Property Investory
Duped by a Dodgy Developer. How To Bounce Back From Financial Ruin with Rich Harvey.
June 11, 2017
Rich Harvey is a widely successful buyers agent and property investor who sits at the head of the Real Estate Buyer's Agent Association, as well as chairing the Buyer's Agents Chapter for the Real Estate Institute of New South Wales.
Join us in this episode as Harvey takes us on a journey through his investment career, revealing the tragic deal he made with a dodgy developer which led to the loss of his entire property portfolio. Harvey reveals the details of his climb back to success, his top tips to improve your chances of a profitable investment and much much more!


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Rich Harvey:
And we thought, you know, we had the money invested there for a couple of years, and we thought this money is multiplying on paper really, really well. But in actual fact, we ended up losing all of that money.

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 property buying agent Rich Harvey. Join us as Harvey takes us on a journey through his investment career, revealing the tragic deal he made with a dodgy developer, his top tips to improve your chances of a profitable investment and much more! 

I’m Tyrone Shum and in this episode we’re speaking with managing director of, Rich Harvey. Join us as Harvey takes us on a journey from owning 14 properties to then losing all his money in a tragic deal he made with a dodgy developer. Learn how he bounced back and rebuilt his portfolio and his life!


Tyrone Shum:
Harvey’s career as a buyers agent began in 2001 and he learnt all these skills as his business grew. He spent his days maximising efficiency and squeezing as much out of it as possible.

Rich Harvey:
(00:47) I mean, when I started out, I was on the tools a lot more, I was out there researching properties, I was marketing my services to find new prospective buyers, looking at properties, evaluating properties, dismissing properties, developing agent databases, doing everything related to property and running a business. So there's never enough hours in the day, particularly as a business owner, as any other business owner would know. 


(1:12) And you soon learn to get very smart, not take shortcuts, but just get very efficient at what you do and how you deliver the service. So my goal is to deliver really top professional services to any home buyer or investor or aspiring developer that wants to get into the property market and help them see how to do that every day of the week. 

Tyrone Shum:  
On top of being a business owner, Harvey involves himself in other highly esteemed property related activities. 

Rich Harvey:  
(1:48) I'm the president of the Real Estate Buyer's Agent Association, REBAA, for short. I've been the president for the last two years, I also serve as the chairman of the Buyer's Agents Chapter for the Real Estate Institute of New South Wales. So both of those roles are a voluntary thing, I don't get paid for that. And it's just my way of giving back to the industry to help improve standards and ethics and professional practice in the industry. 

(2:13) Because we are, I guess, a fledgling or growing industry. And there's, you know, buyer's agencies 10 years ago were not nearly as popular as they are today. And so there's certain regulations and standards that are still growing as we speak. So I serve in that role to help improve their practices with other businesses as well.

Tyrone Shum:
What spurred Harvey’s motivation to take such an active role in the Real Estate industry?

Rich Harvey:  
(2:46) For me the reason I do that, it's about transparency. I mean, my brother got stung by one of those marketing groups many, many years ago, where they used to fly you to the Gold Coast and show you around and take you on a little run around the place, and then tell you that there's only two properties left. And unless you sign a contract by Sunday night, you're gonna lose it. And it's really sad to see people get swindled into buying major assets on the basis of just a couple of hours and pressure tactics. So that was something that really motivated me to help improve the practice in the industry.

Tyrone Shum:  
How would Harvey describe himself as a property investor?

Rich Harvey:  
(4:15) I'm someone that's become very savvy with property. I started out very aggressively trying to buy as many properties as I could, once I sort of got educated I was a very cautious investor, when I started out. My background is actually in economics. And I started out that way and used to analyse things to the nth degree and you know, made sure everything stacked up.

(4:37) So that kind of prevented me from investing in property, but once the penny dropped, I kind of got there and I went out and tried to get, safely, as many properties as I could. There's always a learning investor. I still don't pretend to know it all. There's so many angles to being a property investor. But you know, I'm a cautious but proactive property investor today.

Tyrone Shum:  
Harvey takes us back to his years growing up in Sydney's North Shore and the influences from his early life. 

Rich Harvey:  
(6:05) My dad was originally a solicitor and then became a marriage counsellor in the second half of his life. So my parents really didn't give me much of a grounding apart from saying, 'Be frugal with your money and look to invest'. I started a gardening business when I was about 14 [or] 15 years old. And that was my first ever business. And I built that up to around 10 clients. 


(6:25) And it was the first business I ever sold. So that got me through university. But I always had an interest in property from an early age, just looking to see that, you know, property was a great way you can leverage, it's a really safe investment. I used to deliver pamphlets around and look at the houses and you know, see new houses going up and people doing renovations, I'd think, 'It would be great to own a house one day'. You know, when I was riding my 10 speed bicycle. But I think I used to read a lot of books. I used to go to a lot of seminars, and that's the way that I got myself educated in property.

Tyrone Shum:  
(7:00) So at 14, how did you get yourself into a gardening business? 

Rich Harvey:  
(7:06) My dad was an avid gardener. He used to win prizes for having a wonderful garden, but I just loved being outdoors. You know, as much as I sort of use my intellect, I love to use my hands as well. So I used to enjoy mowing lawns and getting gardening stuff sorted for people and doing great jobs. 

Tyrone Shum: 
(7:25) Wow. And that was on your tools back then, you're not on those tools as often as you used to be?

Rich Harvey:  
(7:30) That's right, exactly. Yeah, I do like a fresh lawn though. I used to do one of the news readers, he used to live around the corner, from Channel 7. So I used to mow his lawn!

Tyrone Shum:  
Clearly a self starter, I ask what Harvey got up to as he got a little older.

Rich Harvey:  
(7:57) No, I actually studied economics at university, I did a Bachelor of Economics. And then I went back and did a Master's Degree in Economics. It was kind of funny when I was growing up, I didn't really know what I wanted to be. Everyone at school put this pressure on, saying, ‘Rich, what do you want to be when you grow up?’ And it's like, ‘Well, I don't know. I want to be a professional golfer, or a great bodybuilder or a great surfer’. 

(8:18) You know, you have these dreams as a kid being a professional sports star. But my golfing handicap didn't really get down by 20. So that wasn't going to work. So I did economics because I quite enjoyed studying finance and money and how it flows and studying investing. But I finished uni, and then I went to work for the Minister for Transport for a period of time.


(8:40) I worked for about 18 months as what was called a Parliamentary Liaison Officer. So during question time in state Parliament whenever the Minister gets asked a question, there's always somebody in the background who's done all the research. And that person was me. So I'd always be quickly handing the Minister all sorts of briefing folders and that sort of thing. So it was a pretty amazing job to get not long out of university. It was the lowest rung in the Minister's office, but it was still a great start.

 (9:05) And then I went back to uni full time, did a master's degree, finished that. And then I looked for a job for a while, and got one with the Forestry Commission as an economist. So I always had an interest in trees and wood and forestry. So I used to work there for a number of years. Then I switched over. And I became interested in environmental economics. 

(9:24) And one of the things I used to do was to crunch numbers on valuing the environmental costs and benefits. And I got a job with the EPA, the Environment Protection Authority, as their senior economist. And I did that for about five years. So I worked on things like water pollution controls, air pollution issues, the Clean Water Act and a whole bunch of other regulatory things. So my job was to analyse for the government, the costs and benefits of implementing new environmental regulations. 


(9:50) But they're really good at evaluating the cost. But no one was very good at evaluating the benefits of environmental improvements. And so we help to develop a whole range of techniques to do that. So I did that for a number of years. But while I was doing that, I kind of got a bit bored with just crunching numbers on a spreadsheet. And that's when I really started to enter my property investing journey. And I'd catch the train to work every day, I'd read a book a week, I'd go to at least one seminar every couple of weeks.

(10:16)  And I talked to people and really wanted to ramp up my education because I figured, ‘I don't wanna be stuck in the rat race for the rest of my life, I want to do something I really enjoy doing every day’. And that's really how I got on the property investment track. So I started teaching people how to buy properties. And when I was in government, I was one of the few people to pay zero tax because I'd managed to buy enough properties to actually reduce my taxable income to virtually zero. 

(10:42) And so people would, you know, in the HR department, say, ‘Rich, how do you pay no tax?’ And I’d say, ‘It's easy, you just do it this way’. So I thought, there's a nice way to start helping people along the property investment journey.

Tyrone Shum:
I ask Harvey how he managed to get his tax down to zero. 

Rich Harvey:  
(11:00) Well at the time my income wasn't that high, so it wasn't too hard. It depends how much tax you pay. It's all relative, but you know, at the time, it really involved buying about three properties, three to four properties at a time. And they're fairly new properties, not all brand new, but some of them were fairly new. And so once you crunch the numbers on that, it actually used to be called the 221D, and now it’s called the Tax Withholding Variation, section 1515, the Tax Act. 

(11:28) So if you know what your tax deductions are going to be for the year, you submit the form, and instead of your employer taking the tax out every week, it actually goes into your wage, because you know, it'll be claimed back at the end of the year. So you actually get to claim your tax on a fortnightly basis, which is a much better system for investors.

Tyrone Shum:
Harvey knew his way around finance, but how did his investing journey begin?

Rich Harvey:  
(12:07) First investment was…. the first time after my wife and I got married, we bought a property in Pennant Hills. And that was our first home, and I consider that still an investment even though it's a home, because that's where a lot of people start making their equity. So they can use their leverage to invest into other things. So we bought a very large block of land, which had an old classic, you know, postwar 1950s [or] 1940s type home on it. 

(12:31) And were able to subdivide off the back. And that was brilliant, because we're able to then, by subdividing and building on the back of that house, that really released and created a lot of equity for us to invest into other properties. So that was a great way that we're able to really add value to the existing block and leverage that to go forward. 

Tyrone Shum:  
(12:49) And how long ago was that?

Rich Harvey:  
(12:51) This was back in 1993 I think it was? Stretching the memory. 1993 [or] 1994. Yeah.

Tyrone Shum:  
(12:58) And do you still hold on to that property right now?

Rich Harvey:  
(13:00) No, we did sell that, that was our principal place of residence. So obviously we traded that, sold it, and moved into the back house. And we've since moved into another home now as well.

Tyrone Shum:  
(13:10) So when did you sell those properties? And what happened next?

Rich Harvey:  
(13:17) So we didn't sell that one straight away, we just moved into the back. And then we basically still were paying that home loan down for a number of years. And that's when I was working in government for a period of time and realising that I had to start getting on the property investment track. So we then started to buy some investment properties. 

Tyrone Shum:  
(13:38) What kind of strategy did you use? And how has it evolved over time?

Rich Harvey:  
(13:45) To be honest, I didn't have a strategy. When I first started, I wish I did. And that's what I teach a lot of people today, it's very important to come up with a very clear mandate as to what you're going to do with your property, and there's no one size fits all, you know, your strategy is going to depend on your age and stage, your risk profile, and your financial capacity. So, at that time, I just knew that I needed to get an investment property.

(14:09) And sort of the mantra of the day was, you know, at the time, was to buy something in a good area close to amenities and very new because you can maximise depreciation. And now, that's not always the case. You know, buying brand new means you're actually paying a developer's margin, it may mean that you're paying a slightly inflated price.


(14:29) And my message to investors these days is probably 98% or 95% of properties are better off to buy established properties than brand new, particularly when you're hitting into the peak of the market. But I’m getting off track a bit. I think that the first thing is I didn't really have a strategy, but my strategy has definitely evolved over time from buying a simple investment property to doing renos to then doing small developments.

Tyrone Shum:
Harvey reveals the details of his portfolio strategy, including the good fortune he had with the market around the time of his first investments.

Rich Harvey:  
(15:16) So we started to buy a couple off the plan. And fortunately, we bought them at the right time, as the market was rising. You look at the property clock, and if you're gonna ever do off the plan, which is not a highly recommended strategy, it is a much riskier strategy.

(15:30) The only time you can really possibly do it safely is when, you know, you're at sort of that eight or nine o'clock on the on the property clock, as the market is rising, because if you buy it at the peak of the market, you're going to have settlement risk or valuation risk, which could be quite an issue. And so yeah, so we bought a couple of those, and that service just does really well. And then we started buying established properties after that.

Tyrone Shum:
Though he has a wealth of experience behind him now, Harvey learned the hard way that the industry can be brutal, and not everyone is trustworthy. He shares one of the lowest points in his investment career.

Rich Harvey:  
(16:40) I mean not everybody gets it right. Not even the experts get it right. I guess for us, the worst moment was when we bought a couple of properties. And we had a bit of equity, and were introduced—through a financial planner mind you—to a developer. And the developer was offering amazing returns. So we thought at the time, naively, around 20%. So we thought, ‘Wow, that's amazing’. And it's all secured against property. 


(17:04) And basically, we were going to become a passive developer, you know, with this particular developer. So he was offering these great returns. And I guess the biggest mistake that we made was not securing and not getting enough legal advice on the type of security we had over the loan that we made to the developer. So the documentation we had was very weak.

(17:28) And we basically invested large amounts of money with this developer, and he had projects in very good areas, you know, they were in Northbridge, Rose Bay and other areas that are really strong markets. But this developer grew way too quickly. He was incompetent in managing money. And we thought, you know, we had the money invested there for a couple of years, and we thought this money is multiplying on paper really, really well. But in actual fact, we ended up losing all of that money.

(17:59) And that was the worst possible thing, because we'd taken years and years to develop that equity. And he kept promising, ‘Yes, the money's coming in, the money's coming’. And it was always going to be coming, but it never came back. And so that was a very, very heart wrenching time in our lives, and really difficult for a marriage and other reasons.


(18:20) And so it was a really difficult time, we basically lost about 70% [or] 80% of our net worth by investing with this developer who we at the time believed in, but ended up taking most of our money. So he misappropriated the funds, and he got charged with fraud and a whole bunch of other stuff. So he wasn't someone we should ever have been associated with. And so that was a very salient lesson to learn. And the pain still is very strong to this day.

Tyrone Shum:
Wow, I feel it too and how can listeners learn from this?

(19:00) So I guess just to sort of finish off the lesson, it was to make sure your security is secure. And we didn't have enough strings to pull the money back, we weren't a joint venture, we were a passive investor in that development. So we didn't have the ability to take control of the projects or do anything with it. We just handed over the money on the basis of a loan document. But we were unable to get equity back from the projects. And they all collapsed when the developer went bankrupt. So it was a very, very difficult lesson to learn.

Tyrone Shum:
From bad moments to good ones, Harvey remembers a time when things clicked into place for him, when he came across a game changing software. 

Rich Harvey:  
(20:00) When I was doing a number of courses, I bought some software called PIA, Property Investment Analysis. And because I used to play with spreadsheets all the time, it was a really great programme. And I suddenly realised that you don't need a lot of money to invest in property, a lot of people think you need, you know, millions of dollars to invest in property. 

(20:18) But once I worked out how the banks lend money and how leverage works, and all the tax depreciation benefits you get to actually hold a property, you know, a decent property at the time was like $15 or $20 a week I think that was the after tax holding costs for for a good quality growth property. And I went, I said to my wife, ‘This is incredible. Look at this, you can control quite a large sum of property without a huge amount of cash’. 

(20:45) And as long as you're going to have a long term horizon, you're not trading the property over the years, then there's a way. So it was really when I went through that programme and actually looked at all of the numbers, how the how the cash flow works, that was my aha moment to realise, well, anyone can do this on a moderate income, you don't have to be earning $400,000 a year to earn a sizable property. 

(21:05) I've seen people earning $60,000 or $70,000 a year, you know, continually, with financial diligence who buy some really good properties, and they just manage their cash flow to afford those properties. 

Tyrone Shum:  
So is it possible to achieve that in the current market? 

Rich Harvey:  
(21:32) I get asked this question every day, you know, they say, ‘Well, Sydney's median house price is $1.1 million, the median unit price is $752,000. So how can I possibly afford to buy? And what about my kids?’ Look, at the end of the day, I'm amazed at prices, but you've got to look at the real rate of return on money, you know, you've got to factor in inflation, right? Inflation is generally predicted around 2%-3% a year, so that erodes the real purchasing power of money. 

(21:55) And when you look at a 3% rate compounded on a million dollars, it's quite easy to see how median prices do double every 10 years or so. So, you know, we can be having a conversation in, you know, 10 years time in 2027, you know, it might sound like a foreign year, but it's gonna come around pretty fast. You know, so we could be having a conversation, and I wonder what the median house price in Sydney will be in 2027, and the median unit price. I believe it will be significantly higher than it is today. 

(22:28) So you've got to look at the drivers. When people get scared about, ‘Oh, can I afford to buy?’ Can you afford not to buy is the question I come back with. So you get into the market, it doesn't mean you're gonna have to go and buy multimillion dollar properties straight off, just buy something to get you on the property ladder, in a growth area, in a suburb that has the right fundamentals for growth in cash flow. And you'll do well. You know, don't just go and buy any property, but get good advice. 


(22:53) Buy something that's close to amenities, close to transport links, potentially areas that have been gentrified, and you'll do well. So you know, the other thing is you don't have to buy in Sydney. If you literally can't afford to buy something in Sydney, then you can buy something in a large regional area. There's plenty of great regional areas that will provide, you know, good cash flow. 

(23:16) So you don't just have to be Sydney, or Brisbane or Melbourne centric, you can consider other areas and consider the rent-vesting strategy. So rent where you need to work and invest where you can afford to invest.


Tyrone Shum:
Coming up after the break, we learn more about Harvey’s investment career.

Rich Harvey:
(5:28) So I went down the negative gearing route for a while. But once you sort of get, you know, three, or four or five properties doing that method, then you've got to realise that a lot of investors come to a screaming halt.

Tyrone Shum:
He offers his advice to younger investors.

Rich Harvey:
(0:58) And I think a lot of investors fall into this trap. We also see it with some of our clients, particularly very analytical clients, like accountants, or financial people that love to model everything. 

Tyrone Shum:
We discuss Harvey’s personal investment strategy and get a glimpse into his current portfolio.

Rich Harvey:
(6:50) But in terms of specific properties, I went for originally capital cities, because I wanted to buy in areas where there were jobs.

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


Tyrone Shum:
Harvey talks us through where he’s currently at in his investment journey. 

Rich Harvey:  
(24:15) You go through phases where you're in either a growth phase, a consolidation phase, or a fixed up phase. So at the moment, I'm going through and looking at my portfolio and going, you know, there's some properties that haven't performed nearly as well as they should have. So I'm actually looking at removing those from my portfolio, because if I leave them there, there's going to be what's called an opportunity cost. 

(24:36) And if I've got, you know, a $500,000 property that I expect to grow at 6% or 7% a year but it's growing at 1% or 2%, then I'd rather get my money out of that property, the equity I have, and put it into a property that's going to grow and accumulate my wealth. So I'm going through a consolidation phase and I'm also looking at you know, keep continuing to invest in good quality properties and develop some properties for equity growth.

Tyrone Shum:
Could you share how many properties you currently hold in your portfolio?

Rich Harvey:  
(25:18) Before I lost all the money that I had to that developer, I had 14 properties. And I'd built those up very, very quickly. Some of them I bought off plan and had yet to be settled, but we'd accumulated them quite quickly, which is great. But we ended up going back to one property. 

(25:33) And then I've had to rebuild from there. So I really had two goes of building a portfolio! So not a highly recommended method, but one that builds character and resilience at any state. But like, when I started out, we were just buying, you know, well located apartments. And then we progressed from there to buying houses. One of my best investments was buying a house that already had a granny flat attached. And that was a brilliant strategy from our perspective of cash flow and growth. 


(26:03) A lot of people say, ‘Oh, but if you add a granny flat, don't you devalue the property?’ I totally reject that idea. Absolutely, you increase the value of the property. And if you look at anywhere in a metro area that's got a granny flat, they're highly sought after. Everybody wants a supplementary form of income. 

(26:20) Even if you don't want the income, and you just want to put noisy teenagers in there or grandma for what it’s literally called: a granny flat...Then you've got that opportunity too. So granny flats have been a really good investment for us. And I always smile when I see the property statement coming in every month and showing the positive cash flow that it's generating.

Tyrone Shum:  
Harvey’s ability to keep smiling after losing his whole portfolio is admirable. I ask him what he’s most excited about for the future.

Rich Harvey:  
(27:27) Lots of things! I think in terms of property, I always think there's new opportunities coming every day, I think we're going to go through a phase where the market should moderate the first half of this year, I think it will be still very strong, very competitive. But I'm excited about opportunities at every stage of the cycle.

(27:45) I like the idea of, you know, duplexes and dual living properties. I think they've got some great opportunities. Granny flats are great opportunities that I'm excited about. Continuing to build my business. Excited about watching my family grow up and seeing my boys launched into the real world. And yeah, just enjoying the best of life. 

Tyrone Shum:
Harvey explains the hesitation he experienced when purchasing property and how he learned to manage it. 

Rich Harvey:
(0:43) I was an economist in my past life, and that's good and bad. It's good that it helps you crunch numbers very well. But it's bad that you get this disease called 'paralysis of analysis'. And sometimes you let perfect get in the way of a good thing. 

(0:58) And I think a lot of investors fall into this trap. We also see it with some of our clients, particularly very analytical clients, like accountants, or financial people that love to model everything. And look, the real world is not perfect. So I was really fearful, I guess, of debt. That was the other thing when we had got our property subdivided. As I mentioned before, we then managed to pay off the loan on the real house, almost down, I think we had like $50,000 left to pay off. 


(1:27) And I was thinking, 'Wow, isn't it great, we can almost be debt free. But you've got to understand the difference between good debt and bad debt, or deductible debt, and non-deductible debt. So I think for a lot of people, they don't understand that distinction. So obviously, investment in property, as long as it's a good quality property, is good debt. And you could leverage that debt into more property and grow your wealth. 

(1:49) And I think a lot of people get scared of interest rates jacking up, you know, they hear about stories back in the early 90s, when interest rates hit 7% [or] 8%. And they think, 'Well, what if that happens again?' Well, it won't happen. You know, interest rates, yes, they will go up, but they won't go up to the same magnitude or the same degree as they did. So, for me, it was getting over a fear of debt. And it was getting through too much analysis from making a decision on something.

Tyrone Shum:
Yeah, I totally understand from that point of view that you've done your research, but at the same time, you can overdo it like you've said. How did you overcome that and just start investing?

Rich Harvey:
(2:41) I read a lot of books, I went to a lot of seminars, I used to meet with a couple of other guys, like, I used to meet with a couple of guys, every once a month, and we'd talk in this, a bit like a book club, if you like, it was our investment club. And we'd sort of compare notes or compare our ideas and share resources. 

(2:59) And that really helped me to kind of get a different perspective. I think, often in life, if you don't have anyone to bounce up against, you know, you're making decisions in a vacuum, that's why I always recommend getting good advice, not just from friends, but from serious licenced professionals is really important. But having that group really helped me to expand my mindset in stepping out of my comfort zone to start really investing in property very well.

Tyrone Shum:   
Aside from his peers in the investment club, what other resources or mentors did Harvey seek in his journey? 

Rich Harvey: 
(3:39) I didn't have a specific mentor as such, like, I didn't have one person that I'd go to. But I would just, sort of like you're doing now, interview other business leaders, and I can't remember all of the names, at the time it was probably 20 years ago. But I had a specific set of questions. And you know, it could be just a one or two line thing that was like, 'You know what, that's a really good philosophy, I'm going to adopt that'. 


(4:05) So some of the best advice that I've received is just manage your money well. If you look after your money well, and you invest in property, property is a bit like a baby, you have to nurture it in the early years, particularly. And sometimes you might buy a property that doesn't provide a positive cash flow, but you want to get it to that positive cash flow position as quickly as you can. So it doesn't become a burden to hold that property and it becomes self sufficient self sustaining. So I think the best advice I've received is manage your money well. Be prepared and keep moving forward. 

Tyrone Shum:  
On the topic of strategy, can you share with us some of the detailed steps that you've taken to implement them in your own journey? 

Rich Harvey:  
(5:04) The first strategy for me was to deal with capital growth. I think, as I said, there's no one size fits all. So for me, when I first started investing, I was still paying a fair bit of tax. So I was able to use the negative gearing strategy for a period of time, which worked really well. And I was able to buy a number of properties, you know, in high growth areas. So, unfortunately, the rent didn't quite cover the mortgage repayments and all the costs of holding the property. 


(5:28) So I went down the negative gearing route for a while. But once you sort of get, you know, three, or four or five properties doing that method, then you've got to realise that a lot of investors come to a screaming halt, and they realise the banks don't have any serviceability and it all just stops. And that often stops investors at just one or two properties. So one of the strategies I've got is to surround myself with a really good team. 

(5:54) So I had a really savvy mortgage broker who didn't take no for an answer from a bank. I think a lot of people give up when they go to a lender, and the bank says they're not gonna lend you any more, they throw their hands up, walk away. Well, that's not me. I say to my broker, 'Go and find another lender who's willing to lend me money, you know, I'm earning a good income, I'm a safe risk'. So if the banks wouldn't lend me, I'd find a second tier or a non bank lender. 

(6:18) And that was the way I started growing my portfolio. So the other thing was, you've got to have a really good accountant. And they also help you with this strategy, particularly working out the way you structure your portfolio. A lot of people discuss whether they should put the property in their personal name, or a company name or a trust name. And again, that's a very individual thing that you have to get advice on. So again, not a one size fits all. So make sure you get good advice around that. So I had the broker, the accountant, and the tax advisor. 


(6:50) But in terms of specific properties, I went for originally capital cities, because I wanted to buy in areas where there were jobs. But then I expanded my horizons to look at regional areas. And there's plenty of regional areas around Australia that you can buy in, they don't all perform to the same degree, and you've got to be very, very careful in the next 10 years to exactly look at where you'd put your money. 

(7:14) So obviously avoid mining towns that are just, you know, pitted on one or two industries, you've got to go into areas that have a number of employees in the town, a number of industries that support the local economy. So my strategy was to build up some equity. And then I do what's called recycling that equity. So once I'd sort of got to $100,000, or a random extra equity, I'd refinance my property, pull that money into a line of credit, and that would form the 20% deposit to go into another property. 

(7:45) Sometimes I would even do a 90% loan, I would use what's called Lenders Mortgage Insurance. And that means you only need 10% for your next deposit. And that allows me to get you know, two properties instead of one. So again, it depends on your age and stage as to when you would do that. But you can just be careful and make sure you're borrowing at a safe rate. But that's a smart strategy, to pay the Lenders Mortgage Insurance enables you to get more properties in your portfolio.

Tyrone Shum:  
(8:28) But as soon as you pull that equity out, and you buy another property, essentially, wouldn't you be buying at 100%? 

Rich Harvey:   
(8:38) You're absolutely borrowing 100% Tyrone, you hit the nail on the head. That's why the cash flow, or the rent return you're going to get from the property is critical in your next step. So you must buy in an area that has very consistent high rent demand. A lot of people who have borrowed 100% think they can borrow 100%. But then if they run into a vacancy issue, that's when they could become stuck and have to dip into their savings, or worse, possibly have to sell the property under stress. 


(9:02) So just be careful that you can manage your cash flow, and one of the things you've got to do is have a buffer in place. So if you do have a vacancy for a month or more, you can cover it. If a hot water system blows up, or an air conditioner goes, you'd be able to replace it without any stress. That's really important. 

Tyrone Shum:
So at what stage did Harvey adventure into developments and decide that was the way forward for him? 

Rich Harvey:   
(9:43) I think you've got to learn to walk before you run. It's a really important thing. Once I developed quite an expertise in buying properties, then that's the point at which you can consider doing some small developments. And again, don't try and do it all on your own. You know, I look at doing joint ventures with other partners who are even more experienced than me in the development field. But I just like to do small, discrete things like duplexes and dual living properties. 

(10:12) You know, if you try to get ahead of yourself and do a 15 townhouse subdivision, and you've never done one before, you could easily become stuck. So it was really when I had enough equity safely, to risk equity into a property that, even if I lost it, it wasn't gonna devastate me, that's when I'm happy to do that sort of developing. And just take small steps, like I say, don't try and do it on your own, do it with someone, do a joint venture with someone that's got land and look for those opportunities, because that's the way you can manufacture equity at a much faster rate. 


(10:45) And I think the next 10 years going forward, I think that's going to be one of the best ways to make money out of property, I think you'll see a lot of the investor success stories in the magazines talk about people that have created value through buying a block of land, carving it up and doing small developments, rather than just straight out buy and hold.

Tyrone Shum:
I ask Harvey if his portfolio includes properties from other states or if he prefers to keep it local. 

Rich Harvey: 
(11:47) I've invested in Melbourne, and Brisbane, and other parts of Southeast Queensland. I think it's great to invest in those areas. So for a couple of reasons. First reason is that you are taking advantage of different property cycles. So every capital city is at a different stage of the property cycle. It might be, you know, on the growth phase, it might be in the downswing phase. So you can take advantage of those cycles and not have all your properties at the same stage of the cycle. 

(12:20) Because when it comes time, eventually, you're gonna need to realise the equity and sell those properties. So if you can sell a property that's at the peak of the market, that's a great time to be selling. Another thing, the reason I buy in other capital cities is  diversification for tax purposes. Your land tax threshold is different in every state. In Queensland it's $600,000. 

(12:42) In New South Wales, it's $472,000 and in Melbourne it's a similar number. So as you accumulate more properties, you're going to end up with a land tax issue. And if you can minimise that by buying in other states, that's another good reason to look at buying in other areas.

Tyrone Shum: 
(13:13) And are you currently investing anything into your super fund and similar entities like that? 

Rich Harvey: 
(13:22) Absolutely yeah. I've set up my own self managed super fund. And obviously, there's very strict rules around what you can and can't do with that. But I use a financial advisor to help me create a strategy for that. And I'm looking to add another property to that super fund very soon, actually. So probably in the next 12–18 months, I'll add another one to my self managed super fund. 

(13:48) I mean, I have other assets in my self managed super fund, too, I think it's important to have different asset classes. Again, you don't wanna put all your eggs in one basket. Another plug for financial planners—get a good one—because they'll help you on your journey. And realise that, you know, it's not the number of properties you have, it's the overall value and the equity and the quality of those properties that will determine your comfortable retirement.

Tyrone Shum: 
Next, Harvey shares some personal habits which contribute to his success. 

Rich Harvey: 
(14:51) A classic one is eat well and exercise. You know I get to the gym three times a week. I play tennis. I go water skiing. I try to do things to keep my mind active, you know, your health is everything. You've got to improve your health above your wealth. Because if your mindset's right, then everything else can fly. So I make sure I watch my diet, watch what I eat, and make sure I keep exercising, that certainly helps me. You know I place a lot of value on my family. They're everything to me. So I think it's really important to create a legacy in your life.


(15:22) I think I wrote an article the other day where I said, 'People won't remember how much money you had, or how many properties you had, but they'll remember how you made them feel'. And they'll remember your legacy more than your bank account. So that's an important goal, to realise what it's all for. Is it just to get, you know, 3 million bucks in the account? Or is it because you really want to leave a legacy and help people? So, you know, I think it's really important to make sure, for your listeners, when they set goals, to set some really strong personal goals around that.

(15:49) Other things I do for success, I read a lot of books, as I said, I'm a big reader. Big fan of what you're doing Tyrone, talk to people that have been successful and get their tips. You know, manage your money well. Keep learning, always have an attitude of learning. An attitude of gratitude. I think one thing I learned in university was how to learn. If there was something I didn't know or didn't understand, I'd get resources and learn it. And that really empowers you. Because there's just such a great ability with the internet and networking these days to get the answers to the questions you have. So that's what I continue to do today.

Tyrone Shum: 
(16:25) Absolutely. Can you share with us the books that you would recommend to read or listen to? 

Rich Harvey:
(16:44) The basic ones, Jan Somers series, you know, I think it's called 'Building Wealth Through Property', is a great one. She's written about four or five books. I really like Margaret Leymaster's books, she's a really straightforward communicator, really excellent. John McGrath. He's written a lot of really good motivational books about real estate. Allan Pease, he talks a lot about, you know, body language, and that sort of thing. What else is there? Another guy if you're looking for sales techniques, Brian Tracy is really good. Michael Gerber, 'The E Myth', and that sort of thing. He's really good for growing your business. You got Robert Kiyosaki, 'Rich Dad, Poor Dad', for mindset.

Tyrone Shum:
Finally Rich, I’d like to learn a bit more about how your buyers agency helps investors to find the best property for their portfolio?

Rich Harvey:   
(18:02) I started my business back in 2001, with a goal to help people achieve their property dreams, whether that's a home or investment property. And I saw that there's a real need to represent the buyer. They've sort of been the forgotten party in the transaction, you've got real estate agents representing a vendor, but there was no one representing the buyer. So what we do is we help our buyers create what's called a buyer's brief. There's really seven steps. We create a buyer's brief and develop a strategy. 


(18:28) That's the first thing we do, we then get research on the areas that we recommend to buy in. And that really fast tracks a lot of our investors' knowledge, and we give references and examples of properties they can buy for the budget. Then the third step we do Tyrone, is to shortlist properties. Over 16 years, we've built up a very, very extensive agent database. So we can send out buyer requests to all of our network and uncover properties that are listed on the market, as well as off market opportunities for our clients. 

(19:00) Next thing we do once we've found a bunch of properties that fit the brief, the criteria, and by the way, we reject a lot of those properties. A bit like that John West advert...reject a lot of the fish that don't meet the criteria. So we take the clients out and we look at the properties, we get some feedback from them. If there's a property there that we believe fits the criteria and the client is happy to proceed on, then the fourth thing we do is a detailed appraisal report. 

(19:27) And we give them an estimate of what the property is currently worth in today's market. We look at comparable sales and we look at the market stats to come up with a number for the client on that property. Next step, we then start the due diligence and the negotiation phase, so really steps five and six go hand in hand. So due diligence means that we go with a pest and building inspection. The solicitor does any title searches and we find out any more about the history of the property. 


(19:56) Then we work out an offer strategy. We negotiate with the agent if it's a private treaty, or if it's an auction we'll try and buy prior, or if they can't buy prior, then we'll attend the auction on the client's behalf and buy the property at auction up to an agreed limit. And then once we've exchanged the contracts on the property, the last step we do is to find that local property manager and appoint that manager to look after that clients property, collect the rent and conduct the regular inspections on the property. 

(20:26) So it's really an end to end service that we offer for our clients. And the average time it takes is around about 30 to 60 days. Sometimes it's quicker than that, sometimes it's a little bit longer, it just depends on the volume of stock that sits on the market. But we certainly don't have any pressure tactics. We're all about collaborating and working in partnership with our clients to help them achieve their property goals.


(20:48) I think the real benefit with us is the confidence that we give to the clients. I think one of the biggest things that people struggle with is procrastination. They know they should buy a property, they know they should get out, but it's just a hassle. So we really speed up that, facilitate that, act as their confidant throughout the process, and really motivate them to make a wise decision. 

(21:34) And look, if we think the property is going to go for too much money we walk away. But at the same time, if we're competing against five other buyers, and we beat them just by a little bit, and we've got the property, you're going to see that property rise in value. 


Tyrone Shum:
Thank you so much to Rich Harvey for taking the time to speak with me on Property Investory.

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