Property Investory
Premek Borek - A House Renovation That Made $100,000 In 5 Weeks
June 20, 2021
Premek Borek is a mechanical engineer and is now switching gears towards property. Borek grew up in Poland and assisted his father on weekends on his civil engineering jobs, which led Borek to move 100km from home to study mechanical engineering at university. He used these skills working in hospitals, laboratories and pharmaceutical companies, and then moved to Ireland and London before settling in Australia.
Join us as we discuss his childhood and tailored education and how that led him to sunny Brisbane. We’ll take an auditory trip to Poland as Borek describes his upbringing in a 16th century tourist town, and we make a stopover in London where he takes us through the dilapidated house he rented and transformed, setting him on his path to property investing. We’ll also hear about the beginnings of his journey in Brisbane and the property that, along with some clever negotiations, completely changed his mindset amidst a growing pandemic.

Timestamps:
04:33 | From Construction to Engineering
06:38 | Growing Up in Zamosc
10:56 | A Hands-On Education
14:49 | Joining the European Union
19:59 | Welcome to Australia
21:49 | If There’s a Problem, I’ll Solve It
22:39 | Buying in Brisbane
27:14 | Holy Shed!
29:36 | A Quick $100,000 Profit

 |

00:27 | When It’s Challenging, It’s Time to be Patient
04:27 | His Superpower: Negotiation
08:52 | Shhhh!
11:36 | Practice Makes Perfect
14:13 | Options Aplenty
15:25 | It’s All About Teamwork
19:39 | Mindsets and Mistakes
23:06 | Research, Then Retire

Resources and Links:

Transcript:

Premek Borek:
[00:21:10] It was a three bedroom house and original house built in the '90s. So everything had to be done. 20 years, no bathrooms, kitchens was not touched. And we didn't have kids at the time, so it was just an easy one. We could do it after work or whatever. So that was the first property and we lived there till 2013. And we sold it for a profit. 
 
**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 mechanical engineer Premek Borek. We’ll learn about growing up in a 16th century Polish town and his technical high school training. Discover how his travels across the UK led him to Australia and how he made $100,000 profit with one property in just five weeks!
 
**END INTRO MUSIC**
 
**START BACKGROUND MUSIC**

Tyrone Shum:
Borek immigrated from Poland to Australia in 2007, with stints in Ireland and the UK in between. This is where he realised his property dream, but he is still focused on his career in engineering.

Premek Borek:   
[00:03:58] Day to day, I'm still a full-time employed professional. I'm a mechanical engineer by trade. I've been doing that for the last 20 years, about. It's not too bad, for engineering minded people, but I always wanted to do something different. And I think running a small business will be definitely a thing I would like to do and property seems to be the way to do it. 

From Construction to Engineering

Tyrone Shum:  
He gives us some insight into how he got into mechanical engineering.

Premek Borek:   
[00:04:33] I think it started probably at high school because it's a bit different system back home. And I actually went to a Technical High School, if that makes sense. So the profile was construction industry. So I got into the construction first. And after that I had to pick a university and because I already was in that construction profiled school, I thought maybe an engineering degree would be something that I would benefit from. 
 
[00:05:01] So I picked a civil engineer, faculty as a main subject. However at the end of the course, I decided I wanted to do a little bit more in mechanical engineering, which is building services, basically. And that's how it all started. So after that I got my first job, in the hospital in the engineering team. So you learn a lot of things in the hospital, because it's a 24/7 operational facility, and everything's critical over there. So that was good there for six months. 

[00:05:14] And after that, I immigrated to Ireland. So I work for Intel over there, and Pfizer, which is microelectronic companies and pharmaceutical companies. And for some reason, here, I'm still involved in hospitals and highly specialised laboratory projects. So that's how it all started.

[00:06:06] Our clients are predominantly builders and managing contractors. So we work with them, as well as consultants, architects, electrical engineers, civil, etc, etc. 

Growing Up in Zamosc

Tyrone Shum:   
He describes the historic Polish town he grew up in, near the Ukranian border.

Premek Borek:   
[00:06:38] The place is called Zamosc. Probably not many people can pronounce it, but it's a southeast corner of Poland, about 60km to the Ukrainian border. It's a relatively small town, about 70,000 people, but it's got a big history behind it. It was established in16th century. So a lot of heritage buildings in the town center and things like that. And it's in a beautiful region. There's lots of touristy places, national parks around it. I always enjoyed living and growing up in that city and going on some trips with parents.

Tyrone Shum:   
[00:07:18] Wow. That's amazing. Have you been back there since?

Premek Borek:   
[00:07:21] Last time, I think we went there in 2016. And there was a plan to go there last year, which obviously didn't happen due to the global pandemic. But we usually try to go back and see parents and family and everyone else every two, three years, if possible. 

[00:07:46] I think Poland as a country gained quite a lot when it joined European Union in 2004. So every time we go there, because it doesn't happen often, every two, three years, you can actually see those changes. The first one is definitely the routes. The infrastructure is just unbelievable, like, from my hometown to my wife's hometown used to take me 12 hours to get there. Last time it took nine because there's motorways now that you can travel 140km/h, which is great.

Tyrone Shum:   
He expands on his childhood and how exploring with his dad led him to where he is today.

Premek Borek:   
[00:08:30] As a kid, I also lived with grandparents, it's a bit of a cultural thing. People live with the older people. I remember Grandma and Grandpa always being around, taking me to school and teaching me things, because parents were busy at work. So after school I used to spend a lot of time with grandfather. Unfortunately, he passed away when I was eight years old. But I still remember it. So obviously, it's embedded in my brain. That was really enjoyable time, I guess.

[00:09:12] My mum, she used to work as an admin in the local furniture factory, but she didn't last there long. She just wanted to be working mum at home, looking after the house and things like that. But my father, he worked for the local government as a land surveyor, so he worked in the town planning division. So as a kid, I used to help him a lot on the weekends, we'd go somewhere in the countryside and do some site survey and land survey. So I am across it, which is very helpful now, because I know how their instruments work and all the technical things behind it. 

[00:09:55] He retired three years ago, and that was a time when I realised that I have to do something about my life, too. Because I could see myself following his path completely. Like, work for 40 years and then just pray for retirement, basically. So unfortunately, they didn't save any money or anything like it. So they purely rely on the government. And it's not something I would like to do. 

A Hands-On Education

Tyrone Shum: 
Borek’s hands-on schooling taught him methods that he still uses in his work today.

Premek Borek:  
[00:10:56] The primary school and secondary school, they were all in my hometown. And the secondary school was a five year term. And basically, because it's added construction profile, once a week we had to work on the construction site. Obviously at that age, you can't do much, other than just clean the site and basically get someone some stuff from the shops. But you kind of learn a lot, because progressively we were allowed to do more, like doing paving or some basic concreting, bricklaying and stuff like that. Which was really good. Because some of the skills I picked up back 20 [or] 25 years ago, I still use it. So that was secondary school, and then in my university was about 100 kilometers north of my hometown, so I had to relocate. And that was a five year course.

Tyrone Shum:   
[00:11:58] Wow, when you said secondary school, that is equivalent to high school here? Is that what you mean?

Premek Borek:   
[00:12:03] That's correct. it's almost like TAFE here, it's a bit of like a TAFE, because you get that practical knowledge and theoretical knowledge. So we had to learn about foundations, roof structures, and stuff like that. Obviously, at the very basic level, not much in terms of calculations, but you had to have that knowledge. So as a building services engineer, I knew exactly, 'Okay, before I can penetrate the slab, I actually need to check with structural engineer, because there may be some steel there that I don't want to damage.' So it gives you a very good background and knowledge. You really appreciate other services in the building and construction industry.

[00:13:15] When you spend a day a week on site, whether you want it or not, you will still pick up a few things. Even when they ask you to push a wheelbarrow for eight hours a day, you still get to see things. And some silly things, there was lots of laughs!

[00:13:57] After I finished uni, after five years, I did come back to my hometown, but only for about six months. And there was a time when I picked up a first job with the hospital in town. But after six months, they did offer me a permanent position. However, I didn't accept it. And that was a time when Poland joined European Union. So there was lots of young people already going west. And that was the same for me. I just wanted to go there and learn the language, earn some money and potentially come back. So the plan was only for a year. But 14 years later, we are still traveling!

Joining the European Union

Tyrone Shum: 
He gives some more background on the effects joining the European Union had on Poland.

Premek Borek:   
[00:14:49] Poland joined the European Union in 2004, and I remember it was the 30th of May, I remember it exactly, because it was my birthday. And two weeks later I was already on the plane to Dublin. So I can't probably really comment much how it changed because I wasn't there when all the things happened. But talking to family and friends who lived there, they could definitely see the benefits of that major— well, I don't know if you'd call it a major. 

[00:15:20] But even things like no borders, very easy travel and things like that. As I said before, the improvement in the road infrastructure and things like that was was definitely a plus, especially when you go to the western side of the country, which is close to German border, and you won't even see the difference that you are in a different country, because the shops and everything is pretty much the same level. So that was definitely something that was quite, not so much shocking, but definitely interesting and positive.
 
[00:16:32] You look at Europe and Poland is surrounded by a few countries, not just one. So yeah, everywhere is a border control. Poland still has it on the eastern border, like Ukraine, obviously, is not part of the European Union. So the border is still there. But yeah, everything further west, there's no borders. Which is great. When you travel, you don't have to stop.

[00:17:09] We used to travel quite a lot to Czech Republic and Slovakia, just with the group of friends, over the school holidays. So that wasn't the first time there. And before that I had been to Germany a couple of times, my father's friend lived there. So I used to go there for school holidays, and do some gardening or stuff like that, just to earn some extra money. 

[00:17:38] So I knew that pretty well. And before the Poland joined the European Union I actually went to UK with a group of friends, just to visit some other friends that lived there already. But we had to go through that very strict process of passport control and stuff like that. So I remember that very well. And that was interesting. Later on when we didn't have to do it was like, ‘Wow, that's great.’ 

Tyrone Shum:   
[00:18:05] That is amazing to hear. And what about language? Was there any language barriers at all going through? Because I know, I've been to Germany, and most people over there speak German, but also, too, speak English as well. But obviously German has been the main language. So when you're traveling outside of those countries, what was that like for you? 

Premek Borek:   
[00:18:22] I tried to speak English whenever I could. I tried to learn German at school, but it just doesn't sink for me. I don't know, it's one of those languages that I have difficulty to learn. And the same with French for whatever reason. So yeah, they were happy to talk English like most of the people do. And yeah, that wasn't really an issue.

[00:18:58] Dublin, we spent almost a year there. As I said, I worked for Intel and Pfizer, two big factories over there. And at that time, I couldn't really get a job in my profession. It was kind of close to my profession, but not to my full potential. And I didn't really like it. I felt like I was going backwards. And at that time, I made a decision to move to UK where we knew that people are a little bit more open to Eastern Europeans. So about a year in Ireland and then two and a half years in UK, North London.

Welcome to Australia

Tyrone Shum:  
Borek met an Aussie from Cairns while he was working in the UK, and this encounter-turned-friendship plus a quick renovation in London set him on his path.

Premek Borek:   
[00:19:59] We became really close friends and he was telling me about Australia, about the life here and the lifestyle generally, and I managed to convince my partner at the time to just come here and visit for a year, at least. 14 years later, we're still here. But Canada was the other country we wanted to visit. However, given the lifestyle we get here and the weather, I don't think it will ever happen.
 
[00:00:58] I remember we were renting in North London. And we found the place which was a pretty dilapidated house, and the price was pretty cheap for rent. And we just said to the owner, that we'll just do a quick renovation and see if they're happy with that. And actually, they didn't see what we did to the property. And it was me and my partner at the time. And when they came to visit about three months later, they were like, 'Wow, you really transformed this place!' But I was hoping that the time that they would increase our rent. By doing this, we're allowed to actually sublet some of the rooms. So overall we live pretty cheaply, in a relatively expensive place in the world. So that was my startup journey. 

[00:01:41] Then we moved to Australia in 2007, things were pretty smooth just before the GFC. And when the GFC hit, we bought the first house, which we renovated as well, and then sold it with a profit. And we had a bit of money on the side so we thought, 'Maybe we'll just invest that money somewhere else.' And we decided to buy a block of land in Poland at the time. My father used to work for the government at the time. So he managed to find cheap land from the government that not many people knew about. So that's how you buy cheap when making money when you buy basically. 

[00:02:23] There was another trigger, like, yeah, there's definitely money in the property. Then we bought another land here in Australia, we build a house, and we did most of the work ourselves, which obviously increased the value, and we managed to pull out some equity. And when I use the service of the buyer's agent to buy a first investment property, which we still have, and again, this one was under the market value, you had a bit of a renovation, which we did, which obviously increased the rental yield, we still have a tenant in place that is good and pays money every month, which is great. And that's how I realised, 'Hang on, there's definitely money in property.' It's one of those houses that never depreciates. It always appreciates in value. You can buy cars and everything else but...

Tyrone Shum:   
[00:03:09] Property doesn't depreciate.

Premek Borek:   
[00:03:10] Exactly. It's one of those things. So that's how I got into property basically, I started reading books and attending courses and Young, obviously, with his courses kinda encouraged me to do a little bit more. So I signed up to a three day daily bootcamp and the advanced property formula course and three months later. 

Tyrone Shum:   
He purchased his first Australian house in 2009, renovated it in his spare time, and sold it for a tidy profit. 

Premek Borek:   
[00:21:10] It was a three bedroom house and original house built in the '90s. So everything had to be done. 20 years, no bathrooms, kitchens was not touched. And we didn't have kids at the time, so it was just an easy one. We could do it after work or whatever. So that was the first property and we lived there till 2013. And we sold it for a profit. 

If There’s a Problem, I’ll Solve It

Tyrone Shum:  
A typical engineer, he has always been on the lookout for things to fix, and this house was one of them.

Premek Borek:   
[00:21:49] It was probably just me always looking for ways to improve things. And that could be me being an engineer, we always try to solve problems. And we thought, 'Well, we've got that limited budget.' And we knew roughly where we wanted to live. We wanted to be close to the transport, so we can get to the city to work quickly. And with that limited budget, we knew that we wouldn't be able to buy something that's already ready to move in, but something that you don't have to touch. So we selected that property. We knew we had to spend another $50,000 [or] $60,000, and that's what happened. 

Tyrone Shum:   
[00:22:28] Whereabouts in Australia did you purchase that?

Premek Borek:   
[00:22:31] Brisbane in Seventeen Mile Rocks, which is on the western side of the CBD.

Buying in Brisbane

Tyrone Shum:   
[00:22:39] After that you sold that property for a profit? How many years did you hold on to that property for? 

Premek Borek:   
[00:22:46] Four years. We sold it in 2013. Because at that time we had our first child, and it was only three bedroom house, so we thought, 'Yeah, probably we'll be good to move to a bigger house if we're planning for the next child.' So that was the target. That was the decision maker. But the next one we wanted to do something different, like build, definitely build something. So we found a block of land, again, in the same suburb, Seventeen Mile Rocks. We selected a builder, then again, I tried to exclude as many things as I could so I could do the rest of the other things myself.

Tyrone Shum:
His engineering and construction backgrounds came in handy yet again during the build, and other than one incident with a sparky, it went off without a hitch.

Premek Borek:   
[00:23:43] We didn't have any issues with the builder at all. And that's probably partially me understanding their construction relatively well. So I could look at the drawings, I knew exactly where the power outlets need to be, or the hot water system had to be on that side of the building. I know people sometimes struggle with things like that. And halfway through the construction, they realise, 'Oh, no, we can't have it here.' So I could already imagine that in my head where I want certain things.

[00:24:12] And as I said, we didn't really have many issues at all. If anything, I think there was only one incident with the sparky, the electrical guy, where he didn't install the outlet in the kitchen where we wanted it to be. But he quoted us, and was pretty much couple days before the handover, and the outlet was still not there. And I said, 'Well, I can't accept it.' And I complained to the builder and I remember this guy was really upset that I complained about it to my builder. I think that was only one incident. He had to come back pretty much on the day of practical completion and basically install it and I remember he did a lot of mess and he did it deliberately.

Tyrone Shum:   
[00:25:01] Well, what have they got to lose? They know that the project's finished, they're gonna hand it over. You know, just get it done.

Premek Borek:   
[00:25:07] Well, that's right. And he was happy, 'I'll give you money back.' I was like, 'No, I don't want money back, I want my outlet to be installed.' And I think that's how the argument started. But at the end of the day, he finished it and we moved in a couple days later. 

Tyrone Shum:  
During the build, he was also in the midst of purchasing a block of land in Poland.

Premek Borek:   
[00:25:44] It's in a touristy area. It's partially commercial and residential. So we know that if we hold on to it, it will just grow in value there. So that property has been fully paid off. And we don't have anything owing on that one. And it doesn't cost us much to maintain, too, which is good. 

Tyrone Shum:
Turning to his investment journey, Borek found a great opportunity with an ‘80s fixer-upper in Brisbane.

Premek Borek:
[00:26:07] So when we were building this one in 2018, I actually engaged a buyer's agent to find us an investment property in Brisbane. And they did actually a really good job because they managed to find that property that had a bit of a structural damage, but we used that as an opportunity to negotiate the price, and we managed to negotiate $50,000 off that, which was a really good result. And again, it was an original house built in the '80s and needed a bit of a renovation, but not really massive. We didn't replace kitchens or anything like it, just painted the cabinets and benchtops, just really refreshed it. And we basically retiled the entire bathroom. And that was it. 

[00:26:58] That was a good opportunity for someone who wanted to live or rent the property to basically pay a little bit more because it was already refreshed and relatively new. And when we compared with the other properties in the area, and most of them were like, original condition. 

Holy Shed!
 
[00:27:14] And the other good point about that property was a big shed. It had a six by 12 metre, 72 square metre shed. The previous owner used it for a home business, like an auto repair business. So it's relatively tall too. And we knew that that would be a good selling point. So when we were actually renovating, some of the neighbours approached us, like, 'Could we rent this shed from you?' and things like that. 'Okay, we'll see how we go, if we find a tenant that doesn't need it, yeah, more than happy.' 

[00:27:48] However the people we found, they actually moved from Darwin. And they had a lot of stuff with them, like boats and camper trailers and things like that. So for them it was just perfect. And they still live there, because they've got a lot of stuff. So that was another property, which we still have. And this one's positively cash flow, which is good. So it doesn't cost us much to maintain at all. 

[00:28:13] And then another one, which is when I completely changed my mindset about property, was the one I purchased last year. And it was after attending the neons courses and seminars. So we set it up properly from day one, set up a company, and followed all the steps. And we managed to secure it reasonably cheaply through some clever negotiations. And yeah, we sold it four months later and made some good money on that one.
 
[00:28:53] This one started potentially as a development site, because it was zoned as a medium density, so up to five storeys. However, the block was a little bit smaller, I think in Brisbane it has to be minimum 800 square metres, and this property was 772 from memory. So we're a few metres short. But when we basically signed the contract, and during the settlement period, I already started looking for developers. Like, okay, well, would you be interested in building something big, etc. 

A Quick $1000,000 Profit

Tyrone Shum:
And then COVID-19 came along and threw a spanner in the works.

Premek Borek:
[00:29:36] But after Brisbane went into lockdown, that was it. Phones just stopped calling, at all. So quick, had to find a way, okay, what do we do about this property? We knew okay, some money spent, it's still pretty good. So we have to find our exit strategies, and we actually decided to renovate it. Because initially we thought that property had to be demolished. There was a bit of a structural damage and termite damage, which we couldn't really inspect much at the time because the property was going to auction anyway. And they were happy to accept our offer on the basis that it's basically auction conditions. So no building, pest, finance and all the other things. 

[00:30:19] But as we realised later, after we removed the asbestos sheeting, etc, that the damage actually wasn't that bad, and the house was still repairable. Which we did. And when we basically did the reno reasonably cheap, we realised we didn't have to do bathrooms, they were pretty good. They just had to be cleaned up. And we replaced the kitchen, however we managed to find a secondhand one, reasonably cheaply. And we decided to put it on the market, see what happens. And that was around May last year. So after five weeks, the property went under contract for over $100,000 profits. 
 
[00:31:21] We were thinking of potentially maybe extending the existing house and convert it to, like, a room and accommodation to get better yield. Because the property was in a really good location, like very close to local shops and trains, etc. So we knew that there would definitely demand for tenants, but we wanted to get a better yield. So we looked at an option of maybe extending it, adding an extra two bedrooms or something like that. And the house was a Queenslander. So they are relatively easy to convert or extend. 

[00:31:54] However, the cost was reasonably high. So when I did the fees on that it just didn't really stack up. Because we were a little bit too close to the rail line. And the amount of acoustic treatment required was just making it too expensive and not really worth it. So we took a risk and said, 'Well, let's just renovate it as it is. Just do it really cosmetically, don't spend too much money and we’ll see what happens. If we don't sell it we'll just get the tenant in and we'll see how we go later.' With property right now we would have probably made even better money. 

[00:32:52] Especially the early predictions were, like, 30 [or] 40% drop in prices. So when you see things like that, we were really concerned.

Tyrone Shum:   
Borek believes now is the most challenging time for developers because the market is so difficult. 

Premek Borek:   
[00:00:27] You can't secure a property that will actually have some numbers that will work on that. Everything sells for more than what I would pay for it. So it's definitely the most challenging period for me, because since we sold that last one, I just can't find anything that will stack up financially. And it's been about eight [or] nine months now. 

[00:00:53] But talking to the other people, I'm not the only one, which is... you know, it's not something that I'm doing wrong. So okay, everyone's in the same boat, obviously. But I think things are changing, like this week, I definitely had more phone calls from the agents, whereas in the last six months, was just basically nothing. Because whatever they get, they just sell it. They just sell it straight away. 

[00:01:16] Whereas this week, I had a few phone calls. So I'm thinking, maybe we're just about to reach a peak. Because some of the complaints, I don't think they go as planned. So it's just 'Watch this space.' And I keep saying it's a cycle. And at some stage, people won't be able to just afford it anymore. And I think there's more properties now coming to the market, which obviously changes the dynamic. So be patient. When it's challenging, time to be patient. I think that's my advice.

Tyrone Shum:  
In these eight or nine months, he discovered some things that just didn’t make sense.

Premek Borek:   
[00:02:07] Nonprofit in the projects, and in some cases, losses, like, really big losses. So it's an interesting one because even with the agents on shifting. As probably many people know, they actually stopped advertising the prices, it was just 'For sale.' Because even agents couldn't put a price against it. They just let it run its way and see who's going to pay the most. I did make a lot of offers, but none of them was ever accepted. Because obviously, I have to buy it below market value. And given the market's crazy, what's the current market value? So I could only look at the information from, like, six months ago, which wouldn't be anywhere near close what's happening right now. So  we've seen a lot of auctions as a result of it, because that obviously stimulates that market and competition. 
 
[00:03:54] There's just way too many emotional buyers at the moment, and they will just pay whatever they willing to pay.

His Superpower: Negotiation

Tyrone Shum:  
He knew property was where he wanted to go when he realised the power of negotiation.

Premek Borek:   
[00:04:27] Once you discover what the other side wants, you've got a huge advantage. So the reason we managed to buy our tourism properties below the market value was the first one, the owners actually lived remotely, so they couldn't look after the property. And they just wanted to get rid of it. When we discount structural issues with their property, they knew straight away, 'Okay, that's gonna be bigger than we thought, let's just get rid of it.' So that's why we managed to negotiate a good price. 

[00:05:07] It was exact same thing with the latest one that we renovated in the middle of pandemic. And this is a state and people live remotely, too, in New South Wales, they only managed to come and clean up the property and remove all the old furniture, and they just left it as it was. Original house built in the '50s with original kitchen and stuff like that. So it wasn't really aesthetically pleasing, if that makes sense. 

[00:05:38] Originally, we offered them $450,000. And they said, 'No, we'll go to auction, we'll start the campaign and we'll go to auction.' Okay, that's fair enough. And about after a week, they realised that there wasn't many people interested because it was really rundown house. So they came back and said, 'Listen, would you sign the contract for $450,000?' And I said, 'Well, that's fine. But I need to check from the build and pest whether the property is actually worth it before I sign the contract.' And they were happy for us to do it. So we got the build and pest guy, and he did the report, which was probably 50 pages long. 

Tyrone Shum:
There’s obviously a lot of problems there.

Premek Borek:
Exactly, exactly. You have to find the right build and pest guy, too. And basically, I rang the agent on the day and I said, 'Listen, I don't think it's gonna work at that price, the property has got a lot of issues.' And she said, 'Well, send me the report.' She rang me a few hours later and is like, 'So what do I do with it?' So that's when the negotiation starts. Because we said, 'Well, the house has no value. So I'm happy to buy it at the land value minus demolition costs.' 

[00:07:00] An hour later, I got the phone call saying yes. And I think that was that moment, once you discover what the other side wants, if they really want to get rid of it, they got it for free, they don't really care if it's $300,000 or $400,000, they just want to get rid of it. You've got a huge advantage. I did spend a lot of time preparing for it. After I did that course with neon in November, for the next couple of months, I was reading a book about the negotiations and people's psychology and stuff like that. So it takes a bit of a preparation to basically get all the information from the other party. 

[00:07:48] And agents, when you're on good terms with them, they will spill a lot of beans. Which is good. So I think that's the ‘aha’ moment for me. And it's applicable not just in property, though, in everything else. You will go to a car dealer, and you can apply the same techniques.

Shhhh!

Tyrone Shum:  
He shares his tips on how to negotiate, and most of it hinges on one simple principle...

Premek Borek:   
[00:08:52] Always listen to what people have to say, and don't interrupt them. And never question things. Never ask why. Just remove that word completely from your vocabulary. Even if they say we want $1 million for it, just don't ask them why. Just ask them, 'Okay, what's the basis of it?' And that automatically triggers them to actually say more. And they will realise that they don't have any argument, because there's no comparable sales data or anything like it. And that's when they start to think about it. 'Oh. Why do I really want that much?'

Tyrone Shum:   
[00:09:32] That's phenomenal. I love that, because if you ask them why, it's the emotional coming out of it, saying, 'I need this money to go and buy...' yada yada yada. 

Premek Borek:   
[00:09:40] They are defensive. When you say, 'Why?', they are defensive. They want to defend their opinion. When you ask them, 'What's the basis? How can I make it work?' That's when they start to think and they try to help you.

Tyrone Shum:   
[00:09:54] Then you make it into a win-win situation because they are trying to get out of a pain that they're going through. Whereas you're trying to also help the situation but also make it a win-win situation for yourself, too, where you can make a profit.

Premek Borek:   
[00:10:07] That's exactly right. And I had that example this week. The owner texted me and explained the situation. And she said, 'I'm after $850,000.' Okay, fair enough. Let's have a chat. And I asked this question, 'On what basis?' Because there was comparable data for the similar property was sold three weeks ago for $680,000. So we got down to $680,000 pretty quickly, but I want it less than that.

Tyrone Shum:   
[00:10:39] That's such a big, big drop in price. But I guess as soon as you take the emotion out of it and you look at facts and figures— wow. It opens up a whole new world.

Premek Borek:   
[00:10:49] Yeah, that's exactly right. And as I said, it works everywhere. My wife uses it whenever she goes to op shops or stuff like that. 

Tyrone Shum:   
[00:11:00] Sounds like your wife and yourself have definitely delved into a lot of negotiation books and learnt all the skills now.

Premek Borek:   
[00:11:05] We did. Yeah. And I've got one book that I think I read probably 17 times now. And every time I discover something new.

[00:11:21] It's a book written by Chris Voss. He's an ex FBI agent that used to work as a negotiator for the FBI. And the book is called Never Split the Difference. You've probably heard about it.

Practice Makes Perfect 

[00:11:36] It's a great book. But obviously, it references some other books, so to get the full picture, you need to read the other ones as well. And some of them date back to, like, 1920s, when they started talking about negotiations and emotions and stuff like that. So this book is a great starting point. But to make it a full picture, you need to read all the other ones, in my opinion, and you will learn quite a lot from it. However, the book itself, it's got all the essence you need. So as long as you practice all the things there, I think you'll be on the right track.

[00:12:43] The thing is to actually practice it. And even if you don't need something, just practice it. Every time you can, you practice it. I remember, I had a period of time that I would go to a dealership and just try to get the best possible price on a car I could get. And you get, like, 10% [or] 15%. And you think they are well trained, but you apply some of those techniques, and you can definitely negotiate the prices. 

Options Aplenty

Tyrone Shum:  
Seeing his father retire three years ago, and seeing himself taking the same path, is what convinced Borek to take the plunge into property. 

Premek Borek:   
[00:14:13] I knew I had to find other ways. And yes, I've got a good job that pays me reasonably well. It's good, but it's not great, if you know what I mean. 

[00:14:26] So I knew I had to find other ways, and property, I think, is one of those things where you can really make it work. Because you can play with different exit strategies, you can negotiate things, and it's just too many options, I reckon. Which is great. And that was really my moment when I realised, 'Okay, if I'm gonna do something about my life and investing, it's got to be in property.' 

[00:15:00] I look at stock market, share market and things like that. I think it's a bit of a gamble. And I'm an engineer, so I'm a conservative, I always put risk factors everywhere. And I just couldn't take it. Surely there's money there too. But it's probably for people who can play with their nerves a little bit more than I can. 

It’s All About Teamwork

[00:15:25] So that was about three years ago. And since then, I've been obviously educating myself quite a lot. Because I realised that I can't do it on my own, you have to have a team. Especially when it comes to development, you have to have town planners, civil engineers, lawyers, accountants, all the people that will actually help you. Otherwise you'll make mistakes, and there's nothing worse to make your mistakes, just learn from other people's mistakes. 

[00:15:54] And there's a lot of information available. The simple thing you can do is just basically go to property catch ups and meetups once a month. You will meet people, you will hear the stories and that's the great starting point. Well, it was for me, at least. Either with regularly every month I go to the meetup, I know probably most of the people there. But every time I still learn new stories and new things, which is good. 

[00:16:23] So that's been my last few years, lots of education. And doing things. Start small, don't start with anything big, because you can probably make a mistake. But if you can start with something small then the mistake may not be as painful. 

Tyrone Shum:  
His main goal is to achieve financial freedom, and at his current age he’s already got retirement on his mind.

Premek Borek:   
[00:17:35] I realised, especially last year when the pandemic hit— when you work for someone, you've got nothing guaranteed. Our business had to make a few people redundant. And one day, they're good workers, and next day, they don't have a job. So I don't really want myself to be attached to that mindset or methodology that I always have to work for someone. I just don't want to be in that position that I'm so reliant on the job and if I lose it, I just lose everything. 

[00:18:08] So financial freedom is definitely something that I look forward to. And my goal is to basically retire at 57, but not retire as a retire, but achieve financial freedom by 57. I'm 43 at the moment, so I still have a few years to go. But at 57, I would like to be comfortable that okay, I don't have to work anymore, the money flows in. I would like to pass on that knowledge to my kids and have them basically follow the same thing, like build a business and start doing your things and don't rely on someone else giving you money, whether it's employer or government.

Mindsets and Mistakes

Tyrone Shum:  
If he could go back, he would tell himself to start what he’s doing now 10 years ago.

Premek Borek:   
[00:19:39] There's actually a bit of a story about it. I remember I was looking at some property course or seminar about 10 years ago, it was 2010, when we were doing our first renovation. I remember I signed up to it and I even got the ticket in the mail and I looked at the ticket thinking, 'I'll probably go there and they will try to sell me something.' 
 
[00:20:04] That was my mistake 10 years ago, that was my mistake, because I should have gone there. Listened to whatever they had to say and talked to other people. But at that stage, I don't think my mindset was there. And as an engineer, we're naturally introverts, we don't network well. So being in a crowd of people where I have no idea about the subject, I think was a bit intimidating for me. And I didn't do it. But right now, I'm just completely different. And it's a lot about mindset. 

Tyrone Shum: 
[00:21:12] Looking forward to the future, what are you excited most about for the next five years for you? 

Premek Borek:   
[00:21:29] Well, I'm hoping I'll quit my day job and I will do property full time. That's the ultimate goal for the next three years really, for me. So simple as that.

[00:22:00] We know that it's difficult to achieve good rental yields in residential property at the moment, so I started educating myself a little bit more in commercial space. So I'm looking at some economical factors at the moment. Obviously we've got a bit of tension with China, and I can see that we probably some opportunities in Australia to actually start manufacturing. So I reckon commercial, especially industrial properties, will grow up in value in the next probably three to five years. 

[00:22:34] And that's why I started looking at right now, that might be a good time to actually secure something right now, like an industrial warehouse somewhere in North Queensland, close to port. And I think that's what we're gonna do, because we know there's good rental yields in the US, you know, we're looking 10 [or] 12%, whereas in residential, we barely get 3% or 4%, unless you're doing massive improvements to the property. And even that, you're spending money. 

Research, then Retire

[00:23:06] So that's definitely on the cards, and learn a little bit more and look at it. Especially with superannuation, self managed Super fund, if I could utilise some of that money towards that, that could be a win-win, because that will prepare me for my retirement as well. So that's definitely on the cards for the next, probably, few months, to research it a little bit more. And I'm hoping in three years time, I'll quit my day job and do property and just keep doing what I probably know, like small renovations, and hopefully subdivisions, and maybe grow a little bit bigger, a bit more risky stuff. 

Tyrone Shum:   
[00:23:57] It's all calculated risk at the end of the day. So, you know, we all know that there's some risks in property development, but all calculated risks.

Premek Borek:   
[00:24:06] It is. The only thing is with the big developments, you have to look at two years, it's not like six months, it's usually two years. And as we both know, the market can change dramatically in that period. So there's definitely got to be more fat in those sort of projects than in smaller residential, renovations, etc.

Tyrone Shum:  
[00:26:03] How much of your success do you think, at the moment, has been due to your skill, intelligence and hard work? And how much of it do you think has been because of luck?

Premek Borek:   
[00:26:16] I think we have to throw in mindset as well, Tyrone, because this one I can see as being the most important for me. Because skills, yeah, you can learn them on a project. But if your mind's not there, you will never do anything. You can be the most skilled person, but you will never know the product because you'll be always looking at excuses. So mindset, I think is probably for me, like 70% [or] 80%, I would say. And then if I'm not skilled or experienced in something, there's always people that can help me with it. I don't need to know anything. And it's probably better if I don't know anything, because it's likely I'll make a mistake.

[00:27:02] I would say 70% mindset and 20% education, because you have to have a good idea about what you're doing. And you look at things on the paper, it looks like, okay, I could do this, this, this, but then you realise, 'Hang on. It might affect town planning or civil engineering.' So that's when I go to specialised people that know more about this stuff. But you have to have a reasonably good idea. Otherwise, you're wasting other people's time, too. So education and mindset, I reckon, are the most important ones.

[00:27:48] I think market year will offer you some of that, like, I know people probably purchased properties a year ago really cheap. And now they're just lucky with what's happening. And some of them, they were just buy and hold. I read a story the other day that someone bought a split block in some gate, he replaced the carpets, and a year later, he sold it for $120,000 more. He did nothing, just buy and hold. So he didn't have to be too clever. He was just lucky. Imagine if the market crashed, it would have been a different story. 

**OUTRO**

Tyrone Shum: 
Thank you to Premek Borek, our guest on this episode of Property Investory.