In this episode of Property Investory, he shares with us the tips and tricks he has up his sleeve for negotiating with people, whether it’s for property, a car, or anything else you could ever want! He also shares his future financial goals that his father made him realise and how he’s planned to achieve it within 14 years, and how to train your mind to not look for excuses.

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

Resources and Links:

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

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 back with mechanical engineer Premek Borek. We hear about his tricks of the trade you can apply to your daily life, the power of the sound of silence, and how he talked down a property price from $850,000 to $680,000— but it didn’t stop there!

Tyrone Shum:   

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

Premek Borek:   

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

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

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

Tyrone Shum:  

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

Premek Borek:   

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

 

[00:03:54] There's just way too many emotional buyers at the moment, and they will just pay whatever they willing to pay.

Tyrone Shum:  

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

Premek Borek:   

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

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

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

There’s obviously a lot of problems there.

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

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

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

Tyrone Shum:  

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

Premek Borek:   

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

Tyrone Shum:   

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

Premek Borek:   

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

Tyrone Shum:   

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

Premek Borek:   

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

Tyrone Shum:   

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

Premek Borek:   

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

Tyrone Shum:   

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

Premek Borek:   

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

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

Practice Makes Perfect 

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

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

Coming up after the break, we delve into Borek’s goal of self-sufficiency... 

[00:17:51] I don't really want myself to be attached to that mindset or methodology that I always have to work for someone. I just don't want to be in that position that I'm so reliant on the job and if I lose it, I just lose everything. 

How his early career suited his mindset at the time, and what’s different now...

[00:20:18] As an engineer, we're naturally introverts, we don't network well. So being in a crowd of people where I have no idea about the subject, I think was a bit intimidating for me. And I didn't do it. But right now, I'm just completely different. And it's a lot about mindset. 

He reveals where in the property arena he sees himself going next.

[00:22:00] We know that it's difficult to achieve good rental yields in residential property at the moment, so I started educating myself a little bit more in commercial space. So I'm looking at some economical factors at the moment. 

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

Tyrone Shum:  

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

Premek Borek:   

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

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

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

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

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

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

Tyrone Shum:  

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

Premek Borek:   

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

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

Tyrone Shum:  

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

Premek Borek:   

[00:19:39] There's actually a bit of a story about it. I remember I was looking at some property course or seminar about 10 years ago, it was 2010, when we were doing our first renovation. I remember I signed up to it and I even got the ticket in the mail and I looked at the ticket thinking, 'I'll probably go there and they will try to sell me something.' 

 

[00:20:04] That was my mistake 10 years ago, that was my mistake, because I should have gone there. Listened to whatever they had to say and talked to other people. But at that stage, I don't think my mindset was there. And as an engineer, we're naturally introverts, we don't network well. So being in a crowd of people where I have no idea about the subject, I think was a bit intimidating for me. And I didn't do it. But right now, I'm just completely different. And it's a lot about mindset. 

Tyrone Shum: 

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

Premek Borek:   

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

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

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

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

Tyrone Shum:   

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

Premek Borek:   

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

Tyrone Shum:  

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

Premek Borek:   

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

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

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

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