Property Podcast
How Jan Somers can Help You Build Wealth With These Simple Tricks
March 31, 2021
Jan Somers is a mogul in the property investing community of Australia and is the author of a number of best selling property books. Beginning her career in teaching, Somers and her husband soon realised the incredible potential of property investing and this saw Somers transition to not only teaching fellow investors but growing their own portfolio which has seen them in the property game for over 40 years!
Join us as we discuss her rise to the top, struggling to juggle family life with building a multimillion dollar empire, how in the 80s she had enough properties in Queensland to buy four in Sydney’s expensive market and how she initially stumbled into property!

Timestamps:
2.52 | Saving for a rainy day
5.05 | From teaching students to teaching investors
8.04 | Difference in the Sydney and Brisbane markets
12.21 | Humble beginnings
17.22 | Switching strategies
19.46 | Making a property more rentable
23.29 | Learn the skills and do it yourself
26.59 | The evolution of Somers first book
29.44 | Other exciting ventures
33.26 | Taking over the family business?
0.27 | Don’t buy depreciating assets
3.36 | Don’t borrow beyond your means
7.32 | Switching to interest only loans
10.28 | When you buy and hold, you don’t have to worry about timing
12.46 | Patience is key
15.36 | Decide how much work you’re up for
18.45 | The value of money
20.18 | Put aside some lunch money and buy a property instead
24.59 | Somersoft

Resources and Links:

Transcript:
Jan Somers:
(04:05): We were always taught to save for a rainy day, but I'm not sure when the rainy day ever came. We just managed to get it into property. Then it was probably more than 10 years later before the penny dropped.

**INTRO MUSIC**

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

I’m Tyrone Shum and in this episode, we’re speaking with property investing mogul and best selling author Jan Somers. She details her transition from school teacher to becoming one of the biggest names in Australian property investing. She also shares nuggets of wisdom gained in the 45 years since purchasing her first investment property.

**END INTRO MUSIC**

**START BACKGROUND MUSIC**

Tyrone Shum:  
After being involved in property investing for over four decades, Somers has proven herself to be a titan in the industry. But her experience has not been limited to one thing.

Jan Somers:  
(00:15): I've done an awful lot, not only in property investing. I've been a teacher, I've been a barmaid, I've done just about everything in life. I look back and I hope that [my] experiences have been very helpful to other people.

Tyrone Shum:  
Coming from very humble beginnings, Somers has amassed incredible success over the length of her property journey. She continues to stay busy and enjoys having a daily routine to keep up with her very busy schedule. 

Jan Somers:  
(00:49): Well, I'm a bit of an early bird and I'm also a late lark too. I'm usually up between about 5:00am – 5:30am because my husband goes cycling. I have a cup of tea and then I always go for a walk. I've gone for walks very early in the morning for about the last 50 years of my life. I would usually walk with the dog, who only recently passed away. But now I do it with my daughter who has a young baby. 

(01:13): I do a lot of paperwork when I get back between 7am – 9am, including paying the bills and other things and then I'll have a late breakfast at about nine o'clock. After that it's more paperwork or it might be to do with a renovation somewhere. It might be cutting trees, fixing kitchen cupboards, sewing curtains, or it might be minding [my] two grandsons. We also go to Europe once a year to do a hiking trip and I might spend a lot of time planning for that. 

(01:42): This year, we're going to the pyramids. So I have a pretty full day. Not too many spare moments, but in the middle of that I squeeze in a light lunch. At about 4pm I'll do another hour of exercise, a little bit more intense, maybe a swim, maybe a bike ride at the gym, never on the road. Just anything to fill in that hour before dinner. 

(02:06): We have an early dinner at about 5.30pm and watch the news. I'm not sure what for, you can miss it for two months and catch up where you left off. Then I watch my favourite shows, 'who dunnit’s' like Agatha Christie, something on the History Channel, rugby league and cricket in season. Then I'll go to bed at about 11pm, unless I get stuck on ancestry.com. in which case I'm up until about two in the morning.

Saving for a Rainy day

Tyrone Shum:  
With such a hectic lifestyle, which sees her juggling several projects at once and family life, Somers values the importance of exercise.

Jan Somers:  
(02:52): You not only think better, but you sleep better. I've been the same for 50 years of my life. I just love getting out to do something and enjoy the world for what it is.

Tyrone Shum: 
Somers humble beginnings stem from her accidental stumbling into property investing and how that has turned out for her whole family. 

Jan Somers:  
(03:42): We grew up in the Redcliffe area, both my husband and I. In fact, we went to the same high school together. We bought our first property in Kippa-Ring which now incidentally and accidently, is only about 100 metres from the new Kippa-Ring railway station that's been very popular lately. 

(04:05): But each place that we bought was because my husband shifted around so much. We managed to keep more because we didn't really know what to do with it and we've been taught to save, to not squander money and put it into something decent. We were always taught to save for a rainy day, but I'm not sure when the rainy day ever came. We just managed to get it into property. Then it was probably more than 10 years later before the penny dropped.

Tyrone Shum:  
So as you mentioned you stumbled into property by accident, [was this] because you were buying a home to live in initially?

Jan Somers:  
(04:48): That's right, yes. Stumbled is a good word.

From Teaching Students to Teaching Investors

Tyrone Shum: 
Born and bred in the beautiful Redcliffe, Somers continued to live there with her family throughout her life.

Jan Somers:  
(05:05): We now live on the other side of town in Cleveland because there was a research station here when my husband was doing oceanography and fisheries research. 

Tyrone Shum:  
Oh interesting, so that was the reason that you moved?

Jan Somers:  
(05:19): That was the only reason that we moved and that was the only reason that we acquired properties along the way.

Tyrone Shum:  
Okay, has your husband always been in the same job?

Jan Somers:  
(05:32): He was always a research scientist, but he had a strong computing background. He did computing before anyone else knew what a computer was. We'd often drive around in the car with all of these little pieces of cards in the boot that had to be kept in a particular order. That was back in the late 60s. But then he adapted that skill to computing and analysing the fisheries dynamics and put it to good use in mathematical modelling of property. So we made a good team.

Tyrone Shum:  
It's a very interesting correlation. Most people usually map land and map housing, but your husband maps fishing?

Jan Somers:  
(06:17): Yes. Well, there wasn't a lot of difference to counting prawns and counting properties.

Tyrone Shum:  
With her background in teaching and mentoring individuals about property, it’s not hard to believe that Somers was a teacher before getting into property full-time.

Jan Somers:  
(06:32): I stumbled, [which again is a] good word to use because that's how I got into teaching. I did three years at university then I took a year off because I couldn't think of what I would do next. I spent a year in Europe and travelling overseas before anyone knew what the word was, travelling overseas. 

(06:54): Then I came back and I thought about what to do next. I decided to do a diploma in education and became a teacher. I was always intrigued about the research, I knew how to dig out information. That was my strength. We had a young family and once I'd finished teaching, I was able to dig up sufficient information on property that made it  work for us.

Tyrone Shum:  
What grade teacher were you?

Jan Somers:  
(07:28): High school,  between years 8 – 12.

Tyrone Shum:  
That's a fun stage to be teaching. I had some very memorable years when I was back at high school and had some really good teachers as well.

Jan Somers:  
(07:39): Yes, well it was good 30 years ago, when you could tell someone to sit down and they did. But these days, they seem to question why they have to sit down. That doesn't suit my style of teaching.

Difference in the Sydney and Brisbane Markets

Tyrone Shum: 
It was during the 80s, when Somers saw the potential in property and spent most of her time buying properties, renovating them, as well as having a family, that she decided to step back from teaching and focus on the properties that she had underway.

Jan Somers:  
(08:04): I didn't really have time for teaching anymore. But I did do a lot of teaching in the sense that I lectured on property investment, two or three times a week for many, many years, which I really enjoyed.

Tyrone Shum: 
It took exactly four years after buying her first few properties in Queensland, before Somers really saw herself and her husband in property long term.

Jan Somers:  
(08:54): I was in Sydney when I had one of those aha moments. We'd gone down there in the early 80s and we had quite a few properties in Brisbane. We wanted to buy into the Sydney market, but I didn't think that we could afford to because, at that stage and probably now too, property down there is twice as expensive as it is in Brisbane. I thought well, that means we'll probably have to sell two properties in Brisbane in order to buy down in Sydney. 

(09:30): But I did have a chat with a real estate agent and he wasn't too interested in me because we had one income. I was pregnant with our first child and I didn't have a job. Here I was asking a lot of questions about property. So he was trying to fob me off until he discovered that we did have a lot of property in Queensland and he made a very profound statement to me then. He said, 'Lady... with what you've got in Queensland, you could probably buy four properties down here in Sydney'.

(10:04): He explained about using the equity and borrowing money, so I came home and I thought about it and started looking up some more properties. Finally I just thought, 'No'. It took another few years before the idea gelled. It was 1987 by the time we were on a roll and it all fell together.

Tyrone Shum:  
Do you remember how much the properties were in Brisbane compared to Sydney at that point in time?

Jan Somers:  
(10:38): Oh, yes. The properties in Brisbane were around the $50,000 mark and in Sydney we were looking at $100,000.

Tyrone Shum:  
Wow.

Jan Somers:  
(10:48): So when comparing that to today, the median price in Brisbane is about $500,000 give or take, but the median price in Sydney is over $1,000,000 now. So I suppose, considering all that's happened, we're still relative in value. Even when I wrote the book, the property values were still of that nature. I tell people, 'Look, if you think the book’s out of date, just go through and add a zero to everything'.

Tyrone Shum:  
History seems to repeat itself and you've just said it yourself, Brisbane was half the price of Sydney and just in today's dollars and terms, it's still the same thing. That's going back almost 30 years.

Jan Somers:  
(11:40): Yeah, 35 years ago, that's right. Well, even going back to 1972 when we bought our first property, that was always the case. We bought our first property at $11,000 and at that time, Sydney properties were around about the $20,000 – $25,000 mark. That's just how it has been and always is. I guess that's where my strength lies in property, the longevity that I've had in the industry. I've seen these things happen and come and go. [It’s been] almost 45 years since we bought our first property.

Humble Beginnings

Tyrone Shum: 
Although Somers had the intention of keeping every property that they purchased, it didn’t quite work out that way and in the last two years they’ve sold a few properties to wind down the debt.

Jan Somers:  
(12:21): My husband and I are approaching 70 and it's time to look at some other things. We can't continue having a huge portfolio. My kids keep saying I can't look after that Mum. 

Tyrone Shum:  
Somers believes that it’s best to keep people guessing on the exact number of properties in her portfolio, which is likely to be quite impressive.

Jan Somers:  
(13:11): If I said to people, 'Look, we have exactly this amount of properties', some people would say, 'Oh, I'll never get there' and others would say, 'Oh, is that all?' 

Tyrone Shum: 
Although not always interested in property and certainly not in having property as a career, Somers and her husband were raised on the importance of saving money and having a good work ethic. This has proven to be a wise lesson for them.

Jan Somers:  
(13:48): It just seemed natural that the first thing you did when you got married was that you bought a property, which we did. Moreso because that was the traditional way of doing things. 

(14:14): We moved to the other side of town and we bought another property, we moved back to the other side of town and we bought another property. This went on for quite some time before we went back and forwards to Sydney. We've never actually bought a property in Sydney, but I can't say I ever became interested until the mid 80s.

(14:33): This is when I had family and strangely enough with three children at home. I had a lot of time to make a lot of phone calls – there was no internet then – do a lot of homework, understand the tax system as it related to property and understand how good an investment it had been to us in the last 10 years. So I never started out with our first property thinking, 'Property is a good investment. Let's get rolling'. 

Tyrone Shum:  
Yeah, I like your story because it details very humble beginnings, in which you just bought properties because it was based on what you were taught.

Jan Somers:  
(15:29): Well, I hope that I can short circuit that plan for a lot of people by saying 'Yes', get into your first home because there are too many people who will just hesitate and say, 'I can't afford it', but you can. You've really got to look at the basics in property and get started straight away. You can't start with a six bedroom, three ensuited house, you've got to start small. 

(15:56): We all started small somewhere. I have people who say to me, 'Oh, look, we've just bought our first home and it's got three bedrooms and one bathroom and it's only 10 squares’. I said, 'Well, that's really good because our first home was three really small bedrooms, one really small bathroom, and it was only 7.4 squares or 74 square metres, in the new terminology. 

(16:21): So we started really, really small and people need to get that idea in their head that if you want to get into the market, I don't apologise, but sorry you do have to start small. Think Big, but start small.

Switching Strategies

Tyrone Shum:  
At the beginning of their property journey Somers strategy quickly changed. She recalls an experience that saw herself and her husband lose close to $5,000 on what turned out to be a pointless renovation, leaving her with no options.

Jan Somers:  
(17:22): I already had this buy and kick mentality back then, except that we had been so successful. I thought because of that, I could afford to dabble a little bit and buy a property, renovate it and then flip it and make even more money. So we bought a property in 1988 and we paid exactly $50,000 for it and it was a dump.

(17:56): But we decided that we could renovate it and then on sell it in a short period of time. So we got in and ripped out the carpet and did everything that we could possibly do. I can't recall exactly, but we probably spent $3,000 – $5,000, 10% of the property's value at the time. [We though], that's warded up to $55,000 maybe we can sell it for $60,000 – $65,000 and that's a good start with a renovation. 

(18:26): So we got the same agent back again and after he walked in and had a look, he said, 'You really want to know what it's worth?' I said, 'Yeah, I'd like you to sell it for us again'. He said, 'Well, I still think I can only get $50,000 for it, the same price that you paid'. I thought, 'Bugger, what have we done all this work for and spent all this money and now it's not worth anything more than what we paid for it'. It probably wasn't. It started as a dump and it really was always a dump. 

(18:58): We probably needed to spend a lot more money on that to make it work. So we decided to put some tenants in it for the two or three years and followed through on my commitment to at least make something work. The market turned and we decided to sell it. That was in about 1989, the market had really, really shot along through to the end of 1988 and 1989. The market crashed in 1987 followed by a property burn because all the money poured out of shares into property. We were lucky to sell it at $86,000.

Tyrone Shum:  
That's not a bad story.

Making a Property More Rentable

Jan Somers:  
(19:46): But it wasn't because of our renovating skills, it wasn't because we had picked [that] time of the market. We were very lucky, we weren't experienced in renovating and we shouldn't have had a buy and sell mentality and we're just lucky for the change in the market that got us out of trouble. From that point on, it's really been a very strong buy to keep philosophy.

Tyrone Shum:  
So from that experience that you've recounted, it really teaches us that you can put a lot of money into renovating, but it won't necessarily increase in value over a short period of time.

Jan Somers:  
(20:26): That's right. It also teaches you that you need to identify more skills. At that stage I was a basic hammer and nails girl, I didn't have a lot of skills in knowing how a kitchen was put together. I do now because I've done a lot of renovations, all with the idea of keeping the property and just making it more rentable. 

(20:45): But at the time, you learn a lot about yourself. I wasn't skilled enough to know what renovations needed to be done and I really didn't have the financial backing to say, 'I can buy this and be able to flick it on and make $10,000 – $20,000. If I don't, well, I'll just buy another one and make even more money’. So it was a good lesson in not only identifying your personality, but identifying your skills as well.

Tyrone Shum:  
It sounds great, but in reality you need to have the skill set to be able to spot those deals. They don't just come out of the blue.

Jan Somers:  
(21:49): I think in the case of a lot of the renovating shows at the moment like The Block, we don't see what goes on behind the cameras. There are so many skilled tradesmen that are operating behind the scenes, giving advice on what can and can't be done, that what we see is just the surface layer [of] renovating. That makes people think, 'Look what they've just done, they've renovated, I can do that'. It's really good for inspiring people, but then those inspired people need to go and learn how to do it. It doesn't just happen.

Tyrone Shum:  
With any skill or anything you want to master, it takes years to actually master something like that and lots and lots of practice. For example, being a teacher, it's not like you can just go into a classroom and you'll be the best teacher to all the kids. You need to build that up over the years to be able to be a better teacher [with that] experience. It's no different to property investing or property renovations.

Jan Somers:  
(22:46): Yes. I think when describing myself, I think I'm probably just a jack of all trades. I've learnt a lot about a lot of things. I wasn't necessarily a builder or a renovator or a good financier, or even the best property investor. But I was prepared to have a go and learn a lot of things along the way.

Learn the Skills and do it Yourself

Tyrone Shum:
With a passion for learning new things and getting stuck into the hard work, Somers has been renovating the properties she has purchased since the first few in the 80s.

Jan Somers:  
(23:29): One of them that I bought was only a half finished house and I was able to get in and do some tiling, which I'd never done in my life before. Even our own home, we sanded the floor ourselves. 

(23:49): My brother is a builder and he's done a lot of renovations in England. So if I ever got stuck, I would just ring up and say, 'Hey, look, I want to stick this piece of stainless steel on top of a piece of laminex because someone's put a pot down and it's burned a hole. What glue should I use?' So I've always been prepared to ask questions for answers that I don't know. That's the way you learn.

Tyrone Shum:  
It sounds like you're a very curious person because you want to learn and then be able to apply those things that you learn.

Jan Somers:  
(24:23): Oh look, the ability to learn something and not assume that you know it all is really what life's about. You know, especially with all the wars that we've had... it just proves that we haven't really learned anything.

Tyrone Shum: 
Somers has accomplished so much in her lifetime, from property investing, to learning new skills and renovating those properties, to mentoring. She credits the move from teaching to mentoring individuals in the property industry, because of the kids she taught.

Jan Somers:  
(25:06): I didn't want to teach kids anymore who didn't want to be taught. I had a lot of information about property that no one else had back in the late 80s. I had an enormous amount of information, but I thought, 'What do I do with it?' I wasn't going to teach high school, for kids who weren't interested in what I was offering. 

(25:33): I started out doing a few little seminars in a local real estate agency with about 10 people. I wasn't really paid anything at all and I just really enjoyed it. I got to sell a few little sets of notes that I had put together. So that was my introduction and then it just caught on like wildfire, that all of a sudden meant that I had lots of invitations to speak.

(26:02): I then developed a more concrete strategy and I was able to research the book that we put together in 1991 – 1992, to explain why the strategy had worked. The digging up of all of the statistics on property over the past 100 years, enabled me to say, 'I know property works, we've done it. But here's the reason why and here's all of the research on shares and property to explain why and how we did it'.

The Evolution of Somers First Book

Tyrone Shum:  
The conception of Somers best selling book was initially stapled notes that she would take to seminars. These were crafted into a manual called “Manual for residential property investors”, which was about 50 pages.

Jan Somers:  
(26:59): I had a cousin print it for me as he was in the printing industry and we had 5000 copies printed. It didn't cost very much to print 5000. Before I knew it, within the year they were all gone, they were all sold. 

(27:29): So at that point, I virtually devoted a whole year to putting together a book. The book was the first of the 'building wealth through investment property' series. So I completed the book, I paid for my own editing, I paid for my own printing. In other words, I did the work, but I didn't know anything about marketing books. So I went along to a distributor at Herum who were distributors at the time. I said, 'Look, I've got this book'. At that time I'd already been turned down by Penguin and many others.

(28:10): He had one look at it and said, 'If you can get a publicist, then we can do this'. Well, I did get a publicist who introduced me to the world as the housewife millionaire. That name kind of stuck. I did Ray Martin on the midday show and a few current affairs segments. It was just like a whirlwind, it absolutely blew me away and just took off. No one had ever explained before, how you invest in property, what are the bones of investing in property? How and why does it work? 

(28:49): So I had a little formula and a little winner, but I didn't set out to write a book and then sell millions of copies. It was just putting all of this information down and then printing it ourselves and researching it ourselves. Then finally, we put it to market. So that was the end result, I didn't set out with the idea of putting it to market right from day one. That's not why I wrote it.

Other Exciting Ventures

Tyrone Shum: 
Although she enjoyed being involved in the seminars and wasn’t in it for the money or sale of books, Somers decided to pursue other ventures in 2004.

Jan Somers:  
(29:44): I had belonged to a skipping organisation that my daughter was very keen on and I decided with my organisational skills that I could organise a world event. Which we did, we had people from about 30 different countries come to the Gold Coast and we had the World Championships skipping on the coast. 

(30:06): I took a year off because I could afford to take a year off and I really enjoyed doing it. When I stopped enjoying it, it was time to stop. 

(30:34): Before that, although we had been involved in renovating properties on a small scale, It was probably about that same time that I became much more involved. I'd be the first to go and check out the kitchens and check out the roller doors and do a lot ourselves from that point on.

Tyrone Shum:  
Wow

Jan Somers:  
(30:58): That became my new interest, I liked being hands on.

Tyrone Shum:  
The skipping was obviously very fun to do as well with your children.

Jan Somers:  
(31:06): Well it was, it was kind of an achievement to run a very successful world competition. Not that anyone has really heard of a skipping competition, but people who skip will know what I'm talking about.

Tyrone Shum:  
I wanted to find out next, what are you most excited about currently?

Jan Somers:  
(31:57): It's a complete turnaround, but probably since our family has now grown up. I hope that some of the information that we've learned along the way has rubbed off and clearly it has because they've all been able to buy property. So I'm very keen to pass on more information to help them. One of our kids is doing a renovation, so I can help them with the kitchen benches and walls, knock out walls and fix drainage problems. 

(32:24): I can help them to work out the right way to borrow money, I helped draw up the plans for my daughter's house. So I think it's been time to help the family. I think I've helped a lot of people along the way and now that my kids are old enough and I think they've got the property investment message well and truly, I can put a little bit more time back into them and of course the two grandsons that have appeared in the last year.

Tyrone Shum:  
How old are the grandsons?

Jan Somers:  
(32:58): Only three months and 14 months.

Taking Over the Family Business?

Tyrone Shum: 
Although a lot of Somers and her husband’s lives have been based around property, which has blessed them in more ways than one, they have no intention of pushing their property portfolio and business onto their children in the future.

Jan Somers:  
(33:26): I think they all have their own careers. It's something that we've been very strong on. It's not like the farmer who hopes that the son will take over the farm. I had a special interest in property and renovations and my husband had a special interest in computing, but it's not something where I've ever said, 'Hey, look, here's the six inches of the manual that goes with the computing software programme. You can take that over if you want'. 

(34:01): They're interested, but they're not interested in this business and I think it's really important to allow children to develop their own set of skills and channel their energy into what they really want, not what Mum and Dad want. So I've never pushed in that direction.

Tyrone Shum:  
I really like your philosophy. If every teacher taught that or every parent could feel that way towards their kids, I think the world would be a better place.

Jan Somers:  
(34:24): The last thing we need is pushy parents.

Tyrone Shum:  
I know what you mean. 

Jan Somers:  
(34:36): My parents are extremely supportive but never pushy.

**ADVERTISEMENT**

Tyrone Shum:
Coming up after the break, we hear about how Somers changed her perspective on the importance of having money when building up your portfolio.

Jan Somers:
(00:57): We had a lot of equity and the idea of borrowing was probably instilled from the family who thought that borrowing money for anything was a big no no. So it took that real estate agent in Sydney back in 1983, to set a train of thought in my mind. 

Tyrone Shum:
We learn about how her reasonably modest lifestyle has allowed her to continue investing, and not worry so much about debt.

Jan Somers:
(03:36): Never, ever borrow for cars, TVs or credit cards. I don't make the banks a lot of money at all from my credit card, I pay mine off well before the due date. I never pay interest on credit cards, except when I've occasionally forgotten or it's been an oversight. But that's where banks make their money. 

Tyrone Shum:
How she created her own software and subsequently, a community of tens of thousands of investors who virtually interact and mentor one another.

Jan Somers:
(26:35): It just became a monster that was almost unmanageable because of the number of people on there and to be fair to them without resorting to advertising dollars, which I'm sure we could have [gotten] if we'd approached some big banks. I didn't want to go down that route because we've always retained our credibility by not supporting anyone in particular.

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

**END ADVERTISEMENT**

Don’t buy Depreciating Assets

Tyrone Shum:  
At the beginning of her property investing journey, Somers struggled with the idea that you need a lot of money in order for you to make more money. She soon discovered this was not entirely the case.

Jan Somers:  
(00:27): Even when we had a few properties and we were absolutely cash strapped because not only did we have principal and interest loans – those loans taken over 10 years, not 30 years, as that was the bank's philosophy back then – they wanted their money back ASAP. So we were busy trying to pay off properties at the rate, we never had any money, we never had any cash. 

(00:57): We had a lot of equity and the idea of borrowing was probably instilled from the family who thought that borrowing money for anything was a big no-no. So it took that real estate agent in Sydney back in 1983, to set a train of thought in my mind. But it took a few more years to really bite the bullet and say, 'We can borrow money and now that I've got the hang of it, I'm gonna borrow a lot of money'.

Tyrone Shum:  
It's so interesting because I know my personal mindset is that I still get stuck on saying, 'Okay, I've got to pay things off'. But you're exactly right. You've got to actually let the property value and equity increase to be able to borrow against that, so you can buy more property.

Jan Somers:  
(01:47): That's right. The worst thing you can do is to buy consumer goods, the cars and the boats and the big TV. So we need to be mindful that yes, borrowing money is a good thing and it's okay to buy something that's going to appreciate in value. But cars and boats and TVs, they're all going to depreciate and then in 10 years, you've got to ask yourself, what have I got to show for what I've just borrowed? 

(02:12): In most cases, you've got nothing to show and you've still got a big debt. Unless you bought property because most people just borrow frivolously to support a lifestyle.

Tyrone Shum:
I hear there are a lot of people out there who have a lot of equity in property as well, but they borrow against that property to be able to live a lifestyle. What are your thoughts on that?

Jan Somers:  
(02:37): Well, they're not alone. I'd say, very conservatively, half the world is about supporting a lifestyle. To me, I have very simple tastes, in that I don't need to have a flashy car. My car is a 12 year old beamer that I bought, [which was also] secondhand. I don't need the latest car. So borrowing to borrow money for frivolous things might show you off as the wealthiest person right now, but you're not underneath. So the appearance of wealth doesn't necessarily mean that you are wealthy.

Don’t Borrow Beyond Your Means

Tyrone Shum:
Somers advice for investors starting out, is to rethink debt This change in mindset will ensure that they not only become successful, but do so without racking up huge debt in the process.

Jan Somers:  
(03:36): Never, ever borrow for cars, TVs or credit cards. I don't make the banks a lot of money at all from my credit card, I pay mine off well before the due date. I never pay interest on credit cards, except when I've occasionally forgotten or it's been an oversight. But that's where banks make their money. 

(04:00): That's where retail stores make their money, on credit cards that go over because people are too busy trying to support that lifestyle. You've got to change that strategy. That [doesn't] mean you have to go to Vinnies like I did for a long time. You don't have to wear second hand things and buy secondhand clothes, but you do need to have a mindset that you can't continue to borrow beyond your means. 

(04:27): Unless of course you're buying for an appreciating asset and then you're just burying the money into a loan. Actually, having a loan is a great way to save money because it forces you to put money into it. Only if you've got something to show for what you have at the end of that time... like a property.

Tyrone Shum:  
You mentioned that when you were buying property back then you were always cash strapped? How did you manage that?

Jan Somers:  
(05:31): Well, it comes back to the fact that I had very simple tastes and we did borrow a lot of money. In the 80s I was probably buying four or five properties a year, sometimes even every few months. To borrow these enormous amounts of money with the principal and interest loan was exorbitant. But the key to it came when I had spent the time to talk to a lot of lenders. I didn't exactly have a mentor, but I learned a lot from making a lot of phone calls, which you can do when you're a stay at home Mum.

(06:09): I made a lot of phone calls and I finally discovered what an interest only loan was. Not an interest free loan, but an interest only loan where you only pay the interest. Immediately, if you're only paying the 5% interest on a simple $500,000 loan today, you're paying $25,000 in interest. Now, if that was a principal and interest loan, you'd probably have to pay $50,000 a year. 

(06:39): So converting all our loans from principal and interest to interest only made a huge difference to that cash flow. I started out scrimping and saving and I thought, 'We can't go on like this forever', it was still viable. But this made a huge difference in discovering  what interest only loans do. It came about at the end of the 80s with the deregulation of the financial market.

Switching to Interest Only Loans

Tyrone Shum:
Somers recalls the harsh realities of the principal and interest loan that was compulsory in the late 70s and early 80s, essentially when she started her property career. Back then there were three things that made you cash poor.

Jan Somers:  
(07:32): When we were buying, you not only had to take a principal and interest loan, it was usually over the shortest term possible of about 10 years. Not only that, you needed to have about 25% cash deposit for that next house. 

(07:53): You had a principal and interest loan, so your payback was enormous. You needed to save for a deposit for the next property at the same time, or so we thought you did. It really made a huge impact in switching to interest only and not having to save the deposit in the late 80s with the deregulation of the market.

Tyrone Shum:  
What was the interest rate back then?

Jan Somers:  
(08:21): It started out at a normal rate, which was about 7% – 8%. With the collapse of the share market in 1987 and property investment took off in about 1988 – 1989, that's when property virtually doubled in value from $50,000 – $100,000. There were probably a lot of cowboys in the industry who said, 'Well, now we can borrow zillions' and they poured it into developments and it went on and on and on. Keating came in and said, 'Well, this has got to stop'. Interest rates went to about 20%.

Tyrone Shum:  
Yeah, I remember hearing that. My parents always said it was very expensive back then.

Jan Somers:  
(09:02): That's one of the reasons I always fix interest rates at the moment because we lived through that. But we lived through it with fixed rate loans and so I was never afraid that we were going to be blown out the back door because I made sure that our backside was covered.

When You buy and Hold, You Don’t Have to Worry About Timing

Tyrone Shum: 
With decades of experience and lots of wisdom to share, Somers delves into the specific strategies and the right mindset tools which will see investors capitalising on purchases. Investors often make the mistake of thinking this business is complicated and something that needs a university degree to interpret. Somers points out that it’s actually very simple.

Jan Somers:  
(10:28): It's not like investing in the share market and guessing derivatives, it's really simple. It's about borrowing money, buying a property and keeping it for the long term. It's so simple that we miss it. 

(10:56): I guess, to explain just a little bit on that, it's borrowing money with interest only because that's going to reduce your payback amount rather than a PNI. I fix the rate to allow me to sleep at night and you use the equity in your own house to be able to borrow the whole lot, you don't need a deposit anymore for a property. Then when you buy a property, I'd suggest you buy the median residential price because that's the sort of property everyone wants to buy in the first home loaners market. 

(11:35): It's the kind of property that everyone wants to rent and you make sure that it's in an area with a reasonably good infrastructure, not a mining town. Then the third thing is, you keep up for the long term. You can renovate if you want, but don't do it like we did and renovate to sell and make a quick quid. Don't sell and you'll never have to worry about timing because otherwise, if you're buying a property to sell, timing is really important. What's more important than time, is not timing and so that's the strategy. It's simple, borrow, buy and keep, don't worry about the timing, keep it for the long term.

Patience is key

Tyrone Shum: 
Investors often struggle with wanting the best results within a short amount of time, but if you apply the right strategies and let them play out, you will see better results that ensure a more successful property journey in the long term. One of these strategies is to add value to a property by renovating.

Jan Somers:  
(12:46): I don't do major stuff. I don't do anything like pulling out walls and reconfiguring the whole house, that can be very expensive and it doesn't necessarily add a lot of dollars. I do things like I might take off all of the cupboards from the kitchen front and if there's any marks on the laminate, I have a little trick where I'll have a tradesman who supplies me with stainless steel cutouts and I stick it on to cover up all the bits. 

(13:20): By the time you've replaced the catches, it finishes up looking like new. I might get someone to paint it. I rarely paint, I'm good at painting fences, but not houses. Replace the carpet and if you've only got a little place to start with, that's just a three bedroom, one or two bathroom at the most, it doesn't take long. 

(13:41): What I can't get done in a week just doesn't get done. So it's almost back to new and then I might spend two days in the yard, getting rid of the trees, trimming it. It doesn't take long, but any more than a week and you're wasting your time and wasting your money.

Tyrone Shum: 
Are you doing those renovations yourself or are you getting trades people to help you?

Jan Somers:  
(14:05): A little bit of both. I'll definitely get people in to do the painting and to replace the carpet, I'm not into that. I might be a little bit selective and only replace the carpet in a couple of rooms. But if it's anything to do with just fixing up the kitchen or replacing taps and things in the bathroom, then we can do that. 

(14:31): I'm very good at fixing up vanities. Just trim the whole lot without a million trim to hold it all together, I've turned some pretty dilapidated chipboard into something that will hold together at least for another five or six years. So it's delaying the inevitable. If you can delay putting in a new kitchen for another 10 years and make it respectable and clean, then that's a good renovation.

Tyrone Shum:  
So the renovation isn't really about restructuring and doing a lot of things to the house. It's all about just touching it up and making it really presentable.

Jan Somers:  
(15:07): It is, making it cosmetic and clean.

Decide how Much Work You’re up for

Tyrone Shum:  
Although Somers likes to take on projects that don’t require too many major changes, the perception of a dump is in the eye of the beholder. Although these kinds of projects can create major problems along the way, some people love that.

Jan Somers:  
(15:36): Now if I looked at an old Queenslander and the weatherboard is completely rotten on the outside and it badly needs paint, that's quite a major job and it's extremely expensive. 

(15:56): So in my mind, I weigh up how much work that is going to need and while all Queenslanders are great to live in and they've got great character about them, they don't necessarily make the greatest investment because of the maintenance issue. But if you can do the maintenance yourself, well that's fine. 

Tyrone Shum:  
Having had the experience of publishing her own property books, Somers values the importance of gaining knowledge from other successful investors as well. This helped her immensely in her beginning stages of her career.

Jan Somers:  
(16:44): Back in the 80s when I was learning a lot and learning about spending habits, I was a great fan of Noel Whitaker. I know he's now steered into investment planning, but he has a very great philosophy on why some people do become wealthy and others don't. He thinks it comes back down towards their own spending habits and I did a conference with him in the early 90s, I think he had a couple of books out and I had a couple of books out.

(17:17): I had a discussion with him at this conference where we were both guest speakers and he said, 'For many people, the best investment that they could possibly make is a concrete box buried in the backyard, where you can only put your money in through a little slot, but you can't get it out easily'. I thought, 'That's a strange thing to say he's just written a book on investing'. 

(17:40): But he says the biggest problem that people have is that they get their mitts on money and it's at their fingertips. It's a recipe for disaster because they'll always spend what they have. But that's also why property is so good because it forces you to contribute to a loan and that's money that you probably would have spent. 

(18:00): So I still think it’s about getting back to basics. Sometimes the property investment will look after itself, I could probably summarise what to do in the borrow, buy and keep as a formula, but developing some good money habits is very good. I couldn't go past Noel Whitiker’s book back then for Making Money Made Simple.

Tyrone Shum:  
That sounds like a good book. I haven't read it myself, but I'll definitely check it out. So it's a very interesting philosophy.

Jan Somers:  
(18:32): It's probably still in print, but the ideas have never changed.

The Value of Money

Tyrone Shum: 
A personal habit that has contributed to Somers success is her good sense of monetary value. This same habit that she was raised with has been passed on to her own children, which she believes will ultimately make them successful in whatever they do. 

Jan Somers:  
(18:45): In later years I've probably been able to stick my neck out, but I make sure that everything I do is covered. I'm willing to have a go and I'm willing to learn, I think that's really important. But I think it's also important that I have quite simple tastes. I don't buy extravagant cars, clothes, jewellery, anything. I mean, we could afford a Rolls Royce or to eat at upmarket restaurants every night, but I'm quite happy with my old second hand car and I have steak and chips, probably once a fortnight at the local pub. 

(19:22): It doesn't mean that you have to go without to buy investment property. It just means you have to be very careful in managing your money and to not be extravagant.

Put Aside Some Lunch Money and Buy a Property Instead

Tyrone Shum:  
Although she is no longer holding seminars and mentoring individuals on property investing, Somers published books hold many key tips and tricks to being successful in the industry.

Jan Somers:  
(20:18): The books are still available through bookstores, but [people] can also visit our website, www.Somersoft.com.au. If they're interested in the software. I've talked about property being affordable, the borrow, buy and keep strategy and the software shows people how a $500,000 property might only cost $50 a week, which is the equivalent of a couple of trips to McDonald's through the week.

Tyrone Shum: 
The popular demand of Somers brought on the need for her to create Somersoft, a software that has proven very useful for property investors.

Jan Somers:  
(21:05): Well, it started out as an Excel spreadsheet, which I put together in the 80s. The purpose of it was to find out why property was costing me so little. I put this spreadsheet together to understand the difference between a principal and interest and an interest only loan primarily. I could work out that if I had a P and l loan, it was going to cost me $100 a week, or if it was just an interest only it was going to cost me $50 a week. 

(21:36): So the template is there as an Excel spreadsheet. My husband was of course a computer programmer, so I said to him, 'Well, you can write this in a piece of software can't you?' Over several years, he did and over many years, he has added to it. So it enables people to put in a property for say $500,000 or whatever it is and it works out what your stamp duty and all your purchase costs are.

(22:08): You can put the rent in, you can put what your wages are, it does a lot of general guesswork on what the depreciations will be for things in the property. The bottom line tells you, 'This property is going to cost you $50 dollars a week'. Now, if I buy a different property, one that's perhaps new and might get some more tax deductions, how much will that cost me? 

(22:34): It's very good for comparing properties along the way and understanding how it works. Should I buy a unit? Should I buy an old house? Should I buy a new house? You can put in those variables and get an answer that is quite a definitive answer because it's there in dollars and cents, not 'This might be better or that might be better'.

Somersoft

Tyrone Shum:  
A forum was introduced to allow fellow investors to interact and help each other out. So, rather than having Somers as a mentor in the background, they’re virtually supporting each other.

Jan Somers:  
(24:59): It started out when we started getting hundreds of phone calls a day. People would ask, 'Should I buy this? Or should I buy that? What's the best?' I didn't really want to get into the consulting side of things. I think you need to know too much about a person's situation, before you can start giving that kind of advice. I didn't really want to get into the advice side. 

(25:25): As a result, we set up a forum so that like minded investors could talk to each other about these kinds of things. Questions like, 'Now, what if I do this? Or should I buy it here? Or should I buy in a mining town? What do you think?' It attracted a lot of people who could discuss things with one another. 

Tyrone Shum:  
It also created a fantastic community, which has grown into thousands and thousands of members over the years.

Jan Somers:  
(26:01): Yes, literally thousands and thousands of members on that Somersoft Forum, which unfortunately has come to an end. It was so popular with 10s and 10s of thousands of people joining, we needed to have different and better software. It became a property chat that Simon is now looking after for us.

Tyrone Shum:  
So that basically outgrew and I think from what it sounded like for you, it just became unmanageable.

Jan Somers:  
(26:35): It just became a monster that was almost unmanageable because of the number of people on there and to be fair to them without resorting to advertising dollars, which I'm sure we could have [gotten] if we'd approached some big banks. I didn't want to go down that route because we've always retained our credibility by not supporting anyone in particular. So that was a natural end to the forum because we didn't want it to be advertorial.

**OUTRO**

Tyrone Shum:
Thank you to Jan Somers, our guest on this episode of Property Investory.