From 12 to 100 properties – how this investor will achieve his goals
podcast

From 12 to 100 properties – how this investor will achieve his goals

By Tamikah Bretzke
MJ Anthony, property investor

MJ Anthony has high hopes for his financial future.

In this episode of The Smart Property Investment Show, he reveals the investment strategy he hopes will grow his portfolio from 12 to 100 properties and secure him half a million in income each year.

Tune in as he discusses the benefits of investing regionally, how buying cheaper-end properties helped quickly expand his portfolio, how he’s pigeon-pairing property to balance his assets, as well as his thoughts on what he’s doing well and what he could be doing better over the long term.

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! 

If you liked this episode, show your support by rating us or leaving a review on iTunes (The Smart Property Investment Show) and by following Smart Property Investment on social media: FacebookTwitter 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 insights!

Suburbs mentioned in this episode:

Brisbane City  
Springfield 
Brookwater 
Nowra 
Wellington  
Dubbo 
Orange 

Related articles of interest:

Why this investor started avoiding off-the-plan investment properties 
Keeping a finger on the pulse of your portfolio 
Greens’ policy ‘out of touch’ with Queensland rental market
Low housing turnover signalling ‘warning bells’ for housing industry

Listen to other instalments of The Smart Property Investment Show:
Episode 106: How ice addicts potentially ruined an investment
Episode 105: New podcast: Investor reveals the opportunities for migrants in Australia
Episode 104: New podcast: Q&A session with Paul Glossop – more questions answered!
Episode 103: Special Episode: Phil and Munzurul talk steering the growth and development of portfolios by managing cash flow
Episode 102: Investor reveals how to find the perfect property manager
Episode 100: Property investor talks research, teamwork and balance in his portfolio
Episode 99: Portfolio update: SPI opens its books to reveal all the nitty-gritty details
Episode 98: Buyer's agent forecasts what’s to come for Aussie property market
Episode 97: ‘How we achieved financial security through property’ – the Property Twins reveal all
Episode 96: Tips for tackling pest and building inspections head-on

Full transcript

Phil Tarrant: G'day everyone, Phil Tarrant here, thanks for joining us on The Smart Property Investment Show. Always a pleasure to have you along with us as we explore property investment in Australia at the moment. Like most Australian investors I am keeping an eye on the movements and activities of the banks and other financial institutions, as they all seek to, let's be honest, deliver shareholder value, and keep profits nice and high. You've got to offset against that with the needs of us property investors. Our ability to secure financing at a reasonable rate is going to help shape our fortune, as property investors, but I think it's important.

I was just thinking the other day that property investment very much is not a game of property, it's a game of finance, and if you get the finance right, the property you can typically sort itself out.

I'm going to have a chat today with someone who has a reasonably sized portfolio, and pick his brain on the way he's gone about building his portfolio, considering the type of assets that he's been buying in. This guest is heavily geared towards regional towns, and we'll ask him why. I'm sure he'll give us some really good insights into it.

To help me with this ... Normally I wouldn't call someone by their initials, but this is the way it's been presented to me, and I think universally he's known as this, other than his mom, MJ Anthony. And MJ, Michael John.

MJ Anthony: Yes, that's right.

Phil Tarrant: Okay, I'll just say it once. Michael John Anthony, but I'll call you MJ, and the only reason why is that you can't have three first names as your full name.

MJ Anthony: I know, I get called Anthony all the time -

Phil Tarrant: You do get called Anthony?

MJ Anthony: ...it's kind of annoying.

Phil Tarrant: Mr Anthony. Thanks for coming, thanks for coming along.

MJ Anthony: No worries, thanks Phil.

Phil Tarrant: So you listen to the show? That's good.

MJ Anthony: Yeah, yeah.

Phil Tarrant: Big fan?

MJ Anthony: Yeah, I done it in the last three, four months. Just trying to listen to as many podcasts from lots of different sources back to back. I'm currently into your November 2016, where I'm up to. I'm going backwards.

Phil Tarrant: Okay. Have they got better, do you think, over time?

MJ Anthony: …yes.

Phil Tarrant: I like a bit of constructive criticism. What could I be doing better?

MJ Anthony: I don't know about constructive…

Phil Tarrant: Just give me a hard time, either way.

MJ Anthony: No, it's really good information. It's really good to listen to people's stories, as well as yours, more importantly as well. Just to help people get a different perspective. There's more than one way to skin a cat in the property game, and you've got a very interesting story. I'm slowly putting the pieces, from today going backwards-

Phil Tarrant: How it all sits together, and works, and-

MJ Anthony: Yeah, evolving over time.

Phil Tarrant: You've obviously been bingeing on property podcasts, and obviously ours is the top of that list, so thank you, and thanks for that five star ranking, by the way.

MJ Anthony: No problem.

Phil Tarrant: It didn't take you long did it? I always try and encourage our listeners to give us these nice rankings.

MJ Anthony: Yeah, you always include that little bit at the end. Just please rate it, it's all good.

Phil Tarrant: But have you had information overload, do you think? Have you just filled your head up with noise, or can you actually dissect all that stuff and actually get something good out of it?

MJ Anthony: Well I've been doing this since 2004, so I had information overload at the very start, and then kind of petered off, because you kind of get to the stage where like, "Yeah, I kind of know property. I know this."

Then you get schooled into bad decisions, and I've made a few ... Basically it's just a continual learning process. If you think that you've finished learning about property, you're wrong, because you've got to continuously learn over time. There is a lot of information podcasts, so I kind of take the bits and pieces that are relevant to me, and discard the ones that don't. Otherwise, if you have too many options, then you're left with, "What do I choose?", then you're in analysis paralysis. Then you've ended up basically taking no action, and don't doing anything.

Phil Tarrant: What's the last piece of really good information that you've learned about property investment, that you thought, "Oh, I didn't know that", or, "That's a really good idea"?

MJ Anthony: There was a lot of discussion on some different forums about interest-only getting really, really ... you know, because of APRA changes, and how it's getting squeezed and squeezed. If you guys have interest-only loans that are expiring soon, the tip was six months ago, extend it now because it's going to get harder. It's not going to get easier.

So when I was purchasing these properties, I went 10 years interest only, set and forget. A lot of them are expiring in, what is it? 2027.

Phil Tarrant: Okay. You can revert back to P&I if you like, but it's considering ... Look, markets change, right? We're in a market right now where banks are looking to tighten up investment lending, and the reason why, the banks love lending money, let's be fair, the banks will lend as much money as they possibly can, obviously, our potential regulator and other government bodies are looking to try and put the brakes a little bit on investment lending, and some would rightfully say for good reason, you know, rampant price increases in a couple cities, the city of Melbourne in particular. So they're trying to put the brakes on, but you've been very proactive in that regard, to say "Well, if I can extend my interest-only period now, that gives me choice in the future." And in five years’ time it might be completely the other way. Banks might be dying to be issuing interest-only loans to property investors. So you don't know what you don't know, but you're doing the right thing in terms of planning for the future.

So when did you start investing in property?

MJ Anthony: 2004. Bought a CBD apartment in Brisbane. Brisbane inner city apartment off the plan. End of 2004 it settled. It took 12 months longer than what it would take to finish, and the first sign on the wall was banks revaluing it down, because they didn't think it was worth ... I paid 336,000 for it, and one bank came back and said-

Phil Tarrant: That was a lot of money back in 2004.

MJ Anthony: 2004, it was a ridiculous amount of money, especially for Brisbane. And I just went out and signed a contract and went, "Right. I'm just going to buy something." No education, didn't really know how loans worked, didn't really know what-

Phil Tarrant: Were you living in Brisbane at the time?

MJ Anthony: No, I was living in Sydney. Moving up to Brisbane, as a lifestyle change. Yeah, when it settled we eventually found a lender that would put in 20 per cent deposit, we pay 80 per cent -

Phil Tarrant: So they valued it up on what the purchase price was?

MJ Anthony: We just basically found a lender who would accept a valuation. Because the first val we went with, I don't remember what bank it was, the val was $310k. And I'm like, "I don't really want to have to tip in more money for this, can we find another lender?" We went with ANZ, that valued up at $336k, and I'm like, "Okay, great."

But this is on Mary Street right in the middle of town, and today it would be worth probably 490. So the growth is not what you would call spectacular.

Phil Tarrant: So you've made yourself $130-ish grand over-

MJ Anthony: 13 years.

Phil Tarrant: 13 years. Isn't property supposed to double every 10 years? 10 to 12 years?

MJ Anthony: That's what I was told. This one obviously didn't. And it's the whole supply and demand. There's essentially no limit to amount of supply you can have in the city, because they'll just keep building towers -

Phil Tarrant: Is it a one bedroom, two bedroom?

MJ Anthony: Two bedroom, two bath, one car. It's a boutique but that's a really, really loaded term. It's 29 floors. So it's not a huge, 60 floors -

Phil Tarrant: Still a big block right?

MJ Anthony: Still a big block, lots of spare ... Lots of capacity in there.

Phil Tarrant: So question for you, have you bought another off-plan apartment-

MJ Anthony: No, no. Once bitten, twice shy.

Phil Tarrant: And why is that? Do you think, and we speak a lot about off-plan purchases on the Smart Property Investment Show, regularly often. Some people, if you get it right, can kill it, but most of the time when I hear of people talking about buying off-plan apartments they often lament ... most the time, lament about why did they do it and all the things they did wrong. So I'm not going to beat up off-plan apartments, because it all comes down to the fundamentals of buying well. And it sounds to me that you probably didn't understand the fundamentals well enough to buy well.

MJ Anthony: No, no, not at all. Not at all. Yeah, It was a good learning experience. Moved out of there in 2005 and rented to the building manager who put it in the apartment pool. He put his own furniture in. So my tenant was the building manager. Essentially it was cash flow negative at the start, the Strata fees are actually what killed the cash flow. It's about four and a half grand of Strata fees a year. Today it's about $570 a week, so it's slightly cash flow positive, to the tune of $76 a week, excluding tax. It's not great, but I keep the property as a reminder.

Sometimes if you make a mistake, you think "Oh well, I can sell that and just move, opportunity costs and all that." But I look at it and go "No, I'm going to keep it." Not that it's going to be worth a million dollars one day, it probably will, it's probably in 2070. But it's just a reminder, for me, personally, don't buy off-the-plan apartments in the middle of the city.

Phil Tarrant: So that's crystallised these learnings, the three things that you would do differently today, should you have your time again on this particular property, what would they be?

MJ Anthony: One, not buy it. Do your education first. I didn't do any seminars at all, I did a little bit of reading, but I'm talking about a couple of hours’ worth of reading, researching Realestate.com, which I think in 2004, Realestate.com was not as prevalent as today. There wasn't lot of resources, either, it was basically just books. There wasn't a lot of online stuff and the forums were very, very new.

But yeah, one, not do it. Two, look outside the city, close to the city, I mean I could have bought house somewhere around Brisbane -

Phil Tarrant: You can still buy a house in Brisbane for that amount right now. I recently bought one in Kingston, which I think was the podcast two before this one, and I think it was about $300,000.

MJ Anthony: What would that have been worth in 2004 though?

Phil Tarrant: Oh, it would have been worth probably about $100, maybe $120. So if you buy well, you can't go wrong.

MJ Anthony: Yeah, exactly, it's -

Phil Tarrant: It sounds like it's a deep-seated emotional ... The fact that you're holding onto this as a reminder to -

MJ Anthony: Yeah, it's a little bit raw still, even 13 years later, but nah, it's a good learning opportunity. You don't have regrets, you've just got to have learning opportunities.

Phil Tarrant: And let's talk about life after property number one. So how big is your portfolio now? How many

MJ Anthony: So I've got 12.

Phil Tarrant: 12 properties? And let's talk about total value of that portfolio?

MJ Anthony: $2.7 mil.

Phil Tarrant: $2.7 for 12, so imagine, and we'll have a chat about this, so you're buying properties probably towards the lower end, or out regionally, than inner-city off-the-plan apartments-

MJ Anthony: That's right.

Phil Tarrant: And what's your debt position like, at the moment?

MJ Anthony: Debt, about $1.8 mil.

Phil Tarrant: $1.8 million, so what's the LVR?

MJ Anthony: About 62 per cent.

Phil Tarrant: Sixty-two per cent, which is quite similar to where we sit. We're about 65, 67, depending on what we're up to. So why are you doing this?

MJ Anthony: To provide options outside of working. I mean, I do love my job, I work in IT. I enjoy going to work, but I've got to build up an asset base outside of that, so that eventually I can choose to, as Martin Ayles once said, to get out of bed when I've finished sleeping.

Phil Tarrant: And is this an idea that you've really crystallised recently? Or is it something that you've been building towards for a while, this sort of idea of independence, financial independence, at a point in time when you choose that you want to be able to finish sleeping-

MJ Anthony: It's been going on for a while, back in 2004 a lot of friends were buying their houses. I live in the Hills District, a lot of them bought houses, $400, $500,000 in the Hills District, tying themselves up with 30-year mortgages, and basically slaving away trying to get that paid down over a long period of time. I went out and invested, and when I came after buying the second one, rented. So I've been renting since 2008. The term rentvestor, I don't like the term -

Phil Tarrant: Yeah, I hate the term-

MJ Anthony: I know you hate the term -

Phil Tarrant: Annoys me for some reason.

MJ Anthony: But I've been doing that since 2008. I've been renting instead of buying, or sorry ... house living -

Phil Tarrant: Well I do the same, by the way. I rent where I live. And I invest where it makes sense to invest.

MJ Anthony: Exactly, yeah. So house number two was built, we went out to Springfield. Brookwater, blue chip, golf course.

Phil Tarrant: Springfield in Queensland.

MJ Anthony: Springfield in Queensland. Ipswich Shire, or Ipswich area -

Phil Tarrant: I've got a place in Springfield. I remember when I was ... And I know I wrote about this so I'm going to probably draw on my memory as much as possible, but it's the largest pre-planned, pre-setting development in the whole of Queensland, I think-

MJ Anthony: It's huge.

Phil Tarrant: That whole Springfield area. And they're still building, right? They're still going.

MJ Anthony: Yeah, there probably would be 20 or 30 year supply left as a guess. But I bought some land, built a house out in Brookwater, and this is another house I'm keeping for a long time as a good lesson, because once we moved back to Sydney, rented it ... It cost $560k to build, got a mortgage of about $580k, so had some equity there, worth today about $750k. But when we started renting it out, it was renting for $420 a week.

Phil Tarrant: Okay.

MJ Anthony: And all the tenants that I had would sit in six, 12 months leases, so that they moved to the suburb, loved it so much, they built their own house. So I was kind of like a halfway home -

Phil Tarrant: Try before you buy.

MJ Anthony: Try before you buy. And they all left to move into their own house in Brookwater because they loved the area so much. So I'm on about my eighth tenant there. But the tenant there loves it, very, very picky, if the door's squeaky they want it fixed sort of tenant. So this in my blue chip property, I guess. In inverted quotes. And I don't want any more of these tenants who are a hassle in terms of very high expectations, anything that even remotely needs fixing, they'll complain about it straight away. But they keep it so spick and span, they're very, very clean, very tidy and you couldn't ask for better tenants, quality-

Phil Tarrant: How long have they been in now?

MJ Anthony: Two years. And at the moment the rent's $550 a week. So it's still cash flow negative, and this is a property that I've had since 2007 and the loan's just gone P&I, so it's actually costing about $480 a week to keep. And do I complain, do I try and get this loan ... Top up the loan or try and go to another lender and hopefully it values up? Or I'll just buy four more positive cash flow properties to absorb that negative cash flow.

Phil Tarrant: And that's a really smart way to look at it, and I know I borrow terms from people sometimes, this is not one of my terms and the person who coined this term will know who it is. It's called pigeon pairing, and it's my buyer's agent, actually, a guy called Victor Kumar, he's a-

MJ Anthony: He's my buyer's agent too.

Phil Tarrant: Oh, is he? Yeah -

MJ Anthony: Well, from 2010. Steve and Victor, and that's property number three, they went and found me a property in Nowra. Two bedroom apartment.

Phil Tarrant: Okay. So the purpose of this was, this pigeon-pairing thing, here's this portfolio I'm trying to build, it's a negative in some respect in terms of cash flow, so what can you do to improve cash flow? You can purchase another asset, which is cash flow positive, and you can use that additional money that you're generating there to help underwrite holding this asset, which is cash flow negative at the time. So hopefully you can move towards a neutrally geared property.

MJ Anthony: A lot of people would look at it and go, "I'll just sell the property, I've had enough."

Phil Tarrant: But the thing is, is it growing in value though? This is what you need. There's no use holding onto a property if it's not growing in value.

MJ Anthony: Yeah very slowly. The problem with Brookwater is that there's still a lot of land available, there's still probably another 4, 5 years of land left but prices are creeping up and the developers are putting minimum prices on blocks of land to buy. And it's a big suburb now. I haven't been there in about two years so I probably need to go back.

Phil Tarrant: If it's doing what it needs to do, and it's a numbers game, isn't it? So you could always look to refinance this property. So let's talk about this subsequent, so you went to Nowra, bought a property, what did you get down there?

MJ Anthony: Yep, so two bedroom apartment, $95,000, in 2010. It's on one of the worst streets in Nowra, it's very, very working class ... A bit of research found that someone got murdered in there in the 1980s. And I went and visited the property, very bare bones in terms of, two-story -

Phil Tarrant: Like a townhouse type thing?

MJ Anthony: Yeah, there's 10 on the block. And today it's worth $180k. The tenant there, the vendor was in the army and just wanted to get rid of it, kind of like "I've had enough of property," and he was in Darwin, and the tenant was paying $110 a week, which was about $40 bucks a week undercooked. We didn't want to increase it straight away so we slowly increased it over time. He's left, we've had a new tenant and it's rented out for $230 a week.

Phil Tarrant: So it's doubled in value?

MJ Anthony: Doubled in value.

Phil Tarrant: And you've increased the rent by a pretty sizable percentage.

MJ Anthony: Yeah, more than double. And this is one that Victor and Steve found for me in 2010.

Phil Tarrant: Don't plug them too much. No, they're good operators.

MJ Anthony: Well I haven't used them since then.

Phil Tarrant: So subsequent to Nowra? What happened then?

MJ Anthony: So after Nowra, I bought ... Well that was my self-managed super fund because when we went with Nowra, I was going to the right property meetings and really, really motivated to buy a property, but I didn't have enough income to support the two negative properties I already had. The super fund was separate so my income didn't really ... Your super payments and the rent, it's got to stand by itself. So I'm like, "What can I afford?" And I could get a loan for about 60 grand.

So I went regional, I went out to a town called Wellington, near Dubbo, it's about a four hour drive from here, and bought a three bedroom house, one bath, no car, because the carport got firebombed, for $69,000. Had a mate refurbish it, he spent four days living there, basically did a mini reno. Paid him in beer and about four grand cash.

Phil Tarrant: That's not bad for four days work.

MJ Anthony: Yeah. Painted the place, fixed everything up and got a tenant a couple weeks after that for $150 a week.

Phil Tarrant: So what happens in Wellington? How far from Dubbo is it?

MJ Anthony: It's about 30, 40 minutes south of Dubbo. It's in the Dubbo catchment area and now it's part of Dubbo Regional Council with the whole council merger.

Phil Tarrant: So what happens in Wellington?

MJ Anthony: Agriculture. A lot of workers ... Because Dubbo to rent would be high twos, low threes, Wellington would be about $230, $240 a week so it's cheaper. A lot of people who live in Wellington work in Dubbo.

Phil Tarrant: So people commute to Dubbo?

MJ Anthony: Commute via a bus. It's $3.50 via a bus, which takes them up to Dubbo to work.

Phil Tarrant: I guess it's, you know, 30 kilometres in country is not far at all -

MJ Anthony: It's nothing, yeah. They don't complain at all-

Phil Tarrant: Just down the road.

MJ Anthony: Down the road, yeah. Just round the corner. It's just 30 minutes away. Orange is further south, it's about 100kms away from Orange so I don't think anyone commutes to Orange. Agriculture, they've got all the banks there. It's a regional town with 8,000 people and there's mining, there's government. There's local government, and all the trades and cafes and restaurants.

Phil Tarrant: Everything's there. And you've bought properties in Wellington in addition to that first one, right?

MJ Anthony: Yes. That was 2010 I bought Short St, today it's worth about $130k. So good couple of growth, but we're talking regional and it's renting for $200 a week. Took me five more years before I bought another one in Wellington. It was like, "Just let it sit and let this cash percolate." Didn't want to rush too far into buying heaps, and then two years ago I'm like, "Right, let's go."

Phil Tarrant: And how's it going?

MJ Anthony: I looked the other week, I created a little spread sheet of where I was in 2015, where I am today. And back then I had four properties with about $200k of equity and $1.3 million of value, since then I've bought another eight and the portfolio's doubled. So it's really, really important to ... Because I'm like, "Oh, I've only bought two properties this year, what's going on?" But then when you look back, you can see how far you've gone. It's very important to look back, not just look forward as well.

Phil Tarrant: So do you think you're doing this well?

MJ Anthony: It's an interesting yardstick, 'well'. All these properties put about $80 to $110 in my pocket every week, after all costs including mortgages, maintenance and everything. And I'm like, "Am I doing well?" Because all of these have their own separate offset accounts so mortgage comes out, rents go in. And all these accounts start with zero in it, how much money's in it today, and there's a sizable sum in there. So yeah, I think I'm on the right track here.

Phil Tarrant: We'll do another podcast in the future just around how you manage these properties, because depending who you speak to, they'll say, "Why do you want a whole bunch of lower priced properties?" Because the administration and management on a $150,000 property is probably the same as a property that's $700,000, or $1 million -

MJ Anthony: Yeah, but you have your own systems. I spend about 10 minutes month on each property. That's including talking to the property manager, ensuring and scanning rent statements and making sure that the rent's right and that it's been paid -

Phil Tarrant: We'll have a chat about that. But what I'm really interested in, MJ, is the rationale for property investment. So you mention that you want to be able to wake up when you're awake, you want to have that freedom of flexibility, and that's what attracts most people to investing in property. It's about preparing for a future, which is better and brighter than the one that you might have right now or you just want to maintain your lifestyle in the years ahead without having to work as much as you work, and you said you work in IT?

MJ Anthony: Yeah, so I guess that's why I've gone down the cash flow position, putting money in my pocket, rather than costing me. I know that some people have a goal, it's not the number of properties, it's the amount. I don't mind having that number of properties.

My big lofty goal, my big stretch goal is 100 properties, bringing in about $1.19 mil of rent a year. Minus mortgages, minus cost of putting cash of $480,000 after everything.

Phil Tarrant: So this is your number. You want each year ... If you choose not to work anymore, you hope that your property portfolio will generate-

MJ Anthony: Half a million dollars cash.

Phil Tarrant: Half a million dollars cash, after tax.

MJ Anthony: After tax.

Phil Tarrant: Every year.

MJ Anthony: Yep. It's a big lofty goal.

Phil Tarrant: There's nothing wrong with a big goal, I like a big goal. It's whether or not it's ... You talk to anyone about goal-setting, right, it's got to be realistic. Is that realistic?

MJ Anthony: Today? No, that's more like a 10 year goal. I've got little milestones, so my first milestone I picked up from Victor was just replace your income. Whatever your salary is, aim to have that as rent, gross rent. And I achieved that a year and a half ago. The next one is 200K of rent and then basically work my way up.

I know that there will be banks, who'll go, "No, you can't do this, the properties won't value up." And all these other roadblocks in place, but you've just got to think outside the square, and get around it.

Phil Tarrant: The question I want to answer, and this is aligned to this, with your job, and you said you're in IT, do you feel as though that you can't truly effect change in terms of your revenue generating capabilities as much as you can in terms of what you can generate through property. So investing in property, you're the master of your own domain. Working as a PAYG employee, you can get yourself payrise every now and then, if you do a good job you can get promoted, but you're never going to hit, really, the stratosphere of true independent wealth, right?

MJ Anthony: Yep, there's a ceiling, there's definitely a ceiling. I mean, banks definitely do like PAYG employees, and it's lot harder as a small business owner, as you know, but while I find working day-to-day fun, it's an enjoyable job, this allows me to also exercise my brain, be creative, especially when purchasing properties and yeah, you are the master of your domain.

Phil Tarrant: So you like having emotional skin in the game rather than just rocking up to work and doing the job, you're going to get paid irrespective.

MJ Anthony: Yeah, exactly. And my colleagues who work around me are like, "How many properties did you buy today?" And I'm like, "Just looking at another one."

Phil Tarrant: Well let's have a chat about that, what do they think about what you're doing? Do they go, "Oh, you're a madman and the sky's gonna fall in and you're going to end up destitute."

MJ Anthony: None of them are investors, so that's one thing, they don't really get it. But when I show them the numbers, they're like, "Oh, that makes sense."

Phil Tarrant: Do they reckon it's bullshit though, or do they believe it?

MJ Anthony: They believe it once they see the numbers. I've got all these spreadsheets that you key in-

Phil Tarrant: Because most of these guys and girls would be IT people, and IT people are typically information based, rather than sentiment based-

MJ Anthony: So you have to prove it. This is what I'm buying it for, this is how much it's worth, here's an equivalent type property, and this is how much rent. And they're like, "Wow, that makes a lot of sense." But it's not for them, because it's outside of their comfort zone, there are too many unknowns.

It's like, "Four hours’ drive, how are you going to look after your tenants?" "Well, that's what property managers are for," "Oh, okay, how do you look after your property manager?" "Talk to them every week. Put in systems, checks and balances, and don't put yourself in a position of weakness."

Phil Tarrant: So the question earlier was, do you think you're doing this quite well? So I think you think that you are doing quite well, so what could you be doing better?

MJ Anthony: I think that's question that's asked to a lot of people, what could you have changed? I wish I'd bought more, I wish I'd gone a bit harder. But there's reasons that people go at a certain pace, and it's when you have that knowledge and foresight years later, and all that information as well. It's like, oh cool I know what I could have done, five years ago. To only put in 5 per cent deposit, back when there were 95 per cent loans, I think I got one of the last 95 per cent loans with ANZ in 2015, and not done 20 per cent deposits, and stuff like that. So use your equity a bit harder, but still being cash flow positive. So it's an interesting...

Phil Tarrant: I'm quite interested in how you articulate your strategy. Everyone's got a strategy, there's a million different strategies, for a lot of other property investors to invest in property, what's your strategy, how would you crystallise that into a sentence?

MJ Anthony: Cash flow positive property, buy below market value, below the median price, regional towns, I bought a lot in Wellington in New South Wales. I've got no qualms purchasing in other regional tows, provided the numbers stack up.

Phil Tarrant: And if our listeners are ... There's a lot of debate around regional towns, and I think a lot of people mistakenly equate regional towns to mining towns, and not all regional towns are mining towns. And I think people think about Port Hedland in WA and some other mining towns where people have been badly burnt, badly burnt.

MJ Anthony: And they tar it with the same brush.

Phil Tarrant: Absolutely, so there is a lot of merit investing in regional towns, should the regional towns have all the trappings to make it a good place ... Good fundamentals for investment, so let's talk about that really quickly, what would they be for you? To invest in regional towns comfortably and successfully and, to take your point, good cash flow, capital growth, what does it need?

MJ Anthony: Yeah, you can't have a regional town of 300 people in it, because you have no supply and demand, it's too risky. So a large enough regional town with lots of people. How many schools, how many hospitals, is there a Bunnings, is there a Mcdonalds, is there infrastructure going in?

Wellington's building wind turbines, that's their next project. They just expanded their jail, so that was another 200-odd jobs starting up, I think, next month, actually -

Phil Tarrant: So job growth, important?

MJ Anthony: Yep. Definitely good job growth, and have a look at the census data as well. Is the town growing over time or is it shrinking? Are more people going into the town than leaving? And staying away from the rivers, because almost every regional town is built on a river, so you've got to look for flood maps, make sure you don't buy in flood affected areas, like Wagga Wagga's got ... North Wagga Wagga should never have existed, as an example. Stay away from ... Just reduce your risk.

Phil Tarrant: Yeah. And you mentioned a couple of points there like job growth, wage growth's important, investment of infrastructure. All these are key fundamentals that, whether it's a regional town or a big city, that you should be looking at.

And if people want more information on that, I'd probably direct them towards Margaret Lomas' Must Ask Questions For Every Investment Property, she covers them all off. I'm not going to go through them all, she can do it much better than I can, so go and check them out. But these are the sort of tenants that you should be thinking about when you're investing in regional towns, if you do choose a regional strategy, that you need to be looking at. And one of the key things will be diversified economic base, and fair enough Wellington is not Dubbo, but it's pretty close and Dubbo is not reliant on any particular industry, it's reliant on a number of different industries-

MJ Anthony: Yeah, it's not a single industry so Port Hedland's a great example, Gladstone as well, all the mining ... Where there's a single industry doing 60 per cent, that's a bad move -

Phil Tarrant: Yeah, alarm bells. So will you keep buying in Wellington?

MJ Anthony: Oh absolutely, I wish I had 100 there.

Phil Tarrant: So you don't feel oversubscribed, you're not putting all your eggs into the one basket?

MJ Anthony: A lot of people go "You're crazy." And I'm like, "Well, okay, have you done what I've done?" People who usually say they don't have any property, or maybe have their own house. So, you know, walk a mile in my shoes before you comment.

No it doesn't have to be one town, I don't mind where, as long as the numbers make sense-

Phil Tarrant: Well, my argument would be if you were happy to buy 100 in Wellington, what is it about Wellington? Can you replace Wellington into another place? How many other towns in Australia have the same basic fundamentals of what Wellington does, right? It must be plenty of them.

MJ Anthony: Yeah, a lot of them -

Phil Tarrant: How do you go and find them?

MJ Anthony: A lot of them. The challenge is the price to buy in might be slightly higher, or might be slightly lower, depending on where you go. Albury would be a good example. Albury-Wodonga where I'm not aware what the minimum price is because I haven't actually researched Albury for the last six years-

Phil Tarrant: It would be pretty low. Could be low down there. You could still get in for just over $100 grand for something pretty reasonable.

MJ Anthony: Yeah, you could just use a similar strategy, as long as it ticks all the boxes, and you're buying below market value, that's really important too.

Phil Tarrant: That's good. We're burning through time here ... Really enjoy the chat. So MJ, let's get you back on, let's do another podcast. So if you're listening to this, make sure you look for the next one, because we'll want to ask MJ about how he manages these 12 properties effectively so it doesn't take all his time up, so he can spend time doing other things or think about the growth. But one of the key points I would probably take away from this particular podcast is that you have this number. You know it's not the number of properties, it's the value of properties that you need in order to ... Number of properties, unencumbered, to generate half a million dollars in income for you at a point in time and that's probably what? 20 years away, 30 years. It's a big number-

MJ Anthony: It's a big number.

Phil Tarrant: It's something that's very aspirational, but it's really clear that you're driven towards achieving this and you're doing things in terms of your education, you're bingeing on podcasts, in particular to try and make you a better investor, so if you're not willing to put the time in, you can't expect to get the benefits in the future. And that applies to anything, whether it's property investment, or sport, or marathon running or whatever it is.

So let's keep in touch with that big goal, I want to see how you're tracking with it, and whether or not you deviate from your strategy of buying in regional towns. Regional towns, we spoke about how they have all these fundamentals, but there is a price point, which is different to the capital cities. You could be buying suburbs in Sydney, but you're looking at $6-$700,000 to be buying these properties-

MJ Anthony: Yeah it needs a large deposit to get into the big metropolitan areas. I guess the plan is to generate enough cash flow, then using the cash flow from the properties as the deposit, rather than going to rely on the banks to value, to extract equity, because it's really, really tricky now with lenders tightening up, and going "Oh interest only, we hate interest only, we don't want to hear about interest only. Nothing over 80 per cent."

So the old strategies of just wait and let it grow and then revalue, take out the equity, and use that as a cash deposit are gone. I can use the cash flow from these properties as deposit, roughly buy one every six months. And the more you have the more it percolates and the quicker the graph goes up.

Phil Tarrant: The point I'd make is, you know your numbers intimately and that's pretty important if you want to have the aggressive growth targets in terms of portfolio sizes you've had. If you didn't know your numbers, you're talking down to pretty much cents on what each individual properties' positive contribution to you saving money in the future. So you've got to know your numbers.

But anyway, MJ, really appreciate you coming in, mate. We'll get you back on but thanks for joining us. Remember to check out Smartpropertyinvestment.com.au. If you're not subscribing to our daily news and market intelligence newsletter, make sure you do. Because if you're not, you're missing out. Smartpropertyinvestment.com.au/subscribe go and do that today.

As MJ said at the start, he was nice enough to leave us a review on iTunes, so wherever you're watching this, whether it's iTunes or Soundcloud or a myriad of other podcast platforms, please do leave a review, we do like them, five stars are the best and a comment as well. If you want to have a chat with me or anyone here in the team, any questions for MJ or any of our other guests, please do contact the team: [email protected]. Find us on all the social stuff. Just search Smart Property Investment, or SPI Online you'll be able to track us down and keep abreast of everything that we're up to. You can follow me, if you like on Twitter @PhillipTarrant. That's probably way too much information there. Information overload and that's what we're trying to avoid.

But thanks for joining us. We'll be back again next time. Until then, bye-bye.

Disclaimer: 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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