In this episode of Property Investory we will learn exactly how this problem solving expert has managed to find the best deals when scoping out properties and how to avoid potential disasters. You’ll also have the opportunity to hear how he expanded his portfolio by venturing into the lucrative property development space and much much more!

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The harder you work, the more opportunities fall into your lap. You’ve got to educate yourself and have a bit of skill and a little bit of talent. But after a while, I think that things come to you because you're working hard. It's because of that and not because you're in the right place at the right time. You were in the right place at the right time, because you've done the work prior to being there.

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

I’m Tyrone Shum and in this episode, we’re continuing the conversation with the director of Atlas Property Group, Lachlan Vidler. We’ll hear how seriously he manages due diligence to avoid making irreversible mistakes, his venture into property development and plans for the future and much, much more!

Vidler began his property journey with little knowledge of the industry and wanted to trust, not only the help of others but his own educated opinion. He saw investing as a way to get out of the rat race, so to speak.

I've always loved the idea of investing and from a young age, I think I was probably 12 or 13, I made my very first investment in shares. That was definitely what stoked the fire. But, as I got a little bit older and I educated myself formally through university, as well as a huge amount of hours spent on the internet, reading blogs and different bits of educational material, I started to come around to the idea of property more. 

The thing that really grabbed me about property was leverage and the ability to leverage more safely. You can do it with shares which is called margin lending, but because of how volatile shares are, you might have to pay that money back a lot quicker than expected.

In the current market during COVID people would have been hurt by margin lending, but with property you’re commonly leveraged through a bank. It's not often that the bank will ever say to you, ‘You need to pay back your loan today, or you need to top up 10s of thousands of dollars’. 

So for me, that was such an eye opener and then being able to take something like $50,000 and invest in a $350,000 property and get the growth on the $350,000 instead of just the $50,000. To me, that was the cherry on top. I thought, ‘Is this some big life hack?’ ‘Am I seeing the world through some crystal ball that other people just can't see?’ So that was sort of how I decided to get into property.

When I first started out, I knew that I didn't know a lot and I think I was smart enough to know that I wasn't very smart about property yet and therefore needed to learn. But I also knew I didn't want to wait. So I actually used a buyer's agent for my first purchase and wanted someone that I gelled with and who understood me on a human to human basis. 

My buyers agent presented me with potential properties and I then did due diligence on top of their due diligence, but being able to have that help on my first property taught knowledge about investing that I didn't know beforehand. That was when I also decided to get my masters in finance, which changed the way I looked at investing and money. I'm not afraid to say I had help with my first purchase. 

He acquired his first property in Brisbane and credits this positive experience to not only his buyer’s agent but his own due diligence that he follows through within all of his purchases.

It was a good experience, [but you have to remember] that you will always have bumps along any sort of property acquisition or property research journey. We figured out exactly what I was looking for, my price point and an investment that was not only going to grow, but something that was going to allow me to build sustainably. I couldn't be working on like 4% yields, or even 4.5% yields, especially with the lending, I needed to make sure that I was matched up with pretty close to neutral or a bit of positive growth. 

So when those properties were being presented to me, I 100% made the buyers agents work. I looked at all their diligence and I was contacting agents in the area to validate every word that was on the pages of research to make sure that it was a good decision and that it was going to be right for me, which it turned out to be. It was a place up in Brisbane. 

We got it for quite a bit under market value. I hate the term ‘market value’, I think it's a bit of a misnomer because the market is what people pay for it. But we got it for a price that was probably less than what it was potentially worth and it's been tenanted from week two of owning the property. It also had quite a good yield. 

The last time I checked, it had an annualised growth of maybe 6–7%, so it's been quite strong. I think a lot of it was in the early stages, where by getting it at a good price, we caught up with that. It's been a great first property to hold, it's been low maintenance, has great tenants, great growth and sort of ticked everything.

That's fantastic. With this first property, did you actually go out and have a look at it before you purchased it? Or was it pretty much based on all the research?

Not at the time, no. I committed to that property sight unseen. In saying that, we received a lot of reports about it to make sure that it was fine and did a lot of due diligence. We absolutely had it inspected quite a few times to make sure that it was all good and I did visit it later on. I didn't go inside, I just did a bit of a drive by when I was in Brisbane one weekend and it was exactly how it looked in the pictures. So I thought, that's a big win. I haven't been sold a dud here. But yeah, it was good.

With a growing portfolio, holding properties in both Brisbane and in the big hubs of regional New South Wales, Vidler is keen to see this expand.

My partner and I have built up a great portfolio. But like a lot of people, we found our lending got capped out pretty quickly and we had a lot of cash and equity available to us. So we then transitioned and we've been doing that a little bit more recently, more so than acquiring property, we’ve jumped into property development, luxury property development.

Vidler and his partner made the decision to cull some of the properties they had acquired over their property investing journey. This was in preparation for their next venture.

Lachlan Vidler (06:20):  

So we're down to about four now. We did a bit of a rebalance and looked at what wasn't performing. When we made the decision to explore other options we wanted to have a bit more firepower and ammunition behind us for that. 

Absolutely, I love property development. That's something that I'm passionate about as well. So tell me a little bit more about this property development. What inspired you or got you motivated to jump down that path? You mentioned it's just lending? Was that something else or did you just actually want to start accelerating? Maybe growing your portfolio even further?

Yeah, I think it was definitely being able to supercharge it. So the development we're currently involved in is a syndicated investment and so we’re working on it with a couple of other people. But that was more about being able to leverage it into a very, very high value lucrative development that we couldn't fund by ourselves. For us it was residential real estate and even commercial.

It's really good, you get good cash flow, good growth. In property development, you really want 13–15% annualised returns. I think anything higher and it's very risky and you're probably having someone sell you a pipe dream that's not going to come true. After fees it drops down considerably and then anything below that, you're not really being compensated for the risk you're taking on.

So for us it was being able to turn around and get that incredible growth in our investments or annualised growth. But over an 18 month timeline or a 24 month timeline, be able to pull it out and then go again.

Tyrone Shum:  

There are always ups and downs in property investing, even when you’re extremely cautious like Vidler. He tries to steer clear of buying properties that could potentially cause problems down the track, however, this one was unavoidable.

At one of our properties that we bought and in the first six or seven months, every piece of maintenance you can possibly imagine occurred. I'm talking, at one point we had to get a bobcat out to dig up the backyard because part of the sewage pipe had, i don't know if rot is the right word, but it had separated away from one of the other sections of the sewage pipe. It was causing obvious issues with the sewerage. 

The tradie that came out said to me ‘Mate, it’s gonna cost you but the best thing that we can do for you is to dig up the backyard, we'll weld it back together and we'll fit it and then it should be okay for the next 10–20 years. Or we can do a small fix and it could last 10 years but it could also last six months. So it's over to you on what you want to do’. We just decided to accept the upfront cost of a more long term fix. But yeah, I mean there are worse ones I can think of.

That one's pretty bad. I mean, you think about having to dig up a backyard and to pick up sewage. That's one of the worst things I can think of and I've also dealt with some maintenance issues. I've had a roof completely leak and had probably been leaking for years, but we only discovered it recently. We initially did the patch up but it didn't even last six months. 

To be honest, I think it was about three months. I was waiting for the winter to pass before we did it, but I had to bite the bullet because it was just leaking so bad that we had to literally replace the whole roof. We actually just finished that about a week ago, so I'm like, finally, it's all done.

That's great. I think one of the funniest moments we’ve had is at one of our properties where my partner's got some family in the area. Her family in this area have trade qualifications and things like that, so if we ever need something within their realm, they're often able and happy to just go and help us out. We'll either just pay the cost of the materials, but we won't pay for labour, something like that. 

But in one of the properties, there was an old heater in the place and it wasn't really that old, it was more of just an old style. Anyway, there seemed to be an issue with it and the tenants ended up calling us to say, ‘Oh, it's not working’. So my partner got one of her family members to go out and check and they said, ‘Oh no it’s working. I don't know what happened? It must have just been a bad day or something when he tried to use it’. 

That was that and then a couple of days later we got another call from the tenants saying that it wasn’t working. It turned out that the tenant had been calling the property manager quite a number of times as well. The real problem was that they just didn't know how to turn the heater on. So thankfully, we weren't sending out other paid tradies [for a non-existent issue]. But yeah, that turned into quite a funny moment when we found out that they just couldn't operate this heater.

Tyrone Shum:  

Yeah, I've heard stories like that too. It's embarrassing, one investor told me that he had a tenant who didn't know how to turn on a light switch. A light switch. Literally, they sent the property manager out there and that night they said, ‘Okay, you flick them on, flick them off’.

Oh, you wonder how some of these people survive in the world normally, don't you? It's so funny, some of the stories that you hear about in the property industry isn't it.

Tyrone Shum:  

Although he has a bachelor's degree and a masters in finance, Vidler really started to get a feel for the industry when he came to understand how leverage works in property, compared to other industries. This was a game-changer for him.

When I speak with some of my clients in my presentation, there's a slide that I put out and it's about a $50,000 investment. It shows the investment over 30 years, using statistics from the RBA and Vanguard for the share side and showing how much it changes. I think off the top of my head, just the value of the property alone over 30 years goes up to about $2.5 million on a $300,000 purchase versus shares, which have a higher return rate. 

But when it's just a return on $50,000 instead of the $300,000, it only goes up to about three quarters of a million [as opposed to that 2.5 million]. It's just mind blowing and whenever I show clients that they are always gobsmacked, they can't believe it. I had a guy yesterday, who when he saw it, was literally speechless. He even said I'm speechless. I don't even know what to say to that because I didn't understand it. 

I was going to say, what I love about property as well is that you get a physical asset. It's not like you're buying paper where something could go wrong, the company could go bust and you'd lose all that money.

Lachlan Vidler (15:06):  

Absolutely and there are so many investors out there that want to be able to see something. You obviously get the backyard investors who only invest in their backyard, but even if you take that out to the people that are happy with that borderless investment model to get the most bang for their buck, they can still hop on a plane and do a drive by. That is such an invaluable thing to so many people. So I think you're right, having that tangible asset is just amazing. 

Tyrone Shum: 

Huge, huge. You really hit the nail on the head [when you said to compound that] $50,000 and invest it into a property, which is a growing asset worth about $2 million. So you work it out, how often can you actually make that kind of money without working? You know, the thing is that people [work their whole lives] and earning that much is not even possible.

Lachlan Vidler (15:53):  

Exactly right. I mean, it's so true. I think the last time that I saw it, the median wage in Australia was a bit over $80,000 and even if you take that, over 30 years, people aren't going to be anywhere near that sort of return. You just buy one house and obviously that's not the solution, that's not going to give you proper long term wealth creation. But, if you just bought one house for $300,000 and you let it sit there, let time and compounding take their effects, you're going to end up with an amazing result.

Plus you will eventually pay that off and you've got yourself a free asset.

Exactly right. That ‘over 30 years’ doesn't account for any value [added work] you do. Even if you just throw in a $10,000–$15,000 renovation on a kitchen and a bit of cosmetics on the outside, you can get 2–3% returns per dollar that you put in, it's incredible. Like you said, that’s just letting it sit there, you do nothing. That doesn't even account for the rent you take in either, that’s just purely the property value. 

Vidler believes that although some investors won’t admit it, their ideal world involves having a billion-dollar real estate empire. Although he doesn’t necessarily expect to achieve this, he is always aiming higher and higher.

For me, it's been all about combining growth and cash flow. There's no point building a two or three property portfolio, if you're then going to be capped out for the next 10 years. [If you do this] you're going to get the growth that we just talked about and that's great [but you won’t be able to achieve anything close to what you may have desired.] I like Grant Cardone's philosophy that talks about the 10 times rule, where you imagine what you really want 10 times. Then, when you fall short, you're still well past what you ever needed or wanted. [This helps me in achieving my goals].

For me, It was really about matching growth and cash flow, so I had to make sure that we picked areas that were going to have great growth prospects. I would then look at it over the long term and think ‘What's it going to do over 10 years?’ We all want it to move in 18 months, or 2–3 years, sometimes no matter how good of a property picker you are, it's never going to happen. 

You've just got to be a bit pragmatic and think, over five years maybe you’ll get the growth, [which will put you] in a phenomenal position, but you’ve got to be able to keep having the power to leverage through the bank or through other means. For most people, it's through the bank, to have to match cash flow. So I think that the lowest yield that I'll ever accept is probably at 4.5%. 

Even then I'd have to be really stoked with the growth prospects because it's so much harder to increase your day to day income. I've found that the better way to do that is to match the income of the property so that it either pays for itself or comes pretty close to it. So yeah, I think for me, that's been that's been the strategy. It's been trying to balance the growth versus the cash flow.

Tyrone Shum:  

Yeah, it's always a challenge. The question that I’m always asked is, ‘How do you find these kinds of growth properties’, because it's not something you can actually predict. You never know if things are going to move up 10 times or whatever it is, especially like what you see in the Sydney and Melbourne [market] boom. No one would have expected double that much in such a short period of time, you never know when to time it.

 It’s the same thing with positive cash flow, that's a little bit easier because you can actually see, based on the rental income and its history, if it's a good positive cash flow investment. But, how do you go about doing that kind of research? Is there a specific kind of checklist or due diligence process that you undergo as well?

Lachlan Vidler (20:23):  

There is, I mean, I think you hit the nail on the head though, you can never predict 100%. You look at all of the metrics and you make an educated assessment. Fortunately, property is quite forgiving and as I alluded to earlier, you might not get it in that first couple of years, but usually, you'll get a bit of protection on the back end, if you've bought in a somewhat educated manner. 

But for me, I look top down. There are 15,500 suburbs in Australia and that includes Broken Hill, where I'd hazard a guess that over 30 years you're not going to get the best return as you would for harbourfront Sydney. But, you've got to be able to break it down. 

Coming up after the break we hear some of Vidler’s tips to finding the right areas to invest in.

You're looking at supply and demand and you're looking at the reasons why somebody might want to live in an area. 

Who has helped him in his property journey?

I’ll never just take one person’s opinion as true or the right piece of advice. Even your best friends are sometimes going to give you bad advice, not necessarily because they mean to, but just because of their own experience.

How he plans to manage his property advisory business as well as his property portfolio in the future...

I'll have to make sure that I keep devoting time to finding properties for myself, not just for clients. I also want to continue doing the developments, things like that. I want to keep ticking [my own boxes], not just helping out the great clients that we work with.

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

With over 15,000 suburbs to choose from in Australia, Vidler determines which properties and in which areas to invest in by researching top down. Although it’s impossible to be completely certain about a suburb and the outcome of investing in it, he does share some of the processes he undertakes.

There's so many property research companies out there that a lot of the listeners will be aware of and everyone takes into account different things. But I'm still trying to work out what I think are great drivers. I think that you're always trying to evolve and understand and after a few years, you might realise some things are not as important as other things. I think that when evaluating growth, it really comes down to some really common principles. 

You're looking at supply and demand and you're looking at the reasons why somebody might want to live in an area. So I think when you're looking at that, you've got to look at the metrics that reflect something like that. So you're looking at what the suburb or the surrounding suburbs look like. Are there good amenities? Is there good transport? Does it have good livability to people? I've invested in places that I would never want to live, but I know that people do. 

I can still understand that there is some sort of livability factor to the area and the list keeps going down, you know, is there employment? Is there some population growth? There is no crystal ball to work out what level is 100% right to dictate it, but to me, I look at those and see if there are some good trends. I then look at what some of the supply and demand characteristics are in a couple of the suburbs that I'm starting to identify and then I even look down into some of the streets. 

Are we starting to see vacancy rates coming down? Are we seeing rents going up? What is it that's going on? What is it that is driving the changes in these areas? After that I sit back and again, look at it across a couple of different suburbs. You can't just look at one in isolation. I do it across states as well, I might look at five or 10 factors in a suburb in Brisbane, but then I'll compare the same 10 factors to a suburb in Victoria because I want to be able to try to compare apples to apples. 

I want to be able to see if there are trends and as I have a finance background I like seeing things that I can try to quantify. I then think it comes down to a bit of common sense. Does it look like a property somebody would want to live in? Whether that's you or not, does it have a solid foundation which includes a couple of good bedrooms and a couple of bathrooms? Or, does it have some backyard for kids to want to be there?

Let a little bit of common sense come across over the top of your investing and then make a jump. Every time I invest my heart races, even still I think that it's exciting. It's nerve racking, you're never going to know how it turns out. But to me, when that happens, it's like sport, you get that adrenaline rush. You're a bit nervous, but you usually play better, I find that's the [case with] me.

Tyrone Shum:   

Although Vidler had interests in investing from a young age, he ultimately began building his property portfolio to ensure a better life for himself and his family. 

Lachlan Vidler (25:23):  

I've heard a lot of people within the property space say, 'Oh, that's not the true why, you’ve got to go deeper than that', but I I don't think it is. I think that is a perfectly reasonable response and for me, I want to be in a position where I work because I choose to not because I need to. That gives my family a better life as well because I could be at work more or less, depending on what's happening at the time. 

I don't want to be stuck on the age pension when I reach the later years of my life, because I know that it's not enough. Unfortunately, so many of the listeners will have family members that are on it and know what a struggle it is. If that's your only source of [income], it's so difficult. I know that when I get into my 60s or 70s, the last thing that I want to be thinking about is, can I pay my rent and buy food? 

Can I buy my grandkids a nice birthday present? Or can I take the family on a holiday overseas? So for me it was really all about wanting that better life for my family.

Vidler surrounds himself with a strong team, who he trusts to advise him and help him make the most logical decisions because you never know what biases people might have.

When I think about who has mentored me on this journey I would say my broker, my accountant, my friends who have invested, people that I met and worked with in the Navy, it's my whole team. [I’ll never just take one person’s opinion as true or the right piece of advice]. Even your best friends are sometimes going to give you bad advice, not necessarily because they mean to, but just because of their own experience. It might not actually end up being true or right for you. 

I've tried to surround myself with an overall great team and take all of their opinions on board. I'll often hear something from one and I'll go to the other and I won't ever say, ‘Oh, so and so said this’, but I'll say, ‘I've heard this recently, what's your experience?’ Then I validate it.

Oh no it's great. It's really true because the fact is, sometimes when people tell you something you don't believe at face value. It even happens with family members as well.

Oh [it’s] the worst!

It's because you have that strong trust in them and you believe whatever they say. But the thing is, until you validate it, they might not have ever invested in property. Yet, they're telling you and giving you property advice. That's probably the worst.

How many times would you be at a family barbecue, or around the dinner table and someone's got a story about property. Always! Whether it's about a bad investment, or a bad property manager that they're renting from, or whatever it is. Someone always has a story, someone always has a perspective, or thinks they know when [a certain] area is about to boom [and tells you], ‘You better get in there!’ 

But so often, it's never really validated. There's never really anything backing it and because, like you said, you trust your family and your friends, you're always inclined to believe them maybe a little bit more than you should. It's gotten so many people into trouble. I've [had chats with so] many people at my buyer's agency, who come and they say some cracking statements to me. 

The first thing I say is, ‘So why do you think that?’ ‘How is it that you've gotten to that thought?’ They tell me and then I give them a pretty real, different perspective [which leaves them thinking], ‘Okay, that actually makes a lot more sense than what I thought beforehand’. So it's funny isn't it, there's always a story.

Absolutely. It's also important to back up these stories with evidence and facts because the thing is, we base a lot of our decisions on emotion. But if you take a step back and take that emotion away, you’re basing it on facts and figures and usually those things are the ones that will actually get you the best result. That's what I've learned anyway because I've made so many bad decisions as well, [listening to unsubstantiated claims]. Mostly because it's just so easy to go, I believe that story because I trust that person.

Oh mate, I am a big believer in that. But you know, to me mistakes are good. You don't want to make really bad mistakes that are going to have a significant and detrimental impact on you later on. But, you’ve got to make some mistakes because it's the best way to learn a lesson, it's the fastest way to learn something. It then helps you to understand how you can change more than just one thing. 

Maybe you went through the wrong bank, for example, but then you also learn a couple of other things from that mistake. I don't know, It could be that you had a bad broker. I don't think it's ever just one thing you learn, but the emotional buys, they get people all the time.

When it comes to self-education in property investing, Vidler relies on more contemporary means, rather than some of the more popular literature that may be slightly outdated.

I reckon I've read every property book under the sun. Unfortunately, what I've worked out is that a lot of them were written in a time that doesn't necessarily reflect today's conditions. You’ve got people like Steve McKnight or Michael Yardney, who are talking about buying up property and then living off the home equity loans. A lot of that is just not possible these days. The theory behind a lot of what they say is great, but practically you can't apply it anymore. 

So although I love reading their material and think it’s great, I think you should always expand your knowledge. By doing that and [taking into account your own experiences], you can work out what's true and what's not. You'll still pick up some things that are great, but I almost think that today, the best you can do is get out there and learn from people who have current experience in the market. 

I think that at the moment there's not too many books that are better than doing those two things.

Times have changed and I think we all just need to learn to adapt to what the changing markets are. [Listening to] experts and people who have actually been there and done that and can adapt to these current market conditions, is so important. So I totally resonate with what you've said there.

It's interesting because [on that note], I've just had a thought about the new Responsible Lending laws. With the changes that are going on with those laws, we might actually see a move back in the property space. Probably not to what it was 10 or 15 years ago, but I have a feeling that over the next couple of years with the easing of those laws, we might see some of those things coming back into play a little bit more. 

A bit more borrowing and a bit more capacity to leverage yourself and some looser borrowing checks and criteria going on. But it'll just be important for everyone to make sure it works for their circumstance and to not put themselves in bad spots. 

Tyrone Shum: 

With his buyers agency on the rise, yet still in its early stages, Vidler plans to dedicate most of his time and energy into building up his business.

I'm so excited to be able to help other people create long term wealth, I think that's going to be so exciting. We’ve already got some great clients who have been really happy with our service and product. We just like chatting with each other, some of them just call me up to say, 'Hey, how are you going? What are you up to?' That sort of thing.

So I think for me, that'll be a really big focus for the next five years. Then I think I'll need to make sure that I don't let my own property journey suffer at the expense of the business. I'll have to make sure that I keep devoting time to finding properties myself, not just for clients. I also want to continue doing the developments, things like that. I want to keep ticking [my own boxes], not just helping out the great clients that we work with.

So the last question for you Lachlan is, how much of your success is due to your skill, intelligence and hard work? How much of it do you think is because of luck?

I don't know who it was that came up with the quote, ‘The harder you work, the more luck you have’. I think that's so true. I have never seen that more [in action] than working on my own business as well as working on my own property investing. You’ve got to educate yourself and have a bit of skill and a little bit of talent. But after a while, I think that things come to you because you're working hard. 

It's not because you were in the right place at the right time. You were in the right place at the right time because you’d done the work prior to being there. But yeah, of course, it was 100% my own skill.

I actually resonate with you on that and I [wholeheartedly] agree. I think the harder you work, you’ve gotten to prepare yourself for the opportunities that come. If you're not prepared and the opportunity comes, unfortunately you can't take it. It’s like the saying ‘The teacher will appear when the student is ready’. 

I love that. You're so right. There's so many hard working people out there and they work hard, always waiting for their big break and it's not for a lack of trying but, you’ve got to make sure you're paying attention to all of the pieces. You’ve got to make sure that you're doing a bit of learning yourself, as you said, when the teacher comes you want to make sure that you're ready to be taught, not just that you want to be taught.

Thank you to Lachlan Vidler, our guest on this episode of Property Investory.

If you want to hear more about his journey and get a copy of this episode guide on the website head over to PropertyInvestory.com/guide

This guide will give you the inside scoop on the little gold nuggets of wisdom all our guest's share from their backstory and all their overall strategies and philosophies. Plus, you’ll get a copy of their advice broken down and shared in a quick and easy-to-consume format!

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