Michael Yardney is the founder and CEO of Metropole Property Strategists, and has been voted Australia's leading property investment advisor four times in the last six years. He is also one of Australia’s 50 most influential Thought Leaders and a five-time bestselling author. He bought his first property as a joint venture with his parents when he was just 21 years old and didn’t know what he was doing— but he soon learnt, and now that $18,000 property is worth $2 million!
Join us on this episode of Property Investory
where you’ll hear Yardney talk about his experience of growing up in a low-income migrant family amongst his wealthy peers, and how this motivated him to get involved in real estate. You’ll hear his tried and tested ‘what not
to do’ stories, including making sure you do your due diligence when investing in a goldmine, and always ventilating the space you’re painting in!Timestamps:
03:01 | Is It An Astronaut? Is It A Fireman? No, It’s An Estate Agent!
06:23 | ‘I Made All the Mistakes’
10:36 | The Property Boom That Saved Him
15:58 | Being Brave in Bayswater
20:04 | All That Glitters is Not Always Gold
26:24 | Even Top Tennis Players Have Blind Spots
00:20 | What Operating System Do You Use? I Use Wealth.
05:46 | The Rat Race
08:30 | His Books Are a Blueprint
12:49 | Strategy? What Strategy?
14:30 | The Cities are Discoupling
16:50 | The Six Stranded Approach
18:41 | Cut Your Teeth on Owning a Property
24:20 | He Owes His Success to His Failures
25:50 | Go On, Have a Go
Resources and Links:
[00:07:38] I bought it back from my mother in 2002. I bought the whole lot from her for $256,000. I've since built two townhouses on it, worth about $1 million each. So I still have my first investment property with a big gap in the middle. It was $18,000 then, it'd be worth about $2 million today.
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 Michael Yardney, founder and CEO of Metropole Property Strategists, one of Australia’s 50 most influential Thought Leaders, and bestselling author. Listen in to find out about his experience as a young migrant to Australia, and how he went halves with his parents to buy his first investment property at just 21 years old!
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Yardney starts off by giving us an overview of his various roles within the property investment realm.
[00:00:01] Many people would know me as one of Australia's leading experts in wealth creation through property. But interestingly, one of my passions is the psychology of success and wealth creation. I've been voted Australia's leading property investment advisor four times in the last six years. I'm an author of eight books, five of them have been bestsellers. Recently, somebody just said to me, 'Michael, you're the elder statesman of real estate'. And I thought, that's interesting. Maybe it's because I got grey hair, but maybe it's because I've been investing for over 40 years, and I probably educated more successful property investors than anyone else in Australia.
[00:00:45] My day job is actually CEO of Metropole Property Strategists. My team and I have been involved in over $2 billion worth of property transactions. And through our property management department, we're managing $1.5 billion worth of our clients' assets. But I'm not a theorist. I'm actually still involved in real estate. I'm currently involved in four property developers personally to keep in the long term. And I'm an active property investor myself.
It sounds like Yardney has more than enough to keep himself busy! He describes what he gets up to on a typical day.
[00:01:30] I've gotten to the point where now I'm the conductor of an orchestra, and I have a lot of people working for us. We've got close to 50 people in the team in our three offices, Melbourne, Sydney, and Brisbane. I enjoy running the business side of things. But I'm very much involved in the marketing, in doing the research and the overall big picture strategy. And I spend quite a bit of my day writing, doing podcasts and speaking to the media about my thoughts on real estate matters.
[00:02:18] Over the years, how I do things has changed. But today I'm a long term investor, but I love adding value. I'm currently involved in four medium density developments, duplexes of four bedroom townhouses in good upper class middle range suburbs of Melbourne that I'm going to keep as a long term investment. So I've always got a few small developments on the go that slowly but surely keep adding to my property portfolio.
Is It An Astronaut? Is It A Fireman? No, It’s An Estate Agent!
Yardney takes us back to his childhood, describing the differences he saw between his migrant family and his wealthy peers.
[00:03:01] I came to Australia at the age of three, I had migrant parents, they were both hard workers. And as I grew up, I saw that a lot of my friends' parents were wealthy. They had businesses, they had cars, they went on holidays, they all seem to own real estate. So my friends' parents— in fact happened to be my parents' friends— were much wealthier. My parents didn't have their own home till I was much older, lived with my grandmother, they both worked hard. They saved up a little bit to go on Christmas holidays, but we never went anywhere fancy. My parents didn't have their own car till much later on in life also.
[00:03:44] I sort of think of it as these other people are becoming wealthy through real estate, or that's how I saw it in my eyes as a young kid. I decided I wanted to get involved in real estate as well. So I spoke to them, I learnt from them, I modelled them, because there [weren't] the books, there wasn't the Internet. So I decided I wanted to become wealthy. I wanted to become an estate agent. So other people wanted to be an astronaut or a fireman. I thought it was the estate agents who are wealthy. I didn't understand that just because they drove fancy cars, they weren't wealthy at all. It was the people who owned the real estate that were wealthy.
He shares more on his family’s experience as migrants to Australia in the 1950s, and how his close family ties helped him to buy his first investment property.
[00:04:29] I was born in Haifa, Israel. My mother was from Vienna, Austria, my father from Czechoslovakia and they escaped Hitler and made it to Palestine. My father was in the British Army and so therefore we were able to migrate to Australia and became Australian citizens very quickly.
[00:04:55] I came at the age of three in 1956. So I didn't know the language. English wasn't my second language, even, I knew Hebrew and German. So I went to kinder and my early memories were of tears as I sort of didn't understand what was going on. But I soon learnt that children learn very, very quickly. And I guess I knew no different. I didn't realise we were poor till, I guess, in my teens. I never went without anything, and my parents taught me lots of good values. But we didn't have the trappings of what I saw as wealth. And as a child, I wanted it all.
[00:05:45] I came at age three, so I went through school here. But interestingly, when I was 21, I bought my first investment property. I actually went halves with my parents. So around the early 1970s I borrowed $2,000, because I did some jobs as I worked my way through school and through university. I borrowed $2,000. And I had half of the deposit on a property in Larch Street, South Caulfield that we went halves with. It cost $18,000. We got $12 a week rent, and I took a 30 year mortgage, because we had no idea how we were going to make money out of it.
‘I Made All the Mistakes’
[00:06:23] Again, in those days, there wasn't any information about where to buy, what to buy, there was no computers or internet, no research data. So I made all the mistakes. I bought right near where we lived. I bought a street away from where my school was, I bought in my comfort zone. I bought where the local shopping centre was where my mum went shopping. Because that's all I knew. And that's what we could buy.
[00:06:49] Interestingly, it was the time Gough Whitlam came into power in Australia. And inflation was rampant. 70% inflation and all of a sudden, this property that we bought went up in value a lot, so much so that I was able to borrow against it a couple of years later to buy another property. The worst thing that can happen to a beginning investor is to get it right [the] first time, because you think you're smart. I just thought I knew what I was doing. And it was nothing at all to do with that. It was dumb luck. I bought a good property, and then I bought a second one.
[00:07:18] Then a few years later I got married, and I made one of my first mistakes. I sold my properties. So I sold that $18,000 property to my parents, I sold it for my half for $32,000. And it's gone that up that much. Again, very high inflationary times in the early 1970s. So I sold it about six years later. Interestingly, I bought it back from my mother in 2002. I bought the whole lot from her for $256,000. I've since built two townhouses on it, worth about $1 million each. So I still have my first investment property with a big gap in the middle. It was $18,000 then, it'd be worth about $2 million today.
He lets us in on one of his earliest jobs.
[00:08:25] I was still at university in those days. I actually worked during the school holidays and Christmas holidays in various jobs. For many years, I actually worked in the storeroom at Portmans over the school holidays, a ladies fashion store as well. Just to get pocket money because again, we weren't particularly wealthy. So I had to work my way through.
[00:08:45] It's interesting, because what I'd like to know is how did you manage to save up that much money back then?
[00:08:51] No idea! I'm often asked that, and I have no idea. A portion of it was a personal loan. I actually managed to go to the bank and get a loan. And I really don't know how, because it wasn't easy then. And it seems much harder now. So I've often thought that. Where on earth did I get that from? I know no one gave it to me. I had to actually get it somehow or other.
The Property Boom That Saved Him
Moving onto Yardney’s property journey, he delves into how he got into his first properties, and shares the lesson he learnt just a bit too late.
[00:10:36] With one of my early properties, I knew the concept of renovation, I thought it would be a good way to do things. And I tried to do my first renovation myself. Nobody told me that you've actually got to open up the airs to get ventilation when you paint a place. So the first property I painted, I actually got quite sick and made myself unwell, but it added value to the property. And when I eventually got married and had to sell a couple of those investments to buy our first home— again, not understanding the concept of refinancing and moving on— I ended up with just a house. And over time using my cash flow and some savings, I got involved in property investment, again. [I] knew nothing about cycles, knew nothing about when the right time to buy was, or even that some areas performed better than others. That lesson came to me a lot later.
[00:11:32] I bought a couple of investments. And then in the early 1980s, I got involved in property development, I was in my 30s and had a couple of business partners. And we got together and were very, very brave. I did some things that if it wasn't a property boom at the time, I would have gone broke. But the property boom covers up lots of mistakes. So we were buying properties to pull down and build units, townhouses, or occasional houses in middle ring suburbs and sell. And it actually worked okay, because prices went up. But one time, Tyrone, I looked back and thought, 'Hey, if I just actually held on to that land, and hadn't done anything, I would have made as much'. It was just a property boom that covered me up.
[00:12:26] Then in the late ‘80s [I] got involved in some very brave property developments, did a couple of subdivisions. I did the renovation of an inner city building in Melbourne, and again, carried away with a very strong property boom in the late 1980s. That came to a very abrupt end in the early '90s, when we had the recession we had to have. Unfortunately, during that time, a number of my friends and colleagues went broke because interest rates went from 10 and 12%— we were happy paying 10% interest in those days, Tyrone— to 17 [or] 18%, and things ground to a halt.
[00:13:20] So the bank said to me, 'Sell up'. And I said, 'To who?' Because they wanted us to pay down some of our debts. And there was no one buying, we owned a lot of industrial properties at the moment. So one of my early mistakes was getting involved in commercial and industrial property, where values dropped considerably as interest rates went up. Fortunately, I had cash flow because these properties were leased. So I was always able to repay the banks, and so they chased people who were not repaying them more than me.
[00:13:49] But the early '90s was my first experience— even though I was 20 years into investing already— of the importance of cash flow, and the importance of cycles. And I thought, at that time, the importance of counter cyclical investing, even though I've changed my tune on that, too. So, as a few of my friends went broke, I thought there I go, but by the grace of God go, it made me a much, much more cautious investor, personally, and for our clients.
Yardney shares an interesting detail on Metropole Properties that may surprise you.
[00:14:29] Interestingly, I started the company Metropole Properties as my family trust, and that goes way back to 1979. And it was named after a restaurant in Melbourne called the Metropole, so that's how it got the name. I still have that company. I've been a director of it ever since. But the company that deals with clients... there's a Metropole Properties Melbourne, Metropole Properties Sydney, Brisbane.
[00:14:57] So there's a number of companies in the Metropole group, but yes, that goes way back there. And it was when my friend and my solicitor at the time Michael Warren said, 'Hey, would you like to be my business partner? Let's do some developments together'. And that was a restaurant called the Metropole.
Being Brave in Bayswater
It’s a large jump from a solo renovation to property development— he explains how this came about for him.
[00:15:58] It was trial and error. And I made a lot of mistakes. I studied, I learnt, but basically from books and speaking to people. And I have a couple of mentors. One of the things I learned along the way is rather than try and do it yourself and learn yourself, to learn from other people. So this partnership that I had with my friend whose name was Michael, also, we actually buddied up with a couple of people. One was an architect, one was already a reasonably serious developer. And so we had a nice group of people who had various skills that helped us.
[00:16:35] But again, I made so many mistakes, that as I said, Tyrone, were covered up by the rising prices of a property boom. It was actually easier those days, there was less regulation. We got builders to do the building. And it seemed to work. One of our biggest projects was an industrial subdivision where we bought a farm. Very brave, very stupid people in Bayswater, in Melbourne. We bought this big farm, subdivided it into 30 blocks of industrial land, sold it all off the plan in those days in the late 1980s. And then went to the bank and said, 'Here's a farm we're settling on in six months. Here's a fixed price contract from the engineers to build the roads and put all the services in. Here's 32 contracts of sale, would you please lend us the money?'
[00:17:30] We never figured what would happen if we hadn't pre sold those and how we could have got caught and got ourselves into trouble. Again, the excitement of youth and getting involved in things, and fortunately got away with it, learnt so many lessons that now make me a much more cautious developer, and help our clients. We're still involved currently, as our project management services with 52 developments for clients. So we're still doing it. And Bryce Yardney, my son, today is taking over that. And he's running the projects division after my previous business partner, Kevin Taylor, who's an architect by degree just retired a few months ago.
He dives into some of the issues he mentioned that could have been a detriment to his success.
[00:18:30] What we did was took a six month settlement. I'd done one little road subdivision, I found a firm of engineers and town planners who designed the roads, designed all the drainage and sewage. We didn't know what was involved. And then they outsourced it to a couple of contractors and got us some quotes. But we actually did that in the wrong order. We hadn't done a feasibility before. And if we had not done it, if we hadn't been lucky, and the sums didn't stack up as well as they did, we could have gone broke. So we bought the land and then thought, 'What are we going to do with it afterwards?' Rather than the other way around of 'Okay, before I commit to this large sum of money, what are my costs, what are my outlays, what are my risks? What's potentially going to go wrong? Will the banks even lend me money?' That's what you have to do today.
All That Glitters is Not Always Gold
Yardney shares an investing moment that begins with a literal piece of gold, but ends up not being the goldmine he had expected.
[00:20:04] In my reasonably early days, where I was scammed by somebody who tried to get me involved in a gold mine. What happened was one of my friends invested some money in a gold mine. And this person told me how he could make lots of money. And I said to Brian, my friend at the time, 'Don't be stupid. Why would you do that? Why would he need your $5,000?' At those days, which today would probably be equivalent to $100,000. It was a lot of money.
[00:20:42] So the end result was I sat down with him, this guy came and sat in my living room, and he pulled a nugget of gold out of his pocket and explained to me that I could have this as well. And he showed me these plans that sounded very impressive Asian Pacific Development Corporation was actually a mine, Asian Pacific mine I should say. And the end result was I gave him my money as well.
[00:21:06] He scammed a whole lot of people, he used it to buy himself cars and helicopters and Jeeps and things like that. None of it went to re-develop this mine in Ballarat in Victoria. So it was a couple of lessons out of that. First of all, not everything that glitters is gold. Do your homework and due diligence carefully. There's no get rich quick schemes. And it was a blow to my ego of a young guy in his 20s thinking I was so smart, getting involved in this big company with a fancy name. So it was a humbling experience, which has remained with me since, to teach me that as I said, not everything that glitters is gold, be careful who you get associated with.
[00:22:11] My gut feel said it was wrong. I said it to my friend, 'What are you doing wasting your money?' But my greed glands got the better of me.
Yardney shares some more lessons he’s learnt and gives out a nugget of gold of his own.
[00:22:40] I have recently been throwing out old copies of Australian Property magazine. This magazine, Australian Property Investor magazine, has recently gone broke. And I've had all these copies way back for the last 17 [or] 18 years. And as I've been throwing them out. I've actually been just reading through and seeing who's been around and who isn't and who's still there. And I've been dealing with the public now since about the year 2000. And there's two or three other people who are still around in that time.
[00:23:14] But during all those years, I was noticing the ads in the magazines of who's come, who's gone, the ideas they've shared, the stories that have gone on. And it's interesting that there's been lots of interesting characters in this industry. And so I guess one of the lessons I've learned is, again, not everything that glitters is gold, don't believe everything that people tell you, do your own careful due diligence. And the fact that real estate, business, investing in general, is a slow way to get wealthy. Wealth is the transfer of money from the impatient to the patient.
He delves into his ‘aha’ moment, and how it taught him to walk across the hot coals to get what he wants.
[00:24:06] I think the biggest aha moment I had was when I realised that I didn't have to do everything myself. My father taught me to learn from my mistakes. And I think when I first started, I tried to do everything myself for one of two reasons. First of all, because I was cheap, and I didn't want to pay other people, and I guess I couldn't afford it. But the other was to try and learn, and it's just very hard and very demoralising to do that. But when I recognised that other people before me have actually done it and achieved it. I think I learnt the concept of modelling and mentoring from Tony Robbins many, many years ago, when I went to one of his seminars, and it taught me the importance of mentors.
[00:24:53] I clearly remember the concept that he did, what's called a fire walk. People go there and walk over fire, the hot coals. And I thought, 'I'm not stupid, I'm not going to do that. I'm going to watch everybody else do it and I'll just sit back'. But interestingly, I did do it. And I learnt that if you can not pay attention, not concentrate on the hot coals below you, but actually look at the green grass ahead of you, you can get through anything.
[00:25:20] So I learned from many mentors— people I pay, people who I've read their books, people whose seminars I've been to— that if I stand on their shoulders, I can see a lot further. I've done some of my best thinking and got some of my best ideas from my mentors, rather than from myself. That has taken my investing to a whole new level. And Tyrone, I still have mentors, I still have business coaches, I still have people that I pay, I still belong to mastermind groups, because I'm still wanting to keep growing.
Even Top Tennis Players Have Blind Spots
With all his years of experience, who does Yardney seek out for mentorship for himself?
[00:26:24] Well, that's the interesting question that people ask me— how come if you are very wealthy, and you own more properties than your mentors, would you use them? But the example I use is the top tennis players, the top golfers. They all have coaches who actually don't necessarily play better than them, but look at their blind spots. I ask my mentors to look at my blind spots to keep me accountable, to have transformational conversations with me. So while I am better in some areas, I'm actually not as good in other areas.
[00:26:57] So while I have strict discipline in a lot of my business things in my writing— for example, I don't have discipline in my health, I'm overweight and I eat the wrong things. Even just before our chat today, there were some chocolate bars in the kitchen here for one of those charities, you know how they collect the fundraiser? Well everyone else bought one chocolate bar— I bought three. In other areas of my life rather than financial discipline, like maybe looking after my health or things like that instead.
[00:27:26] So there's always people I can still learn from. And I think that if I ever forget that, I'm going to stop growing. It's a lesson that you will find from most successful people. They want to keep growing, they want to keep learning. So I set aside time to do this. And nowadays with the Internet, it's so much easier to have mentors and mastermind groups and speak with people around the world.
[00:28:09] Interestingly, they come to you in various ways. So I have a business coach, and I've had business coaches for 15 years, I pay over $100,000 a year for business coaching. And interestingly, I see that as an investment, not as an expense. I wouldn't have been able to grow my business to the level it is without having somebody like that there. I have others in the areas that I'm interested in marketing.
[00:28:35] One of my great mentors in other areas or mastermind groups is Tom Corley who's in the United States. He's very like minded and I've just written a book together with him. So it's through other people. And over time, the mentors and the coaches I've had have changed. After a few years, I've outgrown them or things have changed. So the people I'm hanging around with today, and the people that are helping me today are different to the people who helped me five years ago.
[00:29:09] There's one other group of mentors that probably don't realise they are. And that happens to be the people in my mentorship programme. For over a decade now I've run a 12 month mentorship programme. You can find out about it at michaelyardley.com.au. I've run over 2000 people through this 12 month mentorship programme. And I learn from all of them. I learn things to do and I learn things not to do. And I probably haven't given them enough credit to actually say thank you, because you've heard it said before, I'm sure, Tyrone, that as a teacher you learn a lot as well, don't you?
Coming up after the break, we hear about how Yardney’s childhood motivated him to inspire others...
[00:11:12] I believe that once you got to a particular level, it's an obligation to give something back. So I ruined the first half of my life chasing money, and chasing the wrong thing, because I was angry and cross because of my childhood.
He shares the types of properties he looks for when investing...
[00:17:17] But that doesn't mean it has to have a lot of land, I'd rather own a twelfth of a block of land in one of the middle suburbs of Melbourne or Sydney under an apartment building, than a whole acre in the outer suburbs. I like buying properties with a twist, something a bit unique, special and different about them.
He gives his advice for young investors starting out on their journeys.
[00:19:04] I think you've really got to cut your teeth on owning a property, having some ups and downs, having some vacancies, having some problems with the tenants and the property managers before we get into the deeper issues of property development.
And that’s up next. I’m Tyrone Shum and you’re listening to Property Investory.
[00:03:22] We all have a way of thinking about things. And nobody wants to think illogically. So the way average people think, what average people do is very different to the way the wealthy people do this. And that's why the rich keep getting richer, it's because of the money habits.
This is Property Investory where we talk to successful property investors to find out more about their stories, mindset and strategies.
I’m Tyrone Shum and in this episode, we’re continuing our discussion with nine time best-selling author and winner of multiple property investment and advisor awards, Michael Yardney. He shares the habits that can make us successful, how to get out of the rat race, and how his company has been involved in generating over $2 billion worth of transactions for his clients!
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What Operating System Do You Use? I Use Wealth.
Yardney lets us in on his mindset and how it helped him to make the plunge and invest into his first property and continues to help him today.
[00:00:20] When I first invested in property, I had a desire, I had a drive, I had a dream. And so therefore, I believe that I had the right mindset at the time. The trouble is that your mindset is... well, you're not born knowing how to do money. You learn that from the people around you, and your early mentors tend to be, in general, your parents. So your learning and the conditioning you have as a child will only get you that far. So it did get me to a certain level, but Tyrone, unless I changed my what I call wealth operating system, the way I think and feel and deal with money— I wouldn't have gotten to the level I am today.
[00:01:07] I believe if you took all the money in the world and distributed it evenly, it would be back in the same proportions again in four or five years' time. There are stories of people who win the lottery, and all of a sudden, they lose it after five or six years’ time. So if you suddenly become wealthy, or you get an inheritance, or you get a bonus, and you don't grow to the level of your wealth, you're more likely to lose it. So I had the initial mindset to get to a particular level. But I didn't recognise the importance of that. I didn't know any of that sort of stuff. It was only later on in life, when I was introduced to the concept of personal development that you can't outgrow, you can't become wealthier than your personal growth.
[00:01:52] But the fact is that you can change and you can do things differently. And you can learn. One of my early mentors was Jim Rowan. And somebody that I never met personally, but I bought his tapes, and I listened to this master teach me about how to become a better person, how to learn to grow myself into a bigger, wealthier person by thinking differently, and by doing things differently. So my mindset still grows and still changes.
[00:02:28] Once a year, for five days, I get together with 50 people at a wealth retreat on the Gold Coast. Most of those people are already out of the rat race, very high net worth wealthy individuals, business people and entrepreneurs. We spend four or five days talking about how to become wealthy. And while other elements with this tax and financing structures and property. A huge portion of it is headspace and mindset. So every year, I personally also go through upscaling and upgrading the way I think about things because I want to keep growing, Tyrone.
So how does one change their wealth operating system?
[00:03:22] We all have a way of thinking about things. And nobody wants to think illogically. So the way average people think, what average people do is very different to the way the wealthy people do this. And that's why the rich keep getting richer, it's because of the money habits. In fact, my last book, Rich Habits, Poor Habits with Tom Corley is now a best seller internationally. It's doing really well in America, and in the United Kingdom as well. And Tom, who's a CPA, spent five years studying 250 wealthy people and 183 poor people and working out what their habits were.
[00:04:04] Similarly, I've gone through teaching over 2,000 people over the last decade in my mentorship programme, and we actually worked out that the wealthy people don't have anything different to invest in. It's either businesses or shares or property. So they don't do different things. They just do things in a certain way. They think in a certain way. And they have more habits, rich habits. Early in life they have money habits to get them there, including delayed gratification, learning to save and invest and then build an asset base.
[00:04:38] You'll find that wealthy people hang around other people who are wealthy also. Tyrone, I'm sure you've heard it said that you become like the five people you hang around the most. So if you hang around whingers and complainers and people who don't save and spend all their money, you're likely to be like them. So to answer your question of how to get started early is educate yourself about financial fluency, and get some mentors to drag you up with them and become like them.
The Rat Race
Australia is well-known as one of the wealthiest countries in the world, so how come more people aren’t getting out of the rat race? Yardney delves into his seminars that discuss this topic.
[00:05:46] They don't know how to, they've got bad financial habits. And it's not their fault. They have in general been taught by unwealthy people. At all of my seminars, I actually ask 'Hands up anyone who's got multi millionaire parents?'. And occasionally you'll find somebody who puts their hands up. And I say, ‘Don't you think that the conversations around their kitchen table were different to the conversations around my kitchen table, where my parents used to argue and fight every month when the budget didn't meet, and there wasn't enough money to pay the bills?’
[00:06:22] That made me angry about money, that made me resentful for what was going on. And so I rebelled. While my sister is the opposite. She's actually become very much like my parents and very concerned about money and very conservative. So different people respond to those things early in the piece. So a lot of us have had poor education about money. The system doesn't teach you. The schools don't teach you. Different cultures, different religions handle money differently also. So the answer to your question, why most of us don't get out of the rat race is: they don't know how to, they've got bad habits. They've got bad money habits.
[00:07:05] That's the basis of Rich Habits, Poor Habits, where we all have empowering beliefs, empowering habits, and disempowering habits. So we're driving around with one foot on the brake and one foot on the accelerator. And what you think about the most you become in many ways. So it's really that if you continuously think about the poor money habits, you're not going to become wealthy. So it's important to first of all recognise what's not working, then you've got to recognise those disempowering habits, such as spending more than you earn, such as gambling, such as wasting a lot of time on Facebook and Twitter rather than educating yourself. Such as not looking after your health, such as not getting a steady income.
[00:07:49] So you replace one by one slowly— you can't do it all at once— the disempowering habits with empowering habits. And this is so important, because just like we learned from our parents, many of the people listening to your podcast, Tyrone, will be parents, or are parents. And we are the role model of our.... we've talked about mentors in the last session or this one. For our kids, we are the best mentors, their only mentors for most of their life, most of those formative years. So this is such an important lesson for us as adults, and for us as parents and grandparents.
His Books Are a Blueprint
He explains what makes his book special and different to the other personal finance books out there.
[00:08:30] It's based on the studies we've done. But it's also written by people who've actually done it and kept it and achieved what you wanted to do. So when you seek out a mentor... if I wanted to find a marriage counsellor— and my marriage is very, very happy, I'm only suggesting it as an example— then I would want somebody not just who's written the book, but somebody who is happy in their marriage, and they lived through it together for a long time, and blissfully comfortable, so you actually got to get it from people who've actually done it.
[00:09:06] So what Rich Habits Poor Habits has done, and also my Guide to Getting Rich, is actually not just outline the special money education that the wealthy have got that the average person doesn't have. But more importantly, it gives a blueprint of what you should do, by people who've actually done it and kept it and achieved it. And I guess the results are that over the years, I personally have educated more successful investors than anyone else in Australia. And we've been involved in over $2 billion worth of transactions for clients. Must have picked up something along the way!
[00:09:55] My first book was How to Grow a Multi-Million Dollar Property Portfolio in Your Spare Time. And that was written in 2006. And it's become the classic on most investor's bookshelves, it's one of the most sold books in Australian property history and [has] become the classic. And last year it had the 10th anniversary edition. I also wrote a book on how to buy and sell your home. There's been one that’s just out of print recently that we're doing again on What Every Property Investor Needs to Know About Finance, Tax and the Law.
[00:10:34] When I first started this, I thought, 'How much more can you write about property?' And then I wrote The Rules of Property, which was different all over again. Investing Successfully is a book that's about money shares, personal finance. But I've always wanted to write something on the psychology of success. Rich Habits, Poor Habits was only last week written up in Forbes magazine as being a top book as well. So that's why it's going gangbusters in the United States. You can find out all about these at michaelyardneybooks.com.au.
With all the books he’s written, it’s amazing he’s had time to achieve so much else! He elaborates on what inspired him to write these books.
[00:11:12] I believe that once you got to a particular level, it's an obligation to give something back. So I ruined the first half of my life chasing money, and chasing the wrong thing, because I was angry and cross because of my childhood. When I actually found a useful purpose for money, such as contribution and giving back— we've run a charity ball a couple of times, Tam, my wife, we're running another one next year, that will be the third charity ball. Giving back to charity, into the community is important.
[00:11:48] And giving back in the way I'm learning, the things I've learnt, because I've come from an abundant mindspace, having learned that the fact that I'm wealthy doesn't stop other people from doing it. And rather than dragging people down to the lowest common denominator, I believe if we can make everyone wealthier and make more money go around, it's going to make the world a better place for my children and grandchildren. I believe it's my obligation to teach people this.
Strategy? What Strategy?
Yardney has admitted to making many mistakes early on in his property journey— what strategy has he employed since then that’s done him so well?
[00:12:49] My property investment strategy has changed over the years. To be honest, I didn't have a strategy. When I started, I bought close to where I lived, as I said, in the last episode, close to where I went to school. I knew no better, I knew no different. And then I started getting all this information and research which suddenly became available. And that was also very useful. But today, I think investors play with too much potential research, there's too many things going on, it's hard to get perspective. So I now research differently to what I used to, and differently to most people.
[00:13:28] So when you get all the information on the Internet and the magazines, it talks about what happened in the past, I'm now looking at what's going on in the future. And since I've done that, it's changed my investment results and those of my clients considerably. Tyrone, what I'm looking at is what sort of properties are going to be in continual strong demand in the future. And this has so much to do with demographics.
[00:13:51] I'm very comfortable that Australian property values are going to keep increasing for two main reasons. Number one, it has to do with population growth. And number two, it has to do with demographics. So property values increase because there are more people wanting them. It's not just population growth, but household formation. But you also need people who can afford to live there. So it's not just buying anywhere, but it's where people have got high disposable income. And then it also has, in the short term, to do with supply and demand and what's going on, but it's a short term thing. More importantly is location and the people that live there.
The Cities are Discoupling
[00:14:30] So I use a top down approach, because in my opinion, position, location does about 80% of the heavy lifting on your property's performance, and about 20% of it is the property in that location. So we use a top down approach. How's the economy doing? Is it a good time? Because sometimes with the economic cycle, you just don't get involved. The next step is in which states are likely to outperform the averages. And I believe Sydney and Melbourne— not even the states, but the capital cities— have decoupled from the rest of Australia. So the majority of economic growth, the population growth, the wages growth in our capital cities, and in particular, most of the jobs— two thirds of jobs being created in Melbourne and Sydney— that's where most of the migrants are going. Two thirds of all the migrants, which is driving up our population, [are] going to Melbourne and Sydney. Queensland comes in third, and only 12% of the migrants go to the rest of Australia.
[00:15:31] So where are the people going to go? Then you actually look at areas that are going to outperform the averages because of the demographics. People who've got higher disposable income. They're the ones who are going to be able to afford, to be prepared to pay to push up property values. So we stay away from those areas with new estates. Just because people are moving there— and it's not a judge of people— but I'm looking for areas and I'm looking forward to all the new census data that we're digging into.
[00:15:57] Because you can find that over the last census period, the one just gone, wages went up, on average, about 16% over the five year period. But in some municipalities, wages went up double that. And they're the areas we're looking at, because those people have got higher disposable incomes, and they can pay more for their houses and be prepared to pay more. So we're drilling down from state to suburb, then within the suburbs, the right streets— some streets are more livable than others— then within the streets, the right properties, and then the right price. And to me, Tyrone, price is down the bottom on purpose because you make your money when you buy the property, not by
buying it cheaply, but you make it by buying the right property.
The Six Stranded Approach
[00:16:50] So what's an investment grade property then? I have a six stranded approach to that. First of all, I buy a property that has owner occupier appeal, because not that I want to sell it, but if owner occupiers are going to buy property similar to that, that push up the value of my properties. I like buying properties below their intrinsic value. So I don't want to pay a premium to buy new or off the plan. I like properties with a high land to asset ratio, I like probably the high land to asset ratio because it's the land that goes up.
[00:17:17] But that doesn't mean it has to have a lot of land, I'd rather own a twelfth of a block of land in one of the middle suburbs of Melbourne or Sydney under an apartment building, than a whole acre in the outer suburbs. I like buying properties with a twist, something a bit unique, special and different about them. I like buying properties in those areas that are going to outperform, as I said, the right demographics. And the last strand to my six stranded approach, Tyrone, is to buy properties to which I can add value, so that I can manufacture some capital growth through renovations or development.
Yardney explains his preferences when buying property, and what criteria he uses when weighing up his options.
[00:18:02] It really has to do with what your budget is. So we deal with clients from all over Australia. And this is the strategy we use for our clients. With offices in Melbourne, Sydney and Brisbane, we got access to every property on the market on the east coast. But we actually don't have any properties for sale. So we don't sell properties to clients. We sit with them and understand where they are and their property strategies at Metropole often come from not a real estate background, but a financial background.
[00:18:27] So they understand with economics degrees, we've got CFAs, we've got CPAs to actually give us a wealth advisory because that's really what people want when they want property. They want financial freedom, they want choices, they want the ability to go to work because they want to, not because they have to.
Cut Your Teeth on Owning a Property
[00:18:41] So what we do is we actually take this holistic approach of where they are now, where they want to be in the future, and what their risk profile is. And then we also see what their budget is. Because while many, many people want to become a developer, most don't have the financial capacity to. And even if they do, I wouldn't recommend the first property you buy is a development property. Because I think you've really got to cut your teeth on owning a property, having some ups and downs, having some vacancies, having some problems with the tenants and the property managers before we get into the deeper issues of property development.
[00:19:17] But a lot of people who can't afford the full blown property development, because it's got to be in all those areas that we spoke about a minute ago. It can't just be anywhere because my concept of development is to buy, renovate or buy, develop, refinance and hold. It's not to sell. You don't make enough money selling it by the time you do and pay tax and pay stamp duty on the next one that doesn't work. So you've got to buy in the best location. If you can't afford to buy one that you can develop there, then at least buy an apartment or townhouse, a villa, unit, doesn't have to be a house, which you can renovate down the track or straight away. Because doing a good renovation gives you a wider appeal to a wide range of tenants. If we get better rents, you get a better socio economic group of tenancy, you get great depreciation allowances and you manufacture. You get a one off little boost in capital value.
So is buying in capital cities one of Yardney’s key strategies?
[00:20:24] Interestingly, I just finished a radio session on Canberra radio, where they asked me because of something I'd just written, the concept that there are only three places in this property cycle that have had real capital growth, in other words, capital growth beyond inflation. So since the beginning of this cycle, which happened in December 2010, after the last slump, Canberra radio picked up the fact that I wrote that only Melbourne, Sydney and Canberra have had real growth.
[00:20:58] So in that cycle, in this period of time, Melbourne has had 63% growth in value since December 2008 till now. That's real growth after inflation, Sydney 76%. So, even though Sydney property values have doubled, if you take away inflation, real values have gone up. Canberra has gone up 16%, and every other state hasn't even kept up with inflation.
[00:21:30] That's fascinating.
[00:21:32] I think it's from CoreLogic. So it's not my research. It was just my commentary on it that they asked about.
[00:21:38] It's fascinating. I'm surprised that Brisbane hasn't even caught up as yet. I wonder what's happening.
[00:21:43] There's an interesting lesson in that, Tyrone, Brisbane's a lovely place to visit. And in fact, as I spoke to you off air a minute ago, I've just come back from there yesterday. We've had an office there for 10 years. It doesn't mean you don't invest in Brisbane. I'm saying though, that a good property in Brisbane is going to outperform a secondary property in Sydney. So there isn't one market. You're not buying a market, you're buying individual properties in the market. And we've had some really, really good performance of properties in Brisbane, using my top down approach a moment ago.
[00:22:12] So some locations in Brisbane and those gentrifying areas, and we buy houses in Brisbane, rather than apartments because there's an oversupply of apartments there. Some have done very, very well. And then if you add value and you manufacture capital growth, or you move the house aside and put another new one bedroom townhouse there through a slider. There are good opportunities there too.
[00:22:33] But just because it's cheap, people aren't going to Brisbane. And even though the weather's nicer there, people aren't going there because of the jobs. It needs economic growth. That's why I said to you a moment ago that my research is forward looking, as opposed to what's happened in the past.
[00:22:49] And I believe, as I said, Melbourne and Sydney have decoupled. They clearly have, in the statistics, and just moved ahead. And it's not because the weather's nice here, people aren't coming to Melbourne because of the weather. They're coming here because the jobs are here. And we're no longer a mining country. We're no longer a manufacturing country. We're a service country, we're living in the Asian century. And therefore we are exporting things differently to what most people think.
[00:23:17] So when we think about exports, people think about iron ore, things out of the ground. We're exporting services, education, health, hospitality, I.T., financial services, and in general— other than travel and vacation and hospitality— those things are based in Melbourne and Sydney.
He Owes His Success to His Failures
We’ve heard about rich habits and poor habits, but what about Yardney’s personal habits? He shares the ones that have been contributing towards his success.
[00:24:20] I think the habit of reading and learning, but not just from people's successes— also from people's failures. Because you can learn more from those. So if you wrote a book, The 16 Great Successes of Wealthy Entrepreneurs, people would read it. If you actually wrote a book, The 15 Worst Business Failures, you'd probably find it wouldn't end up being a bestseller. But I've learned the concept of when things do go wrong. I'm only as successful as I am because I've failed so many times, in many ways, in my personal life, in my business life and in my investment in that I haven't made many bad investments in the last 10 years or so.
[00:25:03] I've learned the concept of having a useful belief. So I used to be a bit of a blamer and a victim. And that's a bad habit. That's a poor habit. Rich people take responsibility. And when I learnt to not blame others, and took responsibility for my actions, I became the pilot of my life, not the passenger. So I was in control, I felt much better, and I acted and behaved better. So when things went wrong, I was allowed to be miserable for a few minutes, and be angry and cross. And then I had to come up with a useful belief. Well, what's a useful belief about that? What can I learn from that, to take in the future? To move me forward? I think that's one of the biggest lessons I've learnt about mindset.
Go On, Have a Go
[00:25:50] Wow, thank you so much for sharing that. Where did you learn that from? I'm really curious now.
[00:25:55] I have [had] many, many mentors over the years. The fact that there's no rich victims in most of those books. The concept of [being] the pilot of your life rather than the passenger were words I'd actually learnt from one of my mentors many years ago called Roger Hamilton, who is still around, and I've learned a lot of very, very good things from him. I've been to his courses. I've done some work with him in other ways, as well. And I guess he is one of the early people that transformed my life.
[00:26:28] Christopher Howard, who was trained to be a boss in NLP and in public speaking, and in the psychology of success, was a great mentor many years ago. They were both people whose seminars and courses I attended. Brian Tracy, in my early days of selling, Jim Rowan overseas. So I've learnt these things.
[00:26:49] I've learnt everything from somebody, Tyrone. I'm not very clever at coming up with original ideas. These other people I've just mentioned have. I think Roger Hamilton has come up with some very clever, unique concepts. So all I've done is I've taken them from other people, and mixed them and blended them together. But most importantly, I actually used them and took action. So I think that's the big difference between why I'm successful, and some people aren't. Because I've actually taken them, I've had a go. And if it hasn't worked, I've just got up one more time.
Yardney divulges what he’s most excited about coming up, whether that’s in his work life or his private life, and shares some very sweet stories.
The other thing that excites me, Tyrone, is once or twice a day, I get an email from somebody I don't know, I've never met, who emails me and says 'Michael, I picked up one of your books at the airport', or 'I read one of your things online and it's actually helped me, it's made me think differently', or 'I bought a property has changed my life. Thank you very much'. Tyrone, that is an amazing payment. That really makes my day.
We’re all podcast fans here! Yardney tells us more about what we can expect from his own podcast.
[00:29:05] Over the years, I've had a blog that now has 115,000 subscribers and it goes out every day. And all the top Australian property experts are there. But it grew considerably as I changed the property update blog. So www.propertyupdate.com.au, to widening it into theories of success and money, personal finance. So while it started as a property blog, a lot of people who want property want all those other things as well. And so the podcast is not just about property investment, but it's about success. And it's about personal finance money.
[00:29:42] I did a survey, and about 2,000 people responded to my survey about what they wanted. The number one thing was property investment information. And the number two thing was mindset and the psychology of success information. Now that, interestingly, didn't surprise me, but it confirmed what the content of my podcast has to be. So it's going to be my thoughts with a few guest experts and some of my mentors and some of my mastermind group. But it's basically going to be my thoughts on property, on success, on wealth, and on the mindset of the rich and the habits of the rich.
Thank you to Michael Yardney, our guest on this episode of Property Investory.