about stuff.

From a property investment sense, I carry that same logic into it and I need to know what's going on. You got to know what's going on.

Michael Henry: That ‘sleep at night’ factor.

Phil Tarrant: Sleep at night factor, that's important to me.

Michael Henry: Knowing that ... Where the money's coming in or where it's going out and if it's not, why?

Phil Tarrant: Yeah. After Cairns you're into Brissy and I imagine you've probably done well here now.

Michael Henry: Brisbane's been good. Looking back at those fundamentals, I started ... Once again, there was a lot of hype in the market, and this was before I guess every single person was on the bandwagon, but I'd heard people speaking and I was reading things and I thought, okay makes sense. Big city or big enough city, infrastructure, not too far from the CBD. Like most Brisbane investors I started in Logan, and was able to ... This was my first attempt as well, after buying the first property, this was my first crack at doing it without anyone helping, so no buyer's agents or anything like that. Went around, starting looking and making offers on various properties. Once again, still chasing yield but maybe something's a little bit better in quality, more growth prospect. Ended up with a three bedroom townhouse in Slacks Creek. It wasn't a bad purchase, it was $203,500 for that one and ended up getting some money off through building. Rental, 340 straight off the bat, which was really good. That's come back a little bit now though. It looks like-

Phil Tarrant: It's because every other investor's got out and bought investment properties.

Michael Henry: You've got it. Yes. It was a bit of stock on the market when the tenant left recently, but once again last val came in at 225, so look, it wasn't a stellar improvement but money that I made doing nothing, you know?

Phil Tarrant: The thing is that you're in that Brisbane market now as well, so that thing's probably washing its own face I guess.

Michael Henry: Without a doubt.

Phil Tarrant: Which means that you're in the market there so if and when, and the prospects for Brisbane are considered to be good, it's not going to grow at the same speed as what you saw in Sydney and or Melbourne over the last number of years, but you've got an asset in that market that's not costing you anything to hold. You can benefit from the market over time. It might take 10 years, it might take 20 years, but moving forward ... Okay, after Slacks Creek -

Michael Henry: Slacks Creek. After that was Crestmead.

Phil Tarrant: Okay.

Michael Henry: Went with a three bedroom house on a 700 square metre block with granny flat potential. It's got a big four car garage tucked in like a big shed, giant shed, tucked in where I'd want the granny flat to be. The shape of the block allows for separate driveway access straight into the granny flat where it would be. That was earmarked for that.

Phil Tarrant: Did you find that yourself?

Michael Henry: Yep.

Phil Tarrant: Okay.

Michael Henry: The last one, and this one, driven up there, looked around by myself and just tried to figure out the areas. To be honest, a lot of people, depends who you speak to of course, but some people like to rubbish the Logan area a little bit. I grew up in housing commission in Liverpool. I was driving around these areas thinking this is just the same people that I grew up with.

Phil Tarrant: Just exactly the same.

Michael Henry: This is just the same people.

Phil Tarrant: It's really funny. I have this conversation a lot I think, with people because, I grew up in Blacktown, right? Same as Liverpool essentially, just different areas. When I started investing in property I bought heavily in St Mary's and Mount Druitt, Ambervale down in Campbelltown, like Cambridge Park, places like that, right? Familiarity for me. I knew it because I'd sort of grew up in that space. When that market wasn't as attractive as an investor anymore, I didn't change my strategy, I just changed my location, and that location was Brisbane. We're buying in the same places where you've been buying up round Logan and Springfield and places like that.

Michael Henry: It's funny you say that, because just a little tangent here, but talking about what you were saying earlier Tim about the affordability in Sydney and Melbourne – we've already have conversations that I would like to hypothesise a little bit. What's going to be the next Logan? Where do I go to next? I'm already thinking, I mean I'm sure this conversation's had often, but I'm thinking where is going to be the next big good entry price, good prospects, good yields? I'm just curious. Do you know? Maybe you guys can ...

Phil Tarrant: Course I know.

Michael Henry: Get the crystal ball out.

Phil Tarrant: I'm buying there right now. I'm not telling you.

Michael Henry: You're not?

Phil Tarrant: No, no, no. I've always been open. When we're doing stuff and buying, I let everyone know. There's no secret.

Michael Henry: I guess the point of what I'm saying is exactly what you said, you just implement and take your strategy with you as you go from state to state, town to town, wherever. Same. I guess we'll be saying the same thing in 10 years about the next spot.

Phil Tarrant: People will be going, "Oh, I wish I bought in Logan. Like in ... In 2030, oh. Gee I wish I bought some more properties in Logan back in 2017."

Michael Henry: Yeah. The million dollar Logan properties that we're going to have.

Phil Tarrant: You know what? We've run out of time, Michael. Tim, Adam our multimedia dude here is giving me the hurry up. We're going to have to get you back. I want to talk about managing these properties and -

Michael Henry: For sure.

Phil Tarrant: Your finances.

Michael Henry: For sure.

Phil Tarrant: All that sort of stuff. I appreciate you coming on and sharing your story.

Michael Henry: Thanks for letting me ramble.

Phil Tarrant: It's been a really good one. I've got some takeaways from this, but what would you ...

Tim Neary: You know what impressed me the most Michael about talking this morning? When you bought in the Hunter and it didn't go well, and then you bought another one and it didn't go well, but you didn't do nothing about it. You didn't go woe is me, you said, "Okay, what am I going to do? How am I, how am I going to do this?" You started looking for a way to trade out of it, and you did that and now you're looking to go forward on that. I think that's a real good takeaway for our listeners and for anybody that wants to do something and get involved is, it's not always going to go according to plan. It's not always going to come up roses, so just be prepared to fight a little bit when you need to.

Michael Henry: I guess the reason was having some solid goals set in the initial phase and then knowing, okay this is a little hurdle or it's a little side step. Let's get back on track and do what has to be done. Everyone has that competitive edge in them. I'm just competing with myself, you know, or the market. There's no way I'd let something like that slow down the big goal.

Tim Neary: Yeah, yeah, because it's just paths. What happens just changes the path that we're on.

Michael Henry: Agreed.

Tim Neary: There's always a path. There's always going to be a way. Yeah, it's really good.

Michael Henry: The side step.

Tim Neary: Nice one mate. Yeah.

Michael Henry: Thank you.

Phil Tarrant: I'm going to hit you. This is someone new. Someone suggested I do this the other day, who listens to the podcast so I thought it was a good idea. I think he borrowed this from, if anyone's listened to it, Tim Ferris's podcast, which is pretty good. He did Four Hour Workweek. I'm going to hit you with some real quick questions that I want just your immediate off-the-cuff answer to. So, when you think of what a successful property investor is, what are they?

Michael Henry: I guess someone who's happy and has achieved their goals, because what a property investor means to me is probably something different than what it means to the next person. Successful. Did you meet the objective that you wanted? Are you satisfied? Are you happy with it? Are you happy? That's the end goal right? We want to be happy.

Tim Neary: Yep.

Phil Tarrant: Fair enough. What's the worst bit of advice you think property investors get from other people?

Michael Henry: Don't do it. Don't. The naysayers. The ones who haven't dabbled and have read all the negativity and also haven't had a shot either. I think that's a big one.

Tim Neary: Don't listen to the haters.

Michael Henry: Don't listen to the haters. Haters gonna hate. That's what they're going to do.

Phil Tarrant: Haters. Last question so, outside of The Smart Property Investment Show, if someone had 30 minutes to invest in property investment education, what would you suggest they do?

Michael Henry: I love live seminars with experts. Somewhere where you have an ability to have somebody who's been there and done it, who's maybe better at it than you are, impart their knowledge into your brain and transfer some information.

Phil Tarrant: Good. Thanks.

Michael Henry: Thank you.

Phil Tarrant: Yeah, nice one Michael. Yeah. I'd add to what Tim said beforehand. The visibility or understanding when things aren't working out and actually having the capacity, I was going to say balls but, the capacity -

Tim Neary: Testicular fortitude.

Phil Tarrant: Testicular fortitude. To go out and go okay this isn't working and in a business term, some will call it pivoting. In a property investment term, it's saying this isn't working. Do I got to cut my losses i.e. sell Kempsey, or do I hold on to something for a reason? Being able to understand when it's time to move or change or shift, the value of education, absolutely key. I think probably the most important thing I probably take from this podcast is that to book-end the introduction, you can invest in property, even if you're not on a massive salary, and you've gone and done that. The fact that you're on here and you're sharing that message, I think just resonates with other people who are gonna do something at some point in time. Just don't gonna do it, go and do it. If you don't know and if you don't know whether or not you can invest in property, go and see a good mortgage broker. That's what you're doing today.

Michael Henry: Right guys.

Phil Tarrant: Cool. Thanks Michael.

Michael Henry: Thanks fellas.

Phil Tarrant: Thanks Tim. Appreciate it.

Tim Neary: Thank you Phil.

Phil Tarrant: Remember to check out smartpropertyinvestment.com.au. You can find us on all the social stuff, follow me on Twitter @philliptarrant. If you've got any questions for Michael, Tim or myself, or just in general, contact [email protected] If you want to come on the show, let us know. It's not that hard, is it Michael?

Michael Henry: It's not hard guys. It's easy.

Phil Tarrant: Just come on. Keep those reviews coming on iTunes. We do appreciate them and the more times we get those five star rankings, the more people will listen to us. Really do appreciate it. Tune in next week. Thank you, we'll see you then. Bye bye.

 

Listen to other instalments of The Smart Property Investment Show:
Episode 66: Wealth distribution: how should you manage your money?
Episode 65: Real estate agents: what separates the good from the bad?
Episode 63: Q&A session: the SPI team answers your questions
Episode 62: Property procrastination: the importance of finding help
Episode 61: The ins and outs of strata: what buyers should consider
Episode 60: The pros of using a buyer's agent: why this investor brought someone in
Episode 59: How to invest in property as a team: two investors share their secrets
Episode 58: When do you stop investing? The SPI Show answers more listener questions
Episode 57: Wealth creation through property: trends and themes to think about in 2017
Episode 56: The SPI Show accountant reveals all: How to pick your financial team
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