Property market update: Melbourne, December 2021
Melbourne capped off a bumpy 2021 with double-digit annual growth, triumphing over gloomy start-of-the-year forecasts. H...
In this episode of The Smart Property Investment Show, Guy Williams is in the studio to discuss his buy and hold strategy and 37-strong property portfolio.
Joined by host Phil Tarrant and regular co-host Tim Neary, Guy discusses the perils of procrastination, the importance of getting good advice and why he believes investors should ignore the ‘doom and gloom’ of headlines when looking to make a move.
All of this and much, much more on this episode of The Smart Property Investment Show. Tune in now!
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Property refers to either a tangible or intangible item that an individual or business has legal rights or ownership of, such as houses, cars, stocks or bond certificates.
Welcome to the Smart Property Investment Show, with your host, Phil Tarrant.
Phil Tarrant: G’day everyone, Phil Tarrant here. Thanks for tuning into The Smart Property Investment Show. I’m the editor of Smart Property Investment. I’m joined by a regular co-host of mine, Tim Neary. How are you going, Tim?
Tim Neary: Good, Phil. Thank you. Thanks having me on the show, big fan of the show, as always.
Phil Tarrant: Good, so is the rest of Australia.
Tim Neary: Absolutely.
Phil Tarrant: And growing. If you haven’t tuned in before, thanks for finding us and listening to us. Tim Neary is someone that joins me regularly on the show. He works with us here at Momentum Media. He’s the editor of our real estate platform for real estate agents, so he’s my turn-to guy for understanding the nature of the real estate market and the sizzle of real estate agents and what they’re focusing on. Yeah, appreciate you lending your insights.
For those that don’t know me, I’ve been in this game for ... property investment space, writing about it at least for probably a decade, so I don’t claim to be an expert, but as a journalist, and something that you can probably agree with Tim, you’re fortunate you speak to a lot of people so you become a good conduit of information.
Tim Neary: You do, it’s true.
Phil Tarrant: I really love doing the show. I’m fired up about 2017. I think it’s, for every property investor, irrespective of your current situation, don’t be pulled too far behind by doom and gloom merchants in the media. I’m not one of those and Tim’s not one of those, but look for opportunities. As always, great opportunities in property investment. You just need to know what you’re trying to achieve and how you’re going to achieve it. That’s my two bits to get going.
I’ve got a guy in the studio today who I think is probably going to lend some insights and experience of two decades of investing. Guy Williams. Guy how you going mate?
Guy Williams: Very well. Lovely to be here.
Phil Tarrant: Before we come on air, you were chatting a little bit. Maybe let’s start with a little bit about your background, right. When you started talking, there’s a slight twang. I think you’ve lost a lot of it but you’re not born in Australia, you’re born somewhere else. Where’s that?
Guy Williams: Born in the UK.
Phil Tarrant: In the UK.
Guy Williams: Grew up there, went to university there and arrived in Australia in 89.
Phil Tarrant: As a backpacker or you come here for some other reason?
Guy Williams: Yeah, kind of. She’s now my wife, but...
Phil Tarrant: Okay. You came out for a girl?
Guy Williams: My girlfriend at time, we’d met. She was in Japan studying so she’d done an economics degree here and was in Japan studying...
Phil Tarrant: As Aussie girl?
Guy Williams: An Aussie girl. Yep. We met in Japan and got together there and both had the same agenda, which was to spend some time in Japan then travel down through Asia. She made it pretty clear that if I wanted her coming to England, it wasn’t going to be an option, so...
Phil Tarrant: Understandable.
Guy Williams: Here I am. The plan was to come down through Asia, travel round Australia, go to New Zealand and then reluctantly go back to the UK, and I’m still here.
Phil Tarrant: You found a home?
Guy Williams: I did, yeah.
Phil Tarrant: What do you do for a ... I only met Guy literally, for our listeners, literally five minutes ago, so I know nothing about Guy. I really enjoy learning about these stories. What do you do for a living Guy?
Guy Williams: The day job is, I have a corporate training business so I go into organisations and I work with new or inexperienced managers who aren’t quite doing what their managers expect them to be doing, whether that’s around performance or around growth or around results or around motivation or around teams, or whatever it might be. I then work with that group of managers for, it can be anything up to 12 months. The idea making them much better as what they are paid to do and possibly not at the moment doing.
Phil Tarrant: I imagine that a lot of the trainings that you ... A lot of the content of your training, in terms of the mentorship of young managers and etc., etc. Do you use a lot of that ... I don't want to go into that, but do you use a lot of those skills sets within your other career and that career being a property investor? Is that something like the process or the rigour or the systems or ...
Guy Williams: Yeah, there would be some linkage, yeah. Some tide over to that.
Phil Tarrant: Okay. Talk to me about property investing. Couple of decades you've been doing this now.
Guy Williams: Yep, been investing for ... The first property was bought here in 96, which was ... or 95, which was a two bedroom unit in Freshwater, which was the only one that we've actually sold and we sold that one a few years later to buy the house that we now live in, which is in Beacon Hill.
The strategy has been a buy and hold strategy from the word go. We bought the first one in Freshwater. At the time the word rentvest didn't exist I don't think.
Phil Tarrant: I think that's only really about a year old, that whole ... Personally I don't like the term, I think it's a stupid term.
Guy Williams: It didn't exist back then, and I remember having looked at the property and having a conversation with the tenants. At the time my girlfriend, now my wife, we were living in Manly and I think we were paying something like, I don't know, I think we were paying 180 a week to live in a place in Manly, which we were more than happy to live in, and this people we were speaking to in the apartment were paying 200 and so I just said to them, "Well, okay, well we're going to be 10 or 20 bucks ahead if they just ..." Stumbled into it.
Left them in the unit once we'd bought it. The idea was that we would eventually move into it. Then a year later when I go and see the accountant, he talks about all these things we can get back and all these things. You end up with getting some tax back. "That's great. That's fabulous." I said, "How do we get a bit more back?" He said, "Well buy another one." That's just simply been the strategy, so it's just been a buy and hold strategy for 20 odd years.
Phil Tarrant: Okay. That's sensible and I imagine being ... All in the city market? All your properties?
Guy Williams: No, we started in the city market. We had the first one in Freshwater and then we actually bought a couple down near High Park, some studios there. We had two studios there. We bought them a year or two apart and they've been fabulous. Then we had a two bedroom apartment in Chatswood, so we bought there. Then we just carried on purchasing and went into states, so went into Queensland, or in Victoria and we're in South Australia. We're not in Northern Territory, we're not in Western Australia at all.
Phil Tarrant: Okay. There is an adage here all the time; it's not about timing the market, it's time in the market. You've had 20 years of being in the market, as in you've had assets that were experiencing the benefits of time. Benefits of time is that thing go up in value, and hopefully the rent's gone up in value.
Guy Williams: I think definitely time, length of time, but I think if you could time the Sydney market right.
Phil Tarrant: Absolutely.
Guy Williams: I know you bought when you did.
Phil Tarrant: Yeah.
Guy Williams: I remember buying in Gold Coast before the boom there and the prices, they doubled for me in 12 months. I thought I was an absolute genius. Then of course they did nothing for another 10 years. I also remember buying our first house in Beacon Hill and it went ballistic for about 12 months. Again, I thought I was a genius and then it did nothing until about three of four years ago and then it's going crazy.
Phil Tarrant: Gone crazy again.
Guy Williams: I think if you can time the market, fabulous, but rather than getting too worried about that, get into it and it's the time.
Phil Tarrant: Get into it. I want to chat to you about making that step into the market, but I guess my point is, if you're in the market you don't have to worry about timing the market, because the market's going to do what the market's going to do. If you're there, and obviously you're buying in places which should be going up in value because they're good investment assets. If you're in a market and for some reason market's boom, well you're going to get the benefits of that. How big is the ... How many properties in your portfolio now?
Guy Williams: Okay. I'm reluctant to say, because-
Phil Tarrant: That's cool.
Guy Williams: I will tell you because the number's quite large, but if you think about it spread over 20 years, it's not particularly special.
Phil Tarrant: It's timing and -
Guy Williams: It's 37 properties.
Phil Tarrant: Okay.
Guy Williams: Which, if you just say that number -
Phil Tarrant: That's a lot of property.
Guy Williams: 37, I haven't got one. Spread out over 20 years, that's only one or two a year. The difference was that I just kept doing it.
Phil Tarrant: Going.
Guy Williams: Just kept doing it and ignored the noise. I ignored the noise.
Tim Neary: You did say from the start you had a buy and hold strategy.
Guy Williams: It was a buy and hold strategy, but while I was doing ... It was interesting last year when people were saying, "Are they going to remove negative gearing?" That's a little bit of noise. Over a 20, 30, 40 year timeframe, it doesn't really matter. If you don't listen to the noise and just think 15, 20, 25 ... The little ups and downs, I mean, I've seen huge interest rates, I've seen low interest rates. You see all these things happen, but over that length of time it doesn't really matter. I think the noise gets in the way of people doing things.
Tim Neary: That's real gold that Phil. I come back to what you were saying a little earlier when you started the show and said, "Don't get caught up in all the, sort of the doom and gloom going around." The question is guys, how do you ignore the noise? If you get caught up in it, it can get a little overpowering. How have you done it?
Guy Williams: I suppose it's trying not to listen to it, because you read a newspaper or you ... They're looking for headlines, they're looking for stories, so they want you know, "Interest rates are about to shoot up! You know, they're going to go ... They're going to go ballistic in 2017." "Oh, well therefore, I'd better not invest. I've missed the boat." Or there's a price bubble and so property prices are going to crash. "Oh, thankfully I'm not in it." There's all this noise and it comes out on a daily, weekly, monthly ... It's just mainly just ignoring that and just thinking-
Tim Neary: Do you ignore it or do you get advice from somebody? Do you talk to somebody, talk to experts in the market?
Guy Williams: What I appreciate is that the market in Australia works at different speeds. Personally I think Sydney is, if not at the top of the ... Is very close, so very close. Would I right now be putting a lot of money into the Sydney market? Well, at the moment I'd struggle with yield, which is the rental return, and I'm not sure there's going to be the same growth over the next four years that there has been over the previous four. I could be wrong, I don't know. Whereas I think there are other markets and some of your other listeners and speakers have spoken about some of those other markets, that are ... I do, I listen to that. I guess what I'm ignoring is the too much the doom and gloom.
Phil Tarrant: Don't listen to doom and gloom merchants. This is what we try to do with the show, isn't it Tim? We're journos, we've got to concentrate on headlines because that's what people like to read, but we also see our role as one of responsibility to make sure that we're not ... I don't want to bring people down, I want to paint the picture that property investment is a good thing if you do it right. The stories that you're explaining right now, sounds like you've been doing it pretty right. 37 properties, is that right?
Guy Williams: 37 properties.
Phil Tarrant: 37 properties. The total value of your portfolio?
Guy Williams: Yeah, the total value's probably just over 12, 12 million.
Phil Tarrant: Okay, 12 million, and how much debt you holding? What's the -
Guy Williams: One the day about eight.
Phil Tarrant: Eight.
Guy Williams: What? 7 or 12% I suppose -
Phil Tarrant: There's plenty of equity in there.
Guy Williams: There's plenty of equity. I suppose what I'm not scared of is the debt. To be frank, whether I owe a million, whether I owe 10 million, I still have to sell things to pay it back. If someone said to me, "Look, we need a million from you." Or whether they say, "We need five," I'd just have to sell more stuff to pay that back.
Phil Tarrant: You'd sort it out.
Guy Williams: I don't get spun out by the debt. Also to your point Tim, if we ... Sake of argument, if we agree that property doubles, used to be every 7 to 10, let's say it's every 10 to 12 or even 10 to 15, if you're going to hold that for, call it 10, then my 12 is going to be 24, is going to be 48, is going to be ... It would be lovely if the growth was the same every year, every year, and it's not. There are years that are fabulous and there are years that aren't fabulous. I'm sure the doom and gloom merchants will be talking about Sydney in a few years’ time, saying there's never going to be any more growth and the yield's never going to come back. It's trying to stay on mission. Stay on mission that over the 10 or 20 years these things are going to grow.
I don't think there are too many people who bought a property 10 years ago, almost anywhere, apart from maybe a remote rural mining town, there aren't too many people who bought a property 10 years ago who regret the decision. I don't think. They may have bought one or two years ago and regret the decision or even three or four, but 10, 12, 15, regret it? I don't think so.
Phil Tarrant: The challenge I'm going to have with today's podcast, there's a million things we want to ask you but we've got ... I'm just trying to navigate this chat to work out what information I can pull out of you which is going to be most value to our listeners. I preface that with, why do you listen to the Smart Property Investment Show? You probably represent the 0.0% of Australians who own the number of properties that you own as an investment. You're at the pointy end of it right, in terms of size, scale etc. and sophistication as well, just by chatting with you, you're pretty savvy. You listen to the show and you're on the show, and I really appreciate that, but what do you extract from the show? Someone who is an experienced investor, bordering a professional investor, what do you extract from the show and how does that help you shape or keep you on that mission? I want to ask you what that mission is, but how do you use the show?
Guy Williams: With all due respect to the show, it's not just the show, it's a general state of education.
Phil Tarrant: Yeah.
Guy Williams: I think the moment in any field that you lose that sense of curiosity, or in any field you lose the sense, or you think you know it all, you're in trouble. I have a general sense of curiosity around property and so I listen to you guys, I listen to ... I read magazines, I read books. I've just given my daughter, who's 18, the Rich Dad, Poor Dad book. I've also give her the [Jan Summers 00:12:38] book.
Phil Tarrant: Very good.
Guy Williams: It's all about constant education, so your programme, your magazine, the other programmes, the other magazines, all fall into that category. I suppose I have the view when it comes to whether it be a podcast or whether it be a seminar that you don't go to any of those things, or you don't listen to any of those, and come out having learnt less. I may listen to one of your podcasts and go, "Well, I, I didn't get a huge amount out of that one," but I've never come out having learnt less, so there's always something. There's always a comment or a phrase.
Phil Tarrant: That's a good attitude.
Guy Williams: Something you say or one of your guests say, or in a magazine or an article, and it gives me maybe confirmation of my strategy but also opens me up to other strategies and strategies that I don't want to pursue, like I don't particularly want to do renovations, I don't want to do flipping. I know what I do want to do and what I don't want to do.
Phil Tarrant: It's a strategy and I guess it's connected with your mission. What's your strategy? To summarise your strategy in one really easy sentence for me and the listeners.
Guy Williams: I enjoy buying property. I know which parts of the process I'm not good at and for those parts I get help, so I have a very good broker, I have a very good accountant, I have very good managers of my properties. I flip that round by saying that if I was good at broking, I'd probably do it myself, or if I was good at managing, I'd probably do it myself, or if my properties were all local and I fancied myself as a plumber or an electrician or a DIY person, I'd go round fixing them, but I don't. I know which parts of the process that I enjoy and I'm quite good at and because I enjoy it, I just keep doing it. It's like, you don't ask someone who's a fishermen, "When you going to stop fishing?" Or a golfer, "When are you going to stop playing golf?"
Phil Tarrant: What is it you like about it? A fisherman will go, "I love fishing in because I get away from my wife," or something. I don't know what they normally say, "Or my husband and I love being in the great outdoors." My business partner Alex loves fishing and he's a salesman and he's wired to win. He gets satisfaction out of winning in fishing I believe.
Tim Neary: Beating the fish.
Phil Tarrant: Beating the fish. The persistence, right? He's dogged. What do you actually really enjoy there? Is it about making money? Is it about winning?
Guy Williams: I think the making money is a nice aside. I think that's-
Phil Tarrant: The product of, I guess.
Guy Williams: Yeah, it's a product of. I do love the researching side and I think there's so much good information now, as opposed to what there was back in 96, 97, back in 96, 97. Obviously there was hardly the internet then. There were no podcasts. There was very little research. Any research there was, was very expensive, so now you can get to hold of that quite easily.
Phil Tarrant: People are empowered now.
Guy Williams: They are, and I like the researching. I like finding good properties in good areas that I believe are going to grow and that I believe are going to return a yield. That sense of ... I'm not sure whether winning is the right word, or whether it's just a sense of yeah, that was, that's was a good-
Phil Tarrant: Getting it right.
Guy Williams: Getting it right. Yeah. Just continuing to do it. You say this on the podcast, that it is a business. It is a business, but if you agree that what is it? 95% of businesses go broke in the first five years. Why is it that people are buying all these businesses and then going broke in the first five years? Well, there's a number of reason for that but I think the beauty of property is that for a start, I think you've got a fairly good product, as in accommodation. Unless we move back into caves, people are going to be buying these things or renting them -
Phil Tarrant: People need to live somewhere.
Guy Williams: They need to live somewhere. From that point of view you've got a good product. I think you've got a product, and cash is king in any business, so I'm looking for properties that are going to give me a good yield. Now, when I say a good yield, I was listening actually to a podcast just the other day and you had a couple on who'd gone and invested in Broken Hill I think.
Phil Tarrant: Yeah, about $70,000, I can't remember exactly what it was.
Guy Williams: Getting 13 or 14%, which is lovely, but that's not where I am, but I am looking for between 6 and 7%. Again, the business, you need cash to run this business. I think 6 or 7% return, if you're buying the money at 4 is good.
You also want the business to grow, so you want a rental return, which is your cash. You want growth down the path of the business. Also, in your business you need good staff and you need to know in a business what you're not good at. I suppose, from my point of view, there are things that I know I'm not good at and so I have ... I don't like the word staff, but I have people in the team who are good at those things. Also, with the business, why are you doing it? It's kind of ... Asking me why I'm doing it, and it's a hobby, it's wealth creation. I'm not hugely confident with superannuation, maybe lots of people are. I suppose it's a hobby, it's wealth creation, it's something that I have got better at, it's become a sort of a cookie-cutter model over the years and so I've continued to do it.
Phil Tarrant: It's quite funny. Let's look at property investment as a hobby. You do a hobby because you enjoy it. I surf, myself. I know a lot of blokes who surf and they identify themselves as being ... I don't identify myself with being a surfer. I occasionally go for a surf if time permits and I do enjoy it. I'm not very good at it, but I like it. Guys that identify themselves as being a surfer, you run a lot, you probably would identify yourself as being-
Guy Williams: A runner.
Phil Tarrant: A bit of a runner, right? You're a runner.
Guy Williams: I'm happy to say I'm a runner.
Phil Tarrant: You're a runner. Some people are yogis or foodies or whatever. Do you identify yourself as being a property investor? If I said, "Who are you?" You go, "I'm a property investor," before you're a foodie or a yogi or a whatever else you do.
Guy Williams: Yes, I would also say that my passion is the day job, so going into organisations and helping managers get better at what ... I love doing that. I love doing that, I've been doing it for quite a long time. All of my work there now is through referral and repeat business and I love it. I love the day job.
Phil Tarrant: Good.
Guy Williams: The property is ... Yes, I am a property investor. I identify, but I'm as hands on as I want to be and I'm as involved as I want to be. I know where my skills are and where my skills aren't. To be honest once I've found a property and negotiated a purchase price and negotiated all the terms etc., deciding who the managing agent is going to be, I then just let it ...
Phil Tarrant: Sort itself out.
Guy Williams: Sort itself out. I'm not very then involved in the day to day. I don't want to be involved in the day to day. The day job's what I love.
Phil Tarrant: That's a process stuff, right?
Guy Williams: It is, and there are other people much better at it.
Tim Neary: That comes across very strongly guys we speak to, that you know what you are, you know what you're good at, you know what you want to do and you just go ahead and do what you want to do.
Guy Williams: The things that I'm not good at, I get other ...
Tim Neary: People to do.
Guy Williams: I have a mechanic because I don't know how to fix my car. I have a plumber at home, an electrician. I actually buy my clothes rather than make them myself.
Tim Neary: Don't ignore it.
Guy Williams: Exactly. I know the things that I can do and the things that I can't or don't have interest in, and so it's trying to find others to do.
Phil Tarrant: With your portfolio ... You have a day job and that sounds like a pretty good job, and you have the portfolio, so before tax, so before you get the benefits of tax, are you tipping in money into your portfolio very week, every month to sustain it?
Guy Williams: No.
Phil Tarrant: It's completely self-sustaining. You're not having to supplement the income generated through yield, through rent, to support the portfolio, to grow over time?
Guy Williams: Not now.
Phil Tarrant: Not now…
Guy Williams: The earlier ... The earlier properties back then interest rates were 9 or 10% and there was far fewer of them, there was one or two and so I was getting the benefits of tax and various other things, and so there was a certain amount of money that needed to be tipped in back then. I've hung onto those and so obviously the rents have gone up, and gone up, and gone up. They've grown, and with that growth I've then taken out the equity and bought other things. It's been the perfect storm of course, in that interest rates have dropped and they're now down to, call it 4%.
Phil Tarrant: All-time lows.
Guy Williams: Yeah. 4-ish %, so my strategy of buying properties returning between 6 and 7%, as in rental return, hasn't really changed. What's helped me of course, is that now I can borrow that money at 4, and so yes. Now, the portfolio as a whole, is cash flow positive.
Phil Tarrant: Before tax.
Guy Williams: It is before tax.
Phil Tarrant: Okay.
Guy Williams: Yeah, yeah.
Phil Tarrant: The positive component of that, is that just money into your back pocket to do whatever you want to do with it? Or do you reinvest that into new deposits, complementing or supplementing any equity you might pull out as well? What's the strategy there?
Guy Williams: I'd love to say I don't spend it.
Phil Tarrant: Yeah. It's okay to spend it.
Guy Williams: Some of it does, but the idea is to continue to have deposits. For the properties I'm buying, which are between 2 and 300,000, those deposits are the 50, 60,000 including all the rest.
Phil Tarrant: Do you borrow now, new stuff at 80% LVR, or you go higher?
Guy Williams: I would go higher, but it's harder to go higher. There were days when you could borrow 90% plus. I didn't have a problem with mortgage insurance, I thought that was just the price of doing business, but you get to a stage where the mortgage insurers weren't-Get a bit funny, and they are with me. Therefore, I need to be at 80%.
Phil Tarrant: Do you have a private banker? How does it work? With the number of properties in your portfolio, it's going to start getting a lot harder to get financed, it's just the nature of the beast. Servicability etc. Let's have quick chat about this. How many different lenders do you have across your portfolio?
Guy Williams: About eight.
Phil Tarrant: Eight different lenders.
Guy Williams: Eight different. All organised by my broker.
Phil Tarrant: Okay.
Guy Williams: My broker is aware of my strategy. My broker is aware of my plans, which as I alluded to earlier, is not really to stop. This is now a generation thing, I've got children and just a ... To keep going with it. There's not really an end point.
Phil Tarrant: Is this going to be generational assets? What you're doing is creating long term wealth for the family.
Guy Williams: Yeah, I think so.
Phil Tarrant: That's okay.
Guy Williams: Yeah, I think so. The idea is it's not a distraction from the job that I love doing, as I alluded to. It takes enough time that I can manage, so I can see that continuing.
Phil Tarrant: You set your kids up or their grandkids, you know, for-
Guy Williams: Don't tell them.
Phil Tarrant: Yeah, I know. I hope they're nice to you.
Guy Williams: It is generational, and I think part of that is, not wanting to get too deep and meaningful here, I didn't come from it. I didn't come from money, far from it. In fact, I came from circumstances where there was very little of it. Things happened when I was younger that gave me a view on money which is ... I probably need some therapy around.
Phil Tarrant: This is therapy.
Guy Williams: This is therapy.
Phil Tarrant: With Phil Tarrant. Phil Tarrant Therapy.
Tim Neary: Not just a smart property investment show we're doing here folks.
Phil Tarrant: We get deep and meaningful if we need to.
Guy Williams: It is generational.
Phil Tarrant: I get that. I think it's-
Guy Williams: It's a generational thing. Also, something that my wife and I got some advice on, was also our wills. We've put them together in such a way that ... Obviously if one of us dies, it passes to the other. We've looked at the worst case scenario where both my wife and I go at exactly the same time. I didn't want, at that point, my kids be handed this 12-ish million portfolio and said, "Have some fun with it." We've put in place, things to ensure that's not the case.
Phil Tarrant: That's a really important point that you make. I think a lot of people overlook that. Plan for the worse, hope for the best.
Guy Williams: Yeah, yeah. I think what we didn't want is just hand this portfolio over to the children at an age where they couldn't cope with it. It's a poisoned chalice in that sense. We put things in place that if that were to happen, that the portfolio would be dribbled down to them over a number of years and there would be outside help and things. That was just something we put in place a few years ago as it became obvious that the portfolio was the size it was and it's going to continue to grow.
Phil Tarrant: The advice around that, was that from your broker or some other ... Your accountant? Did they ...
Guy Williams: Yes, it was from my accountant and it was then a good friend of mine who recommended someone to go and see. The accountant said, "Look, you do need to get this in order." He didn't recommend anyone specific, but then someone else did and we've been very happy with that.
Tim Neary: Makes a lot of sense doesn't it? You build up the portfolio over a number of years. If you were just to ... You get used to it. If you were just to inherit it in one go, if you just take it on in one go, it can be a little bit overwhelming.
Guy Williams: Not only is it overwhelming, you also don't have the 20 years of learning. That we've got with it.
Tim Neary: Absolutely. Good point.
Guy Williams: I've stuffed up big time along the way. I've got some lemons in the portfolio. When you mentioned your point about timing, I bought two properties ... I'll say where they are, I bought two properties in Rockhampton about six weeks before the GFC hit, before mining plummeted.
Tim Neary: Nice, nice.
Guy Williams: Yeah, was nice. Yeah. It was great. Good timing. Are they lemons? Well there's been no growth, none at all since 2008. They haven't grown a cent. However, the yields have stayed good, so the yields have stayed around six and a half on both of those. They were a bit of a strategic purchase.
Tim Neary: Right.
Guy Williams: What I'm getting at, there was some learning there, and there's been learnings over the years, and to just give the portfolio to the family, they wouldn't ...
Tim Neary: They don't have the benefit of that-
Guy Williams: That's not their fault.
Tim Neary: Yeah, yeah. Exactly.
Guy Williams: It's not their fault.
Tim Neary: They were -
Guy Williams: We just need to help them.
Phil Tarrant: When you sit there and ... Have you got a deposit ready to roll? Are you buying now? Are you in the market? You're ready to keep growing the portfolio?
Guy Williams: As of today, no. I was quite active last year. Bought four properties last year in 16, 2016. Bought nine properties in 2015. As soon as the equity is there-
Phil Tarrant: You'll do it.
Guy Williams: I go out pretty aggressively. I'm in a little bit of a waiting for some equity to materialise.
Phil Tarrant: You know where it's going to come from?
Guy Williams: Yeah, I've got a pretty good idea where it's going to come from. It's just a matter of getting those properties revalued. As of today, am I ready to go out and purchase? No.
Phil Tarrant: It's more of an equity situation, rather than ability to secure finance situation, why you're not buying [crosstalk 00:26:50]?
Guy Williams: Yeah. The securing finance has never really been a problem. I've got a fabulous broker that I use now. Saying that though, I've had about three or four over the years, and the moment a broker says, "Guy, there's nothing else I can do for you."
Phil Tarrant: It's time to move.
Guy Williams: Thank you, it's time to find a new broker.
Phil Tarrant: I don't mind giving you ... Who's your broker?
Guy Williams: A chap called Rob Horner.
Phil Tarrant: Okay. What's his business?
Guy Williams: I think it's Jack Horner, is his ...
Phil Tarrant: I don't know him, but I know a lot of brokers that specialise in property investors, and when you started getting in these big portfolios a good broker is absolutely key, because you can be hamstrung. A lot of people say, "No way. Too hard."
Guy Williams: Yeah. Look, I feel a little bit sorry for him because he does have a lot of work to do every time he goes off and gathers statements together.
Phil Tarrant: For a 200, $300,000 purchase.
Guy Williams: Exactly.
Phil Tarrant: It's not like $700,000 first home buyer [inaudible 00:27:37] New South Wales.
Guy Williams: I've probably got more property than anyone else on his books, but I certainly haven't got the value that other people have got. There'll be certainly people on his books with greater value, who are probably far less of a headache and involve far less work getting more equity than me. He's been fabulous.
Where I'm going with this is, he knows that I want to access the funds. He knows where he can get me funds from. Do I get too upset by interest rates? I don't get too hung up by that. I'm not going to let .5, or even a percent even, get in the way of me borrowing, because it's about leverage obviously. All your listeners know that. The bigger the lever.
Phil Tarrant: This is 20 years of experience-
Guy Williams: It is.
Phil Tarrant: Allows you to say that. You speak to someone who getting their first [inaudible 00:28:22], they'll be like, "No, I saw a mortgage rate down the road and they're 0.01% cheaper. Can you get me that deal?" A broker will go, "Yeah, that's might be like $20 a year. Does it really matter that much?" Takes time.
Guy Williams: It's a little bit also like when I'm purchasing, am I out to screw the vendor for every last cent? No, not at all. I know what return I want to be getting. I'm pretty confident that it's in a growth area, so as long as I'm getting my 6, 7 ... I'm going to go in there and do my research. I go onto the websites, I've got the CoreLogic RP data. I've got the information, I know what it last sold for, I know what they paid for it. I know how long it's been on the market, so I know those things, but I'm not out there to -
Tim Neary: Yeah, and that fits in with your long term strategy as well.
Guy Williams: Yeah.
Tim Neary: You know it's not going to suddenly, it's going to need to give you a big return quickly.
Guy Williams: No.
Phil Tarrant: It's a business. It's a business. You're making a business transaction [inaudible 00:29:17]. Just sticking on this financing this for a sec, 36 properties is a lot, probably a little bit more difficult to get financed because of the breadth and scale. You need to go through rigmarole of providing rental statements probably on every single property so a bank can determine your ability to service a loan.
You're self-employed and a lot of our listeners are self-employed, and a lot of people who are self-employed invest in property. I hear it time and time again where people are self-employed, and they're self-employed because they try and get really good tax minimization out of it, and they might have the wrong account and so at the end of the day they go, "Oh no, I made a, a loss of X thousands of dollars this year Mr Tax Office. Could I please have that money back?" Then they take that to a bank and the bank goes, "Not giving you any money whatsoever." They go, "No, no, no. It's not really like that." "Well it is because that's what your tax return says." As a self-employed person, how conscious are you constantly around the picture that you can paint to a lender about your ability to manage finance and service debt? You might pay a little bit more in tax within your business because you want to show a business which is very, very healthy. What's your views on that?
Guy Williams: Sure. Well, when I first went out on my own ... I was an employee and then I decided I could do this for myself, which was 10, 12 years or so ago. There were a couple of years there where I was finding it very hard to get money, to borrow money. They needed the tax returns and they needed to see a couple of years of healthy returns. Once that happened and you can show them three, four ... What I'm saying to your listeners, if you do go out on your own, be ready for a one or two years of it being a little lean and a little harder, but assuming that you are in a good business and assuming your business is making money ... The banks want to lend you money, but they don't want to go down the American path of lending it to the wrong people.
They want to lend money but they have their checks and balances they have to go through, so it was hard to begin with, the first couple of years. Again, my broker said, "It's going to be hard to begin with, because you haven't, you can't demonstrate anything." Then having been in the length of time I have, then the banks can see that. They can see the portfolio having been built over a number of years. They can see that it's positively cash flowed, so they can see that it's actually putting money in my pocket as opposed to taking money out. Then it's my broker's job to go out and convince them to lend me, which is why we've moved away from the mainstream banks and we've gone to people like Pepper or we've gone to Liberty or some of the other-
Phil Tarrant: You're using those guys are you? The sort of ...
Guy Williams: Yeah, I've used them.
Phil Tarrant: What do they call themselves now? What's the right ...
Guy Williams: Second tier or something.
Phil Tarrant: The second tier.
Guy Williams: I don't know what -
Phil Tarrant: Originally they were non-conforming. They're not really non-conforming anymore, they're second tier. Non-banks... Non-bank lenders. Non-bank lenders is the right term.
Guy Williams: Macquarie as well, they're not in that ... The traditional sense of CBA or Westpac or whatever. I have gone some CBA loans and I've got some Westpac loans.
Phil Tarrant: I imagine that's probably your earlier stuff, right? Is all the mainstream banks?
Guy Williams: Yeah, although we did refinance the family home couple years or so ago and pulled out quite a lot of equity out of that.
Phil Tarrant: What's your debt position on your family home? Is it big?
Guy Williams: Yeah. It's large. As soon as-
Phil Tarrant: Like an LVR ...
Guy Williams: Of that particular property?
Phil Tarrant: Of your principal place of residence, because the great Aussie way to do things traditionally, probably same with the UK, is that get a family home, you pay it off and then you're completely unencumbered, right?
Guy Williams: Yeah.
Phil Tarrant: You're comfortable having debt against your family home, not driving down a mortgage and using that to realise asset growth elsewhere. What do you run your principal place of residence, your family home?
Guy Williams: The principal place of residence is no different to any of the other investments. In fact, because it's in Sydney and it's on the northern beaches and it's done very well over the last three or four years -
Phil Tarrant: It's been a cash cow for you? It's been an equity cow.
Guy Williams: Yeah. Saying that, I mean we bought it in 2001 for 580 something, in 2001, and it did nothing. For years and years and years, and then it doubled in a ... This is where, to your earlier point about ... If you bought into the Sydney market in 2012, 2013, don't get too cocky, don't get too clever. You've had a very good run since 2012, 13, and I did too, but I'd got into it in 2001 and it did very little, but then because it did grow, and so quickly, we pulled the equity out.
The debt on that, I think I alluded to earlier, it's about this idea of lever. You can have a portfolio of two million, you can have a property of one million, two million, or three million, fabulous. In 10 years’ time that two million will be four million, which is brilliant. I just simply ... I just think going from two to four, I'd rather go from 12 to 24. It's the same ... They're just numbers I suppose.
Phil Tarrant: Just numbers.
Tim Neary: Bigger lever.
Guy Williams: It's just a bigger lever.
Phil Tarrant: Yeah, bigger lever.
Guy Williams: That's why, to your point, I continue to purchase, just getting that lever-
Phil Tarrant: The thing that most people say is bigger lever, it's a lot more risky. Through scale though, you can often de-risk as well. It might be bigger exposure, but your VR position might be lower or you've got more assets in a market in different places, and therefore if market move you're going to get the benefits of that. It's a whole different podcast. We're running out of time, Guy.
Just one thing I wasn't to finish up on in this podcast is, a lot of our listeners, we've got so many listeners to this show right now, who are gonna to invest in property. They're gonnas, right? "I'm gonna do this, I'm gonna do that, I'm gonna do that," and they never do it. They just never do it. One of the earlier points you made around education and just being a sponge and taking the information, that's cool and I highly recommend that everyone does it, whether you're a no properties or 37 properties or a hundred properties, that continued investment in your education is absolutely critical.
A lot of people are doing this but they never ever get around to investing because, "I can't do this year because I'm going to do this holiday. Or I can't do it this year because of this reason. Or I might change my job." There's a myriad reason why you don't want to invest or you can't invest. What do you say to those gonnas and the procrastinators out there? What would be, from a guy who has done well in property, you're confident in your ability to do what you do, you know what you're good at, what you're not good at, but for those people who want to invest in property who are going to do it this year but probably won't do it this yeah, what would you say to them?
Guy Williams: Firstly, think about what's getting in the way of you taking that step. As sort of alluded to earlier, if you ... I said to you that I think a lot of people are change adverse. They don't like change, and the moment you invest that's a change. There's pre-investment and there's change. If you don't really like change, at a subconscious level you'll be looking for reasons why not to invest. All the property's about to bubble, it's about to burst, or interest rates are about to go up. There are lots of reason that you can find for not taking that step. That's the first thing I'd say.
The second thing is I think a lot of investors don't know what the very, very, very, very, very, very first step is. I think what happens, they think, "Right, I'll go on to realestate.com or I'll go onto domain. I've kind of got an area in mind 'cause the taxi driver told me somewhere so I've got an area. Right, and I'll ... I'll look at ..." They look and they go, "I think I've got a price range," and then they see so many properties and they go, "Oh, it's all just too hard." They just, "Where do I start?"
I think getting clear on what the very, very, very first step is, and I suppose my advice would be, the very, very first step would be to find a broker who can tell you if you can borrow money and how much money you can borrow. That would be my first step. Then, assuming you can and you know how much, I would then go to a buyer's agent. There's lot of good ones out there. Do I personally use a buyer's agents? No, because the researching and the buying is something I've learnt over time, I'm quite happy to do.
Phil Tarrant: That's what you like doing.
Guy Williams: What I like doing. That's why I don't use them. I don't like doing the going from bank to bank to bank, which is why I use a broker. I think where people go wrong is the first step they take is the wrong step, and so because the first step's the wrong one, it goes, "Oh, it's all just too hard. Oh and remember, it's about to burst. And oh and remember, interest rates are about to go up. And oh, so ..."
Tim Neary: They're off the path from the first step. They're not on the path from the first step.
Guy Williams: If your very first step is the wrong one, then you ... Journey of a thousand miles starts with a single step. Yeah, but you've got to be going in the right direction.
Tim Neary: On the path, yeah, yeah.
Guy Williams: Get that broker advice first. Let's make sure that you can and how much. Then, use a ... Look, after you've done a few and you're feeling more confident, then maybe don't use a buyer's agents. You've said on the podcast yourself that time is a big component for you. It's not so much, I don't have time, it's just, I'd rather spend my time doing other things. It's not that I don't have time. You do have time.
Phil Tarrant: Everyone's got time, it's just where you choose to put it and place it.
Guy Williams: We've got time. Where do we want to put it? Where is our time best spent? Long answer to the procrastination piece, but make sure that first step is the right one. There's plenty of good advisors and good help. You mention people on the show and people can find out good brokers and they can find out good ... Maybe the very, very, very first step is to find a good broker, but I don't think the first step is to sit on the web and look at realestate.com.
Phil Tarrant: I'd also add to that, I don't think the first step is to go to a property investment seminar on apartments and with some pretty slick sales people. That's often the first step that people make and it's often the worst step [inaudible 00:38:49].
Guy Williams: I think if you're going there from an educational point of view, then-
Phil Tarrant: Okay, that's cool.
Guy Williams: Then possibly.
Phil Tarrant: Just be wary.
Guy Williams: Be very, very wary. Be very, very wary.
Phil Tarrant: It's good. Guy, I really enjoy the chat, you're going to have to come back. There's a whole bunch of other things I want to-
Guy Williams: Love to.
Phil Tarrant: Discuss with you. Appreciate it.
Couple of things I take from this podcast, and like you, I'm fortunate that I get to speak to property investors all day so I learn something every time I have a chat with someone, irrespective of who they are. Sometimes it just might give me a bit of a kick in the backside to go and do what I was going to do in relation to growing my portfolio. Often I'll go, "Oh, that's actually a really good idea. I might look into that further." Couple things I've taken out of our chat, and something I invest in all the time, is my education, constantly. I'm reasonably sophisticated property investor, but I'm always investing in my education. This is part of my education. I'm lucky I get paid to do it. That's brilliant.
The whole procrastination piece, just get out there and get it done and if you don't know how to get started, ask someone or ask for help to try and get started. It's still comes back to yourself. If you're motivated and driven to go about realising how you can potentially transform your life, or plan for your retirement, or create a generational asset which you can hand down through the generations, you've got to start doing something. Speak to the experts.
Thanks for tuning in. Thanks Guy.
Guy Williams: Can I make one more point?
Phil Tarrant: Absolutely.
Guy Williams: Are we out of time?
Phil Tarrant: No, no, no. Let's go.
Guy Williams: I guess if I was going to make one more point about this procrastination is I think people default to worst case scenario. There is worst case scenario, but there's also best case scenario and there's most likely scenario. Before you get stuck on worst case scenario, at least consider the other two. People say to me, "Well what happens all your properties were vacant?" Yeah, if all 36 were vacant at the same time, I'd have a problem. "What happens if interest went to 10% overnight?" Yeah I'd have a problem. That's the worst case.
The other thing I was going to say regarding that, is property is very forgiving. It's very forgiving.
Phil Tarrant: That's a good point.
Guy Williams: You know? Yeah, I've made some dumb decisions over the years, but it's forgiving. It's forgiving. Trust that over the 10, 15, 20 years -
Phil Tarrant: Trust the asset class.
Guy Williams: Trust the asset class. Trust that even if you stuff up, it'll forgive you over the longer term.
Phil Tarrant: Unless you really make a mistake, for example, buying a million dollar property in Port Headland which is giving you 15% yield that today's worth $200,000. That's a pretty big problem that not very forgiving whatsoever. Just don't make your mistakes too big a mistake.
Guy Williams: Well a property buyer wouldn't let you do that. A good buyer's agent wouldn't let you do that. A good one. Probably a broker wouldn't either, so it goes back down to the-
Phil Tarrant: Get on the right foot.
Tim Neary: Got to take the right first step.
Phil Tarrant: You do. You do, but you got to take the first step. Thanks Guy.
Guy Williams: Pleasure.
Phil Tarrant: Let's get you back again. Tim, appreciate it mate.
Tim Neary: Mate, thank you very much.
Phil Tarrant: It was very good.
Tim Neary: Always good to be here.
Phil Tarrant: Yeah, nice one. Make sure you check out smartpropertyinvestment.com.au. We're going to have some stories up there around what we've spoke today with Guy and a bit of a profile. Remember to follow us on all the social stuff; Facebook, Twitter, LinkedIn, you can follow me. You can follow me at Twitter on @philiptarrant. If you want to ask any questions or get onto the show, our contact is [email protected]
Keep those reviews coming on iTunes, we do like them. If you enjoyed the podcast, just I think you press a little button that says 'review' and give it five stars. We like that. The more times we do that, the more people will listen to the show and the bigger and better the community around property investment we can create. Tune in next week. We'll see you then. Bye bye.