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Mitchell Burge read an article about how he could acquire 10 properties in 10 years and thought he’d give it a go – but now he’s set his sights even higher.
Find out how this tradie rapidly built up his portfolio and what he’s going to do next.
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Phil Tarrant: Welcome to The Smart Property Investment Show. Coming up in this episode, we speak to a tradie whose life changed after a simple fishing trip. Now he has 13 properties and he's not slowing down anytime soon.
Good day guys, welcome to The Smart Property Investment Show. My name's Phil Tarrant. I'm the editor of Smart Property Investment, www.smartpropertyinvestment.com.au.
We've got a special podcast today. I've got two special guests in. I have Mitchell Burge, who is a passionate property investor. I also have my business partner and our group publisher across Sterling Publishing, Alex Whitlock.
Now the reason why I've asked Alex to come in today is that he's a fishing buddy of Mitchell Burge and I think he's responsible for getting Mitchell onto his path in property investing. He now has about 13 properties, so I thought I'd bring the guys in, have a bit of a chat about how Mitchell got started and where he is right now with his property portfolio.
Mitchell, say good day mate.
Mitchell Burge: How are you? Nice to be here. Thank you.
Phil Tarrant: Alex, say hello to everyone today.
Alex Whitlock: Good day.
Phil Tarrant: Now who's the better fisherman?
Alex Whitlock: Well clearly me, but Mitchell’s better at property investing now, so I'll concede that one.
Phil Tarrant: Good one.
Mitch mate, tell me about property investing. How did you get started? I think it was all about a fishing trip went wrong or something.
Mitchell Burge: It was. I bought my house that we live in when I was 20, but I always wanted to invest, but I didn't know where to go. There's a lot of things you can read about. Everybody seems to be an expert in it, but I actually went for a fishing trip with Alex and we got talking about it and then you guys released an article in, a long time ago, ‘10 properties in 10 years’ and something clicked.
Alex Whitlock: It was actually, I’d like to talk about fishing for a bit because it's obviously important. You took me out, it was you that took me out fishing. You showed me some things that I had never seen before, catching kingfish in Pittwater on lures which was very unlikely for me. We had a great day fishing and it was on the way back in, we'd fished for, I don't know, four or five hours. We were actually going back in and I knew what you did vaguely and you knew sort of vaguely what I did and it was on the way back in as we were cruising down the creek that you were talking about buying another boat.
This was the actual catalyst. You were talking about spending, I don't know, $30,000 on another boat, it's when you still had that little tinny, and I said, ‘Have you thought about buying a property?’ That was what sparked it. It was actually on the way in. We'd fished for hours without even talking about anything other than fishing.
Mitchell Burge: That was it, but it was after that, I got reading and it was that article because that article, ‘10 properties, 10 years’, it actually had details of regular people, tradesmen like myself, doing extraordinary things, big portfolios.
Alex Whitlock: That was that cover story for SPI.
Mitchell Burge: Yeah, so it was a combination of driving back and that and that kind of triggered it and within a month, didn't buy that boat, thank you for that, and we put it into a property. Within a month or six weeks from that fishing trip, the first investment was bought and that was in Minto. We managed to close it for $265,000 near housing commission, on a main street. Rental income at the time was $365, put money in our pocket every day, so it was positive yield.
Alex Whitlock: What year was that, just thinking back? It was probably three years ago, wasn’t it?
Mitchell Burge: Yeah, it was only three years ago.
Phil Tarrant: Mitchell, tell me a little bit about yourself mate. You said you're a tradie. I think there's some extremely smart tradies around now who can generate good cash via what they do, but you actually run quite a large business, don't you?
Mitchell Burge: I do now, yeah.
Phil Tarrant: What do you do?
Mitchell Burge: I've got an air conditioning business. We do commercial buildings like what we're in right now all the way, we do about 1,000 domestics a year.
Phil Tarrant: Okay.
Mitchell Burge: We've got just about 20 staff now, but it's taken years to get that to there, but I separate the portfolio as a different company and that's a different company. We don't mix the two at all, but as you guys would know, even when you're creating business with business expenses, people think business owners are always wealthy. That's not always the case. Coming up with the cash for the portfolio wasn't easy.
Phil Tarrant: You've got a business which generates you cash. I imagine you draw an income out of that, which gives you the capacity to be able to service a loan.
Mitchell Burge: Absolutely.
Phil Tarrant: Talk me through how you started off the financing of your original investment. Did you have some cash stuck away that you wanted to use for a rainy day? Or was ready to go into a new boat that you said, ‘Here's some deposit money, this is what I can use to get going’?
Mitchell Burge: Two things. I bought my original place of residence when I was 20 and didn't kick off the portfolio until I was 29, so in that time even though I paid too much for that house, I bought it at the peak of the market, there was still equity there to pull down. I pulled down on that equity.
Alex Whitlock: You've been very diligent. I just remember from sort of, even going back to that first fishing trip, that you'd really put a lot of your salary into paying down that mortgage. I think, I know yeah, the property had gone up in value, but you'd really made a big effort as young man to pay down that mortgage.
Mitchell Burge: Absolutely. That's why the portfolio grew so quickly. From the day I got the mortgage when I think I was 20, 21, I put everything into it. As I earned more money and things, I lived the same life that I've always lived and never splurged out and put everything into that mortgage so we could do this.
Alex Whitlock: In other words, a tight-arse.
Mitchell Burge: Tight-arse, yeah. That money that I was going to put into the boat, that went into the first portfolio on top of that. Even then I didn't want to draw too much.
Phil Tarrant: Let's talk numbers mate. How many properties you got, 13?
Mitchell Burge: 13 including the place of residence.
Phil Tarrant: Alright. What's the total value of your combined assets in terms of property?
Mitchell Burge: Combined? What, business as well?
Phil Tarrant: No, no, no, just your properties.
Mitchell Burge: Oh, property, about $4.3 million.
Phil Tarrant: What sort of debt do you got on that?
Mitchell Burge: Leverage now is pretty good. We're only at 58 per cent.
Phil Tarrant: You're at 58 per cent LVR?
Mitchell Burge: Yeah.
Phil Tarrant: For our readers, what Mitchell’s referring to here is the loan-to-value ratio. This is the proportion of debt he has against the value of his property – and at 58 per cent, that's, to a lot of property investors, that's very conservative. Guys would be sitting there with money burning holes in their pocket thinking ‘I got to get up to 80 or 90 per cent. There's plenty of fat for me to buy more properties’. Is that the plan moving forward?
Mitchell Burge: Yeah, what we've done is, it sounds pretty aggressive, 12 property purchases in 2.5 years since we first started, but it actually hasn't been and most people have the capability to do it – because I had $300,000 to draw down on the house. At the time the median house price in Minto, three years ago, what we were looking to invest was $250,000 to$260,000. Then, since that market dried up and got out of control, we've moved to Brisbane, $250,000, $260,000. You're looking at approximately – I used a buyer's agent, Right Property Group, Steve, absolute gentleman, has been helping me along the way, like you have Alex.
I've been, on average, I put down about $60,000. If you look at a $300,000 draw down, allow for reno, you can comfortably do quite a few properties with that and you're not leveraging and then if you, if it's the right sale and it's neutral yield or slightly positive, it's not costing you a cent. You're making immediate equity on the way in and you're making money out of it each week or breaking even, so there's no limit. You can keep going.
Phil Tarrant: You represent a very, very small percentage or a fraction of Australian investors who own more than two or three properties. You've got 13 properties, well you got 12 investment properties plus your principal place of residence and you've only achieved that in less than three years’ time. That's impressive. Do you think you're a big-time hot shot property investor these days? I'm giving you a hard time, but mate, there's not a lot of people walking around with that many properties under their belt.
Mitchell Burge: I left school in Year 10.
No not at all, no and I've noticed that most of the blokes, I still wear a tradie uniform even when I'm not on the tools, I can't help it. No. I deal with a lot of people now that have portfolios that I can't even believe that they're that successful and large and I find usually the more successful they are, the harder it is to read on them, they hide it. They don't want to talk about it.
Phil Tarrant: You're more of an accidental investor, do you think? Or was this always going to be that?
Mitchell Burge: Always.
Alex Whitlock: Sorry, can I take things back Mitch? Just to that very first property. You moved very quickly after reading the article in SPI and also our sort of brief chat, but just going back, I mean, you're now with 12 investment properties under your belt, just give, I think it would be good to give our listeners just a bit of a sort of an insight into how you felt buying that first property, what kind of experience it was and perhaps what you've done differently since.
Mitchell Burge: Okay, it's a rush. It's a game that can have bad consequences but it's the most rewarding thing I've ever done. Buying that house and seeing that it wasn't in the best condition, the Right Property Group negotiating it, meeting Ross from Aussie Home Loans, building a better relationship with you and Munzurul, our accountant and the whole team pulling together, it's really rewarding.
Then to get the tenant in there and actually see the figures and everything come together, the animal works. It's actually, at the end of the whole thing, it was paying me and then within one year that place went up $100,000.
Alex Whitlock: Because I remember talking to you when we were just cruising back at the creek on the boat and I was sort of just outlining – we'd bought, I think, we just settled in St. Marys or one of the properties out there and I was talking you through just sort of some rough figures and you just refused to believe the numbers I was talking you through. I know and you're somebody who's cautious, you're a business person, for you to actually go ahead and still look into that and to see that those numbers stacked up, just tell me a little bit about the enlightenment as you started to look at the numbers and evaluate them.
Mitchell Burge: Just going back a sec, what closed it was, I didn't believe the figures, didn't think it was feasible and I'm a businessman, so I wanted to study them and I did and then I went and saw a property that you guys were closing near Nepean Private Hospital that you guys bought.
Mitchell Burge: Yeah. I was there. You guys did it and I went out there and saw it and then you –
Alex Whitlock: Was that when we were doing the reno was it?
Mitchell Burge: Yes, and I saw the property, I saw the exact figures and went, ‘This is actually real. This isn't a joke’. Then I started doing more recon and then that lead one thing to another. And if a property's paying you an income or breaking even, and they're going up, every property you're buying makes equity, you never need to stop.
Alex Whitlock: Yeah.
Phil Tarrant: Have you got any nails in your portfolio, any dogs that are just?
Mitchell Burge: Nothing.
Phil Tarrant: No?
Mitchell Burge: Nothing. Not one.
Alex Whitlock: What's your worst-performing property you would say?
Mitchell Burge: There isn't one.
Alex Whitlock: Okay.
Mitchell Burge: No, the way we've done it and I'm going straight from this meeting to a meeting with Steve from the Right Group, from here, because what we've done is we've set plans, very simple plans. Sometimes we'll buy, like for example, we got a 930 square metre block in Brisbane with a big house on it, but it's got a low yield. It loses us a bit of money. But that block and its location strategically is going to be worth a lot of money. So it's going to be a money maker over time, but the yield doesn't break even. But then we've got some small units that we've paid as low as under, just under the $200,000 mark, which is so positively geared they make a lot of money. So every purchase we buy, we re-evaluate.
Alex Whitlock: So it's a balance of capital gain and cash flow – but it sounds like a lot of your properties give you both capital gain and a cash flow?
Mitchell Burge: Absolutely, but the trick is we make sure that they all balance.
Alex Whitlock: Can I just, for somebody as ambitious as yourself and I've known you for a long time and I know the way you're wired, what is, right now, what are your goals and not just in terms of your property portfolio, but how does that align with other goals in life?
Mitchell Burge: Okay, I’ve found in business, this can be demotivating because you can do a lot better in this than you can flogging yourself 10 hours a day, five, six days a week, but I love business, so I can't help it and this has been, this portfolio is actually going to overtake the business this time next year – we're looking at the figures – with not much work.
Alex Whitlock: That's incredible.
Mitchell Burge: Which is mind blowing because the business, we've nearly got 20 staff, so you make money every day when you wake up depending on the market but the goal is now financial freedom, stability. I was brought up quite poor, single mother, public school.
I've seen a lot of friends follow the wrong way down the tracks and fall apart. I don't want my kids to be brought up poor or their kids, so what we're doing now is, my partner, she's been really positive in helping me and supporting me over the time. I now can't do the portfolio, it's too big, and the business, I'm now branching off more into the business and she's taking over the portfolio.
Alex Whitlock: Okay.
Mitchell Burge: As she's getting better and getting more trained in it, she's going to keep growing it. Now, we're now putting properties across into her name. You need to spread liability. We've got trusts and subsidiaries set up and we're putting in, when we start a family, when we get married in a few months’ time, we're planning a big family, every child that we have we're going to create a trust and put a house in that trust, so they're set for life – so this isn't just us. We're going to set this up for our kids and their kids.
We've also now got to the point where I did leverage a little bit high to start with but the market was, interest rates were very low, the property was going up. I could sense it, and I made a calculated risk that, I could see the market had more in it. It was worth taking a calculated risk and hitting it very hard, so we did. We've now pulled back a little bit because there's not that much in it. We're paying down debt, which most people aren't doing and we're reconvening and calculating the next move.
Phil Tarrant: Mitchell, mate, we can chat about this all day, what I want to do is get you back in here in a couple of weeks’ time to run through some other stuff.
Mitchell Burge: Done.
Phil Tarrant: I want to look at serviceability, you're talking about how this is going to overtake your business interests at some point, but your business gives you the cash flow to be able to continue to invest in property and the lenders are happy to give you that cash to move forward. I want to pick that up in a bit of time but mate, thanks for coming in today. I really do appreciate it. Alex, thanks for joining us mate.
Alex Whitlock: Thanks so much.
Mitchell Burge: Thank you very much.
Phil Tarrant: See you guys.
Alex Whitlock: I hope I'll be invited along for the next one.
Phil Tarrant: Well maybe, we'll see. Thanks guys. Remember to follow us on smartpropertyinvestment.com.au. You can check us out at Twitter and Facebook as well. We'll see you soon. Thank you very much. Bye.