Discover why Fitzgerald says you should always triple check the cash flow rate before making a commitment, how you can find your all-important mentor to guide you in your property investing journey and learn from a template to success that 3 of Australia’s top investors endorse as a great way to accumulate wealth.

Transcript:

John Fitzgerald:

Don't be emotional about it. Everyone wants to buy around where they live and where you live is going to boom maybe two or three out of 10 years. You're better off, if you're going to be serious about building a property portfolio over 10 to 20 years, get used to doing your homework.

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 continuing the conversation with affluent property developer John Fitzgerald, whose focus on buying land in areas of growth will inspire you to kick-start your own property journey. Find out why you should be looking interstate for your next property and how you can build your wealth in seven steps!

Something that Fitzgerald believes holds many people back from investing into property is the looming fear of losing everything.

[00:00:22] I had nothing to lose, so there was nothing holding you back. And the mindset gets harder as you get older, because as I coach people in their 40s and 50s their fear is what they can lose, that's front and centre. And then they have the fear of being broke at 65 which is the biggest fear, being broke at 65, or losing everything.

Now you shouldn't lose money in property if you set up your cash flow properly, so don't ever take a risk on cash flow. That's what I say to every investor; and you do your homework on that, don't kid yourself on that - triple check the cash flow and do your numbers. Only truth in numbers. So what I say to everybody is by the way it’s not for everybody you know, you can't sweat the small stuff.

You do have to recognise that you will have to manage tenants, talk to agents you know, communicate with valuers, banks and a myriad of people and you have to work with them. But if you can do that you can make millions of dollars out of property. I've got a client who started with $20,000, whose portfolio is worth over $3 million in net today. He started with $20,000! I could tell you lots of stories of people like that, but he doesn't sweat the small stuff and he's got a good backup plan. 

[00:02:20] And look the only time you'll get into problems in property is cash flow. 

[00:02:26] Yeah. 

[00:02:26] So don't kid yourself on cash flow; cash is like oxygen, if you run out of it it’'ll be over very quickly for you. And that was drilled into me from the start and you know essentially, just triple check your cash flow rate. 

In our previous chat with him, he attributed a lot of his initial success to his mentor, Michael Hersch. But how do you find such a great mentor?

[00:03:05] They'll find you. You know when the student is ready, the master will appear. I remember I knocked on 21 doors and 20 shut in my face. The first door that I knocked on, my presentation took you know 25-30 minutes where I was just babbling on. The 21st door, it happened in five minutes. Michael Hersch said he just looked at me across the table and said, ‘You've got five minutes.’ I looked at him and I said, ‘It's so hot I only need 36 seconds. I'm John Fitzgerald, I buy and sell property. I've got a deal - we can buy 700 blocks, rezone it for 1,200 lots and double our money within eight to 12 months.’

[00:03:53] It's amazing. It's over that many times of repetition and also practice, you really became articulate at what you had to put across and that's how you were able to put something across in such a short period of time.

[00:04:06] You know they'll make their decision about you within one minute. Warren Buffett said he could do it in 10 seconds, but they'll make their decision about you in one minute and there's nothing worse than someone who babbles on. 

Fitzgerald’s book Seven Steps to Build Wealth details how you can become a millionaire, endorsed by three of the wealthiest property investors in the country.

[00:04:41] Look I'm really proud of the fact that three of Australia's property billionaires have read it and endorsed the book and that's really good. Bob Ell, Maha Sinnatham, and the late Nev Pask passed away a couple of months ago. The book is a template, Seven Steps to Build Wealth in property and it is fail proof.

Step 1 - and this is step one of any journey that you make - is commit to growth. So step one is growth now and in seven steps to all this, buy land for growth. Steps 2, 3 and 4 are cash flow, cash flow, cash flow; and that is your income, your tax deductions and your finances, how you set that up. Step 5 is making time work for you. This is really important. And 6 is affordability. Step 7 is that power of compound growth and repetition.

Now you could use this model for everything that we do in life, because everything has got to start with you’ve got to get up everyday, you’ve got to do this yourself.. So have I reached my full potential? No. OK, so what am I going to do today that’s going to take me one step closer? So that's where Seven Steps really gives you a mentor - and almost like what I learned off my mentors. It gives you a purpose every particular day, ‘How can I just go one inch closer, one inch further?’

[00:06:13] Love that it's very very good. It's just those little things that you do as a habit that continues to compound and build and help you move towards closer to your goal. 

[00:06:23] Habits will make you or break you. We’re all made by our daily habits.

He has also read many inspiring books about others’ success stories.

[00:09:43] I love autobiographies about successful people and I love Ray Kroc story which is Behind the Arches of McDonald's that was published. That's an old book now, I think it was really in the 1980s. But I loved it because one of the first deals I ever did was with McDonald's and I got to meet Pete Ritchie who ran McDonald's in Australia. So the whole Ray Kroc and the founder and everything like that. It's just a fantastic story. I really like the Frank Lowy story, that's an older book as well but it’s the story of Westfield. And Westfield is an interesting story because you know, technically if you had to put $1,000 in Westfield in 1960 when Frank started the place for more than $100 when they sold out a few months ago, that thousand dollars would have been worth about $300 million now. A lot of people don't realise, but that is compound growth on steroids. And Westfield's property strategy and their land strategy is absolutely phenomenal; so they're probably one of Australia's greatest companies. 

[00:10:47] Kerry Packer's story - I just love all those stories that I've read you know, all the main stories... BHP’s story was a great story; how they came to the brink of nearly losing it back in the late 1990s and then turned things around and had the biggest boom they've ever seen in the company's history. I just like reading stories and autobiographies. And I didn't read any one Arnold Schwarzenegger to Mike Tyson, Kevin Hart the comedian, I loved his story - and his story is interesting too, because they all have the same steps. To work hard, to have a vision of what you want to achieve, what outcome you want to achieve, work hard find a mentor, be authentic, then give without wanting to receive, all those sorts of things are all very common. And they are people with strong, positive habits.

Having developed a plethora of properties across Australia, Fitzgerald’s strategy is focused on buying land in high growth areas.

[00:12:20] We deal specifically just with investors who want to build a property portfolio, so if someone is only looking to buy one property, they wouldn't deal with me. But if you want to build a portfolio of 5-10 properties - and I've got hundreds and hundreds and hundreds of investors with 10 or more, that have bought 10, 15, 17, 20 properties off me over the last 20+ years - then the strategy I have is that we buy land. Number one, we identify land in high growth areas. So I'm just a numbers person. There is only truth in numbers, so I'm looking at land in high growth areas and I'm trying to get the biggest block of land for the smallest amount of a square metre rate that I possibly can in a high growth area. And I want to get my timing right, timing is vital.

So let me give you a practical example of this: In Sydney, as an example, where some of your listeners may be in Sydney (and if you're not in Sydney don't worry, I'll try and put some texture around it). Sydney was a basket case in 2003 to 2011; Sydney had literally no growth. Now from 1998 to 2003, the median house price in Sydney doubled from $260,000 to $520,000. It went up to $560,000 and then came back down to about $523,000 and stalled for eight years. When the GFC hit, Sydney was a basket case. The government was in turmoil, everything was just horrendous.

In 2011 it had been eight years and they had had no growth. I decided we needed to get into there and we needed to get our clients into there, because there was a shortage of land supply and we were able to buy blocks around, because there was some infrastructure being built - the M5 and M7, which was a loop road around Sydney right to the outskirts. It was going to open up lots of areas in the west; 60% of people live west of Parramatta anyway. So we started buying land for $400 and $500 a square metre and doing house and land packages.

With his clients buying house and land packages for $395,000 back then, within 5-6 years that same land has increased in value to $900,000-$1 million.

One of the best sites and best areas that we went to will probably give you an example of how we do our homework. We went to a place called Edmonton Park, which was literally a new city that was being built - or I should say a new town centre that was being built - around a $1.5 billion rail and town centre infrastructure. And we put clients into there when it was just a paddock and the quires paid around $400 a square metre for their land - and their land now was worth about $1,200-$1,300 per square metre. So the land is tripled while the median house price in Sydney is doubled, or just on double.

People often say to me you know, ‘John you buy land in the outskirts. Aren't you better off buying in the 5-10 km radius?’ I say, ‘No you're not, because you can't get the big size blocks, which is 400, 500, 600 square metres. And secondly, if you're buying in the outskirts close to infrastructure it will grow by a faster rate than in the inner areas.’

[00:15:40] And I did the example and I took a sale and resale of a house in in Roseberry, which is a case from Sydney CBD, that factual sale in 2007 has grown by 108%, whereas Edmonton Park had grown in the same time by 176%. So if you get your numbers right and you really do look hard at infrastructure, transport, considering all the disabilities and amenities, then you get landed a really good rate per square metre. You absolutely took a huge goal - and that's what we do. We do it in Sydney, Melbourne, Adelaide, Brisbane and we have done a lot in Perth, we did about 500 properties in Perth.

[00:16:29] So by the sounds of it, at the end day it seems like a recurring theme because as you said, property or land prices constantly go up; it just depends on the timing of the market.

[00:16:43] But it's also getting you cash flow. This is an interesting point you raise: a few of  our clients pulled out of Sydney in 2014-15 when the Sydney median house price got to $800,000. But more importantly, the returns on housing were 3.8-3.9%. So it meant that if we were borrowing you know 90% or thereabouts, it would cost us $100-$200 a week. And I just felt that that's too much of a burden. I'd like to buy a property that's cash flow neutral or positive. And I thought that instead of investing $800,000 into a particular area, there was more opportunity for growth in Melbourne. So we hammered Melbourne really hard in 2014-15 and that's all now… we would have made $200-something million out of Sydney for our clients and our clients have made you know the best part of $500 million out of Melbourne in this cycle.

The key points to take away from this is to buy well and ensure you hold your properties for the long term.

[00:17:56] Don't be emotional about it. Everyone wants to buy around where they live and where you live is going to boom maybe two or three out of 10 years. You're better off, if you're going to be serious about building a property portfolio over 10 to 20 years, get used to doing your homework and buying in areas before they actually cycle. 

Coming up after the break we will delve into the properties that Fitzgerald invests into with his own portfolio...

To be honest I think there's nothing better now than housing, so I'd buy land and houses.

The personal habits that has contributed to his success.

I do an hour of exercise and then I do an hour of meditation and yoga, where I literally just still my mind so that you're literally ready for everything.

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

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For his personal property portfolio, Fitzgerald focuses on residential.

[00:18:29] I have housing. To be honest I think there's nothing better now than housing, so I'd buy land and houses. So what my clients do is have a massive portfolio of that. I have a little bit of commercial property, but I found during the GFC, the banks when they do commercial loans that they can make a margin call on you. And I thought that's really tricky for investors you know; so I stick with residential. 

[00:18:58] And if you look at residential housing here, a really good example is that first block of land I told you about, it must be 50 minutes ago I was buying land for $16,000; that was in Brisbane. That was 1,000 square metres for $16 a square metre. Today that land is worth $750 a square metre. Now do the maths on that: that's 30 years ago. There's nothing you can show me that you've grown as an asset class in Australia that's outperformed residential land in Australia. And we have got the highest population growth in Australian history and with the lowest interest rates people should. But the population growth is in the four main capitals, particularly the three main capitals. So you've got to be careful about where you actually go to. 

In terms of personal habits that have aided Fitzgerald in attaining success - both in life and in property - he attributes yoga and meditation.

[00:06:44] I get up in the morning at 5:00, I exercise for an hour and I do that because I don't eat anything and it kicks my endorphins and it just starts my day and gives my mind a boost, because successful people are positive people. So you want endorphins, you want to give yourself a chemical kick without coffee and all that sort of stuff as well. So I do an hour of exercise and then I do an hour of meditation and yoga, where I literally just still my mind so that you're literally ready for everything.

And during that time you've prepared everything that you're going to do and then you have breakfast and get to the office and hit the ground running, organise the people with what I want to achieve today. I'm very much an outcome focused person. There's often two types of people in the world - there's process people and there’s outcome people; I'm an outcome focused person. So at the end of each day, I want to have received an outcome. As small as it might be, I want to have achieved an outcome, I don't want to get stuck in the process. 

[00:08:29] I mean lots of people say yoga asanas or movements or all that sort of thing. True yoga is just a union of your mind, a stillness of the mind. And there's a saying in yoga that the fast mind is sick, the slow mind is sound and the still mind is divine. And when you just still every part of your mind for that period of time, you really do tune in to something, tune in to the universe. I spoke about that, it’s really been a determining factor to every meeting, every coincidence, everything that happens and you just open yourself up to it you know, and I find it quite amazing. So I’ve been practicing that for as long as I can remember.

If Fitzgerald were to meet his past self from ten years ago, what advice would he give?

[00:21:58] I'd say just keep doing what you're doing. I love everything that I do and I’d say to myself ten years ago, ‘Slow down.’ But looking back now I'm happy with the pace that I had.

And continuing to work at that phenomenal pace, now he is excited about working on a new project within the next five to ten years.

[00:22:31] The next five years, I'm working on a project which is probably the biggest urban project I’ve done. I have a massive block of land in fact on Broadbeach, which is a block of 1,550 apartments. So that will be my big project; over the next 25 hectares of waterfront land, that'll be my big project over the next ten years and where I want to spend a lot of my energy and time. 

For such a long term project, Fitzgerald says it’s always important to keep the end goal in mind, as well as working with the right partner.

[00:23:13] You always start with the end in mind. So who is going to buy the product and what is the product going to be in that regard? I'm not an apartment developer, so I'll partner with probably one of Australia's top developers or a partner from China or Asia, who has a specific product for a specific market where they have a model and a margin built in. I've had lots of people talk to me, but I've got to find the right partner for that. I mean I'm in no hurry in that regard, I've had the land for nearly 20 years so I'm not in any hurry to do a development there. But I think it will reach a stage of maturity where it will be good to develop it over the next ten years.

If you wish to get your hands on his new book for a great insight into building your wealth through property, here’s how.

 [00:24:19] The best way is you can buy it the book shops today, I've seen it in all the bookshop, it's called Seven Steps to Build Wealth and please send me a note or send me the book and I'll sign it for you and all that sort of thing. So I like to keep in touch or go on our website Seven Steps to Wealth and you can get get a copy online. You can get it in the bookshops, in the airports, all that sort of thing and all the money goes to charity - so the good thing is that nothing comes to me. So you're doing yourself a favour, but what you'll like about it if you read the book, is it really does give you a template where the proven template is. I've had clients use it for 20 years who are now millionaires and multimillionaires, starting with $50,000, $20,000, $100,000, starting out with a little capital base. So it absolutely does work.

If you want to reach out and learn more from Fitzgerald about his strategy, you can check out his website.

[00:25:17] The best way is just go on our website and reach out. In my head office, there's about 60 of us here and if you go on the website and say, ‘Hi John,’ you know it'll come to me. It’ll come through Nathan, who is my executive assistant, and it'll come to me and I'll happily engage with you and you can ask me any question you like particularly about property. I get emails from clients and from people everyday.

You can also find out where he is speaking in all the major capital cities across Australia on how you can kick-start your property journey!

[00:25:54] You can find out on our website as well, we do workshops in the main capital cities maybe once a month and I will be speaking. I do speak every three months or so, I've just been a little bit busy going back and forth to China and all that sort of thing; but I often attend and do the workshops and love to say hello to everyone.

Thank you to John L. Fitzgerald, our guest on this episode of Property Investory.

 

If you want to hear more about his journey, then visit our website at www.propertyinvestory.com. Simply type in the search bar John Fitzgerald and select that episode to learn more about his story.