The keys to a successful portfolio from those working in the background

By Demii Kalavritinos 06 November 2017 | 1 minute read

Get a greater insight into Phil’s portfolio as he’s joined by business partner Alex Whitlock and accountant Michael Johnson, who work behind the scenes to manage the heavy lifting on the portfolio.

Michael discusses the day-to-day operations of the portfolio that he controls, as well as the impact property managers have had in steering the portfolio into success.

On the other hand, Phil and Alex reminisce on their portfolio over the years, including what their greatest successes have been and what they would have done differently.

You will also find out the importance of keeping an eye on cash flow, the reasons behind each purpose and the importance of goal-setting.

You'll hear all of this and more, in this episode of The Smart Property Investment Show!


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Suburbs mentioned in this episode:

Sunshine Coast
St Mary’s
Mount Druitt
South Bank
Cambridge Park
Seven Hills 
Mount Kuring-gai

Related articles of interest:

What keeps investors up at night and which professionals do they turn to?
Four simple steps to begin your property development journey 
Special Episode: Phil and Munzurul talk steering the growth and development of portfolios by managing cash flow
Leading portal ranked top by Aussie Millennials


About the author

Speaker 1: Welcome to the Smart Property Investment Show with your host, Phil Tarrant.

Phil Tarrant: Welcome to everyone, it's Phil Tarrant, host of the Smart Property Investment Show, thanks for joining us today. We're going to do something, which is really popular and we've found over the years or so that we've been mapping out portfolios being one of the most popular things that we've done within Smart Property Investment.

            For those of you who are new to the podcast, welcome. For those of you who've been listeners for little while, what we're going to have today is a bit of a greater insight into our property portfolio and if you listened in a couple weeks ago, you would've known that we just finally settled on our latest purchase, which was five units up in a place called Lawnton, which is near Petrie, not far from the new Sunshine Coast University, which is getting developed, so go and tune in, listen to it. We're pretty excited about that purchase, cost about a million bucks. Five attached essentially townhouses or units all under one title, we control the whole lot, they're all individually strated and that's going to be a good purchase moving forward. So, what we're going to do today is, I brought a couple of people into the studio who, behind the scenes of the Smart Property Investment show, behind the scenes of the Smart Property Investment portfolio, do a lot of the heavy lifting in particular, a guy called Michael Johnson, Michael how are you going?

Michael Johnson: Yeah, good Phil thanks having me.

Phil Tarrant: It's good to have you here and I also have Alex Whitlock who is my business partner here and he's involved with me as we develop the SPI portfolio, it's our combined portfolio. Alex, how you going?

Alex Whitlock: Good Phil, thanks a lot, good to be here.

Phil Tarrant: So, this is the guy who you hear me banging on all the time around our portfolio. Obviously painting a picture of how to invest in property and do it the right way. Alex, as you know we've been very honest and frank and transparent about our portfolio, what we've done good and what we've done not so good.

Alex Whitlock: It's really why we launched SPI in the first place and really the bedrock of SPI was to build this portfolio to share our experiences buying, and also to really highlight to existing investors and also potential investors, every single facet good and bad and different about a property portfolio. There's a lot of costs that often get forgotten about. I think when people talk about their portfolio, I think people inherently want to talk about the nice things. Talk about gross returns and they'll sort of forget about a few of the costs that go in, I think it's pretty common in terms of property so it's really essential to SPI, the SPI proposition and you know I love property. It's what we're all about.

Phil Tarrant: And as we've gone down the journey of building this portfolio within SPI from our very first purchase or first couple of purchases out in the western suburbs of Sydney to where we are today, with a portfolio with about 20 properties in it or so.

Alex Whitlock: I think yeah, 19.

Phil Tarrant: 19, 20?

Alex Whitlock: With the latest acquisition.

Phil Tarrant: And when you start talking this way, it is a reasonably large portfolio and it's not messy, it's not small, but we've had to get a lot more sophisticated in how we managed that portfolio and fortunate we've got Michael on side who very much does the heavy lifting on the portfolio.

Alex Whitlock: And I think, you know, when you introduced us, just be clear to anyone listening, Michael does the heavy lifting and Phil and I'm something of a passenger in the portfolio these day, but yeah, Mike was invaluable to us.

Phil Tarrant: But, we'll chat about that, there's nothing wrong being a passenger because if you get the right people behind you to help drive a portfolio, you can get the benefits from it.

Michael Johnson: So, I just want to make a quick point though, really I don't do a lot of the heavy lifting. We have an amazing team surrounding us as well from our brokers, to our property managers, to our buyer's agents. I really just sort of-

Phil Tarrant: Take the credit, it's alright.

Michael Johnson: Plug in, and do some signatures and we're good to go.

Phil Tarrant: Let's talk about the process, so we'll cover a couple of things today, we'll talk about where we are in our portfolio and what we're gonna do in the future, but I think for a lot of our listeners to actually understand how we manage our portfolio, so 20, 19, 20 properties in our portfolio. It's quite large and it's quite a administrative sort of ... it's quite a lot of heaviness between-

Alex Whitlock: So, the way that we choose to do it, and I think again, sorry I'll let Michael talk in a second, but because of the transparency around this, we want to have in detail every single transaction, every single element to the portfolio and so it is a complex process, but it's also something that has grown organically because we set the infrastructure up ... yourself Phil, very much in terms of from the first property, I remember you working on an excel spreadsheet, which still exists now-

Phil Tarrant: Which still exists, it's just a lot bigger isn't it?

Alex Whitlock: Yeah, so it's become very scalable, but yeah sorry, Michael.

Michael Johnson: Yeah, so-

Phil Tarrant: So, what do you do?

Michael Johnson: When I joined here Phil started me and said, "Ay, help us do this." Right, and so for me it was all about just learning property to begin with and SPI's being one of the resources bound to pull from, but in terms of day to day stuff, a lot of the time it's obviously management stuff with the property managers, and so it might be maintenance, that sort of thing. And then a lot of times if we're say, moving into a new acquisition, it'll be dealing with the broker and that sort of thing, but day to day? It's relatively passive for me personally because we do have all the heavy lifting done by all the property managers. It might be coming to you and say, "Hey guys, what do you think about this? Should we be doing this? Should we paint the walls here?" This sort of thing, so really it's not too difficult once you have the systems in place and the systems I walked into that Phil set up it's pretty seamless.

Alex Whitlock: So, Michael, again ... Phil's pretty hands on with the portfolio. I think you've got the systems set up, but one do the things that you do, it gives you visibility, and you're a smart guy and I work with you on a daily basis and you've been able to spot through having this transparency with the way we've got this set up. You're able to spot ... it gives you real clear visibility on whether interest rates are out of sync, what other things do you sort of pick up as you manage and observe and sort of steer this portfolio along?

Michael Johnson: Yeah, so one of the key things I think for any sort of portfolio is cash flow. And one of the things that, as you mentioned before, there's a lot of hidden cots that people don't realise you have to pay for. So one of these things that Phil and I have built into our way of processing things is keeping an eye on cash flow and say, okay, well how much does it cost us to hold these properties? It might be a cost per week, it might be a cost per month, however you want to look at it, but making sure you have every singles cost allocated to something so that way you know how much it's costing you.

            For example, counsel rates or water rates, we'll go reach out to the counsel every year and we'll go okay great, hey, how much is it going to cost me this year and we'll make sure we filter that in. And then when it comes to a dashboard sort of thing, so we have all this information built in then we look at a dashboard. I can say to Phil, I can say to yourself, hey guys, it's going to cost us x amount of dollars per month to hold this, so we need to make sure we have this amount of money in our bank account so it doesn't get overdrawn. You know, really simple things like that.

Phil Tarrant: Do you reckon it works good?

Michael Johnson: Yeah, it does. I think we're well ... so, for a large portfolio-

Alex Whitlock: Sorry, just for listeners who are not familiar with our portfolio, Phil, just give us a quick overview of the ... we got 19 each-

Phil Tarrant: I don't have any numbers in front of me.

Alex Whitlock: It's okay, so alright-

Phil Tarrant: I've just counted in my head I reckon there's about 18 properties in the portfolio, Michael?

Michael Johnson: I think we're 17.

Phil Tarrant: 17, okay.

Alex Whitlock: It's going down.

Michael Johnson: It's going down.

Phil Tarrant: But, I think there's 18 doors though, because the place that we have down in-

Michael Johnson: That's correct, there's 18 doors, so that means we're 18 sets. Exactly right, so 18 sets of tenants.

Phil Tarrant: Let's call it 18. It's about seven million bucks in value and I think now the debt is probably about four, is that about right?

Michael Johnson: Yeah, sounds about right to me.

Phil Tarrant: See, Michael knows more than me these days.

Michael Johnson: Yeah sounds about right.

Phil Tarrant: Normally I put a spreadsheet in front of me when I do these podcasts and make it sound as though I really know what's going on, but so about seven million with four million so about three million bucks in equity, which not too bad.

Michael Johnson: Not bad.

Phil Tarrant: Is my math right? Yeah that's pretty good. It'll be asseted about 67% in terms of holding costs, it costs a little bit a year and if the second last podcast we did around talking about portfolio, we jogged down with that with our accountant called Munzural.

Alex Whitlock: Just to interject, or is it interrupt, I'm never really quite sure, but so-

Phil Tarrant: It depends, interrupting's rude, interjecting is, I'm going to offer some value.

Alex Whitlock: I'm hoping so. So, just again sort just to give a bit of light and colour to this, we bought our first place, I think it was a  Mount Druitt unit wasn't it?

Phil Tarrant: ... always, without looking at the spreadsheet 'cause it's all in order from purchase, but it's either North St Mary’s or Mount Druitt’s.

Alex Whitlock: Okay, and that was 2011 and I was thinking-

Phil Tarrant: I keep looking at Michael, he keeps nodding yeah.

Alex Whitlock: So, I was talking, I went fishing the weekend with a few mates and this young bloke who's, he's saved some money up and he's keen to get into property and he's just a young man who's trying to get ahead, so he sort of said, Alex what do you think I should do? Understand that you know a bit about property so ... I said look, it's a good move, but it sort of made me think about our portfolio, made me think about those early days in 2011 and it's funny to think back when we went to a number of auctions in and around when we bought the St Mary's programme and being in an auction you-

Phil Tarrant: What's the place that got it's own post code, what's that place? Is it St Mary's Leagues or Saint Mary's RSL, the big-

Alex Whitlock: Oh, it's that credit place, isn't that Penrith?

Phil Tarrant: No, no Saint Mary's ... it's the one that lobbied for its own post code.

Alex Whitlock: But it just made me think back to standing there in that auction, I think there was some sort of x counsel held properties that we're coming up for sale and it's funny you know you look back and you think, oh if we'd have gone that extra dollar, 'cause we had a walk away price, I believe that one of them we walked away was 2.15 for one of the properties, which I think we ended up getting. There were a couple of others for around that mark, and you think back and you go, if we'd gone that extra couple of bucks, just think how much money we'd have made, but I think this is a valuable thing in terms of buying property is you don't know what's going to happen ahead of you so having that walk away price, in hindsight that's a wonderful thing, but you just never know where the market would have gone. But it's just incredible to think back at the price those places we're going for.

Phil Tarrant: We could've ... and it's funny, when I chat with other investors in the Smart Property Investment Show, most of them say the same thing, they go, I wish I bought more early on because I could've, and we're definitely that, we could have easily gone a lot higher than what we did.

Alex Whitlock: But you just don't know.

Phil Tarrant: You just don't know. And there's a lot of reasons why and I look back to then and I think why didn't we buy more then, well, we bought pretty hard initially but then we just got so busy doing other stuff that we just went ... you know-

Alex Whitlock: But I guess the flip side is it's far better to be in a position where you go, oh I wish I'd bought an extra couple when we could've have done be standing there and saying I wish I hadn't paid that extra couple of grand if the markets turn again. So I think going back and look at the discipline-

Phil Tarrant: Well there's no lemons now. There's no lemons-

Alex Whitlock: There's no lemons at all.

Phil Tarrant: There's some ... not all properties are credit equal, some are really, really good, some are good and there's hardly any indifferent ones in there, they're all delivering in terms of capital growth and they're all delivering in terms of yield.

Michael Johnson: With what you're saying Alex, retrospect is obviously great, looking back, but every single one of the properties that we've purchased, we've purchased it for a reason. There's a lot of properties in there where it's land banking or there's infrastructure-

Phil Tarrant: You actually sound like you know what you're talking about.

Michael Johnson: I know. What, crazy. Yeah, no there's a lot of potential there and I think that's what comes back to it right, you can look at the price lines and go, oh this moved from this to this, oh great, would've made this amount of money, but there's a reason behind every single one of these purchases.

Alex Whitlock: Again sorry, back to this friend of mine who's looking at buying, I'm a strong believer and I been buying property now for over 20 years and you can make money in any market, but I think having this discipline to know buying something that's below market value, and that's a current thing it doesn't matter about what's going to happen in the future, and I think having the discipline, whether you've got the tools and the equipment and the know how to do it yourself or if you engage a team as we have done, we've got buyers agents, Right Property Group buy our properties for us, buying at today's prices and buying at a value today and hoping for where that's going to go tomorrow. Look at all the factors that should mean that property increases in value at a greater level than others in the area, I think that's a very key thing.

Michael Johnson: Well, yeah, exactly. You just mentioned Right Property Group I know one thing-

Phil Tarrant: That's enough free passes for those guys.

Michael Johnson: I have heard Steve say and it really rung a bell in my head, it said, "It's time in the market, not timing in the market." And I think that's really important. And getting there as soon as possible being a young lad myself-

Phil Tarrant: Well, I want to ask you a question about that, but before I get there, so this process of us how we manage our portfolio, it's reasonably smooth. We could do things better often when we get to a point where we need to get documents together for the next round of financing, it's a little bit of a headache but it's okay. But I'm always quite reflective about how I can be a better property investor so my question to you, what irritates you most about me trying to help us create this property portfolio and you're the guy sort of having to do a lot of the management of it.

Michael Johnson: Well for me-

Phil Tarrant: And be honest.

Michael Johnson: Well, I'll do my best. For me the hardest thing obviously managing it on your behalf, there's sort of a disconnect there so when ... being able to speak to the right people in order to make things happen. So that's one of them, that's sort of a specialist to us, and in terms of just one hard thing in managing a large portfolio, it would be keeping up with the banks, would be keeping on top of the interest rates and when those changes and that sort of thing. You don't really get much notification, you might get an odd letter in the mail, but you also might just get a rate pike and then if you come back to me and say hold on, this has gone up to whatever, I want to be able to tell you, yes this happened on this date and that's one of the things I find is quite difficult to stay on top of.

Phil Tarrant: And what would you like to see if you could make one action or one change today to how we manage our portfolio, what would you do?

Michael Johnson: I'd look for us to move to a more digital platform and move the scope away from excel spreadsheets and rather it being a more of a manual process to sort of take a little bit of disconnect away and see if there's any software, anything like that, that we could leverage.

Phil Tarrant: Interesting and you probably have one of the best apprenticeships in probably Australia, so how old are you now?

Michael Johnson: 22.

Phil Tarrant: You’re young, yeah. And I know what you earn for a living so you could easily be investing in property right now but you're not, so what's stopping you from investing in property right now, learning what you've learned?

Michael Johnson: It would be ... you haven't paid me that much for that long.

Alex Whitlock: Right answer.

Michael Johnson: No, it's definitely one of my goals and I'm actively looking to invest in property in the next year or so. What I've learnt in ... in order to put the best portfolio together, you really need to leverage people around you and create that A-team. I think that's really important.

Alex Whitlock: It took me 'til I was 29 years old to buy property, which it's not particularly old, but at the time I felt like I had to wait a long time, id always wanted to buy property and I think the younger you start, the better it is but there's no age where it is too late and I think if you apply the things that we do our very best to highlight, to teach you, and I think if you buy right and if you buy and get on with it at any stage in life, you can construct a portfolio, it's never sort of too late.

Phil Tarrant: I can concur. Absolutely, it's never too late.

Alex Whitlock: And in terms of being your age, I think it's great to be able to get in the market when you're young, but I think it's also ... I know, you're a bloke who's travelled you've done a lot of stuff, you're seven years younger than me so ... how old are you in 2011, you'd have been ...?

Phil Tarrant: Mid-thirties?

Alex Whitlock: So-

Phil Tarrant: Early-thirties, around 33.

Alex Whitlock: Just with regards to Michael, I think he's getting a balance between doing the things you want to do in life and then also, I think getting the education that you're getting and understanding what you're understanding and the insides that you've got into proper portfolio construction, as and when you do move into it, I think you can go in very informed.

Phil Tarrant: Great skills. it's a funny point you make there Alex. I sort of go to the property shows or I'll go down speak at different stuff or people come on to our show and they say to me Phil, I want to get into property, how young is too young or I feel like I'm 22 years old, I've already missed out and they say when should I be doing it, and most of the time, and remember we went to that thing the other week some young lady come and chat with us and I said go and have some experiences. Don't start investing property. If you start investing property now, if you start investing property now ... so you're 22 right? Which is cool, you can do that and you can afford it if you got a deposit together and all sort of stuff, but don't discount life experiences first and making sure you're not encumbered by debt or hammered by debt from early age. You want to go out and have some fun.

Alex Whitlock: And you think about, you know, why do you want to build wealth through properties, usually give yourself freedom. Right, for most people. Money buys you opportunity later on and I think to build that passive income through properties a wonderful thing and you look forward to being able to live off that passive income, but I think to your point, and I know this is something that's close to your heart, getting the balance right before, 'cause it's a very big commitment taking on finance of a property, so I think educate yourself and be educated from the outset and have a goal and understand where you're going. But I think it's good to do the things you want to do before you have those commitments because when you have those commitments, you got to stay with those commitments and I think once you get on that track of building a portfolio,  and if you are going to build a portfolio of multiple properties, it is something you got to be ready to put time and to be very disciplined to-

Phil Tarrant: There's got to be compromise somewhere right. You need to choose where those compromises are Michael.

Michael Johnson: And yeah, so I 100% agree that balance has got to be there and I think for a lot of people, especially young people, I speak to my mates and they'll say, just getting that first deposit is the hard part right?

Phil Tarrant: That's right.

Michael Johnson: And that's in my head, that's what I see. Especially if you pick properties that have good capital growth and you then leverage that to get your second or third or fourth property and that sort of builds it increase that capital base. But I think once you have that first one, you're sort of over the hill if you like. And that for me is my goal to get that first one locked down and in. And then I might go oh I'll spend a couple years just not worrying about it like you guys did you know you jumped in, you went hard for it and then you let it sit, let it simmer. It's a passive investment right, that's the idea.

Alex Whitlock: I bought my first ... and I wouldn't do it again, not that I have anything against this strategy but I bought my first property, it was an off the plan apartment, which did very well, it was in Southbank in Melbourne and I bought it in 1997 and for me, just going back to the saving deposit, see the good thing for that was I was able to put down a 5% deposit, which was ... I bought it for, it was $217,000 for a two bedder in Southbank on Kavanagh street. It was good because I got my first, 29's a bit pathetic really but I got my first bit of savings ever, I put that deposit down and I knew I'd got about 18 months, two years to scrape together the rest of the, well so the other 15% because you could only get an 80% loan and that was sort of really at the sharp end those days and it got me to commit.

            I saved that money up, I put that deposit down and I was motivated and I had to go and save again for a further 18 months to fulfil the rest of the deposit for finance, so it was a good exercise. I was very excited about it as well I'll tell you how, you know, from walking in and the emotional feeling, I know you talk about investments not being an emotional thing, it is a very emotional thing, it's exciting.

Phil Tarrant: I think it's emotional in that for a lot of people, it's a sense of accomplishment. If you buy the right way it's like, it's a drug.

Alex Whitlock: You know, so I got very excited and I put my deposit down and then for the next 18 months I dreamed and dreamed and dreamed about this apartment being built and I'd seen all the artist impressions and it was very, very exciting and I went on to buy a number of different properties because I developed sort of the financial muscles, if you will the discipline to actually save, I was very motivated to save from there on in, it was too early to leverage off my investment, but I carry on I saved up and bought another one shortly afterwards.

Phil Tarrant: And Michael you sort of spoke really briefly about the importance of having a good team around you and you're much like me you say everyone else is doing the hard work and I'm not really involved that much into growing a portfolio but you say yes about having the right people. As you get on the path of intentionally investing in property and you're a young guy, we got a lot of young listeners as well, what would be those one or two things that you'd really want to emulate out of our portfolio that you'd like to see in your own.

Michael Johnson: Really good question. Really good question, I think two things. First thing, 100% using a buyer's agent. I will plug in Steve a lot here but just listening to someone like that, someone who has that knowledge and skills you're not going to get that from those years of experience knowing the macro and micro economic factors that happen within a region or within a street, you're not going to have that. That's one element the second element that's really resonated with me is pigeon pairing. So, being tight on cash flow, or a beginning property investor I think pigeon pairings really important and if anyone doesn't know it's basically, in my mind, correct me if I'm wrong, but sort of picking a high capital growth property and then putting it with a high yield one so you can try and net out everything as well. So just those little tips and tricks and I know that we do that within our property portfolio-

Phil Tarrant: We can't claim that term though, and I hope you're listening to this old Victor over at Right Property Group and he's going to be steaming this, and we nicked his term, but Victor, shout out to you mate, I'm disclosing it, but the way you've painted that is pretty fair. You know, what do you want to achieve as a property investor, you want to achieve capital growth and you want to try and make those properties or that property as little possible hold as it grows in value, so if you can find some good yielding properties that add positive cash flow to offset negative cash flow, you might have a neutral position and hopefully both cap in value.

Michael Johnson: And just one more thing to add, what you said Alex, I liked your point where you said you've built those financial muscles in your brain to save. And I think me and you are pretty similar in personality, we like to spend, we like fancy cars, we like that sort of lifestyle, but to build that to, get that-

Phil Tarrant: I don't know if Alex's cars will be called fancy.

Michael Johnson: Very fancy Land Cruisers, love them. But getting that muscle and getting that want to save and that drive to save I think that's something that I've worked on personally over the last twelve months and sort of enough Evo on toast sort of thing and start points-

Phil Tarrant: I'm actually going get a bit salt onto the podcast-

Alex Whitlock: It's not anything salt ... you know, dieting, I cannot stand dieting. I can't think of anything worse and I end up sort of just putting the pounds on, but for me I do a bit of running so then I'll set myself a target for a race usually six months in advance, way before I need to start training, but what that does for me psychologically is, it tells me I need to just cut out some of the things that I don't need to be eating to get myself race fit.

            I think in terms of saving money and budgeting, it's a miserable thing to do if you don't have a goal and I think having a real clear goal in terms of getting your foot on the property ladder, once you have that on the goal, I think that saving money then becomes gratifying and seeing that nest egg growing that you know that you can put into that deposit and seeing something evolve from that I think is very, very exciting.

Michael Johnson: Yeah, and what I've done personally to set that goal is I've worked out my own personal budget and how much I'm spending on rent or whatever else right. And then, my backgrounds in accounting so I love an excel spreadsheet and basically just worked out if I saved x amount, lets say two grand a month or something like that, what does that work out into a year and a half's time right? How do I go about purchasing that property. And then, which the knowledge I've here okay how much does it actually cost to buy your first property? There's a bunch of elements go into that, but if you know these things you can set that goal.

Phil Tarrant: You've got a unique perspective in terms of property investments. You work with us on our portfolio on what we're doing and we talk about it a lot but you see a lot of people come into the studio here to chat about property as well-

Alex Whitlock: Buyers agents from across the board we use one but there's a lot of good guys out there.

Phil Tarrant: There's some great guys out there, so you've got a really interesting perspective and I would say that your view towards property's a lot more sophisticated than your average person your age who'll probably sit in there complaining about then they're never gonna be able to buy property in Sydney. Now if you save two grand a month for 12, that's $24,000, you're a long way from getting a deposit to be able to buy property in Sydney. Are you doomsday man, do you sit there and feel angry about the government? Do you feel angry at property investors like me for pushing prices up, or is that just the market and you need to play within the market, what do you say?

Michael Johnson: I can't stand this Phil Tarrant guy.

Phil Tarrant: Yeah. He's breaking everything, he's pushing prices up. But, you know, compared to what your mates are, is that a conversation you guys are having-

Michael Johnson: Yeah, and I think it's all about, like I've have the privilege of working with you guys, so I understand that there's more opportunities outside new south wales, right. And when I say New South Wales, I mean Sydney. But I think some people don't get that there's other ways to create wealth other than just buying a home. I know some people my age, they want to go and they want to buy their home straight away, and they'll go and they'll save and they'll save and they'll save and they'll put their 5% deposit on some off the plan house out wherever in the suburbs. For me I'd prefer to have my 20's as a lifestyle and I'll go rent in the northern beaches or somewhere there and just enjoy my life, get a bit of a surf, bit of fish, that sort of thing, right? And then I'll place my investments where I can actually leverage then right, so it might be Brisbane it might be Tassie it maybe Victoria, so-

Alex Whitlock: Michael I think you got a really good outlook and I think being 50 years old now, I look back and I think understanding what your goals are in life it's not just financial how property fits in with that. And again, back to sort of a point earlier about doing the things you want to do now, knowing where you want to go, looking at buying in the right places, understanding why you're buying and what you're buying and how that's gonna fit in your overall play. You know what, some people are gonna want and need to have a reasonable portfolio to do the things that matter to them uniquely in their lives. Other people might need a couple, but I think really knowing where you're going, cause I think, if you don't know where you're going, your portfolio plans may end up becoming a burden. If you end up with too many properties too fast with too many debts to pay on them and you don't really know why you're doing it, that's not necessarily a good thing. Equally, if you go to slow and then you realise you should have maybe bought more earlier-

Phil Tarrant: You could sort of make that up right? My point around it is unless you can afford that, don't be in a race to grow up too quickly. Just enjoy your twenties. If you get into your 30's and you start going hey I want to start getting serious about property investment, you can sort it out.

Alex Whitlock: It's never too late.

Phil Tarrant: It's never too late. We're running out of time, but Alex, the way we have grown our portfolio I would say, is quite organic. We're quite pragmatic. We go alright-

Alex Whitlock: And it's also 'cause it's you and me, we both we got a joint portfolio, we get on well, we both on the same page and things crop up-

Phil Tarrant: We want to talk about it for ages, but then we'll just, so we just bought these places in Lawnton and go back and look at the feed here on iTunes or if you're on the website, and everywhere it says portfolio update it's where we're talking specifically about our portfolio. We bought this Lawnton joint that was a pragmatic purchase. We said we were gonna start getting some more interesting assets rather than just the pretty simple stuff.

Alex Whitlock: New phase factor.

Phil Tarrant: Yeah, so we're gonna go down this path. Stuff, blocks of units, or development site potentially or things that we can do granny flats, so stuff with an upside, right? So we just bought these places in Lawnton and it's a good buy, we're really happy with it and we can sit on that for years and not do anything with it or we can develop that in the future depending on what's going on. Lawnton, go and check it out. It's just south of Petrie, right near the new campus going in, the Sunshine Coast University so I really like that area at the moment. All through there through Kallangur, Petrie, Lawnton, we're gonna keep looking up that way, and we're gonna keep buying, right?

Alex Whitlock: Yeah.

Phil Tarrant: So, let's have a chat right now how we normally would chat about buying our next property. Are you worried about the market at the moment? Should we be buying property?

Alex Whitlock: I think there's never a bad time to buy property. I think there are always properties that are below market value ... no, not at all. I think you ... when the market's rising, it's easy for a certain period of time to not be too disciplined and everything will go up, you know, boats float in a rising tide, whatever the old adage is. I think if you, and back to walking away from those properties at that auction in 2011, the way that we buy and the way that we're both wired, I know you very well, we've been mates for 17 years, you're tight and that's a good thing, so we're both-

Phil Tarrant: I'm just financial strict.

Alex Whitlock: But I blow money on fancy cars, but at the end of the day, fundamentally, we're both the same. We're both disciplined in terms of viewing opportunities in business, in life, in properties, so I think it's always a good time to buy property and I'm a huge advocate and I have been all my life and I've been growing my education in partnership with yourself and certainly with Michael and all the other people who've been very much influential in helping us build our portfolio.

Phil Tarrant: Yeah, so the question to you, so you run a really good and popular podcast called Nest Egg, which is about creating wealth for retirement not just within property across just as everything, health, happiness, money, all that sort of stuff, right? So Smart Property Investment Show, it's about property and we advocate property and if you go back and actually listen to the podcast he did with Munzurul who will talk about the compounding growth we had in our initial investment in property. It was about 46% year on year for I don't know how many years, six or seven years, that's pretty good. Are you gonna get the same in equities are you gonna get the same putting your money in cash, and you talk about this on Nest Egg, but your view towards diversification. So I know you've got shares outside of what we do and all this sort of stuff. How do you feel about property-

Alex Whitlock: For me personally?

Phil Tarrant: Yeah, what's your view on it?

Alex Whitlock: Okay, so for me personally, I am a person who lacks discipline in a number of ares and I like property because it forces me to have discipline. I buy shares, anyone would shake their head the way I buy shares. I will kind of have a quick glance at the market, I'll see the CBA, I'll believe the CBA is tracking down [inaudible 00:28:09] a buying opportunity and I'll buy a few shares.

            I break even at best with my share portfolio, so for me personally, I like property because it keeps me honest, as well as our joint portfolio, I've also bought some properties for my own portfolio cause I've got a, and just to digress for a second I've got a goal to drive down my own mortgage on my primary place of residence because I'm lacking in discipline, I don't pay my mortgages quickly as I ought to. I bought properties aside from that to help me grow an asset that I can sell down and I can punch down my mortgage in a few years time. So for anyone who is ... I don't know how you guys are listening, how you guys are wired who are listening in, but if you sometimes lack the discipline probably just keeps you honest it means that you ... for me personally, I can let those assets grow, I can't do things quickly with property you can't sell-

Phil Tarrant: This is one of the arguments right, a lot of people say you don't invest in property because it's not liquid you can't get your money quickly, but people on the other side say it's a great asset because it's not liquid and therefore it holds its value. It's not so sentiment driven.

Alex Whitlock: If you buy property well, and that means buying below market value at any point of purchase, okay, if you do that ... you've got advice at buying property. You have evaluation from a bank, they are gonna tell you gonna say, yes Mr. Whitlock. You are making a fairly sensible financial because we will lend you 80, 85, 90, 95% on that asset. Now that's a pretty gold stamped endorsement that you're doing okay. And you know what, property is forgiving as long as you don't make rash buying decisions. As long as you don't overextend yourself. As long as you consider how you can service that debt, it is very forgiving.

            Because as long as you don't have to do things, and this is what I would say to anyone who's listening who is thinking about going in, make sure you're comfortable with services your debt levels because you know what, if the market dips because of just market conditions not because of that asset is a bad asset. If it dips for 18 months, it is likely to go back up. If the whole market is dipped, then the whole market will eventually return, so for me personally I've made money and made money and made money through property and we've made money together, it's been great fun and we'll continue to do that. And with the three properties I've bought over the last twelve months I've used different buyer's agent. I've used pure property, those assets have grown really nicely. I bought one in Tazzie and I bought two in Queensland. They've just tracked up so probably for me, it's in my blood, I love it.

Phil Tarrant: He likes property.

Michael Johnson: I 100% back up that. I think the thing about property that makes it so attractive to people out there is that you have so many different touch points with so many different professionals. I keep going back to the team thinking right so, our accountant Munzurul is the absolute king of property as well as our buyers agent and our mortgage broker, they are three people that we bounce off and their knowledge is so much greater than ours, so then if I turn around open my CommSec account, I'm not gonna have that same connection, I'm not gonna have that same touch points, right?

Phil Tarrant: You can't control anything if you're trading in equities, right? You can control your decisions around whether or not you buy or sell, but-

Alex Whitlock: It's the sentiment, I won't get into equities, it's not my thing, but you've got the fundamentals of the asset that you're buying and something may happen to that particular business, but you've just got sentiment that drags things down. If there is negative sentiment about the banks, all four banks, all four big four banks will drop. In fact the whole banking asset class will drop. It's very much beyond your control, I think probably so much more within you and I agree with you and whether you want to get external advisors like an accountant and I would always say you should do, and like a property buyer's agent, which I personally would not buy without, but just the fundamentals you've got a bank that will asses the value. You'll get a valuation on the property, you'll get a building and a pest report to say that it is essentially-

Phil Tarrant: Not gonna fall down.

Alex Whitlock: You can go along, you can get an RP data report to give you all sorts of diagnostics. You don't have to be a genius to make money buying property, but you do have to have common sense and you have to have a level of discipline and you have to ... as long as you stay within your comfort level, and don't get ahead of yourself, it's a great simple way to build wealth.

Phil Tarrant: And what we're not doing here, we're not advocating that you don't diversify your assets-

Alex Whitlock: And I'm saying personally. I'm irresponsible in terms of buying shares.

Phil Tarrant: It works for you.

Alex Whitlock:           I know a lot of people that make a lot of money in the share market.

Phil Tarrant: Yeah there is and there's a lot of good advice you can around that as well and irrespective of whether you're investing in property or in other assets, you should make sure-

Alex Whitlock: We're not the smart share show, we're the Smart Property Show.

Phil Tarrant: We are. We're not the small share show, that's a bit of a tongue twister, but go and speak to Sonya, she'll be able to help you out as a way to roll with this sort of stuff. When are we gonna buy next Alex? When something good pops up?

Alex Whitlock: You know what, I got a bit of a taste for this new phase in our portfolio and I think I'm quite keen to look at something, maybe a small development. I don't know, what do you reckon?

Phil Tarrant: Yeah, yeah give it a go.

Alex Whitlock: Yeah, yeah we'll see.

Phil Tarrant: There's plenty of equity in there right?

Alex Whitlock: We have.

Phil Tarrant: We're just refinancing at the moment to free up some cash, see what we can do with it.

Michael Johnson: We are, just a lot of signatures and Alex I 100% concur. I think there's some small development opportunities in there and I think we should pick-

Alex Whitlock: 'Cause I think a lot it's nice to see your assets in a building, but it's just exciting-

Phil Tarrant: That's proper, like, if you, in terms of being a property builder there's a big, big step ahead for most property investors go from buying assets to building assets, right?

Alex Whitlock: Yeah, yeah.

Phil Tarrant: And if you can manufacture good property, and sell them at a premium or a lot more than what it cost you to build it, that makes a lot of sense cause there's a lot of moving parts with development.

Alex Whitlock: Well how 'bout yourself though? What's your thoughts if you're to look in the future?

Phil Tarrant: I reckon anything good that comes up, we buy it. You know, I'm quite pragmatic in that regard. That's a message to our buyer's agent, Steve. But good stuff, it's got to have an x factor. We've got a lot of good properties in our portfolio, which are just growing in value, but if I look at some of the earlier stuff we purchased, a lot of that has gonna up by 100% in value. Some's like 130% in value, I'm thinking Cambridge Park for example, so we've done really well there and it's helped us create a lot of equity, but stuff with an x factor that we might not realise immediately. In ten years time it might be something we can do is good.

Alex Whitlock: I think spotting opportunities is getting harder because markets, and I'm using very broad brushstrokes, but they are levelling off, it looks some of them starting to drop, I don't see anything horrible happening in the near future, but I think because spotting the real gems is just getting a little bit harder in terms of undervalued properties where you might need to do a bit of a quick fix up or a few termites need to be expelled or that kind of stuff. I think, getting opportunity to do maybe a knock down rebuild or sort of, you know ....

Phil Tarrant: Yeah, knock down rebuilt, yeah. We got some-

Alex Whitlock: You spotted something, sorry to interrupt, but you spotted a just something we looked at in Seven Hills where you're from originally and that sort of things exciting cause you were driving past I think, heading out west down to your mom.

Phil Tarrant: There's a auction, yeah, yeah.

Alex Whitlock: And you spotted a couple of houses, there's an auction going on, so-

Phil Tarrant: It's just a-

Alex Whitlock: And we didn't buy it, but just that sort of thing.

Phil Tarrant: It's cool and we've got properties in our portfolio that we purchased early on, I'm thinking place in North Mary’s on the corner, you could not that down and chuck a duplex on that, it'd be a great little learner bit.

Alex Whitlock: When I first came to Australia, I was up in Mount Kuring-gai, which is 30, 40 k's north of Sydney and it's on the north shore line and I have watched the development of that area with medium and high density accommodation. Just unbelievable, so I think, for me, either looking at some of the land that we've gotten and starting to reevaluate whether you could put something along those ... I saw that medium density's kind of-

Phil Tarrant: This is about buying well. If you buy well-

Alex Whitlock: Or maybe the next thing that you buy is maybe viewing it in that ... through that sort of spectrum.

Phil Tarrant: Watch your space listeners. I think we'll share it with you either way, it's what we do. And to your original point Alex, one of the reasons why we created Smart Property Investment was to show how you go about doing this without the bullshit.

Alex Whitlock: Yeah, we've not stumbled yet.

Phil Tarrant: Although, you know, go and listen to some of those property updates we did recently and we've made some mistakes, which have hurt financially. Little things like not paying our mortgage advantage fee with the Common Wealth Bank and costing us an extra $10,000 in interest for the year. That hurt, but I'm not gonna admit too much and I'm not gonna blame the bank, I'm gonna blame myself. There would've been a ways around that I think, but stuff like that you're gonna get wrong.

Alex Whitlock: There's been no bloody noses in there.

Phil Tarrant: No bloody noses. Couple pf grazes, but we like what we're doing, this is good fun, so keep shooting in everyone. We really enjoy you joining us down this journey. The problem is a bit of a catch-22, the more help educate people how to invest in property means we're creating more competitors that we gotta compete against to find these great assets, but we're happy to play in that-

Alex Whitlock: Plenty of room for everybody, get on board.

Phil Tarrant: There is plenty of room for everyone. If you have any questions to myself or Alex, I think it might be the first time people have heard from you?

Alex Whitlock: I did a few in the early days, it's been a while. You keep me locked away, I'm not allowed in here.

Phil Tarrant: No, no [email protected], email that and the team'll get it if they're any questions for me or Alex, we're happy to answer them. Anything at all about our portfolio, just let us know. Michael, thanks.

Michael Johnson: Thanks, guys.

Phil Tarrant: That's good work.

Michael Johnson: Appreciate it.

Phil Tarrant: Thanks for doing all the heavy lifting, it helps us do what we do.

Michael Johnson: Anytime mate, happy to help.

Phil Tarrant: And if anyone's got any questions about how we actually run our portfolio from a process or administration perspective, please do get in touch because it's a process that works for us and you need to make sure whatever you choose works for you, but don't think you need to reinvent the wheel to make it exactly for you. Most things are common, so just borrow from what other people are doing, happy for you to borrow how we do stuff. Again, [email protected] if you want any questions answered around that.

            We're gonna do a Q&A session pretty soon as well, so get your questions in about absolutely anything in property and I'll make sure I get the right people into the studio to help answer them. Remember to check out smartpropertyinvestment.com.au if you're not yet subscribing to our daily market intelligence news bulletin every morning, make sure you do. Smartpropertyinvestment.com.au/subscribe. You'll be the first to hear about what's going on. We'll be back again next time, until then, buh-bye.

Speaker 1: The information featured in this podcast is general in nature and does not take into consideration your financial situation or individual needs and should not be relied upon. Before making any investment, insurance, tax, property, or financial planning decision, you should consult a licenced professional who can advise whether your decision is appropriate for you. Guests appearing on this podcast may have a commercial relationship with the companies mentioned.


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