Bad builders: how this investor bounced back


David Shih says he’s been burned before, but explains how losing out to a dodgy builder taught him to open his eyes and better Research his investment strategy.

In this episode of The Smart Property Investment Show, he joins host Phil Tarrant to reflect on the lessons he’s learned, as well as share his thoughts on property procrastination, how he’s better preparing himself for loan serviceability and why he believes being a property investor means having more choice than ever before.

Tune in now to hear all of this and much, much more in this episode of The Smart Property Investment Show!

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

Did you like this episode? Show your support by rating us on iTunes (The Smart Property Investment Show) and by liking and following Smart Property Investment on social media: Facebook, Twitter and LinkedIn. If you have any questions about what you heard today, any topics of interest you have in mind, or if you’d like to lend your voice to the show, email [email protected] for more insight!


Listen to other instalments of The Smart Property Investment Show:
Episode 84: 'How I overcame dodgy builders to manufacture $100k in equity in less than a month'
Episode 83: BONUS EPISODE: Top Aussie broker’s tips for surviving changes to mortgage lending
Episode 82: The investment strategy that could allow this 32-year-old to retire TODAY
Episode 81: BONUS EPISODE: Secrets of the Perth market uncovered: invest now or wait?
Episode 80: Q&A session: SPI answers all your burning questions
Episode 79: A property investor explains how he earns two incomes on a single title
Episode 78: The house sitting venture helping this young couple achieve their investment goals
Episode 77: How will the government's changes to tax depreciation impact investors?
Episode 76: SPI portfolio update: what's next for the team?
Episode 75: How travelling cross-country helped this investor buy 9 properties in 6 years

Full transcript

Phil Tarrant: G’day everyone, it's Phil Tarrant here. Welcome to The Smart Property Investment Show. Thanks for joining us. It's always good to have you. I'd like to, a big shout out to all our listeners. We've been dominating the iTunes podcast charts the last couple of weeks. I think we're number two to Tim Ferris there for a little while, which frustrates me, but let's hope we can somehow get that guy off the top podium and we'll do that just by continuing to bring in property investors to share their story.

Today I've got a guy in the studio who I just met very quickly off air and longtime listener of the show and I asked him why he likes it and he said all the right things, which made me quite happy. To summarise it was the fact that it was about real life investors, it's about guys like me and you who are just in the trenches out there trying to build wealth through property and sharing our stories. That's what we'll keep true to. We'll keep driving forward.

On that basis, if you are a property investor and whether you've got one property, no properties and you're aspiring or you've got 50, get in contact with us and we'd love to get you on the show to share your story. As I hope our guest today will contest to, it is pretty easy. On that note I'll invite David Shih to the show. David how you going?

David: Good, thank you.

Phil Tarrant: That was a bit of a long winded way to introduce you, but...

David: I like it, it's good.

Phil Tarrant: I guess a question for you, and as you can see this is completely unscripted; we've got no questions to ask you. We'll find our way through our chat today. I said to you what do you take away from the show when you listen to it? How do you listen to it? When do you listen to the show?

David: I listen to it on the train, because obviously during the commute times or sometimes when I drive to clients for example. Just play in the car and just basically keep feeding through different episodes. There's some episodes that obviously will resonate with you more. Every time when you listen to the same episodes you'll always be able to pick up different things. That's obviously because when you build up different experiences and as you listen to how other people put forward their experiences, you'll be able to learn more.

Phil Tarrant: What do you do for a living?

David: I'm an IT project manager.

Phil Tarrant: Okay.

David: Yeah.

Phil Tarrant: Like in a car, you drive out to see someone and you talk to them and do whatever?

David: Yeah. No, no.

Phil Tarrant: Use that time then to...

David: Correct.

Phil Tarrant: To think about property.

David: I don't like to listen to music or radio. A lot of commercial stuff on that. I personally like to turn it into education centre, so I listen to good CDs, slight edge, that kind of stuff, motivate yourself. Obviously, probably SPI, you know, obviously different episodes and just try to pick any good things out.

Phil Tarrant: So when you hear stuff and go, "Oh that's all right," do you sort of just go, "All right, I'll just pack that away in the back of my brain and at some point in time I'll think about it again," or do you ever sit there and take notes or anything, about it?

David: I don't, but that's one of the reasons why I keep listening to it. I have to listen to it a couple of times until it sinks in. That's when I go, okay, when it sinks in, that's when I realise it's actually part of me now so I can take that experience forward and apply it, instead of just letting go pass.

Phil Tarrant: The reason why I ask you these questions is I'm always really intrigued by how people learn and how people educate themselves. Some people are very academic and they've got really good academic rigour and they like to learn in a particular way, whereas some people just have a real fluid way of learning. Everyone's different but I think the big step is actually investing the time in...

David: Exactly, yeah.

Phil Tarrant: In doing it. However it works for you just do it. If you want to read books, read books.

David: That's right.

Phil Tarrant: If you want to listen to a podcast, listen to a podcast. If you want to go to seminars, go to seminars. Do everything, but I think it's just a matter of, I know the way that I learn and the way I enjoy learning most effectively and it means you do more of it. I listen to podcasts on the way to work. I walk up...

David: Yeah yeah, that's fine.

Phil Tarrant: Takes me 15 minutes to walk to work and I listen to a podcast. Sometimes property. David, so you're a property investor?

David: I am, yes.

Phil Tarrant: So what does being a property investor mean?

David: Look, if you have a dream about building something and you have a dream about, you know, think about long term, 10 to 15 years, where you want to be. When I think about that I go, I don't want to be just still on the average income, still having to rely on working for someone else. I want to have another option for myself. That's why I'm thinking, how can I achieve that? The more I research I find property obviously is one of the path that basically how I decided, because my dad is actually a property investor. He built his portfolio overseas and he was able to retire when he was about 37.

Phil Tarrant: Sounds okay.

David: I learn a lot from him and I go, "He must be doing something right if he can retire so early, right?" He's tried to bring me on to the journey and he's tried to push me as early as I can to try to get into property investment. That's also part of the reason why I think okay, well that's why I want to build that property portfolio, to give me the options, 10 to 15 years’ time.

Phil Tarrant: Being a property investor for you means giving yourself choice.

David: Correct.

Phil Tarrant: When you want to have that choice.

David: Yes. Options.

Phil Tarrant: Not a bad way to look at it. It's good to have options. So you said your dad retired at 37, he built offshore. Whereabouts did he build his portfolio?

David: In Taiwan actually.

Phil Tarrant: Okay.

David: Yeah. He's a business owner, but he sort of rode the wave as well and a couple of cycles, to the point where he was able to retire, I wouldn't say like obviously living a very luxury life, but enough to be able to retire and spend more time with the family.

Phil Tarrant: Okay, so he had choice.

David: Correct, he had choice.

Phil Tarrant: Did he build his business for the basis of giving him the ability to invest in property or was it, the building of the business the thing that was going to allow him to retire?

David: Yeah, looking, I'll say that was partially a lot of it too, as well. It's about choosing the right property at the right time.

Phil Tarrant: If there's one thing that your father taught you about property investment, that you think all of our listeners would really cherish or really need to know, what would be that one thing?

David: Don't procrastinate, jump in straight away.

Phil Tarrant: Just do it.

David: As early as you can.

Phil Tarrant: Yeah. When did you start investing?

David: I started when I was 26.

Phil Tarrant: Okay, how old are you now?

David: I'm 33.

Phil Tarrant: Okay, all right. So you've been at it for... what's my maths? Six years?

David: Yeah yeah.

Phil Tarrant: Which is a little while.

David: It's been…

Phil Tarrant: But you started young then? That's quite young.

David: I wouldn't say that's young enough. I would still want to push, but you know, and that's what I've been doing to my brother as well. I said, look, you know, why don't you jump in? But obviously different mindset, that time, and unfortunately he's not really into that bandwagon.

Phil Tarrant: That's right. People sort it out themselves as well is what I've always found.

David: Correct.

Phil Tarrant: So let's have a chat about your portfolio.

David: Sure.

Phil Tarrant: How many properties do you have?

David: I've got six properties at the moment.

Phil Tarrant: Okay, six properties in six years. One a year, that's good.

David: I'm rich, yes. The first two is in Sydney, one in Granville, one in Hornsby and four in Queensland. One in Slacks Creek, Woodridge, up north and also Eagleby.

Phil Tarrant: Okay so Hornsby and Granville are probably a lot more expensive than the other ones, than the other four.

David: Oh absolutely. I bought them a lot earlier as well. Granville one is actually my first one.

Phil Tarrant: A unit or a house?

David: It was a unit.

Phil Tarrant: Okay.

David: That was purchased back in 2009, but it didn't settle until 2011 because it was an OTP. Like a lot of people who started, they bought in into OTP.

Phil Tarrant: Off the plan first.

David: Off the plan first.

Phil Tarrant: I'm sure you probably did okay out of it though?

David: Look, it has done fairly well.

Phil Tarrant: Yeah, Granville's a vibrant area.

David: Yeah, but when I initially purchased it back in 2009 the average price around there for units was about mid-$200,000 to a high $200,000. I paid $360,000. So that was a lot of premium, but the reason I paid 360 and the reason I jumped into that deal was because, at that time this deal offered me five years rental guarantee at 450 dollars. So that was basically something that just stroke me and go, you know what, if I got this property, and I don't need to worry about it for five years, whether it's rented out or not. That was one of the reasons that got me over the line as well. Because the first time, you always, not sure what's gonna happen, that kind of stuff.

But I did, I mean, looking back, the purchase pile was a bit high, and obviously those rental guarantees probably affected it to the purchase price.

Phil Tarrant: It's the reason why, well, the thing with all that. Anything with an incentive, and we speak about a little bit on the show. Anything with an incentive like a rental guarantee, you're paying for it somewhere, and this is something you need to be very conscious. Was your property untenanted?

David: No.

Phil Tarrant: Okay. It was worthless.

David: It was, it was, yeah.

Phil Tarrant: Yeah. If you go back to yourself, 2009 and said, David, yes it's a good idea to buy this property. Would you say that to yourself?

David: Looking back, I probably still would, given it's the first one. But look, I would probably look for a lower price instead. I would do more research at that time. Because obviously the first times, not enough research, not enough knowing about the area kind of stuff. I'd just go, you know what, give it a try, don't procrastinate.

Phil Tarrant: So you paid $364,000. You got financing. Was the value $360,000 so the bank lent it?

David: Yeah.

Phil Tarrant: The bank was having lend you a 360. Probably, you know ...

David: That was at 80 per cent.

Phil Tarrant: At 80 per cent. What's that probably worth today?

David: About $520,000, about $530,000.

Phil Tarrant: Have you refinanced it all or has it still got the original?

David: I've refined already.

Phil Tarrant: Okay.

David: So that I can achieve purchase to Queensland…

Phil Tarrant: Okay, we'll have a chat about that. You bought Granville number one, then Hornsby you said.

David: Hornsby, yes.

Phil Tarrant: So, a unit in Hornsby, I imagine?

David: A unit in Hornsby, yup. That's actually currently my PPOR.

Phil Tarrant: You live in there?

David: I live in there.

Phil Tarrant: Did you, have you always lived in it? Your place in Hornsby, you bought it for the purpose of living in?

David: Correct, that's the purchase. That's the...

Phil Tarrant: Is that near the station, walking distance for everything?

David: Yes.

Phil Tarrant: Any idea at some point time, it's becoming an investment property?

David: Become an investment property.

Phil Tarrant: Okay. And you bought that at 80 per cent LVR?

David: Correct.

Phil Tarrant: Have you refinanced it?

David: I did as well, yes.

Phil Tarrant: Okay, all right.

David: Both Sydney is refinanced. The Hornsby one is really good, because I bought it around 2013, just around the time when it's about to start. That one's actually one of my best performance. Basically jumped in and it just rode the wave.

Phil Tarrant: You paid, two bedroom apartment in Hornsby ...

David: Two bedroom apartment. I actually paid about $438,000.

Phil Tarrant: Not a new build, it was something ...

David: Not a new build, it's one of those old style, three level walk up. Very little strata fees, that kind of stuff.

Phil Tarrant: You can't go wrong with that stuff.

David: Can't go, can't go wrong, yeah. It's just literally five minutes to a train station.

Phil Tarrant: So 2009, Granville, 2013. Okay, so a bit of a gap. Then, sounds like you got on a buying spree. You've refinanced these two properties and purchased four properties in four, four, three years, yeah.

David: In the last two years.

Phil Tarrant: Talk us through that. Why have you done that?

David: The reason for that is, I was like a lot of people. For the last, obviously, after I purchased Hornsby, I had a bit of a gap in order to save up again for deposit. At that time, I was like a lot of other people in Sydney. Starting to get the fear of missing out, starting to go to different places, and you know, Parramatta for example. Looking at a unite which is advertising for $430,000, and then end up selling it for about $500,000 and I go, this is crazy. At that point in time, that's when I started doing a lot more research, jumping on online forums and reading what other people were saying. Basically, that's the time when the mindset started to switch and go, you know what, I think Sydney is starting to get unaffordable. I need to look at somewhere else and might need to reassess my strategy as well. Because at that time, you know, I didn't quite have much idea about where to go with it.

Phil Tarrant: So you talked about strategy, reassess your strategy, you said. Did you have a strategy that really needed reassessing?

David: None.

Phil Tarrant: You didn't.

David: I just go, okay, the first one is investment and I just let it go, and the second one is, I have to live myself, so I just obviously choose whatever is convenient.

Phil Tarrant: So you have a strategy now?

David: I do have a strategy now.

Phil Tarrant: What is your strategy now?

David: Buy and hold and cash flow.

Phil Tarrant: Okay, which is pretty much a lot of people's strategy.

David: A lot of people's strategy.

Phil Tarrant: Is that a strategy or is that just an ethos to how you approach property?

David: Oh look, it's probably a bit of both, but I personally you know, like for example some people say strategy is just buy and flip, and some people say they buy and renovate or and flip, or flip. It's about what you want to achieve at the end of the day, right? The strategy is how you will get there. I said, look, if I want to have a passive income in 10 years’ time of X amount. I want to get there, then what would be, how can I get there, essentially?

Phil Tarrant: This is important, talk about goal setting in the matter of achieving goals and...

David: Correct, goal setting.

Phil Tarrant: Goal setting, you have short term, long term goals and all that sort of stuff. Much you’re your father, you probably will have to work a little bit longer, because he retired at 38, you know... Your goal is to have a passive income, that allows you to choose whether or not you want to work.

David: Correct.

Phil Tarrant: That number, if you're willing to share it with us. What do you want that number to be, for you to be able to go, I'm happy that property provides me with this much a year to live on.

David: At the moment it's a $100k passive income.

Phil Tarrant: So you have a $100k in your pocket, after tax?

David: Correct.

Phil Tarrant: Okay, $100k in your pocket, after tax, every year, generated by property. What do you need to do in order to achieve that now, this is a strategy.

David: Yes, correct.

Phil Tarrant: So, what do you have to do?

David: That's, I think, after working with my broker, basically, I think that means about 2.6 mils of unencumbered portfolio value. Which means I'll have to look at buying double that. Either that one way is buying double that, sell half, and obviously pay off the other half. Wait for a couple cycles later on. Or obviously I can do something smart about, by one, do cosmetic reno, put equity, keep going, and so on. Or you know, even do development deals later on.

Phil Tarrant: Yeah.

David: At the moment I'm just building the foundation, at the moment, to be able to allow me to ride the cycle, and then based on that, you know. It's still a bit of a distance to obviously hitting that number, but just at the moment, I'm being ambitious and go, I want to achieve what I can at this point in time. Push myself hard, and then wait until the wave comes, and then I've got options to say what I want to do.

Phil Tarrant: You're heavily relying, because you got a buy and hold strategy with good cash flow. You heavily rely on the fact that your property is gonna go up in value. It's fundamental to your strategy in order for you to reach your goals, right. You've got to buy it at a pace which is gonna be able to build a portfolio value of five plus million dollars, at 50 per cent if you sell a half. Your happy days, right.

David: Yup.

Phil Tarrant: How many properties do you need to buy every year moving forward, for you to reach that goal in, was it 10 years’ time?

David: Well, it depends on, I don't think it's the number of properties, it's the portfolio value.

Phil Tarrant: The value of, yeah.

David: If I say I need $2.6 mil unencumbered. Then I'll need to probably double that, which means at $5.2 mil. That's the number.

Phil Tarrant: You gotta be buying in locations where you have a lot of confidence that they're gonna go up in value. But the right type of property as well. You could go and buy million dollar properties, right.

David: Correct.

Phil Tarrant: It might be hard to get financing on it.

David: Probably not gonna get million dollar properties at this point in time.

Phil Tarrant: But, so if you've been buying up in Brisbane, for the last four properties, I imagine you've been spending between maybe $200,000 to $350,000 for the properties that you bought?

David: Correct, yeah, about $300,000.

Phil Tarrant: About $300,000. Okay, those properties are gonna keep going up in value, so that if we're gonna have to decide spending more to secure these properties. But that's the way the market works.

David: That's the way it works.

Phil Tarrant: Are you gonna stick around in Brisbane and keep buying, is that where the goal is, moving forward?

David: Yeah, look, I think at the moment I'm starting to have serviceability issues, like everybody else, banks starting to tighten lending. I'm actually looking more towards Adelaide, for the yield as well. But I think for this cycle, I already got four in Brisbane, and if Adelaide has the good yield that can also support me to get that passive income quicker, then I wouldn't rule it out.

Phil Tarrant: So you talk about this cycle. What do you mean by that? This cycle in Brisbane, what does...

David: As in, it has not yet... I'm thinking, okay, how many do I need to get until this booms, right? Because strictly speaking, Brisbane hasn't really had that growth yet. There are still a lot of differences between Sydney and Brisbane in terms of pricing right now. I go, okay, well, my option is, I can keep buying in Logan, if I really wanted to. Or I could look at diversifying a little bit. For me, I am more risk averse than I thought. We already have about four properties at the moment in Queensland.

Phil Tarrant: That's good exposure.

David: Yeah. I thought maybe it's time to look at some other markets, just to see what are the options that are also out there?

Phil Tarrant: Which a good way to say it, I think, the challenge a lot of property investors have now, and if you're new to the game, you're probably not gonna be as intimate with this as you are, but you know, we bought a lot of properties out in the Western suburbs of Sydney, at a very opportune time. A lot of those will probably have doubled in value in five years, right. The paradigm or the benchmark for me is that, buy a property, it doubles in five years’ time, isn't that great? That's a bit of an anomaly. I think a lot of people, if you listen to all these podcasts, and you hear guys like myself or other people coming on, talking about that.

That doesn't happen all the time or very often. That was the Sydney market at a point in time. There's a lot of reasons why the Sydney market did that. But buying up in Brisbane, we've got properties up in Brisbane, you're not seeing the same dynamics, and I very much doubt you'll see the same rapid price increases in property, in Brisbane like you're seeing in Sydney. I'm not an economist, you can find heaps of information around why the Brisbane market or Melbourne market, but why the Brisbane market will move at a particular pace, compared to Sydney. I highly suggest that everyone goes and makes themselves familiar with that, because I think at the time, Brisbane will be a safe bet, but you're never gonna see the equity increases like you're seeing Sydney.

Adelaide I think is the same. I mean, Adelaide is always gonna be a good, stable area of growth, but you're not gonna see what you're seeing in Sydney. You know, with that sort of information, how do you go about shaping your portfolio build, because you need to balance, serviceability is a problem, so you need to make sure you get good yield, but you want to keep going as well. How can you persuade a bank to give you more money, when a way that you can do it is potentially make more money yourself, and then you can actually prosper a pay rise or you know, are you gonna do anything on the work front to try and increase your ability to service debt?

David: Oh, that's certainly something that I've been constantly pushing. I'm open to basically any opportunities at the moment to increase that income. I also don't rule out having a business myself in the short time future.

Phil Tarrant: Okay, that's good.

David: That's what I've been thinking.

Phil Tarrant: A lot of people like the control of having their own business, but you know, it comes with its own headaches and challenges when it comes to securing debt. David, are you happy with your journey in property investment, are you sort of quietly confident that what you've been doing up until this point, and sort of your mindset moving forward, it's gonna realise these dreams or these goals that you have, or do you sort of get frustrated by the pace of growth or, yeah ...

David: Oh look, I don't like to speculate prices. Personally for me, property investment is a long term game. As you point it out. What happens in Sydney for the last five years is really, it's not a normal cycle, let's put it that way. For me, I think, for my strategy, because I've got the yield, I've got the cash flow. I'm happy to just keep it as is, and without having, because until I sell, I don't have to worry about the prices. I just keep going, keep going. During the meantime, if I do get stuck on serviceability, keep working on that income as much as I can, and I think just keeping that positivity as well. Because it's a long term game.

Phil Tarrant: Yeah.

David: I'm not saying, I'm not selling them in the next three years, I'm not selling them in the next five years. But you know, when that wave does come, then I go, great, it's time for me to look at the next phase.

Phil Tarrant: So if you got a preapproval, where did it go, and...

David: I don't, but I've, my mortgage broker doesn't do preapprovals, and in Queensland obviously we can do preapproval after the offers being accepted.

Phil Tarrant: Okay, and does that concern you, because you know, I like, when I'm buying, I like to know that the bank has said, yes, Mr. Tarrant, no worries, we're happy to give you the money.

David: Yeah, look, I check with my broker in terms of how much I can still borrow at this point in time. I've got a figure in mind in terms of how much I can still spend at this point in time. I'm not just blindly going out there, and go, you know what, I'm gonna pick that one mil property.

Phil Tarrant: So you're actively buying at the moment, are you looking?

David: I'm still looking at the moment, yes.

Phil Tarrant: Okay, and what are you looking for?

David: I'm looking, again, I'm looking for yield, as much as I can. In good locations, but obviously not in Queensland anymore. As I said, it's either gonna be in Adelaide, or else in Melbourne, is where I'm mostly looking at.

Phil Tarrant: Okay, house, unit, doesn't matter?

David: A house.

Phil Tarrant: House.

David: I'm looking for a house.

Phil Tarrant: Both your Sydney assets are units.

David: Yes.

Phil Tarrant: In Brisbane...

David: They're all houses.

Phil Tarrant: They're all houses, okay. You're looking for stuff that has some sort of X factor around it, where you can potentially granny flat it or subdivide.

David: All the ones I saw, all the four that I bought in Queensland, are all with different type of strategies. The first one in Slacks Creek had a, it's a high set, so two level. Downstairs, obviously had its own living area and a bathroom. I bought it with a very outdated bathroom. Spend a bit of money, get it tidied up, make it like a studio, and that got me...

Phil Tarrant: Is it sort of, meet the requirements in terms of height? Because a lot of the high set stuff...

David: It's not legal height. If it is, the price would be completely different. But it still gives me a good income to be able to get a yield of close to seven percent.

Phil Tarrant: It makes it more attractive than for the person that rented, that it has some of the space, you know, that they can...

David: Correct. Space is one.

Phil Tarrant: It's a high set one, okay.

David: It's a high set one.

Phil Tarrant: What are you doing with the other properties you have at the moment?

David: The second one in Woodridge is again similar. But downstairs was not built out. Half of it's legal height, half of it's not. I bought that one mainly because I can build out the downstairs later, as another living space, with three bedrooms and living space, bathroom, et cetera, et cetera. Also, back at the block is also a big shed, which I can convert this into granny flat.

Phil Tarrant: Okay.

David: Those special things that...

Phil Tarrant: Subject to council approval, yeah, yeah.

David: Correct, it's subject to council.

Phil Tarrant: Okay. And the other properties, what sort of upsides are there?

David: In the one up north, Moorimba Downs, is close to, very close to a train station, so the new Moreton Bay train station. That one is about five minutes to train station, so that one's more of a location play.

Phil Tarrant: Okay.

David: That one's also. I think I assessed it, there's also a side entry, which I can put a granny flat later on, if I want to. Subject to council approval. Then the last one, Eagleby is actually a corner block, which is around 750 square metres. I can look at stuff dividing that, or I can put a granny flat at the back as well.

Phil Tarrant: Okay.

David: So they're all with different type of strategies, and I bought them with specific ideas and goals. Say, you know, this is what I want to do at a later stage when I start action.

Phil Tarrant: All that stuff is good for, you know, put granny flats on or subdividing, but you know, the good capital growth place to, I guess, maximise your asset, but I think from a cash flow perspective, granny flats are a really nice addition to increase your yields and increase your serviceability or take pressure off your finances. You turn yourself into a more positively geared situation, rather than negatively geared. You know, that's essentially an outcome of how you invest and how it sort of applies with your tax. Is there anything in particular that really worries you about your portfolio, that keeps you awake at night?

David: Not really. I think like a lot of people, they're probably very concerned about interest rate going up. That's one of the reasons why I decided I'm gonna go for cash flow. Yield ... because I know I can still sleep at night when interest only goes up two or three, you know, because I've done risk assessment myself to say, what happens to my portfolio, when it's sitting at 7 per cent or even 8 per cent interest rate. I know I can still comfortably hold them with my current income. That's my sleep factor.

Phil Tarrant: Which is good. You have, you've assessed your ability to keep this proper portfolio, shoot it, rates go up to 7 percent, which, you know, I might too. Never say never.

David: That's right.

Phil Tarrant: But it gives you a nice big, fat buffer then. Your portfolio now, not counting your principal place of residence is positively geared?

David: Yes.

Phil Tarrant: It is. Okay. Putting money in your back pocket.

David: Correct.

Phil Tarrant: What do you do with that money, do you sort of spend it on stuff, or save it?

David: Save it and try to look for the next one.

Phil Tarrant: Yeah. It's just the way to go. Way to go. What would you sort of say to property investors at the moment who might have taken a plunge and bought one property, who are dreaming of trying to build a portfolio like yours. What would you tell those guys?

David: Look. I think, the mindset has to be, you have to dream big, but you also need to know where you need to end up, because really, that's what's going to drive you. If the why is strong enough and it's clear enough, then the how will come. Essentially, they need to, I mean, at the moment, due to lending conditions, they may not be able to go to 10 immediately, but you know, keep working on it, keep building up the knowledge, and you know, don't procrastinate, basically. Keep working on it every day, then eventually you will get there.

Phil Tarrant: It's sort of being inward looking or reflective of yourself, what can you do to be a better property investor, do you think?

David: I think for the last, I would try to educate myself earlier. Initially, you know, because when I had bought the Granville and Hornsby one, I wasn't as educated as I was.

Phil Tarrant: Today, what can you do today to make you a better property investor tomorrow? Other than listening to this property investment show.

David: That's a good one. Look, I think I will just constantly learn from other people as well, that's one of the reasons why I go to different meetups and share with different experiences and learn all the strategies as well. That sort of just broadened my experience and my knowledge in that as well, so.

Phil Tarrant: Your biggest mistake investing in property?

David: My biggest mistake was I trusted my PN, the remote PN so much that the builder that she recommended was actually a dud.

Phil Tarrant: Okay, what was that for, like?

David: That was a remote reno, that I was doing for my property, but what happened was, because we had so much trust in this remote PN, unfortunately, I didn't go check myself on the licences of the builder.

Phil Tarrant: Okay.

David: What happened was, the builder, obviously we established rapport and we met a couple times face to face, like the guy in the end, took my deposit and ran.

Phil Tarrant: Oh really?

David: I could not track him down at all. I spent over a year.

Phil Tarrant: Where did that happen, up in Brisbane?

David: Queensland, yes.

Phil Tarrant: How big was the reno that you were doing?

David: That was about 25 grand.

Phil Tarrant: Okay, so it's a 25 grand reno, and he went in there and quoted it all and then you go, yeah, that sounds good, you met with him on site?

David: On site, yes. We talked for a couple of things.

Phil Tarrant: And he showed you what he was gonna do, and then he went great, and he said, I need to start the work, you gave him a deposit.

David: A deposit, yeah.

Phil Tarrant: How much did you give him?

David: So about four grand.

Phil Tarrant: You gave him four grand. Then gone.

David: Then gone. We agreed on, you know, I signed a work order, I sent it to him. We agreed on the start day, then I was never able to reach him again.

Phil Tarrant: You never thought you should question him beforehand like, did you go, this guy seems really good, I trust him.

David: That's the thing. Because we met personally as well and we had rapport. Even though he seemed extremely busy, because I think at that time, yes, he was recommended, and he was good and he showed me a couple of his work as well and it looked really decent. But don't trust him on face value. You still gotta check all the licences, do all the right things before you sign that work order.

Phil Tarrant: Your property manager recommended this person.

David: Correct.

Phil Tarrant: Have they used him before to do other work?

David: Yes, yes.

Phil Tarrant: What did they say to you?

David: Look, I've actually touch base with other investors who have also been burnt by this ...

Phil Tarrant: The same guy.

David: Correct, by the same guy. Some of them actually in the midway of renovation, and this guy just disappeared. We actually ended up, they actually ended up having to spend more to fix it up.

Phil Tarrant: Have you lodged with fair trading or anything like that?

David: We have, we have. Queensland fair trading, et cetera. We even rang the police, but...

Phil Tarrant: Yeah. Are people talking about, I don't want his name but, are people talking about him on property forums and stuff, you know?

David: Yes.

Phil Tarrant: Okay, so people can learn it.

David: People can learn it, yeah.

Phil Tarrant: It's, yeah, sage advice. People get stung, people get obsessed or really into the moment of renovating or the dream of building wealth through property, and look, it is achievable. But you’ve got to watch out, there’s some charlatans out there.

David: There's always risk associated, so definitely do your homework. Check to make sure the licence is proper, and make sure that, obviously be careful about what other people claim that they could be.

Phil Tarrant: It's good, good advice. Do you have any questions for me David?

David: So how did you...

Phil Tarrant: Sounds like a job interview.

David: I was going to say. How was your, you've obviously built up a very massive portfolio.

Phil Tarrant: I wouldn't say massive, but it's got a few properties in it.

David: It's very opportune. What's your next step at the moment? Obviously you're building your business. Are you still looking at buying more later on, once you had your business?

Phil Tarrant: Yeah, absolutely. I'm trying to buy property right now, so...

David: Oh, you are, okay.

Phil Tarrant: I'm sitting on a couple of preapprovals and I've got my buyer’s agent out there, I'm gonna give them a call right now. This is good. I do this, and it just motivates me to go and, you know...

David: Sure. Yeah, yeah, yeah.

Phil Tarrant: I go, shit, I better prioritise that a little bit more, so I'm gonna go and call them up now. He's working on a couple of things for me as we speak, some interesting things. Hopefully, we can get one of them, or two of them might come off so, yeah, I'm looking to buy, I'm always looking to buy.

David: Yeah, yeah, yeah.

Phil Tarrant: It's just the different stages of you know, sometimes I'm so sucked into my business that the property is just whatever.

David: I understand.

Phil Tarrant: And then other times I go, I gotta sort this property stuff out for a little while. But going back to your point, if I don't do anything, the stuff that I bought is good. The portfolio pretty much runs itself and I don't really have any concerns about it, so.

David: Absolutely.

Phil Tarrant: That's my world at the moment.

David: That's excellent. It's a great position to be in, let's put it that way.

Phil Tarrant: Well, it gives you choice, all right.

David: That's right.

Phil Tarrant: This is the beauty about property investment, something we talk about a lot, that you know, versus other asset classes, I haven't got the time to share trade, I've got, you know, a minute in the day where I'm not having to do something, so the idea of sitting there and spending half an hour or an hour looking at stocks to buy. Sort of two plus three, sort of trades. I just don't have the bandwidth, I don't have the appetite, don't have the knowledge. I don't have the attitude to want to go and learn too much about it, because I'm not gonna invest in companies if I don't know them intimately so. But property, property gives me choice, you know. It allows me to invest and choose what place I want to invest in, so it sounds like you're down the same path, so.

David: Yeah, but if you use a BA, say for example, if you're buying different estates, how would you ... Obviously, because I actually look at properties myself, I do my own research, because I like to control my own decisions in that sense. What sort of things would you do if your BA present you a deal? What are you looking at specifically, when they present those things to you?

Phil Tarrant: I'd probably, normally I call up my accountant and say, I've got this opportunity, what do you think?

David: Okay.

Phil Tarrant: They'll give me a sort of common sense check about how it fits within wider goals and aspirations around property investment. You know, I trust my accountant, they're a very accomplished property investor themselves so. Every deal, I typically, I challenge the buyer’s agent and going why, and they'll say, this, this, this, this, and I go, all right, that makes sense. Then I'll run it through my accountants just to get their view on it, and they'll say, oh look, this is an idea that works for this reason. It fits within your portfolio for this particular reason. But I trust my buys agent. If they say fill this property, knowing, they know intimately what my goals are in property investment, so they'll know, this will fit within your property, your portfolio, it will serve this particular purpose, and you know what, in the future we can do this with it, this with it, this with it.

That typically made sense. But it's then, it comes back to what's my yield gonna be on it, what's the market like there right now, what's the prospects for this market. Why, and it's a question, everyone should ask it. Whether they are doing it themselves or they got a buys agent. Why is this property gonna go up in value?

David: Correct.

Phil Tarrant: That's a question you need to ask about every, why is this property gonna go up in value? And if you can't answer that, don’t invest in it. The answer is not like, because it has a new train line going in, or something like that. That's not enough.

David: Sure.

Phil Tarrant: You need to go deeper, so, yeah, that's a good question. But you know, I am, I pay a good fee to get advice, so.

David: Having a good team around you…

Phil Tarrant: It lets me do what I do in business, and let them do what they do in terms to help me create wealth through property. Probably after I wind up, I think, David. Thanks for coming, enjoyed the chat.

David: Thank you.

Phil Tarrant: It was really good.

David: I appreciate you.

Phil Tarrant: Keep at it. Let's get you back in when you've got a few more properties. I'd love to see what that next investment is, whether you go Adelaide or Melbourne. You're quite fortunate, I think that you've got a couple of good assets up in Sydney, Hornsby, you can't go too wrong with, I think at the time, and Granville, well, it’s near Parramatta in the centre Sydney side. It's always gonna be, people who want to rent it the least, but I think sort of in terms of capital growth, you probably won't go too bad, if you hold over numerous cycles. That'd be a real jewel to your crown.

David: Sets a good foundation.

Phil Tarrant: It does. And something that you can, overtime maybe look at revisiting in terms of refinance as well. You know, make cycle, but over a good, lots of good lessons there for our listeners so, if you got any questions for me or for David, you can now contact the team. The email address is [email protected] Anything for David in particular, if you want to hear more stuff, I will flick it over to him and you can have a chat. Remember to check us out at smartpropertyinvestment.com.au for all the latest marketing, news, opinions, advice, et cetera around property investment in Australia. We've got some good stuff from some economists there, they're talking about the market and what the world looks like particularly in Perth, and I think that's a market to watch. We're on all social stuff as well, so make sure you follow, so you can hear what we're doing, but thanks for joining us, we'll see you again next week, bye bye.

Thank you.

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