Ben Everingham is the founder of buyers agency Pumped on Property, based on Queensland’s Sunshine Coast. He tried his hand in nearly every industry possible until the age of 23, when he picked up a book and knew exactly where his life and career were headed.
Join us on this episode of Property Investory
where we learn about both Everingham the family man and Everingham the investor. He shares the moment in primary school when he learnt about property prices, a story about an unusual uni pool party, and the horror investment story so crazy that detectives needed to get involved. Grab your popcorn for this episode— but don't worry about finding a seat, you’d just be on the edge of it anyway!Timestamps:
03:53 | It’s All in the Timing
05:53 | Guy Meets Girl
09:56 | A $90,000 Beach House— Those Were the Days...
14:23 | Beers, BBQ, or Book?
18:05 | Somebody Get Hollywood on the Phone
21:08 | But Wait, There’s More
26:51 | Surf’s Up, Man
04:42 | Hooked on Books
08:16 | Portfolio Predictions
13:09 | I Didn’t Know What I Didn’t Know
15:00 | Buy the Ugly Duckling
20:56 | The Main Mistakes Made
26:32 | Keep it Simple
30:43 | Be Better, Not Bigger
Resources and Links:
[00:08:37] At an early age, I learnt that businesses could be great things and businesses could also be successful and last, then you could do the right thing, and look after people in business and still make good money. So that was a really good thing that I didn't realise the significance of until much later in life.
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 Ben Everingham, from Pumped on Property. After a post-uni gap year overseas, he purchased his first property in Sydney and was bitten by the property investing bug. Also hear a story that sounds like a major blockbuster movie— now, if you don’t have landlord’s insurance, you may want to rethink that after this!
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Starting off, we find out that Everingham turns over some serious money with his businesses.
[00:00:19] One of those businesses is Pumped on Property. We're a buyer's agency that buy[s] between $50 and $70 million worth of property per year in Australia. And I also own a property management business, which manages our clients' properties after we've bought them for them.
[00:00:49] Our philosophy with our business is very simple. We only take on 10 new clients per month. And we can get into the philosophy of what I like to buy personally later on in the podcast. But it's been a great little business. And, obviously a whirlwind in terms of the growth over the last couple of years as well.
He gives a rundown of his typical work week, which varies day to day.
[00:01:19] My day to day is extremely regimented I suppose, because I'm a father, and live on the Sunshine Coast with my wife, I've got two little girls up here. So my thought process is the time that I trade away from those girls needs to be put to its absolute best use. So on a given day, at the start of my week, I've obviously planned my week and the things that I'm looking to achieve over that period of the week. Monday is generally catching up with the team and setting up for the week, reviewing the previous week. And then the marketing side of my business, which I love, like the shooting the videos and the podcast and the cool stuff like that.
[00:01:59] A Tuesday would be catching up with clients in what we call our strategy sessions, where we talk with people for an hour and find out where they are and where they're looking to go. I might do those conversations back to back from 8am to 8pm. And then a Wednesday is working with existing clients and the team and reviewing the properties that we're looking at that week. A Thursday is a little bit the same, working with clients.
[00:02:25] Then a Friday is kind of the get into everything that's left over from the weekend [day], finish up all of those things that I haven't had time to do type [of] things. So a general day is the same way that everyone starts, planning the day, getting the emails, and then I focus on one or two priorities or tasks per day, those big rock type things just so that I can knock them over.
It’s All in the Timing
He shares the top five most important things to him as an investor, and what type of investor he sees himself as.
[00:03:53] Very, very conservative, I suppose probably one of the most conservative people in the Australian property market that's actually still buying property. There's five things that are very important to me as an investor that serve as the foundation of what I think every successful portfolio needs. And the number one thing is timing the market. The example I give would be anyone that's bought in Sydney or Melbourne in the last five years now knows the power of timing the right market at the right time and riding that capital gain wave up at the right time of the cycle.
[00:04:30] The second most important thing to me outside of timing is obviously consistent long term capital growth. Which means targeting major metro markets, from my perspective. The next thing that's very important to me is buying a property that you can add value to over time, so that if the market stops performing or goes backwards, you've got a way to continue to build your portfolio— which might mean subdivisions, duplexes, renovations, etc.
[00:04:59] The fourth thing that is very important to me now, especially as I've become more mature as an investor is above average rental returns or good cash flow. And with the recent changes in lending— this is 2017, during the time of recording this podcast— it's becoming increasingly difficult for certain investors in the market to borrow money. So it's important to have a strong cash flow position, and then I, like a lot of the people that listen to this podcast, earn money and pay tax on that money. So, you know, I do like to have some form of taxable benefit with the properties that I buy as well. But you know, that's a very distant fifth.
**Guest’s personal story/background**
Guy Meets Girl
Turning back to his beginnings, Everingham details where he grew up and how his childhood taught him that business was the way to go.
[00:05:53] I grew up on the southern side of Sydney, in an area or suburb called Engadine which is about 20 minutes inland from Cronulla beach.
[00:06:15] I met a girl, like most stories start. And she was a Queensland girl. She's far too attractive for someone like me to ever be able to actually stay with [for the] long term, but for whatever reason, she decided to! So when we moved to Sydney, after I finished university, I was in IBM's global graduate programme. And we went down to Sydney and gave that a little crack for a while. And then she said that she wanted to move back to Queensland for the lifestyle. And I said, 'I'm not letting this one go'. And I came back across the border with her. And that was kind of what happened. We've been back up here now for six years or five years, that's been quite a while.
[00:07:18] I went to a Catholic school in Engadine called [St. John] Bosco. I went to Bosco Primary and Bosco High School. I grew up playing a lot of sport, surfing and doing a lot of competitive sports. So Bosco was a good fit from that perspective, because sport was a big part of their curriculum there. And it was a very competitive school, one of the best competitive sports schools in the state. And also lots of the kids there used to get on the train, and we'd go surfing at the beaches after school and on the weekends, and skateboard and stuff like that. So that was kind of our school.
[00:07:53] And then my parents, my mum grew up on the Northern Beaches of Sydney. And my dad grew up in the western suburbs out near Canterbury and Bankstown, which is why I'm still a Bulldogs fan. A lot of my mates always gave me a hard time about that. But, that's kind of their journey. Dad started with absolutely nothing. One of eight children, [he] lost his dad when he was four years of age. So he kind of was a self made guy and had worked really hard his entire life to create a better life for us. And maybe at, I don't know, 45 years of age, he started his own business, or bought an established business and continued to run it.
[00:08:37] And so at an early age, I learnt that businesses could be great things and businesses could also be successful and last, then you could do the right thing, and look after people in business and still make good money. So that was a really good thing that I didn't realise the significance of until much later in life when I had the confidence at a very early age to step out on my own and go and do my own thing.
With his father being one of eight children, I imagine Everingham family reunions must take place on a full-sized football field!
[00:09:19] We do a big Everingham get-together every couple of years. And we laugh about it, like, there's literally over 100 uncles, aunties and cousins start seeing and now there's the next generation coming through so there's probably more like 150. It's crazy what one woman's legacy could be over a 90 year period of time.
A $90,000 Beach House— Those Were the Days...
We know he wanted to get into business, but we don’t know where property investing came into it. Did his parents invest in property when he was younger?
[00:09:56] They actually didn't. They bought their own homes. My mum owned three by four properties over her entire lifetime, but never more than one at a time. It's always been her own home in Sydney, or recently, she moved up to the coast. And my dad, same sort of thing, he's owned three properties over his entire life. And all three of those properties have actually been the house that he's lived in. I remember going on a family holiday when I was in primary school. And I remember my parents seeing this house right on the beach for $90,000 at the time— that was 20 years ago. And I remember hearing them talk as I grew up about that house that they'd missed out on and what their life would have been like if they had bought it. So very early, I understood that property prices, I suppose can go up over time. And I didn't want to be the person that missed out on these opportunities and was talking about spending a lifetime worrying about money or thinking about that sort of stuff.
He sticks to property now, but back in the day Everingham was a jack of all trades, and one who knew his value!
[00:11:24] This is a story, my mates give me a really hard time about this. But I think over from the time... I got my first job when I was 12 years of age. And I think, from that time until now, I've literally had over 50 different jobs. I've worked with some of the biggest companies in the world, from your IBM, and your GJ Gardner Homes and the American Expresses and your cornices, right through to local corner stores. And I did landscaping and labouring for four years when I was at uni, and worked in cafes and bars, and absolutely everything you can imagine. I was kind of that person that, one, valued myself from a young age. And so I just wouldn't put up with shit. In terms of getting treated the way I think I was supposed to be treated, even as a young guy.
[00:12:21] And secondly, I was a bit like the kid in the candy store with learning. And so I used to go into positions and jobs and learn as much as possible. But then my learning curve— I identified very quickly I didn't want to be in that space, after three, six, 12 months. I think the longest job I actually ever had before starting the business was about a three year period, which is kind of crazy now that I look back at it. But I didn't realise how invaluable all of those experiences, observing different types of leaders in different types of businesses would now be.
[00:13:12] I've met some incredible people. One of the guys that I think about often is my last boss at my last job, which was the marketing manager for six different global brands. Three of those brands were in the building game in Australia, America and New Zealand. And I just observed a very young guy at the time— when I started with him, I think he was 34— making very good money. And not really working a lot. I think in the last 12 months that I worked with him, he probably came into the office 20 days out of 12 months. He just said try to be so scalable, very sustainable business model. And working with those types of people and observing those things at a young age is extremely powerful, because it changes your paradigm. And it changes the way that you think about everything from seeing someone else that's already gone out there and done it.
**Property investing journey**
Beers, BBQ, or Book?
He tells the story of the typical pool party he went to during his uni days that ended up determining his future career.
[00:14:23] I remember I picked up Rich Dad Poor Dad when I was 23 years of age, and I think [for] everyone that doesn't come from money, that book has a pretty significant effect on [them] when they read it if they read it young enough. And so I picked up Rich Dad, Poor Dad, and when I was 23, I had a year and a half left of university. I remember going to my now wife's, at the time girlfriend's, friend's house they were having a party and everyone was getting heaps drunk and I'd picked up the book the day before and I literally couldn't put it down. So I took it to this party and just sat on the pool chair all day reading it in the sun while everyone else got smashed around me.
[00:14:31] I felt like an asshole looking back about it now, but at the time, it was just so captivating, I couldn't put this thing down. And what I learnt from that book— even though I didn't have money to go out and buy property at the time because I was still at university, living out of home— was that assets are definitely better than wages. And so I learnt the power of investing and compound interest over time. And I also learnt that running your own business is better than working for someone else. So from that time I read that book, I knew that I would, at some point in my future, invest in property, and then I'd use that property, and that passive income to go in and start my own businesses without the fear of doing that.
[00:15:48] So the first year I got out of university, I saved a bunch of money. It was the first time I'd really had money in my life, and a friend of mine came up for a holiday. And he said, 'Want to go to America next week?' And I said yes. So I actually went and spent my whole first deposit on a trip to America with some friends. I came back, got a big slap over the knuckles from my wife's father, who was a very hazard property investor and just sort of said, 'What the eff have you done?! You've wasted your first deposit, you're an idiot'. It took me another six months to save another deposit.
[00:16:24] And then I went and bought my first place, which was a two bedroom unit in the Sutherland Shire in Sydney, in Miranda. And then three or four months after that I went and bought a second property, which was a five bedroom house with a granny flat on the Central Coast. So from that time on, I was hooked. And that was seven [or] seven and a half [or] eight years ago now. So over that time, we've accumulated and sold and bought and held and built a lot of different properties. And that's where we are today.
He shares what his property portfolio has been able to give him and his family.
[00:17:07] Enough to make me comfortable, that's for sure. I'm not one of the guys in the industry that's trying to buy 4,000 properties, and do that sort of thing, and it's all about ego and sacrifice. I'm just looking for a great lifestyle as myself and my family, which I've been able to create. And it's not about how much more, it's about how much better quality of life I can now have.
Somebody Get Hollywood on the Phone
Buckle up, because we’re in for a wild ride with this investment horror story!
[00:18:05] Are you ready for this story? Man, I don't know if your audience is ready for this. Because this is probably like the most... you could write a Hollywood movie about something that recently happened.
[00:18:18] This happened actually recently, like, I've currently got two insurance claims in on a property. So it's a Friday afternoon at four o'clock three weeks ago. And I get a call from my mate, who said, 'Have you turned on the local news?' And I said, 'What local news?' firstly, because I was in Queensland. And he said, 'I think your property's on the local news on the Central Coast'. And I said, 'What?' And then he said, 'Yeah, you should probably ring your property manager'. And then he hung up the phone. I'm like, okay, what's going on?
[00:18:54] I ring my property manager and I'm like, 'What's going on?' I'd leased the property out to one lady who'd been there for eight years. But I found out in the latest inspection that she'd subleased it out to eight other adults. So it was a house with a granny flat. Eight adults living in one property is just deadly, as you know, especially the quality of the tenants that we had in there. So I've kind of gone 'What happened?' and she's like, 'Well, there was a domestic issue at the property the other night', and I said, 'What happened?' And she's like, 'Well, two of the males in the property had a knife fight'. And I said, 'Okay, that's insane, like what the hell happened?' And she said, 'They've done a fair bit of damage to the property'.
[00:19:52] A couple of days later, six detectives have rocked up to the property because they've realised that something else is going on. And these people have effectively run out the back of the property. And I don't know what's happened. But at the exact moment the detectives have rocked up, my granny flat— which had been there for eight years— has caught on fire and burnt to the ground. So the cause of the fire was undetermined from the police event and the fire event. I don't know what happened. But it's pretty coincidental that something's obviously happened.
[00:20:30] The detectives couldn't enter the property until the fire was out. So two fire trucks have rocked up into this little suburban street by the beach on the Central Coast. The six detectives are there, and then they've called for backup and as they're called the backup and sectioned off the straight, these eight adults have run out of the property, apparently four of them have got away, and four of them have been put in [hand]cuffs. And so... I hope it's okay to share this story, like it's pretty... it's the most extreme example of what could ever happen to a property, I think.
But Wait, There’s More
[00:21:08] This is just the start, bro, like this just escalates over a period of weeks. So these people, four of them are in cuffs and about to be put in the cop car, then a couple of the neighbours come out that have AVOs against these people in the house. And they start breaking off fence palings, and getting cricket bats and then attacking these people that have their arms cuffed behind them.
[00:21:29] So there's now 30 or 40 members of the public in a full blown fight in the street. Because for whatever reasons that I didn't know, and my property manager never told me about, there's a massive issue in the street with these tenants. And so there's now 30 or 40 policemen in the property and 30 [or] 40 people literally fighting. And you think the story is gonna end there, and these people go away— then the tenants get back into the property, we've gone to tribunal. And obviously, using the police event letter, the courts have granted that they've got 10 days to get out of the property and remove all their stuff.
[00:22:11] Over that 10 day period, there were two more knife fights, and the tenants during those fights broke every single window in the property and put their heads through about every single wall in the house. So the entire house is now destroyed internally as well. And so that's where the second insurance claim comes on top of the first one! And then they've vacated the property but before they have, it's the Easter long weekend and the electricity company's cut the power off so the person in my property's got an extension cord, illegally plugged it into the neighbor's house and is running their entire house off this one cord.
[00:22:49] It's raining, the cord catches fire and has to be put out again. It just keeps going and going, man. And then they've finally got them out of the property. They haven't cleaned anything. And not only that, they've actually dumped four stolen cars onto the property before they left. So this all literally occurred in the last three weeks man, this has been my life, just trying to go through this thing. I don't know many people that have had an entire house trashed, what looks like some form of illegal activity going in the house, their granny flat burnt down, three knife fights, and four illegal cars dumped in one sitting. But that's kind of a worst case scenario. It's the worst thing that's ever happened to me. And if I didn't laugh about it, I'd have to cry.
[00:23:46] It's funny because the property's increased in a five year period, it's doubled, almost tripled in value. So it's been an incredible investment. We just lucked out with the wrong tenants at the wrong time.
I’m exhausted after just hearing about it! After all of that, Everingham lets us in on what his plans are once he’s on the other side of the drama.
[00:24:31] To be honest with you, I'm getting the insurance money, renovating, and selling the property! But I was planning on doing that anyway. That was going to be the plan at some point in the next two years, because the property's now worth $500,000— I can't see it being worth a million dollars in this suburb in another five or 10 years' time. I have a rule that when the money is being made I don't have a problem exiting a property and reinvesting into a higher performing market. I don't believe that property should be something that you hold on to [for] the rest of your life, I think strategically entering and exiting markets at appropriate times can be a very effective strategy to move forward faster as well.
[00:25:49] Yeah. Geez. When you say insured, is it 100% insured, or is there a certain clause…?
[00:25:57] Insurance is fundamental, man. Like, if you're not covered for everything, then you're absolutely gambling.
Coming up after the break, Everingham reveals his buying strategy...
[00:06:38] My strategy has changed dramatically from just buying whenever I had enough money to buy, to buying very strategically, at certain times in the market.
He shares the story others are keeping to themselves...
[00:08:16] In the good old days of investing in anything, the mindset was that property prices double every seven years. Worst case scenario, they double every 10 years. And I just don't think that's true anymore.
He delves into what he wishes he knew when he started investing.
[00:13:09] When I first started buying property, I wish I could say there was a strategy behind it. The reality was, I knew I wanted to buy property. I was in that stage where I didn't know what I didn't know, as an investor. And that's a very dangerous stage.
And that’s up next. I’m Tyrone Shum and you’re listening to Property Investory.
<insert money partner advert here>
Surf’s Up, Man
That’s definitely the take-away from that story! Switching to a more positive note, he dives into his ride on the property wave and when it all clicked for him.
[00:26:51] I suppose the aha moment would have actually been when I bought that second investment property and realised a number of things. None of my friends at the time, and not many people where I grew up had investment property. So the fact that I was 24 and had a couple of properties was a big deal in my own mind, it was kind of like a pat on the back and a feeling of worth or something like that, if you know what I mean, it gave me some self gratification.
[00:27:22] What I also learnt from buying that second property is that you can buy well below market value, if you know the pain points for other people. So that was huge for me. The biggest thing that I've probably learnt in the last seven years, and has been everything that I've been focusing on lately, is just timing. The power of buying those initial properties in the right markets at the right time, directly after the GFC or during the GFC at what would have been very close to the bottom of the market. And then riding that wave back up kind of made me realise that most of the hard work in property is actually done over a very short period of time.
[00:28:05] And then a lot of it's just sitting back and continuing to consolidate and get yourself into a better position, a safer position. So that would be huge for me. I just actually finished this incredible book, by Philip Anderson. He's an economist in Australia, who's got businesses in America and London. And for anyone that [has] seen that movie, The Big Short, he was one of those guys that identified the housing crash in 2005 in America and shorted the American market all the way down. And he wrote this book called The Secret Life of Real Estate and Banking, which looks at the last 300 years of boom and bust cycles in America and Australian property. And is just the most powerful book I've ever read in terms of understanding the bigger picture and the timing of different markets.
[00:28:55] What was interesting to me was there's a very consistent pattern of 14 years of relatively stable upward growth and four years of very hard times. So it was extremely interesting to see, over such a long period, a pattern repeating itself based on a centralised banking system that constantly breaks at some point, based on a certain amount of pressure in the market. So that's big for me, to kind of be able to see a little bit more of the future than I've been able to see before, as well as a good review of the past.
He divulges on his penciled-in plan for the next 30 years.
[00:29:47] It took me a really long time to understand what my personal investment strategy was, and I've tried a lot of different things. And luckily, with the timing of the market, most of those things have come off in a positive way. But what I've now realised for me, and what I'm most excited about moving forward, is the fact that I know that Sydney, Melbourne and Brisbane are going to be my playground for buying property over the next 30 years. I know that I'm going to be buying walking distance to the beaches, or within 10 kilometres of the CBD. I know that I'm always going to be able to find those distressed assets, and then add value to them over a very short period of time to release immediate equity.
[00:30:39] I understand that capital growth is affected by a few things, and far less things than most people think about, and higher quality properties is actually what gets you there in a shorter period of time, as opposed to stuffing around with all sorts of different things that people stuffed around or create businesses out of just because they see a niche in the marketplace, not because it's the most effective thing for people. I'm excited that I've got a plan in place and that I'm at a stage of life where I know what I now know, and can just consistently apply that for the next 30 years.
Coming back, Everingham reveals his long term objective and his advice on how to avoid listening to the nay-sayers.
[00:00:32] I think an investor lives and dies by the internal belief systems and values in their mind. So I've had to overcome the same things that I think every investor has to overcome— that's a fear of failure. And then, after you get over that fear of failure, like a fear of success, and actually, 'Oh, shit, I've achieved what I wanted to achieve, now what?' And that actually took me a long time to come to terms with, that things were getting better in my life and redefining myself once I've achieved all those goals that I set out to achieve when I was younger. The same things that plague every investor, the information overload, and the different types of strategies and different opinions and all of the noise in the industry. And taking the different pieces of each of those strategies, and actually defining something for myself that was in line with my personal risk profile and thoughts on investing. So I've had to overcome those things.
[00:01:32] And then, at different times, not having the right mentors or coaches around me, feeling isolated, and pretty lonely, to be honest with you, because I didn't have a lot of people to connect with that were at the same stage of life in terms of their investment journey. So I think they're things that almost every investor comes through, and I wouldn't say I've overcome everything. There's still so many times that I wake up going, 'Holy hell, I'm in a fair bit of debt right now'. Or the whole world gonna fall on its head today, when you see a couple of bad articles.
[00:02:06] But then to get past that stuff, I just remember that my long term objective isn't about year on year returns, it's about consistency over time, and there will be good times and there will be bad times. And to just not buy into the hype that's happening around me based on only two things, sell papers, and that boom or bust. So if one is not selling it, the other one is, and it's easy to get caught up on that stuff if you don't have a consistent long term vision and plan for yourself.
He lets us in on how he gets his mentoring advice.
[00:02:49] I've done a lot of the things that a lot of other people in the industry initially turn to. I went to what I thought were awesome educational nights and turned out to be property market business brokers and financial planners that weren't financially independent just flogging their crap. I've gone to the nights where the accountants and the solicitors get involved, and they're also trying to flog you rubbish that you don't need. I've gone to a lot of the seminars, and the big events. I'm not going to name names, but a lot of the people that you've had on your show, and that everybody knows in the industry. And I've listened to their DVD programmes, and I listen to their podcasts.
[00:03:29] I've also read a lot of the books. About three years ago, what I did was I looked at every one of the wealthiest 100 property investors of all time, and the 100 wealthiest traders I suppose, if you want to call it, whether that's in bonds, commodities, or stocks, and then I looked at every single one of those 100 wealthiest people. And if any one of those people had read a book, I bought it. So I ended up buying about 65 books and just reading those over the last three year period. Because if you're going to be the best, you've got to model the best of the best. So I suppose I didn't really have direct people in my life until my previous job. But those books, podcasts, and all those sorts of things were a big helping hand for a long period of time in my journey.
**Personal habits and book segment**
Hooked on Books
While we’ve got books on the brain, Everingham lists off some of his favourites.
[00:04:42] Obviously, I mentioned in a previous episode as well, like I really enjoyed Rich Dad, Poor Dad, because the people that are just getting started. I actually just finished Tony Robbins' new book, Unbreakable, which is a condensed version of the book that he wrote last year about money mastery. And I actually found it to be one of the better financial books that I've read, for a person to digest. I just finished that one on the way down and back on the weekend to Melbourne for a mate's wedding.
[00:05:17] From a property investment perspective, there's probably not a hell of a lot of others that have had a huge impact on me. A lot of the share trading and investing books have because I think those guys are a lot smarter and a lot more sophisticated than the average Australian property investor or spruiker. I kind of like a couple of books that are a bit outside the genre, like, for example, The Richest Man in Babylon and The Alchemist. And those types of things as well, like a lot of that more motivational or mindset related stuff.
We’ve heard the advice he’s taken, but he has some advice and wisdom of his own to pass on.
[00:06:17] I think the best advice as I've gotten older is Warren Buffett's, which is 'Be fearful when others are greedy, and be greedy when others are fearful'. Everything that I've been reading in the last couple of years has been related to markets and patterns over time globally, and the effect that it has on the local marketplace. So my strategy has changed dramatically from just buying whenever I had enough money to buy, to buying very strategically, at certain times in the market.
[00:06:47] I know I've only been investing for seven years so I haven't been through even half of a full cycle yet. But that's been very important to me, which is the reason why, as a buyer's agent, I stopped buying in Sydney, for our clients a couple of years ago and transferred our focus to the Brisbane marketplace, which is just starting to get some great results now.
[00:07:11] Unfortunately, with only 1% of Australians owning more than five investment properties, there's not a lot of people that you can actually turn to that have been there and done it. There's plenty of people that talk crap about doing it, but there's not many people that have really achieved financial independence through property investing. And a lot of the people that are currently in the industry haven't really done anything since the '80s, or the '90s, which was when properties doubled every seven years.
[00:06:37] So you didn't really have to do anything back then, you could just buy and then hold and you'd be a millionaire. Where today, returns aren't guaranteed, it's a lot more competitive. And markets just don't do the consistent things that they used to do. So you've got to be more sophisticated in terms of your strategy to get the same result.
He shares how he predicts when and where to invest in his personal portfolio, and which cities he’s focused on.
[00:08:16] In the good old days of investing in anything, the mindset was that property prices double every seven years. Worst case scenario, they double every 10 years. And I just don't think that's true anymore. Sydney and Melbourne have gone through a great wave of growth, and most suburbs growing between 40 and 80% in the last five years. But the story that people aren't telling is the 10 years of completely flat property values that Sydney had before that. So I just don't think those old things ring true anymore.
[00:08:49] When I'm forecasting personally for my own portfolio, I do my assumptions that Sydney, Melbourne and Brisbane will only do 4% capital growth per annum for the next 20 years. Wages haven't increased in line with property values and so I know it's an international marketplace now, particularly Sydney and Melbourne, which means local incomes don't matter as much. But when the correction does come, there's going to be a lot of people that are significantly overexposed from my perspective, and that's from talking to 800 or 900 investors every single year and intimately understanding their situation.
I Didn’t Know What I Didn’t Know
Moving back to strategy, Everingham details the steps he took to achieve and build his portfolio.
[00:13:09] When I first started buying property, I wish I could say there was a strategy behind it. The reality was, I knew I wanted to buy property. I was in that stage where I didn't know what I didn't know, as an investor. And that's a very dangerous stage. One, you make decisions based on third party advice that might not be in your best interest. For example, at that time in my life, if the mortgage broker was prepared to get me the money, I was prepared to spend it— that was my attitude and mentality.
[00:13:39] What I was very lucky to time was the year that I finished university was that middle/end of the GFC. And the market was tough for certain people, and people were still scared and not buying stuff. But because I hadn't been through a cycle, I went on a buying rampage. And effectively every time I had a 5% deposit I went and bought another property in Sydney, or the Central Coast or Brisbane.
[00:14:07] And so at that time I didn't really have a strategy. I knew that high quality property in good areas close to the beach, or close to the city was what I wanted, but that was about as far as it went. My scope for identifying suburbs at the time was pretty much limited to buying a residential report, having a look at a couple of numbers, talking to a couple of local agents, looking on realestate.com.au and then buying something. It was very, very basic. These days, it's changed dramatically.
Buy the Ugly Duckling
Now that he has a clearer vision and strategy, what criteria has he changed to select properties for his portfolio?
[00:15:00] I was looking for suburbs that had a predicted average annual price rise for the next eight years in a residential report of over 6% per annum. And then at that time, I was looking for a rental vacancy rate in the suburb below 2%. Because I knew that represented an undersupply of property for rent. And then at the time, what I thought represented value— which has changed dramatically now— was the cheapest property in the worst condition in a good suburb.
[00:15:30] I thought that value shopping meant buying cheap and buying something that no one else wanted to touch. But I now realise that buying cheap can sometimes mean that you lose 1%, potentially even 2% capital growth per annum over a longer term period of time. So, that was my strategy— just buy the really ugly duckling, buy them off people that were just in a distressed state like divorces, very ugly properties or deceased estates— and to be pretty aggressive with trying to buy something that I thought was below market value. Which in real terms, the agents would have been laughing seeing me come in because market value is whatever someone's prepared to pay, and I didn't have access to the sales history data at that time. So I actually had no idea what market value was, I thought it was what was on realestate.com.au.
Hindsight is a funny thing— if he could go back, what would he do differently?
[00:16:34] Looking back at it now, it's easy with retrospect to know that I just would have bought a bunch more property on the beaches of Sydney. I would have bought a couple of unrenovated units at Cronulla Beach, I probably would have been able to afford a property in the eastern suburbs of Sydney, and I probably would have bought a couple of houses in the inner west.
[00:16:56] Looking back now, with the income that I was earning and the way that the banks were giving out money at that time, I just would have focused more on the Sydney marketplace and bought much, much higher quality product with potential to add value to that product in much more premium suburbs. And I probably would have just held that property through to about the end of last year and then started cashing out of it.
The Main Mistakes Made
Everingham believes the average investor loses a large amount of money in capital gains by making these mistakes.
[00:20:56] I think most investors just make decisions that they don't understand will cost them. I think the average investor, by making the decision that they make on the average property probably costs themselves between $100,000 and $150,000 in capital gains over 10 years. I just think people make big mistakes that they could avoid by listening to people like yourself, and the people that you bring on to your shows or doing better research. Like, they spend so much time looking at the fluffy stuff, and not enough time looking at the hard, how to identify the right properties, how to identify the right market, how to identify timing. Those more sophisticated things that everybody that has had to stretch further, eventually learn either through the market, smashing them or helping them or through getting into this stuff very seriously and only wanting to make solid returns which beat the index funds in the stock market, which is about 8% per annum over the last 50 years. So if you're not beating index funds in the stock market, like, why are you investing your property when you can just go put it in there and just make your life simple?
What’s his personal habit that contributes towards his property investment success?
[00:22:34] OCD. I'm sure there's people sitting on this podcast going 'Shit, this guy's anal, man!' But I am, like, I'm obsessive about property, I can't help it. It's my passion. It's my purpose for being here. It's what I love to do, it's what I would talk about all day. I don't talk about it outside of work, luckily in work I get to talk about it most of the day. That kind of gives me my fix. But I'm OCD, like, I'm constantly learning. I'm not one of those investors where it's like 'Oh, capital growth works! So now I just do capital growth for the rest of my life until it doesn't work'. I'm not a high risk taker, which means I avoid the development stuff that a lot of other people decide to take on. And there's so many examples of people over the last five years that have done five developments where if they had have just bought one property in Sydney, they'd be in a better overall position right now.
[00:23:35] So I think the fact that I'm detail orientated, I'm very patient now. And that I have a very structured way of buying, from identifying markets to identifying suburbs, to reviewing suburbs, to identifying quality properties to reviewing those properties— it just makes the process simple and automatic. I can qualify out a suburb in about two minutes, which people could spend two months looking at before they actually decide to walk away.
[00:24:03] So the simple processes that I've set up because I'm so over the top with this stuff, and I want to do the right thing by myself and the people that we help has enabled us to just systemise it down to a point where it's hard for us to miss something now. It's very difficult for me to buy the wrong type of property for myself, outside of obviously the whole global market crashing and burning, which is probably going to happen two or three times during my investment journey, and I've had to come to terms with that.
Keep it Simple
Another mistake he sees investors making is one he has made himself in the past.
[00:26:32] A number one reason why I see most investors failing— that is something that I've done personally. So that's the only reason I can say this. It's not to have a dig at anyone but myself in the past, it's literally— people get bored. And people want to tinker. And people want to overcomplicate very simple things. Once you've bought a couple of houses, and you know how to do that, then people go, 'Well, I don't want to just buy anymore, I want to do this, or I want to do that'.
[00:27:04] The number one congruent thing that I've seen from talking because that's the cool thing, I get to have about 700 sessions a year with very sophisticated investors with portfolios of between three and 30 properties. And from speaking to all these people, once they find a strategy that works, you've got to evolve with the market and the market conditions and different strategies will work at different times.
[00:27:27] But once they find an approach that works for them, they just rinse and repeat it but they rinse and repeat it for long enough that it can actually be an effective result, where most investors, you talk to people, they'd buy one house, it's probably a unit or a townhouse. And then they go and build something because that's a bit newer and more exciting. And then they're looking for a little splitter block or a subdivision. And it's just if you don't consistently do one activity over time, then you don't learn enough about that one activity to really refine it and improve it.
[00:27:59] So you've got all these people running around looking for splitter blocks, where they're only making eight to 12% net returns, where have they had just bought a high quality property close to the city, done a renovation and added a bedroom or bathroom, they would have added 30% of value. And it's just crazy how illogical people are and how much their need for change affects their long term results. And I think that's where most people get it wrong.
[00:29:34] So many people come to me and they're like, 'I've just spoken to this guy and he said I need 10 to 20 properties', and I'm like, 'Why? What's your goal?' And they're like '$100,000 per year in passive income'. And I'm like, 'Four properties in the next three years. Hold them for 15 years and you'll achieve your goal’.
[00:29:50] Just simple, man. Just do that, and then focus on having a sick life during that period of time and repaying what debt that you can and at the end of it all, renovate a couple and sell to pay off the other two outright. Like, it's that simple. But people want to make it so much harder than it really is.
Be Better, Not Bigger
He’s gone from selling out up to five months in advance to taking on a maximum of 10 clients a month, but Everingham and his business have never been happier.
[00:30:43] Our buyers’ agency, like everything in my life, is simple. So 12 months ago, I read this amazing article that was sent to me by Seth Godin, the legendary marketer in America. It said at the top of the article, was 'Why be bigger, why not be better?' And at the time, we were helping buy around about 15 properties per month. And just probably on our way at that time to opening a Sydney and a Melbourne office, and becoming one of the big boys if you know what I mean, in this space.
[00:31:19] And then I read that article, and literally that day, I talked to my wife, and I talked to my team and said, 'Let's just focus on being the best and better'. And since that day, we've never taken on more than 10 clients a month. And that's meant that in previous times, we've sold out anywhere between one and five months in advance, but it means that we choose the people that we work with that are culturally aligned, we choose the people that we work with, because their strategies are aligned them because I'd actually want to have a drink with those people and actually spend some time with them.
[00:31:52] And it's completely changed our business and our model from the whole property industry is bigger, bigger, bigger, more, more more, where we're just, 'Let's get above average returns for our clients, let's aim to get a one or 2% average annual capital gain better than the market average in the state we're buying, and let's try and do that consistently for the next 20 or 30 years'.
[00:32:20] And the other thing that we're obsessive about is customer service. So we're by far the most hands on buyer's agency in the industry, and it's really about when you come to us working with me, my sister and my brother directly, there's no one else that you'll ever have a conversation with. We're super hands on with what we do. And I think that's some of the special sauce that is what Pumped on Property has now become which is definitely by far one of the agencies in the industry that is trying to do the right thing by people and just telling it how it is. It's not us taking everybody's money just because they're prepared to give it to us, it's us helping the right people execute on a strategy and actually create the right strategy before you start wasting money and time looking at stuff and buying things.
Thank you to Ben Everingham, our guest on this episode of Property Investory.