Teaching invaluable strategies such as the concept of ‘optioning’ and equipping listeners with the tools to navigate the complicated and expensive current market, Ferris is the perfect person to listen to for those of us trying to get our own house. And, he shares some silly anecdotes from school in his youth. Don’t be fooled: stay in school kids!

Timestamps:
00:01:05 | Childhood Construction
00:03:50 | The Three Metrics
00:07:23 | The Immigrant Dream
00:10:49 | School = Success ?
00:13:15 | The Iceberg’s Tip
00:14:46 | The (Minor) Enjoyments of School
00:20:23 | Brotherly Bonds and First Properties’
00:23:34 | Listener Lesson #1: Guarantors
00:27:00 | Further Education, Further Success
00:34:22 | Listener Lesson #2: Optioning

Resources and Links:

[00:31:25] And, you know, I've got to say that, you know, you've got to judge yourself off your losses, not your wins, because from your wins, everything goes right. And you think, well, I can do that again. I'm a superstar, right? I can do that again. 

[00:31:42] But whereas your losses’ is where you sit back and go, ‘Okay, I did this wrong, I did this wrong, I did this wrong’. Here's what I need to fix and improve for the next time you become better. I don't think you'd become better from your wins alone in isolation. 

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 of Property Investory we’re speaking with cofounder of Coposit, Chris Ferris. A seasoned entrepreneur, he shares his secrets to investing in the current, high-price market as well as the principle of ‘optioning’. Plus, he shares a little anecdote about his time at school!

Tyrone Shum:

Compassionate in a ruthless field, Ferris founded his company to help people like us get into the property market in its currently crippling state. A learned behaviour, his generosity clearly stems from his childhood. The child of hardworking, immigrant parents, Ferris talks about his upbringing and the tools he was equipped with to help pave the way for his incredible journey of success. 

Chris Ferris:  

[00:00:36] My parents, being very much into property, you know, my dad was the first migrant into the country. So he was from Lebanon and came at the age of 14, I believe. So, you know, not knowing the language, not knowing the country, but having to make it work for himself in the family. And he was a plumber by trade. So, you know, he was in the industry working consistently within the construction space. And, you know, we were from young ages. So myself, and my brother Daniel, who's also a co-founder here at Coposit, you know, we were on construction sites from the ages of 9-10 years old, so. 

Bringing his skills into adulthood, Ferris outlines what a typical day might look like for a CEO.

Chris Ferris:  

[00:01:30] Yeah, so Co Founder and CEO as well as Coposit. So again, talking through what Coposit is, is being able to break down that deposit barrier in a really different way for new properties.

[00:01:41] I suppose my day to day is really fortunate where I'm able to hear everyone's property journey, whether it's an investor, first time buyer, owner, occupier [or] even downsizers. I speak to property buyers every day about their biggest challenges and some of the, you know, what we're seeing at the moment. And some of the drawbacks. 

[00:01:58] So, you know, apart from running in the team, there's a team of 20 of us here [in] a closet at the moment. And it's really, really interesting to see some of the stories that we're seeing at the moment, particularly with that rising interest rate environment, very difficult for people to make projects work from being able to get into property. 

[00:02:17] But I suppose on the flip side that we deal with developers, so property developers everyday as well. So not only are we seeing the struggles of people trying to get into property, you know, whether it's a first time property or that fifth property, whether whatever that is, we're seeing the difficulties on the other end from developers in trying to get new stock to market. 

[00:02:36] And we're seeing that on a daily basis, whether it's with [the] government trying to introduce new schemes, and we saw, you know, in 2023, this is what was the main topic of discussion in the media [about] housing supply. But it is very difficult to get that out of the ground. And we're seeing that from developers every day that it is very difficult to get products out of the ground. And therefore that affects purchases and people trying to get into property that it's very difficult because there's no new supply coming on. 

[00:03:03] So that's my day to day, I see a lot of that firsthand and speaking with property developers and speaking with purchasers, and obviously managing the team and motivating our amazing team here.

Tyrone Shum:  

Imparting words of wisdom to listeners, Ferris shares the most important things to consider about development. Summarised into 3 easy points, take notes!

Chris Ferris:  

[00:03:38] Yeah, so my background as well was in development. So after leaving school, started off my career in accounting, and then came into the development space, I've had a good background in development as well. And know a lot of the pain that developers are experiencing. 

[00:03:51] Pre COVID, there was a general formula, right? That made projects work, you had your land costs, you've got your construction costs, you've got your sales prices, and then there's everything else in between, yes, that rulebook after before COVID, that’s got thrown out the window, that doesn't exist anymore, right? 

[00:04:07] So you've got your land price, which is, if you've bought five or six years ago, that's a fixed cost that can't change, the cost of construction has gone up 30-40, 50%. That's a huge problem. But not only has the cost of construction gone up, the availability of labour has also become very scarce. And that's become a problem for people to actually get people onto the sites to get it delivered. That's become a huge problem. 

[00:04:34] And so then the third metrics, which is your sales price, so you've got the cost elements being your land, your construction costs, and there's all those other costs in there as well, but particularly the the land and construction, but then you've got your sales prices, which effectively determines you know, a plus b minus c equals your profit on a project right? 

[00:04:53] And your sales prices are just not increasing enough to be able to get projects out of the ground and make [them] feasible. And we're seeing that on a day to day basis where developers have done their assessments on projects that are just not stacking up. And it's compounded by rising interest rates. And the fact that interest rates have now become a huge problem. And another cost, of course, in development, if you're buying whether it's from a bank or a non bank lender, it becomes very difficult to get projects out of the ground, from the interest rate hikes and interest rate increase from COVID side of things as well. Yeah.

Tyrone Shum:  

[00:05:31] And that's so true. I think you've hit the nail on the head, because of the increase in costs of construction, hard to get labour, you've pretty much eaten. So profit margin of a developer, and then they go, what's the point of doing it? There's no, you know, there's no money to be made. So that's why projects are not getting off the ground, and we're not getting enough supply. But what about the existing supply? That's in the market? What about that?

[00:05:52] The existing supply? I mean, it's, it's there. But, you know, we're talking about first time buyers, they're not buying that three or $4 million property in Lane Cove, like how can they actually afford those properties. 

[00:06:01] So, you know, you had during COVID, interest rates at all time low. Now, you've got interest rates when they're elevated, or some people might call it back to normal, right? The affordability component is very difficult. So were they able to afford, you know, three 400 grand more during COVID, those same properties, they can't actually afford those properties. So there's an affordability issue as well, that people just can't actually get in based on, you know, wage growth isn't happening. So how do you actually get into the property market?

[00:06:31] I scratched my head asking that question every single day.

Chris Ferris:  

[00:06:34] It's very difficult for people to get ahead at the moment. There are ways it's not impossible, of course, yeah. But it is very difficult. And we're seeing it, we're seeing it, people getting in people buying people transacting, which is fantastic to see. But I think having the aspirations to want to be a homeowner and [to] want to buy property is the first step you need to have that aspiration and not have given up. 

[00:06:54] I think a lot of people do give up maybe too early. And I encourage people to not give up so early and keep down that path and find a way to make it work.

Tyrone Shum:  

Escaping a war-torn country, Ferris’ family found themselves in Australia in search of a better life. Although hindsight can confirm for us that they achieved that, Ferris’ childhood was one of labour, gratitude and faith. 

Chris Ferris:

[00:07:21] So I grew up in the hills in Sydney, so out west, southwest, I suppose, in Cherrybrook, [a] little suburb called Cherrybrook. Out here in the hills, I grew up there. I've got a brother and a sister, my parents, so my mum was born here. And as I mentioned earlier, my dad was born overseas, came here at the age of 14. And did it tough.

[00:07:42] It was very, very difficult to come out here from Lebanon to avoid some of the war and some of the civil unrest that was happening in Lebanon at the time and came for a better life. Yeah.

Tyrone Shum:  

[00:07:54] So you must be [a] first generation Australian, because...

Chris Ferris:  

[00:07:58] First generation Australia, and I almost feel there's like this, you know, there's some obligation that I owe to my parents and in you know, particularly my dad, that, you know, he did everything for us to give us an amazing platform, to, you know, build something and make something of ourselves.

[00:08:16] You know, during school [I] talk about my experiences being on construction sites from an early age, you know, with dad, you know, a lot of the time it was that school, and people say 'Chris, are you excited to go on holiday?' I'm like, 'yeah, man, not really'. Two week holidays working on sites with, but, you know, at the time, I didn't, I wouldn't say I hated it. I didn't want to do it. 

[00:08:39] But now I'm looking back like that was the best thing that dad could have done for me. It gave me that experience. That was the hard work element right there. Yeah, he's instilled that, it's ingrained now. 

[00:08:51] So that was an early age, we're like 10 years old, up to 16-17 working on job sites with dad, but that's also probably spawn[ed] the love for property. Because a lot of it was like bathing or as a plumber, it was like bathroom renovations. And, you know, I'd go speak to the electrician, and I'd speak to the builder on site and speak to the renderer. And like he'd speak to everyone. And that's sort of getting all the inputs of property, just by being on site, which was great. It was an amazing spirit. 

Tyrone Shum:  

[00:09:20] Oh, absolutely. That that is invaluable at first when you as a kid, you don't realise the value of that until you know, you appreciate [it] when you're much older, you're just thinking oh, my other friends are going on playing at Why are you pulling me back in here? I don't want to do it. But you're absolutely right. It's only much later. And I think the challenge that we all face is even just the kids nowadays. Everyone wants to get to where they want to go quickly. But the thing is that they don't appreciate the hard work that goes into it because they don't see what goes on behind the scenes until you actually get there. 

[00:09:56] I was forced into it. I still remember it had some mates when I was at the age of 30. Let's say 'Chris, come to the movies today'. And I'm like, 'Nah, man, I gotta work.' So I'm working with dad on site. I mean, my brother, actually both of us. But again, that's [what] bought the hard work, work ethic, I suppose. And it's also brought the love for property we get to today, and that's sort of the early. 

[00:10:18] That was my early exposure to property. indirectly. I didn't think it at the time, but that was my early exposure to it, how to add value to a renovation adds value. 

Tyrone Shum:  

Outlining his childhood, Ferris reminisces on his upbringing. For any listeners who have felt that school wasn’t for them, Ferris’ shares an important lesson: academic intelligence does not necessarily limit your success. Hence, Ferris—a business entrepreneur and CEO—shares his stories about the struggles of school.  

[00:10:52] So [I] went to high school at Oak Hill College there. Although the road was great, a great school. And again, very fortunate to be able to go to such a fantastic school, huge grade, I think there were like 300 Kids, or students in each grade, which then I wouldn't even know if one in each grade at the time, that was a massive school. Yeah. But again, that was a really good tie. 

[00:11:13] I wouldn't say I was a model student, either. My mom was at the principal's office a lot of the time, but, you know, they, you know, it's, you know, square peg round hole, maybe well, what is it? Schools, not for everyone, but I was just restless, I think, you know, and I see that now that school is very structured, and you know, but sometimes you need to come out of that to really blossom. 

[00:11:45] And, you know, I think that's when Lee had left school, and it was a fantastic school, mind you. But having left school, started my career as an accountant studying at, you know, US and Western Sydney University, and studying accounting, and I would say that was a fantastic base. For anyone that's looking to do anything studying accounting, and having an understanding of numbers and how numbers work and understanding money and how money works is really important, particularly with property, you know, property is almost a game of financing.

[00:12:18] So you've got to figure it out, understand that component and how that all works. So I went in, did the accounting side of things, studied, worked for Deloitte top for accounting, and practic[ed] for a bit. And then I bought my first property at the age of 20. Very lucky, and I was pushed into my parents, obviously saying, buy property, buy property. 

[00:12:42] And I was fortunate to be able to buy their first property using a guarantor, a mum and dad when guarantor for my deposit, I didn't have it at the time. It was a $300,000 property in Blacktown, of New South Wales. 

Tyrone Shum:

[00:12:56] Oh, nice. 

Chris Ferris:  

[00:12:57] Great way to start off, you know, I think probably people listening now think 300,000G's.

Tyrone Shum:  

[00:13:01] I know, you'd be laughing if you got that now.

Chris Ferris:  

[00:13:06] You know, it wasn't that long, like when I think about it was 2011. Wasn't that wasn't that long ago. Yeah. So. And that was that started the prop, the love for property or the actual first investment into property. I've done some other investments. 

[00:13:21] So I had my grandfather, I suppose, taught me about investing in shares. So at the age of 16, I think I had saved up a little bit of money from working with that. And then he was giving me 30 bucks a day at the time, which was nice. Thanks. But it was crazy. But he was teaching me how to drive manual at the same time, so I guess that sort of idea. 

[00:13:47] But [we were] able to invest 500 bucks into shares, and at the time [it] was a fluke of quite a lucky purchase, where the company got taken over, we made 100% gain. Wow, cool. So that was my first exposure to a different class of assets, investing somewhere for 400 bucks, 2000 bucks. Then my very next investment, I bought a company called Babcock and Brown. 

Tyrone Shum:  

[00:14:11] Oh, yeah.

[00:14:12] 1000 bucks.

Tyrone Shum:  

[00:14:13] I remember this one. 

Chris Ferris: 

[00:14:14] A 100% loss. Administration sales. So that was my early exposure to shares that I was like, Okay, this is [the] share market. Yeah, yes. It's up and down. Let's get back to property. It's like that, that property investment in Blacktown was a fantastic way to get on the ladder and start the property investment journey. 

Tyrone Shum:  

[00:14:36] Yeah, that's amazing. I want to just take a little step back, sort of paint a little bit more of a picture behind your childhood. I'm actually curious to know. So as you mentioned, when you went to school you did all the things that parents asked us to do. But you felt a little bit restless as you're saying, some of the things that you really enjoyed or have memories of school besides the academic side of things. Obviously, you did okay there, but what were some of the major things that you enjoyed about it?

Chris Ferris:  

[00:15:01] I actually think I did, I did quite well, for not being extremely academic I did quite well, but 98% in maths at the time, it was General, General maths, general maths, that's great. But like that was my claim to fame like it was, that was my thing. So maths and numbers have always had a love for numbers. And, you know, a lot of time property is just sort of a game of numbers. 

[00:15:23] And looking at that, but feeling restless as a kid, you know, it's really interesting, I think I was the youngest of three. So maybe I felt like I had to live in the shadows of my sister who was the oldest and my brother. But just always having to, I think the youngest becomes a bit more resilient as well. 

[00:15:38] And, you know, mom and dad, they did everything they could to give us a great platform, but we weren't reached by any rich family by any means. Like they, I still remember times where dad was self-employed, so not working for anyone. And there were times where, you know, he didn't have work. And I still remember, you know, as a young kid that it was tough. 

[00:15:55] Like, you know, again, they gave us everything we could, but it wasn't easy, financially, there were times where we struggled financially, we didn't go on those holidays, we never went overseas. You know, my grandfather had a caravan in Shellharbour, that was our holiday place, which was the best holiday play as a kid, you don't give it you don't care...

Tyrone Shum:  

[00:16:15] You don't care as long as it was spent with family and you having fun? 

Chris Ferris:  

[00:16:18] Exactly. So, you know, they did everything they could to give us that base, which is why I mentioned that, you know, there's an obligation to me, there's an obligation to actually make something of what we got, and just try and should live with minimal regrets. Not no regrets, as always regrets, but minimal regrets as possible.

[00:16:35] Yeah, it's really interesting that you say that, because I think ultimately, kids grow up, as long as there's family, and lots of love, and so forth. No matter what you go through, you will remember it and I can resonate with you. Because you know, once again, my parents as well, they're immigrants and they came to Australia with only $200. And at times, there would be times where we didn't have enough money, and you'd hear the pain and the stress that my parents would go through. But they get through it because they know how to actually survive. And I think that's a key thing that passed on to the future generations is because you gotta hustle, you got to actually work hard, you got to be able to do all those things. Because ultimately, not everything just fed to you. I mean, if you're working for someone, it's a different story, because you know, you get a secure regular paycheck. But the thing is, when you're running your own business, it's a completely different mindset altogether. And your resilience has to be stronger than anything else.

[00:17:28] Absolutely. And I think that's, that's a really important message to get out there that it's easy when it's not easy, but it's when you're working as an employee, it's you get your paycheck. And that's, you know, you've got your reliability of income. 

[00:17:40] Yeah, when you're self-employed, you don't know when the next paycheck is gonna come. And you don't know, you don't know if that subcontractor is going to pay you, for example, when you don't know that, you know, and at the time, and that did happen to date once, I think was one car where someone didn't pay him. And that was, you know, two or three weeks worth of work that had just not been paid. And that's really hard to take in for the family. 

[00:18:02] But again, like you said, the household was filled with love and affection at the time. And it was an amazing household to grow up into. And they still have a great relationship with mom and dad. And even now so you know, I think they're always encouraging us and trying to push us to do better and to do things. 

[00:18:20] And now I'm at the point where we were pushing so hard on my dad's get[ting] a bit older and probably more conservative. He's like, slow down. So it's really interesting to see that dynamic. come into play where it's like just slicker slow down like you do it a lot. 

Tyrone Shum:  

[00:18:34] Yeah. 

Chris Ferris: 

[00:18:35] Which is really interesting, because he's always been pushing and pushing. 

Tyrone Shum:  

[00:18:37] Yeah. 

[00:18:38] I guess maybe in old age, they get a bit scared or risk averse, right? 

Tyrone Shum:  

[00:18:42] Yeah, risk averse. I got exactly the same thing. Your dad and my dad's probably very similar age because he's telling me the same thing. What's wrong, dad? You're the one usually telling me to go faster and harder.

Chris Ferris: 

[00:18:52] Oh, wonderful. We tell our kids that.

Coming up after the break, Ferris explains the value of a guarantor loan in making or breaking one's ability to finance and structure a property investment

[00:21:50] And so, you know, the whole structure of having an 80% loan against the actual property, and a 20% loan against, you know, a guarantor loan with your parents property, or whoever goes guarantor, you know, avoiding Lenders Mortgage Insurance and being able to buy a property with effectively no deposit, but you know, that you can service that property.

He shares the secret regarding rental returns and granny flats.

[00:27:55] Yeah, the yields on the granny flats were just amazing, were 20 odd percent, because it costs 100 grand to build a granny flat and you're getting the same rent as the granny flat as the front house, which was incredibly, 

And reinforces the most important lesson of all: have resilience. 

[00:31:59] And what followed were some losses, let me tell you, so what we decided to do after that seven figure gain was We then went and said, ‘Well, we can do this again’. Let's go option up our stack more properties. 

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

Tyrone Shum:  

Unlike many others, Ferris’ story of success is also a story about family. Crediting his passion for property to his parents, Ferris outlines the role of his family in his journey.

Chris Ferris:  

[00:19:10]  So we went from Cherrybrook as our primary residence for our family home, then we moved to a small block enduro as well. So they're still out there and also never had investment properties or anything like that. 

[00:19:25] But then my brother was the first one to buy a property at the time. So he bought it in Seven Hills. And it was a completely rundown I think Housing Commission property where they start to sell some of them off every now and again, went to the public auction. He won that by 500 bucks, and he wasn't going to bid for it again. And that's like, not just keep going. Go one more than that. 

[00:19:49] I remember Daniel sounds like he showed that he's like, yeah, just go for I'll give you the 500 bucks like it's okay. And he won and at the time, and I think we've all been through this when you buy a property every single time you win an auction or You buy a property, you always think you've paid too much at that time.

[00:20:03] I mean, I don't know about you, but every single time, every single time you win it, you're like, oh, wait, she's gonna pay too much every single time. And obviously time, you realise time makes you realise you've made the right decision.

Tyrone Shum:  

[00:20:16] In hindsight.

Chris Ferris:  

[00:20:18] Hey, it's always in hindsight. But that was the first experience where it was completely rundown, so [we] needed to renovate it. So we were all working together with my brother Daniel, working together to renovate it, we added some value. And then about a year later, I was able to purchase my property in Blacktown. 

[00:20:33] And that was the same thing. But it wasn't the next time the Housing Commission bought a property where it needed work, it had this huge old concrete pool in the back, it was a completely non compliant pool, which I didn't know at the time, it needed to be compliant. No pool fence. 

[00:20:48] And this was just as the laws were coming in, I believe where you needed to register pools and make them compliant. So we had to renovate the whole property and then add value, and I was looking at how to add value to the property and the renovation was one of the key ways to do it. And I was fortunate to have a really good mentor at the time in the finance side of things.

[00:21:12] So mum used to work at the bank whether she was managing it or not. She was a teller at one of the Commonwealth Bank branches in Pena Hills, which I believe has since closed down. But she introduced me to Carol, who was one of the lenders there at CBA. And she gave me a lot of different ideas about financing. And that's what really opened my eyes to how you finance things and how you can buy property. Yeah, so she introduced me to the idea of the guarantor loan.

[00:21:41] Ah, okay, and that's where you open up your world of finance, and you go, hmm, actually, this is going to be interesting, we could potentially access this and et cetera, correct.

[00:21:50] And so, you know, the whole structure of having an 80% loan against the actual property, and a 20% loan against, you know, a guarantor loan with your parents property, or whoever goes guarantor, you know, avoiding Lenders Mortgage Insurance and being able to buy a property with effectively no deposit, but you know, that you can service that property. So she really opened up my eyes into that side of things and being able to finance and structure how to buy property.

Tyrone Shum: 

[00:22:15] So just explain for the audience's listening out there. They're probably wondering, because guarantors now aren't very common, as you probably know, because that's changed a lot. But how did that function work? Did your parents say for example, your equity from their place to guarantee the 20% deposit or something else was structured?

Chris Ferris:  

[00:22:31] Yeah, so they had to, they had a mortgage on their property already. And they had to refinance their mortgage to allow me to actually attach the security in black down to their property as well. So there was an 80% loan. So it was about 240,000. Against that, passing Blacktown. And it was the balance being a $60,000 loan against the parents property. 

Tyrone Shum:  

[00:22:51] Yes. 

Chris Ferris:  

[00:22:51] But then Carol also structured it so she said to me. She goes ‘Look, you need to pay off your guarantor loan as soon as possible’. Okay, well, how do I do that? 

[00:22:59] So then she then structured at the site, that the bigger loan, which was against that property, the main property, do an interest only component and then pay principal and interest and put all the other payments on to your parents guarantor loan, in a couple years time, we'll see what the property is worth and refinance it, and then remove the guarantor loan, and credit to her in about four years time we actually refinance, got my parents out and was able to, you know, I think you've got valued at 400,000, roughly at the time.

[00:23:28] I was able to get my parents out, which was just amazing. But it would have taken that fast tracked my property journey, because it would have taken me four or five years to get to that deposit, Target, and be able to get into the property market. So really fast track. So that's amazing.

Tyrone Shum:  

[00:23:44] That's amazing. Yeah, I was gonna say exactly that, because that just leveraged to help from the parents usually helps people or kids, especially with their kids getting into the property market. Without that I think a lot of kids who struggled to be able to save up men 60k. Now, today's money in terms isn't that much to save up. But in saying that, it's still a lot to be able to actually contribute towards buying a property because you'll take time to build that. Me nowadays with properties more than million dollars, people have to say, almost like 200,000. So you'd like to think, how the heck do I do that? 

Chris Ferris:  

[00:24:13] Well, it's crazy. I know, we're going to dig into this later on on the deposit side. But that's the exact reason why composite was born because of the difficulties people face trying to save for that first time deposit or even if it's a second property, that deposit is the primary barrier stopping people from getting into the property market.

Tyrone Shum: 

[00:24:31] Yeah, it's always the case with any brand new buyer, because they don't understand is, you know, if everyone had like a carol like you did, it would have been much easier for a lot of people in our generation to be able to buy but I don't think a lot of them really understood that concept until now. So in hindsight, it's always a little bit too late.

Chris Ferris:  

[00:24:47] It has its risks. I mean, like, there are risks that come associated with the guarantor loans, which I think why people don't don't like them as such, but it was my leg up and my way that my parents were To help out to be able to get me into property really fast track my journey. 

[00:25:04] And the second way they were able to help me was, you know, I was able to live at home and not have to leave. I think maybe that's the old mentality, maybe the Lebanese mentality, maybe even or I've seen some of the Asian I've got a good friend of mine who [is from] the Asian family the same way they refused to let them leave the house until they actually bought a property and saved up where. 

[00:25:25] And that just helps, you know, if you have to leave at the age of 18,19, 20 and have to rent a property because of that cashflow that's the power of compounding. And you're not able to put that into a property or put that towards your deposit. That's a huge issue. 

Tyrone Shum: 

With the previously outlined troubles regarding school and motivation, Ferris definitely seems like the active type of personnel. But, in a surprising twist of events, Ferris actually decided to go to university! And, for a reason he’s about to share, he chose accounting.

Chris Ferris:  

[00:26:02] This has really come down in school. So I, the reason why [in] year 11 and 12, I decided to do accounting and the numbers side of things, I was doing really well in maths. And I think the accounting side just seemed like a natural fit.

[00:26:17] I always had an interest in numbers. And I always had an interest in business. And I think being an accountant, you get to see every type of business, you get to see which businesses make money and which businesses don't. And you get to see, you know, a balance sheet and Profit Loss and how this all looks. 

[00:26:32] And that actually complemented the fact when I was doing share trading, looking at all share investing while looking at companies and looking at balance sheets and looking at, you know, why are they profitable, and look at, you know, the insights into companies that this was such a natural connection for me to be able to actually go into the accounting side. So I spent five years doing my accounting degree because I was working full time at the time. 

[00:26:56] So I was doing University part time doing that at night, and working, and also then going into the accounting side of things. That was for about a six year period. And I got into property development after that with myself and Daniel, my brother, 

[00:27:12] Daniel had done a very different career path, he'd gone down the construction management side, and into the construction field. So [I] followed dad's footsteps on that side. So we're looking for an interior fit out company. And we both had our property purchases at the time. 

[00:27:27] And we said, look, we've got a bit of equity here, you know, how can we leverage this to, you know, to buy more property? And that's always been the limitation for us in property is capital? How do you leverage your capital as much as possible to get that next property or to invest? And during that six year period, while I had bought that property and was working, I managed to figure out how to get a high yield on my house in Blacktown, which was by putting a granny flat on the back.

[00:27:55] Yeah, the yields on the granny flats were just amazing, were 20 odd percent, because it costs 100 grand to build a granny flat and you're getting the same rent as the granny flat as the front house, which was incredibly, 

Tyrone Shum: 

[00:28:07] It's absolutely crucial because it's a brand new granny flat. People actually want that new even though it's smaller, but you're still getting the same rental return.

[00:28:13] Exactly right. It was a brand new property. It was [a] great rental return, the front house and the back House released for the pretty much the same amount. So it's like I doubled my income for a 10th of the cost on that property, which was fantastic. So that helped build more equity into the property. 

[00:28:28] I think it's about generating more cash flows. But then we sort of said, what do we do with this equity? Do we just buy another property and put another granny flat and just keep repeating that cycle, which was a sound strategy at the time as well, if we had done that and done one every year, you'd have 15 or 20 by now. 

[00:28:45] And it's a very good strategy from an income perspective. But we were very interested in the development space and apartment development in particular. And Daniel had been notified because he lived in the area in Seven Hills. He'd been notified that there was an area in seven hills that was going to get resolved. And Council were looking to rezone a particular area around Seven Hills train station. 

Tyrone Shum:  

To listeners: bring the notes back out. Imparting absolutely invaluable advice, Ferris teaches us about a somewhat unorthodox method to help purchase property. For those of you who are keen to enter the property market, this just crack the code!

Chris Ferris: 

[00:29:15] I said, ‘Well, what's optioning?’ and optioning is a way and I'll explain a little bit where, you know, typically a property purchase is [when] you find a property, it's worth 600,000. You pay a 10% deposit usually to secure and you're settling 42 days later. Whereas with options, you're actually going to someone too and there's different types of options you got and call options or just put options or just call options. 

[00:29:44] But we would go and approach homeowners and say hey, we want to buy this particular property. You know, we think at the moment it's worth six or 700,000, which is what it was. But we'll give you 900,000 If you grant us an option to buy that property in say 24 months time And, and we'll give you 1% of that 90 days upfront as the call option fee.

[00:30:05] You know, there's three main things to the option, which is time price. And the amount upfront that you're paying the amount upfront is always need[ed] to outlay. So that made it very easy for us to be able to option up multiple properties and start, you know, amalgamating sites. We went out to that area in seven hills, and we're able to option up four properties in a row. And that was, you know, an amazing experience. 

[00:30:32] We had two other great mentors that were with us on that and [an] accountant and a lawyer, who introduced us to the idea of, I suppose, the structure of optioning. And the accountant also acted for quite a lot of large developers in Sydney as well. So it gave us the idea of, you know, if you amalgamate sites, this is how you put them together. 

[00:30:49] And we've always had the interest of getting into development. And those two partners also became our investors into a lot of the projects as well. Very good, very good. Yep. So we managed to get four together. And then what we did with that particular four was, we had optioned it up for a particular amount, and then ended up selling it. And we sold it to a developer and made a seven figure gain on that out. 

[00:31:11] So we're talking about a 2,000% increase in our investment, it was to lock it to lock all those properties up was about 150,000. But we've made a second seven figure gain on those particular properties. 

Tyrone Shum:  

[00:31:23] And it's phenomenal. 

Chris Ferris:  

[00:31:25] Right? So that was the start of the next phase of the property journey. And, you know, I've got to say that, you know, you've got to judge yourself off your losses, not your wins, because from your wins, everything goes right. And you think, well, I can do that again. I'm a superstar, right? I can do that again. 

[00:31:42] But whereas your losses’ is where you sit back and go, Okay, I did this wrong, I did this wrong, I did this wrong. Here's what I need to fix and improve for the next time you become better. I don't think you'd become better from your wins alone in isolation. I think you'd become better from learning from your losses, so long as you're learning from your losses. 

[00:31:59] And what followed were some losses, let me tell you, so what we decided to do after that seven figure gain was We then went and said, ‘Well, we can do this again’. Let's go option up our stack more properties. So instead of locking out four properties, we ended up going through and locking up about 40 properties. 

In the next episode of Property Investory, Chris Ferris continues teaching invaluable lessons to the audience. He further explains the value of ‘optioning’...

 

[00:02:03]  So the idea of options actually came from Daniel at the time where he said, ‘Look, we've got this, have you heard of optioning?’. And I said, ‘No, let me have a look into it’. And I came back to him about three days later [and] said, ‘We need to option our properties,’ because it was low.

 

He encourages listeners to think outside the box in order to find success in unexpected places.

[00:07:35] So whenever someone's expecting [to] flip the ball, but that little lesson of flipping the board, it's not about throwing the game away, it's about if something isn't working for you, change it, don't just keep doing the same thing. Flip the board, what's your equivalent of flipping the board, right? 

And highlights the importance of taking a swing. 

[00:36:19] And don't be afraid to take risks, I think, you know, risks are part of a part of life, you don't want to get to 60, or 70, or 80. And even think, geez, I wish I did that.

 

And that’s next time on Property Investory.