Join us on this insightful episode of Property Investory.

Timestamps:
00:01:22 - Development strategy

00:04:30 - Opportunistic investing 

00:06:06 - Lessons from COVID

00:09:35 - Benefit from new market conditions

00:15:03 - An exciting property future 

00:16:07 - Inspirations and self-growth

00:19:30 - Koulizos family advice

00:23:27  - Helpful Resources

[0:13] You know, being the age that I am now, and having the experience that I've had, I can easily say that buying and holding property is the best way to make money. But it's not the only way. You can develop. If you want to give up your day job, buying and holding investment property is not going to cut it.

[0:20] Development doesn't always mean building, even if you buy a parcel of land and chop it up into 2,3,4, or five or more, blocks of land. That's actually much better than building, because the value in real estates in the land, it's not in the build. Most of my more profitable projects, from a percentage point of view, have been just subdividing land.

This is Property Investory where we talk to successful property investors, find out more about their stories, mindset and strategy. 

I’m Tyrone Shum and in this episode we’re continuing the conversation with The Property Professor Peter Koulizos, whose proven tips on timing will help you reap the rewards of a booming property market... Find out how to invest smarter in a COVID world and why we should take confidence into an uncertain future. 

**End intro music**

In all his years as an educator and an investor Koulizos has learned to never overlook an effective strategy, even if it may seem daunting at first.

[3:46] I find the sweetest deals are those where you just subdivide the land. All the development projects that I've done, not all the development, all the building projects that I've done, I've done to build and keep, not build and sell. And generally I'll keep it for around five years because that's the best depreciation period. And then I'll move on to the next development.

Like any investment strategy, Koulizos says in his own experience of property development it quite literally pays to look into the numbers.

[1:32] So I'll give you an example, and people can Google if they want. So it's 25 Peterson crescent, Port Noarlunga, which is a seaside suburb, here in Adelaide. So if you go and have a look at it, you'll see that it's a triangular block, which puts a lot of people off. But if you look at it on Google Maps or Google Earth, you'll see now that it's chopped up into three elements. So the first two allotments are quite rectangular, except for the slide at the back. But the other block is, yes, triangular. But for memory, Oregon might have a percentage profit of 25 to 30%, just by chopping up the land. But, you go there now and you'll  see three houses there. But I never built the houses. Because I mean, let me give you some rough numbers to see what it's worth now. 

So if let's say I, I bought the land for 500. Alright, knock down the house, good - The subdivision. And now it's worth 600. Right? But it cost me 600. And I chop it all up. And each block owes me 200. But it's worth 250. All right. So somebody buys it at 250. And they want to build their dream home. And their dream home costs another 250. So for them, you know, 250 plus 250 is 500. But if I was to do it and spend another 250. So each block of land owes me 200. Now I'm going to borrow another 250. That makes 450, it doesn't mean that I make $50,000 profit, because now I've got interest to pay. And there are other major holding costs. So for me, I would have been better off (which I did) -  It owes me 200, I sell it for 250. So make 50 rather than it owes me 450 and sell it for 500. I still only make 50.  Well, not really because I’m gonna lose money in paying interest. 

Koulizos claims that most of his property purchases have been opportunistic - taking the right chances at the right times. He says that the simple forces of supply and demand can also be an investor's most powerful guide. So his key takeaway is learning how to read them. 

[6:28] Mine - most of my purchases were all opportunities, I saw the opportunity and I took advantage of it. I've been fortunate enough to go through a number of property booms like the one that we're experiencing. And that's where the satisfaction and the reward comes, like in the smaller capital cities like Adelaide and Brisbane. Even in places like Darwin, oh actually Darwin fluctuates too much. So say in Brisbane, not much happens for many years. And then for about two or three years, there's a big spike, and then not much happens for many years, and then you get another spike. Whereas, Melbourne and Sydney, you can get big spikes, but also big dips, big spikes and big dips. So you know if you're holding property in Adelaide or Brisbane, for most of the time, there's not much happening, like you might go up a few percentage points. 

But it's periods like this where it goes up by 20% in one year, which is good, but we've had better years in the past. Like I've done the research and I know that in the early 2000s Perth increased by 45% in one year. Hobart increased by 55% in one year. Can you imagine owning property in that period of time? So that's why I say that owning investment property long term is the best way to make money because you don't know when that boom is coming. But when it does come and you own a number of properties, that's where the money is to be made.

COVID impacts have caused huge disruption to many investment strategies, whether by changing markets or patterns of behaviour. However, as a lifelong student despite his success, Koulizos says he’s learnt from Australia’s pandemic changes.    

[8:03]  I didn't predict that property prices were going to go up over 20% because of COVID. Like many others I thought that it was going to go backwards. But, I said it was going to go backwards by 5%. Others said it was going to go back by 15 or 20. But to go up, and it's all about for me, it's all about shortage of supply. It's because there's not many houses to buy. It's not like stacks of people are looking to buy, it's because there's not many properties for sale. 

[9:07] So back in March last year, when COVID first hit, I was very worried because I knew we had economic downturns before but not pandemics and lock-downs, you know. So I went back and looked at what happened to property prices after the 1970s, 1980s, 1990s recession, and global financial crisis. I discovered that residential properties were actually quite resilient, not necessarily commercial property but residential properties. And you just need to look at some of the major events, global events and what's happened to property prices. Like we often talk about the post war boom. So we had the war which lasted for six years and it was horrific. Yeah, huge impact, not just economic but after that there was like a big release or a big relief. And I think the pandemic is a little bit like that. People were very scared. And often when people are scared, they flock to safety. And one of the safest investments is real estate. 

[10:17] But also, not just looking at it as an investment, but people wanted to secure their home as a place to live.  So, what's happened is, for many people, I think the reason why there's not a lot of properties for sale, there's some people still very scared and not willing to put their property on the market. Because they might not be sure of their job. You're in lock-down. And when you're on job-keeper and job-seeker, things might be okay. But if you're off job-keeper or have job-seeker, and you're in tourism or travel or hospitality, then you know, it could be an issue. Or if your job is in retail with more and more people buying stuff online, we don't need physical people standing in the retail store. But we might need people back in the warehouse, and loading up the delivery vans. So I think that's the main reason why people are not putting their properties on the market. And for property owners, the story is going to get even better, because when international borders open, and somewhere between 300,000 to 400,000 people are coming to Australia every year, they're gonna live somewhere. And so, you know, rental vacancies are really low at the moment. There's hardly any properties to rent, which means rents are going up. And that's with nobody coming into Australia. What do you think is going to happen when hundreds of 1000s of people start coming?

As global borders start to re-open for the long-term, his opportunistic strategy means taking advantage of what will surely be new property conditions. Whether you are looking to enter the market, renting or even managing a large portfolio, he says everyone should act accordingly.

[12:39 Unfortunately for any tenants or renters that are listening, the news is not good for you. I'm not going to get into too much economic speak. But, supply is inelastic, whereas demand is elastic. What I mean is demand - people can change their mind about buying property overnight. Like as happened with home builder. Home builder was announced on a Sunday, on the Monday stacks of people are out looking for new homes. But it's not like on the Monday there were 100,000 new homes magically built. It takes, first of all, you've got to find the land. And then you've got to build the house. So there's a big, big lag with supply. And look what happened when we tried to increase supply. There is a shortage of building materials of concrete, structural steel, and timber. And so generally speaking, new property adds about 2% to the existing stock. So in simple numbers, if you're going to a country town with 100 houses, probably next year, we'll have 102 houses. Now people might be thinking, well, let's just build more houses. Well, look what's happened when we tried to build more houses, there's a shortage of materials. And so you know, maybe we need to look at designing properties differently, or constructing them differently, because if we're going to build them brick by brick, and it's going to take a year to build, you know, we're going to have this rental issue for a while, because not only will those migrants continue to come in like they used to, but we've got to make up for loss time. 

[14:22] So, if we used to take in 300,000 people we'd probably take in more to make up for that loss. And we're fortunate in that Australia is a very popular country to migrate to for many reasons. And now they have another one, because Australia copes with COVID-19 very, very well. So, unfortunately if you're a tenant, you know, I would encourage you maybe to secure a long term lease rather than just a year. The other thing you might want to look at if you can, is to save some money to try and buy something. Because, I've just talked about the rental situation, but the property price situation - what happens is most people that come in, they're not allowed to buy because you're going to become a permanent resident. Most immigrants can buy when they get the permanent residency, which means they live here for two years and work for at least one. So in two years time, after the gates open or the borders open, then we're gonna have a lot of people moving from renting to buying. Yeah, well, like I said, you can't just magically bring in hundreds or 10s of 1000s of new homes. So, I think for property, it's going to be if you own property, it's going to be a golden era, a bit like a significant portion of the 70s and the 80s. And the early noughties, where we had large increases in property prices, whether it was because of increased demand or limited supply. And this time around going forward, there would have been increased demand, in particular from overseas migrants.

Coming up after the break, we will dive into Koulizos’ plans to capitalise on the new realities of a post-COVID property market. 

[16:21] And some areas will benefit more than others. I actually think Sydney and Melbourne, their rate of growth will slow down mainly because of people's -  I wouldn't say Exodus - but certainly considering moving to regional areas or moving to smaller capital cities.

Some of his biggest inspirations…

[21:50] Oh, I really admired Noel Whittaker. I'm a big fan of his. I really admired Margaret Lomas, I still do. I'm writing a book with her when I first started out. And she's the queen of property.

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

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From studying historical property patterns and applying basic supply side principles, Koulizos says property investors should actually be excited about what the future holds.

[16:14] I don't think we'll be going as fast as we are. But, I can virtually guarantee you property prices will be higher in 12 months time than they are today. And they'll be higher again in 24 months time than they are today. And some areas will benefit more than others. I actually think Sydney and Melbourne, their rate of growth will slow down mainly because of people's -  I wouldn't say Exodus - but certainly considering moving to regional areas or moving to smaller capital cities. You know, I know personally of three people whose job is based in Sydney, but they're living in Adelaide. I just spoke to a journalist just before I spoke to you - Melbourne job - lives in the country town in Adelaide. So imagine that. You're on a Melbourne salary and you live in a country town...you're paying peanuts for rent or property. 

But like any other of life’s endeavours, Koulizos believes to make the most of a good situation, investors should arm themselves with knowledge, which he continues to do. 

[18:09] When I was a young lad, many years ago, when Dinosaurs roamed the Earth, I read a lot of books written by Noel Whittaker. He's fantastic. He's written many. And even now you're looking at him; he's written books for young kids, written books for people that are looking to retire, you know, with super, and everything in between. So I'd strongly encourage people to read books by Noel Whittaker, there's some other very credible property authors. I really like Margaret Lomas' books on property investment. When it comes to property development, there's a Western Australian architect called Ron Forlee - F O R L E E is how you spell his surname. He's written three books on Australian residential property development. 

[19:40] Or you can do a course. Yeah, and unfortunately, nowadays, not many people Interested in courses because of the time more so. And I'm not saying you need to go to university to be a successful investor or developer, but even like I mentioned adult community education. They might run courses that go for two or three hours, it might cost you 50 bucks or 100 bucks. And those sorts of organizations wouldn't have pirates running them. They'd be legit people who were there to educate you, I would imagine, or, you know, look at what other courses credible institute's are offering. 

[20:36] One of the beauties about the course, unlike a book, is assuming the courses are being taught by a real person, you can ask them a question. And you can also learn from other people. Now, the other people may not be in the room, they might be on Zoom, right. But not only do you learn from the person at the front of the room, but you also learn from other people who have similar interests, but maybe different experiences to you. So, as far as resources are concerned, you can start very simply with articles and books, go to informal courses, and then you might want to do some more formal courses to further your education.

In his own life some of the best little nugget’s of wisdom have come from the most unexpected of places. Yet they may have been wasted if he didn’t get out into the real world and just had a go. 

[22:06] So like I said, at the beginning, I reckon it was through a process of osmosis, sitting at the dinner table with Dad talking about property every day, that I learned. So I don't think he deliberately wanted to mentor me or teach me, but it was just being engaged in the discussion that helped me learn more, and also importantly, getting out and doing it. And so talking about resources, it's one thing to read and do courses, but in the end, you need to get invested. If you don't buy something, you're not going to make any money. Some people, unfortunately, suffer from analysis paralysis, they do so much analysis, spend so much time working out what's the perfect property? - And by the way, the perfect property does not exist - that they miss the train. And so they end up never buying anything.

Koulizos says his own father left him with some advice all investors can utilise. 

[23:09] Like he would always say, look, if you buy a property and the property pays all your expenses, that's a good property. Well, today, you can do that. And 30 years ago, you could, but when we had double digit interest rates, and most people were negatively geared, you couldn't do that. But I mean, I understood what he said, it was really more about affordability. So  buy something that you can afford, I mean, back then, all right, it didn't cost you any money. Now, it might cost you $50 a week or 100 bucks a week. But that was certainly a valuable lesson. And also, marketing - as in if you're going to renovate, you want to fix up things that people will appreciate and pay money for. So I found or he found painting was the best bang for your buck, you know, he spent $3,000 on painting, you get much more than $3,000 back.  But you spend $3,000 on putting a rainwater tank in, nobody cares. Or you spend $3,000 and put something in that nobody can see. So they need to be able to see it. So there might be extra insulation in the walls or in the ceiling. Nobody can see that. You're not gonna pay extra. Spend $3,000 on an air conditioner. People will see that. They'll pay extra for that. 

We asked Koulizos to give us a piece of his own advice. 

[25:58] Isn't luck the crossroad between opportunity and preparation.? Some people might think, you know, that I'm lucky or other successful people are lucky but there's a lot of work that's gone into that for most of my working life. I was doing something else other than work, whether it was, you know, working full time at school, and studying. Or, whether it was working full time somewhere and teaching somewhere else part time. Or whether it was, you know, working and doing developments, or working and renovating. So, no, you might look at successful people, whether it's in property or whether it's in business, anything "oh gheez they're lucky". Well, for most people, unless, you know, some rich parent gave a million dollars or rich grandparent gave them a million dollars. But most people, it's hard work that they may not moan or whinge about. But it's hard work that they've done in the past that bears fruit later on. Remember I said earlier, investment is about sacrifice now, for a benefit in the future. So sacrifice some time, whether it's learning about property, working extra, because if you work extra, then your service ability increases, then you can buy more. But you won't reap the benefits until the property market goes up, in particular in a property boom like we're experiencing now.

Despite experiencing incredible success with his substantial portfolio, Koulizos isn’t planning on slowing down any time soon. He thinks he’s been gifted with the perfect opportunity to share his genuine passion for property. 

[25:09] Well, you know, teaching at one of Australia's best universities, in an area that I'm really passionate about. For me, it doesn't get any better than this. Yeah, this is good as it gets. So I just want to do more of this for as long as I can. I'm not hanging out to retire.  If retirement comes in, I'm sure I'll live very comfortably. But you know, so long as people are happy to pay me to teach property, I better continue to do it.

He has some of his own helpful resources. Spanning topics from residential development to large-scale commercial properties, here’s how to access them. 

[19:06] So the third book, which is coming, I'm writing together with Margaret Lomas, is on small-scale residential property development. So that could be another good resource for people. I've written a series of articles. If people Google my name and property development 101, they can see a series of 10 articles I've written basically on the steps of property development. If they Google my name, property development 101 videos, they'll see a series of videos, which is all about the development of those places I've built on the Esplanade at Port Noarlunga south, which I talked about earlier. Talking to the people involved like the mortgage broker, the accountant, the builder, the town planner, and so on. 

If you want to reach out and learn more from Koulizos about his strategy, and enrol in his new course, here’s how.

[27:54] So people can email me at Peter.Koulizos@adelaide.edu.au. Actually the new course that I'm writing, which is called introduction: property and valuation, I'm also making a non-award course, which means you don't have to enroll in the Masters, you don't have to have had an undergraduate degree, anyone can enroll, you don't have to do the assessments if you don't want.  We start off easy, but then we move into some more difficult concepts. And you may not stay for the full 12 or 13 weeks. But one of the important bits of the course for me, again, is keeping it real. We do a field trip. So we go around and I'll explain why this makes a good investment, this does not make a good investment, this makes a good development, this does not make a good development. So you can talk about it all you like in class. But it's not until when you're actually physically there, that it really succeeds. Now I know that might be hard for people that don't live in Adelaide, but you can do the course remotely. And then you just might come for that one weekend, - because the field trip is on a Saturday- and do the field trip. But, that should be on the Adelaide University website early in the new year.  Introduction of property and evaluation. Yeah, that's for anyone for the non award component.

Thank you to Peter Koulizos, our guest on this episode of Property Investory.