Property Podcast
53 Reasons Phillip King Picked Retail Shops Over Residential Properties
November 14, 2021
Phillip King has $30 million worth of reasons he’s the Sutherland Shire’s king of commercial real estate. Aftera 30+ year career at IBM Australia, where he was one of the first mobile phone owners and worked with computers as big as living rooms, he thought it was time for retirement. He was wrong. Harnessing 3 decades of commercial investment thanks to his childhood chats with his Uncle Joe, King realised his calling and jumped at the chance. Now with 53 commercial properties of his own and a database of 350 clients, he’s living the career of his dreams.
In this episode King delves into what it was like to grow up in God’s country, where his childhood revolved around sport and definitely not around writing books! The author of Engines of Wealth: Commercial Retail Shops describes how and why he got involved in commercial property investing, and why residential property just wasn’t the fit for him. Plus, millennials rejoice: we hear how you can have your avocado toast and flat whites and save for a house deposit, using just one spiralling method!

Timestamps:
01:20 | A Passion for Property
04:38 | Retirement? No, Thanks
15:09 | Early Days in Engadine
17:05 | The Great Generational Debate
20:59 | Tapes and Pagers
24:52 | The Times They Are A-Changin’
28:17 | Transient Tenants

Resources and Links:

Transcript:

Phillip King:
[00:26:15] I remember her calling me, 'Son, I'm sleeping better at night, my anxiety's gone and this shop will just tick away, and I can now help my daughter, I don't have to ask her for money.' So an amazing turnaround there. 
 
**INTRO MUSIC**
 
Tyrone Shum:
This is Property Investory where we talk to successful property investors to find out more about their stories, mindset and strategies.
 
I’m Tyrone Shum and in this episode we’re speaking with Phillip King, the Sutherland Shire’s own king of commercial real estate currently with a portfolio of over 50 commercial properties. He shares a wealth of stories, ranging from his carefree childhood to his unexpected degree, and answers the age-old generational debate: who has it harder?
 
**END INTRO MUSIC**
 
**START BACKGROUND MUSIC**

Tyrone Shum:   
After a 33 year career at IBM Australia, King tried retirement on for size but found it didn’t quite suit. However, while he was at IBM, he was harbouring a passion he could turn to.

A Passion for Property

Phillip King:  
[00:01:20] I held several roles there, sales roles, and ultimately sales management roles. And during that time, I had a passion for property. I owe a lot of that to my uncle, who was an accountant. But first and foremost, he was a property investor. And he taught me a lot, and I think instilled an interest in commercial property. 

[00:03:45] When I first retired, my day to day used to be to get up, get dressed, go to golf. I sort of thought that I'd like to have a really good crack at being retired. And so I started playing golf three to four days a week. But after a couple of months, I realised that you really need to do things within limits. And that was too much golf. And ultimately, I got bored. 

[00:01:45] And throughout my 30 year career at IBM, I was collecting and purchasing commercial retail shops. And I'm happy to delve into why I found that a superior asset class to build wealth on. So during my 30 years at IBM, I continued to buy commercial properties. And I've managed to build up a portfolio now of 53 commercial properties. Which, to prevent my children having a garage sale with my life when I pass, Tyrone, and I knew they wouldn't sit and listen to me for two hours, or even an hour podcast. But it was my hope that they would read the book that I wrote, to teach them why I've built up this portfolio of commercial properties. 

[00:02:37] And if they keep them, how they will be able to live off the income that they generate. And hopefully, if they understand the principles in the book, they'll be there for their grandchildren as well. So I spent the last few years of my career, when I was traveling overseas, in and out of airports— which seems a distant memory through COVID— I wrote chapters and pages whenever I got the chance. And eventually, when I retired, I published the book, which is simply titled, Engines of Wealth: Commercial Retail Shops.

Tyrone Shum:   
Day-to-day life is much busier now than it was during the golf days, but that’s just the way he likes it.

Phillip King:   
[00:08:16] I've got a database of about 350 real estate agents. I try and ring them every month, just to ask them what they've got listed, what their line of sight that they're about to list, and hopefully, so that I can secure properties before they even go on the internet and on the market. 

[00:08:33] And once I've found those properties, my job is really analysing that particular property. And I might analyse 15 properties to pick two or three properties that I really like. And that analysis would entail checking all of the outgoings. Often there's a lot of outgoings that aren't declared. I've got a great article on the website, there's a website that you can go to, enginesofwealth.com. It talks about alarming omissions. Agents just like to say, 'Well, here are the outgoing rates, water rates, council rates, insurance.' 

[00:09:07] And it's like magically no other outgoings exist, but there's often real estate administration charges, there's annual fire safety inspections. There's annual audits, if you're charging outgoings. You must have an allowance for repairs and maintenance. 

[00:09:24] So part of my job is to just make sure all the outgoings have been accurately declared. And we do land on the correct net rent, because that's what we're basing our valuation on that property. It's based on a capitalised return on that net rate. It's so important. So a lot of my analysis work is done on each and every property and that also involves me talking to the tenant. And in my book, pretty well everything that I've learnt over the 30 year career investing in commercial property I've captured in the book, but it's about all the questions that you want to ask the tenant. 

[00:10:00] Have you reported anything to the landlord that hasn't been fixed? Does the roof leak when it rains? Do they have public liability insurance themselves? How's business? Are you making money? Is the rent killing you? And a lot of these tenants are more than happy to have a talk, if you tell them, 'The building's for sale, I'm interested in purchasing it, ultimately, I may become your landlord.' A lot of them are happy to have that conversation with you. 

[00:10:32] So the bulk of my day really is, if I have time left at the end of the day, I spend it searching on the web, but also then interacting with clients. And it's about me understanding my clients' budget, understanding my clients' investment goals. And what I typically say to a lot of my clients is, 'I'm not really here to help people buy one commercial property, I'm here to help my clients build a portfolio of commercial property that will generate a positively geared income that will fuel their retirement.' 

Tyrone Shum:  
He delves into his personal background which involves a degree you wouldn’t expect, and a reminder of just how far the mobile phone has come.

Phillip King:   
[00:12:12] I grew up in Engadine, which is God's country, they call it, Tyrone. The Sutherland Shire. I went to university in the University of New South Wales, I became a chemical engineer, and realised four years after graduating, that I really didn't like chemistry. And I got a job in IBM, which was obviously computers. I felt fortunate to be in IBM, it was a large global company. And I had the privilege of traveling internationally for many, many years with the company. So I got to see a lot of the world through my job and business. And I think I was also in an industry that just had amazing growth over that 30 year period. Right now, when I first started, the computing power in your mobile phone wouldn't have fit in an entire lounge room.

[00:13:21] I felt very special to be one of the first people with a mobile phone, and I carried it around with a car battery to run. So a very interesting career at IBM. And as I said, my uncle was an accountant. And I used to go out a lot and I used to babysit my nieces and nephews. And he would pick me up to drive me down to babysit and the following morning, he'd drop me back home. And I got the privilege of being in the car with him for a half an hour down and a half an hour back every day. And we would just talk about properties. And so that's really where I had a passion for property. And my uncle John just instilled that in me. And has been there as a sounding board pretty well through every property that I've purchased.

Tyrone Shum:  
[00:14:17] Is Uncle John still alive? 

Phillip King:  
[00:14:20] Yes, he is. And he's an accountant in Helensburgh and he still knocks out tax returns at 84 years old. 

Retirement? No, Thanks

Tyrone Shum:
After his book was published, he found readers approaching him to thank him for writing something so accessible and understandable. 

Phillip King:
[00:04:38] And I was starting to receive a lot of requests to assist people with their search for a quality commercial investment. So again, I asked my mentor, my uncle, my accountant, what I needed to do to be able to help people with their search for a commercial property. And that entailed actually getting a real estate license. And so after 33 years in the IT industry and approaching retirement, I spent four months studying real estate and attaining my real estate license, so that I now act as a buyer's agent, helping people get property. 

[00:05:24] And I'll be honest, at first, I thought the hard part would be finding clients. And the easy part would be finding investments. But it's been quite the opposite. I've had a lot of inquiries from clients. And have been able to secure a lot of interested investors. And one of the difficulties has been actually finding good quality properties at healthy yields. 

[00:05:55] And as you know, we can talk about it a bit later, but three years ago, when I started, I'd never really bought properties in Victoria. Because in Victoria, the yields and properties have been capitalised down there around the 4-4.5%. And lately I've been seeing them trade at 3% yields, which for me, has just been too expensive. A lot of the properties that I own, that I started buying years ago, and I'm talking 15 years ago, in Sydney, because I was able to buy properties around that six and a half to 7% yield. 

[00:06:32] Well, unfortunately, Sydney has now followed the path of Victoria and properties here in Sydney are trading around that four, four and a half, 5% yields. Very tight. So my search took me to what I like to call the golden rectangle of Queensland, which is the Gold Coast, Brisbane, Sunshine Coast. Because I'm able to still purchase properties and find really good investments up there around the six [to] 6.5% yield.

[00:07:04] And a few years ago, two years ago, I was buying them at seven, seven and a half, even 8% yields. And we do need to be careful, there'll be properties out there today that you can still buy at eight, eight and a half percent. But typically, they'll be in remote regions, or they could be in flood zones, there might be an underlying problem that we really need to be careful that we're not buying potential problems. So that's my caution. If you see a property at a high yield in today's market, there may be underlying issues that we have to investigate.

Tyrone Shum:   
In everything he does, he has his family at the forefront of his mind and his plans.

Phillip King:
[00:11:08] And the most important thing about that is that we're actually building a legacy for your children. Because long after you go to God, this money won't stop. These properties will continue to generate this positively geared income. So you have the confidence and comfort of knowing that this income, this portfolio you've created, is a legacy for your wife and your children. Because that money will continue to roll in and fund and fuel their lives. So that's really what I'm working with with a lot of my clients. And I have several clients that have bought five and six properties through me already.

Early Days in Engadine

Tyrone Shum:   
King’s siblings were shocked to find that he was writing a book, as the idea just didn’t mesh with the brother they grew up with.

Phillip King:  
[00:15:09] I went to Engadine Primary, I went to Engadine High. And I lived in Engadine with my parents till I was 24. I moved out around the corner and rented a house with mates in Engadine. And I was into waterskiing, and sport and squash. Furthest from my mind was studying and excelling in any sort of academic endeavors. It was just purely sports focused. 

[00:15:39] And now my brothers and sisters can't believe that I was an author! But the book isn't a love story. It is absolutely, purely, the way to build wealth out of commercial property. And it explains the principles of why this is such a superior asset class.

[00:16:02] Then I moved to Como, married, I had a daughter to my first wife. And my investment career certainly had two major phases when I grew up. I started buying residential property. And my theory then, which a lot of people, I think, agree and pursue, is that you buy a residential property at the entry level of the market. I used to love it when I found a residential property with a granny flat because it had that dual income potential. And you knew that when the market lifted, the value of these entry level properties was going to rise. And it didn't have the sponginess of the higher properties. 

**ADVERTISEMENT**
 
Tyrone Shum:
Coming up after the break, King reveals his thoughts on the debate of whether young people have it harder...
 
Phillip King:
[00:16:23] My annual salary was $25,000. So when you hear our kids today say, 'Dad, we've got it harder than you.' And everyone says, a lot of us older generation will say, 'No, you haven't, it was just as hard when we were young.' 

Tyrone Shum:
A brief history of the PC, which may sound unfathomable to some...
 
Phillip King:
[00:22:32] A PC had a hard drive. Over there, they had these machines called 3380s. And they were about the size of a refrigerator. 
 
Tyrone Shum:
He shares the conversation with the bank manager that changed everything.

Phillip King:
[00:28:17] The bank manager rang me and said 'Mr. King, we're not lending you any more money. We're too exposed to you now. You're so negatively geared that if all your tenants moved out, you wouldn't be able to afford to pay the loans.' 

Tyrone Shum:
And that’s next. I’m Tyrone Shum and you’re listening to Property Investory.
 
**END ADVERTISEMENT**

The Great Generational Debate

Tyrone Shum:
King’s very first residential property was a two bedroom unit in Cronulla, which he paid $105,000 for.

Phillip King:
[00:17:05] At the time, I'd just graduated and got a job working for IBM. And my annual salary was $25,000. So when you hear our kids today say, 'Dad, we've got it harder than you.' And everyone says, a lot of us older generation will say, 'No, you haven't, it was just as hard when we were young.' Well, it absolutely wasn't. Back then the average wage was $25,000. I bought the unit for 104 times your average salary to buy a unit in Cronulla. Today, that very same unit sold a couple of months back for $850,000. Now the average wage is only sort of $80,000 [to] $90,000. So it's over 10 times more. So when our kids today say, 'Dad, we've got it harder'— please, let's believe them. They absolutely have.

Tyrone Shum:   
[00:18:01] You're the first to say that! Every person I’ve interviewed said that the kids just don't understand it, and the generation back then was just as hard!

Phillip King:   
[00:18:09] As a matter of fact, I was published in an article in the Leader, which is the local Shire paper here. And that article I wrote was called A Different Property Path. And back in my day, and I'm 56, we couldn't afford to just go straight out at entry level age, when we just started working and buy a four bedroom house. They were out of our reach. So we bought a residential two bedroom unit. And that was our stepping stone, to buy the unit first, which was affordable. Help us pay it off, either stay living at home with your parents and rent it out so that you had a tenant helping you pay the mortgage, and pay that loan down to the point where eventually after five or six years, you can sell that unit. And then upgrade and buy a house. 

[00:19:05] And the article I wrote for our young kids today to read was really a different property path, which meant there needed to be an extra step. And I think commercial property can provide young people that extra step. Because I've bought clients commercial properties for as little as $230,000. So it's a low barrier to entry. Young couples can afford that. And they can use that commercial property as a stepping stone to get to the unit and then get to a residential house. 

[00:19:39] So that's what the article in summary was about. It was adding that extra step and how commercial property enabled them to get into the market. To get a tenant to actually start helping with them paying the mortgage and building their equity and getting the capital growth happening. As they increase the rent each year, the value of that shock is going up in value, that they can ultimately leverage against and get themselves to the next step being the unit.

Tapes and Pagers

Tyrone Shum:   
He explains how he got his job at IBM, and lets us in on how the computers of the day worked— as long as the weather held up.

Phillip King:   
[00:20:59] We were about two months out of graduating in our fourth year at university. And I was sitting at the Roundhouse Cafe at the University of New South Wales. It's still there. And I used to work as a waiter in that Roundhouse Cafe, for a bit of pocket money. Over on the board, you tore [it] off, there was an IBM interview board, and they had tear off time slots. And I tore off a time slot. And I went to the interview with IBM at the Roundhouse Cafe. And I got a second interview in an IBM, and eventually, they gave me a job. 

[00:21:41] So I never spent one day as a chemical engineer. I was straight into IBM, and they taught me. I spent the next 12 months in IBM's school at Rosebery, where I learnt how to fix machines. So I was literally running around with a tool bag. And back then I was in what was called the mainframe team. And I would fix large CPU processes, which is— if you think about a PC, it's got a motherboard, when you're talking about the big machines that the Westpacs and Commonwealth Banks and NABs of the world ran— that motherboard was a big CPU. Central Processing Unit. And it was a big machine about the size of your bedroom. And I was trained to fix those. 

[00:22:32] A PC had a hard drive. Over there, they had these machines called 3380s. And they were about the size of a refrigerator. And there were basically big discs spinning inside them, which had accessible heads that went out and read the data. So I would fix those machines. And then also the permanent storage of the day back 33 years ago were tape drives. And I used to fix the tape drives. So data would be stored on what was called a direct access storage device, the hard drives, because that was accessible quickly. And then when it wasn't required, and it needed to be archived, it would be written to tape. And then the tapes would be filed, if they ever needed, in the event of a disaster, to reload that data. 

[00:23:21] So I was trained by IBM in all those machines. And then I was given a pager, one of the first mobile phones in Australia. And you'd be running around answering calls when clients rang up and said, their machines failed. Out you'd go and you'd fix those machines. But back in the day, when we had a lightning strike, it was a busy time. Because all the machines fell over. All the computers, all the motherboards would seize. Obviously today when lightning hits, the technology has advanced and it doesn't wipe the memory and wipe the disk like it did in the old days.

The Times They Are A-Changin’

Tyrone Shum:   
After his successful career at IBM, King settled into family life.

Phillip King:   
[00:24:52] I got married, I had my daughter. And I guess like any father would, you're besotted by your daughter and your marriage and you want the best for your family. And I had a definite drive to create a bright future for my family. And I meet a lot of clients. And that's their underlying drive of what they want to do. 

[00:25:15] Now, as you get a bit older, it also becomes, 'Well, I want a solid, reliable income stream, so that I never have to work again ever, through my retirement and when I get old.' And what's happening, obviously, with COVID and the fact that banks are offering super low interest rates, is a lot of these retirees are now faced with that very problem of having to work again. Because the strategy they chose back then was one of just put your money in the Commonwealth Bank in a term deposit. And that is no longer working for them. 

[00:25:49] So I've got an article on my website called For The Times Are A Changing. And it's about an 86 year old lady, Val, Goodman, who for the very first time, at the age of 86, pulled her term deposit out of the bank, and bought a commercial shop, which is returning over 7% it's a little pool shop in Kowloon on the Sunshine Coast. And I remember her calling me, 'Son, I'm sleeping better at night, my anxiety's gone and this shop will just tick away, and I can now help my daughter, I don't have to ask her for money.' So an amazing turnaround there. 

[00:26:29] But for me personally, at the time when I had my daughter and was newly married, my strategy at the time was to build a portfolio of residential property. And look, it went really well. And I dare say there's a lot of people that have been into residential property have done very, very well. And predominantly, they've done well because their property has risen and has had this capital growth. And when they look at their investment performance, they're counting that capital growth. 

[00:27:03] But as you know, you can't live on it, unless you sell the property. And if you sell the property, you have to pay capital gains tax, which means that money is not working for you anymore. And then you've got the money and then what are you going to do with it? Put it in the bank at  0.1%? No. And so a lot of people choose to keep their residential properties. 

[00:27:24] Typically they're contributing because they bought them negatively geared. And over many, many years, they may become neutrally geared, but they're really not to the point where they're going to generate an income that's significant enough to live on. So that's the first problem. But what I found is that as I purchased residential property, the first property you buy you're negatively geared and you'll wait a couple of years and you buy another one, leveraging the equity in the first one. And then you buy another one, and another one, and eventually you start to spiral in. 

Transient Tenants

Tyrone Shum:
When the bank was looking at him, he was becoming more and more negatively geared as he purchased more properties. All was well, until the day he tried to buy property #6.

Phillip King:
[00:28:17] The bank manager rang me and said 'Mr. King, we're not lending you any more money. We're too exposed to you now. You're so negatively geared that if all your tenants moved out, you wouldn't be able to afford to pay the loans.' 

[00:28:30] And I remember screaming at the bank manager, saying, 'What's the chances of six tenants all moving out?!' And the bank manager looked at me and said, 'Well, it's actually higher than you think, Philip. All the tenants are transient. They are renting because they don't own a home. They're all probably saving to go and buy a home themselves, and they'll leave. They've all signed short six to 12 month leases, some of them are going month to month. And a lot of tenants after their six month or 12 month period, a lot of residential tenants demand, 'Can I go month to month?' Because they don't know what they're doing. Or they get a job elsewhere and they terminate the lease.'

[00:29:10] So, typically that was the bank's position. And if you compare that to commercial property, when you buy your first commercial property, when buying it on a mathematical formula that will see a six and a half percent cash flow return. So when you buy your one commercial property, you're positively geared. You buy a second, you double positively geared. Suddenly you got three times cash flow, four times cash flow. And as you keep buying commercial property. So in residential when I got to six residential properties, the bank stopped me borrowing any more money.

Tyrone Shum:   
[00:29:48] That's when things changed, is that right? To decide okay, this was your turning point to do something different.

Phillip King:   
[00:29:54] Well the truth be known, Tyrone, I got— what happens to some people is you get divorced. And I thoroughly don't recommend that for anybody. But if it happens, it gave me an opportunity. Because the judge said, 'Mr. King, you have to sell those properties and give out your ex wife.' And you shake yourself off, dust yourself off. And you get to reset, where you go in on the second time. And this time, I'd had that experience. 

[00:30:21] And so this time, I started my new life with my second wife, who I've been with for 20 years, purchasing positively geared commercial properties. So this time when I got to my sixth commercial property, and I went to the bank and asked, 'Can I have a seventh?' The bank manager said, 'Yes, you could.' 

[00:30:42] So what you're doing is, I call it you're now riding the outward spiral, where your cash flow is growing. Every time you collect a property in commercial, it's growing your cash flow, and what do the banks love? Cash. So the banks love this positive cash flow income. So I was able to continue to grow that portfolio out to where it is today. 53 properties. 

[00:31:24] As you're collecting up, you're spiraling in, where you're becoming more and more negatively geared to the point where the bank says 'Stop.' And in the book, we talk about the outward spiral, where you're buying commercial properties, and you start spiraling out to where the bank says, 'Keep going.' And they enable you to keep going. And right now, I've only just finished a meeting this morning with my bank manager. I'm looking at buying another commercial property.

Tyrone Shum:   
As for his first residential property, he ended up renting his two bedroom Cronulla unit to a very well-known Sutherland Shire organisation.

Phillip King:   
[00:00:24] I rented it out to Cronulla Leagues Club. And they had a football player come over from England that was playing for us for the season. And they rented it off me for 12 months. And I rented that unit for about three years before moving into it.

[00:00:58] It was absolutely fantastic. I mean, to own property... I mean, even when I remember receiving the contract, and it was an inch thick, and I remember sitting there, and I wanted to try and read the whole thing. And I did give up after probably halfway through and thought, 'I need a lawyer to do this. This isn't me.' And I was just genuinely rapt to own my own property. To know that I had somewhere that I could stay in. That I wasn't reliant on my parents anymore. 

[00:01:37] But also the fact that I was renting it out. Because I bought the property fully furnished. It was a divorce. And the couple sold it to me— I wanted to offer $100,000, we agreed on $105,000 but they leave the furniture. So I was able to rent it to Cronulla Leagues Club fully furnished for a football player to come in. So I was getting a premium rent to what other two bedroom units were achieving here. 
 
[00:02:08] So I was stoked that I had my wage. So I was paying my savings off the loan from my IBM job. So I was still living at home. Any money that I could save, I was paying off the loan, I was paying the interest and I was on an interest only loan. And any money that was left over from the tenant, I was paying off the loan by choice as well. And the value of the property was increasing every year, as properties do. 
 
[00:02:45] I love that expression on the superannuation ads. 'Past performance is no guarantee of future performance.' So there's no guarantees residential properties aren't going to cool, flatten or even go down. I mean, as we know, they've gone up. I've heard 30% this year, which is an enormous increase. So there's every chance that property prices could flatten. 

[00:03:17] What pleased me the most was that I now had an investment, where I was building equity three ways. My savings, the tenant's positive income, and capital growth. And I knew I just had to keep that property for a couple of years, then I could borrow against that equity that I'd built, and go and buy the next property.

Why Commercial Over Residential?

Tyrone Shum:   
[00:03:41] Coming down to the first commercial property, because after as you mentioned, you got divorced, and then you had a clean slate to start again. Why did you decide to go into commercial property instead of going back into residential? How did you determine that factor or that change?

Phillip King:   
[00:03:58] It's a good question. And one of the questions you sent me through, Tyrone, was maybe you could tell us about your worst moment in your investing. This is a big reason. For any residential landlord, it's the fact that you have your tenant stop paying the rent. And that can be a nightmare. Because, look, you can take them to court, and you need to get the judge to evict them. And let me tell you, the courts don't want to see young families and children evicted onto the street. So it's not that easy. 

[00:04:36] And a judge has in the past said, 'Well, no, I'm confident the tenant has had some misfortune. They've lost their job. He's been retrenched. There's a confidence level there that I have that he'll get work. You can give him six weeks to get a new job and start paying rent again and work out a plan to catch up.' And whether you as the landlord say, 'No, no, I'm done with this tenant, I want him out'— no. 

[00:05:08] Tenant issues can be bad. And I had pretty well one of the worst experiences with a tenant where they stopped paying the rent. I started legal action to have them evicted. And in the end, I got a phone call from one of the neighbors that said, 'Oh, do you know your tenant's moving out?' And it was the middle of the night. And I went over there in the morning. And the state of the property was indeed, not what I had hoped for. It was terrible. 

Tyrone Shum:
You may think dogs make the biggest messes, but there’s one pet you haven’t thought of yet that can easily outdo them!

Phillip King:
[00:05:39] The individual tenant had owned a pet python, a snake, which you don't see very often. But the unique problem with that is that it excretes an oil out of its skin, which left a black film on the carpet. So I was up for new carpet, I was up for $4,500 in new carpet. They were heavy smokers. And so the roofs and the gyprock ceilings were stained grey. I needed to take two weeks off work, I needed to paint the property. The grill and the ovens hadn't been cleaned for the two years that were there. And I pretty well just went down to Second World and bought a new oven and put a new oven in there. 

[00:06:23] The gardens and the lawns were overgrown and had never been done. And this is something that I talk to my clients about— it happens, it absolutely happens. So I was left to take two weeks off work, go in there, paint the property, replace the carpet, do all the running around to get tradesmen to fix things and ultimately spend about $8,000 to get that property back up to a lettable state so that I could get a new tenant in there.

[00:06:54] Now, do you want to be doing that in retirement? When you're old, and you're living on the money that's being generated from your investment portfolio? If you've got a portfolio of residential properties— and this is a regular occurrence— and you've got to continually get tenants out and fix properties back up. Because it's not their property, they don't want to spend their money on it. 

[00:07:17] And let's compare that to a retail shop. When you're buying a retail shop, effectively, you're buying three best of brick concrete walls, a concrete floor, a glass shopfront. There is nothing really in there that you own. Everything in there is the tenant's fitout. So they spend their own money on the fitout. Some tenants spend $100,000 [or] $200,000 on the fitout for their shop, because they want their clients to have a beautiful shopping experience. 

[00:07:50] And in addition to that, the only things that can go wrong is two things. The air conditioner, and you know what? To cool that 80 square metre [or] 100 square metre concrete box, you only need a five [or] six kilowatt unit, they cost about $5,000 and they last 10 years. And you can write them off on the government's instant asset write off in the first year. So it's not a big expense. It's not going to break the bank. 

[00:08:22] And the only other thing that can go wrong is the hot water service. And they're even cheaper. They're, like, $1,000 and they last 10 years. Actually, I have a shop that I just pulled the hot water service out at Yarrawarrah Shopping Centre. And I said to the plumber, 'Is that worth fixing?' He said, 'Have a guess how old it is.' I said, 'I have no idea.' 32 years. I think that’s a record. I had one hot water service last for 32 years. Now I don't say they don't make them like that anymore. But I think you'll get 10 years out of a hot water cylinder. 

**OUTRO**

Tyrone Shum:
Phillip King’s story continues in the next episode of Property Investory. He shares the extraordinary story of his favourite tenant of all time...
 
Phillip King:
[00:11:50] I went up there, literally my jaw dropped and hit the ground. And I said, 'Oh my god, I own this. I own this building. Wow!' 
 
Tyrone Shum:
How wealth management is all about playing the game...
 
Phillip King:
[00:13:28] If you really want to be wealthy in life, who do you ask? And there's an analogy that I heard that said, 'Let's treat life as like a game of football.' 

Tyrone Shum:
He gives insight into how he came up with the title for his book, Engines of Wealth.

Phillip King:
[00:22:47] I was sitting in Vietnam in a place called Nha Trang, which has a big dragon going over the bridge, and every half hour, the thing shoots fire out of his mouth. And I sat there with a bottle of bourbon and started writing out potential names for the book. 
 
Tyrone Shum:
And that’s next time on Property Investory.

**END OUTRO**