In this episode, we throw it back to the 80s and 90s. With no bike helmets and less parental supervision, the world was an oyster for young Raiti. He tells us about growing up in Sydney and the influences around him that started his extensive investment history. With a background in finance, Raiti expresses the importance of prudent investment in this can’t miss episode!

Timestamps:
1.06 | Starting Property Investment At 19
5.51 | Thanks Dad! Mentors in Raiti’s Investment Journey
10.40 | Half-Time Property News
13.26 | From Losing Out on Margin Lending to 9 Investment Properties
17.25 | Property Market Endures
20.10 | Born for Property Investment
 
Resources and Links:

[11:45] I invested in my first property when I was 19 years old, and have been, you know, now coming up to 29 years investing in property. So it's a great passion of mine, I love it.

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 to Sydney-based head of an investment buyers agency Frank Raiti, whose 29 years investing in property lends him a unique expertise. We’ll explore his journey from a financial background into the business of being a buyers’ agent, and learn about the ins and outs of the property research he carries out.

Starting his portfolio when he was just 19 years old, Raiti has extensive experience in property investment which lead to where he currently works as a buyers’ agent. So what does a typical day look like for him?

[1:06] It can range from anything, from prospecting for new clients, we have a lot of inbound leads come to us and [inquiries]. So following up on those and just having a chat to people and seeing what their strategy is. Why [do] they want to get in? Why are they looking to invest in property or by an occupier? 

[01:26] Finding out a little bit about their story, having a casual chat, going on to managing current clients, sourcing properties for them based on the criteria in their brief, whether they be off market properties, pre market, on markets, or monitoring the property market and stock of what's out there. 

[01:47] Obviously, that involves talking to a lot of real estate agents. And we have a lot of close relationships with real estate agents, so calling them in the relevant areas that we're looking to buy for our clients, going to inspections, taking videos, photos, all the applicable information that we can pass on to our clients, and explaining that to clients and whether we're recommending that property or not. And obviously, then getting into negotiation with real estate agents and trying to buy the best property for the best possible price for our clients.

Raiti grew up in Sydney and went to a public school in Homebush, which shaped his early years.

[2:50] I grew up in Strathfield, in the Strathfield area for anyone who knows that area. I went to Homebush Boys High School. So, [I was] a public school boy.Then went on to obviously do some study, post high school basically focusing on accounting and finance.

Raiti looks back fondly on his upbringing in Sydney, particularly remembering the simpler times before a lot of today’s technology.

[3:49] I went to high school, which finished in ‘91. So I went there from ‘86 to ‘91. So I suppose in the glory years of the ‘80s, as they call them. Fun times, no mobile phones and no Netflix and Foxtel and all these channels of choice but playing on the street with my mates, riding our bikes, no helmets, playing cricket on the street, touch football on the street. School was great. There's only happy memories to be honest with you.

He went to TAFE after his ‘glorious’ high school days, doing an advanced diploma in accounting but studying part time instead of full time so that he could get some work experience while he was studying. 

[5:19] The HSC results came out and I wasn't aware of how to manipulate getting the best tertiary entrance rank as it was back then. So I did well. But because I did 2 unit subjects, and I applied for uni, not really wanting to go to uni, to be honest with you at that age.

[05:43] But it was like, ‘Okay, well, I've got to do something, I'm not going to be a builder or something like that’. My dad was a bank manager. There's plenty of jobs in accounting back in those days, the first three pages were all accounting jobs in the Sydney Morning Herald. ‘I'll apply for uni’. And the only prerequisite was a two unit maths which I did really well in but because I did only two unit subjects in all the rest, I [didn’t get] a high enough rank to get in. 

[06:08] So me and my mate trotted off down to Sydney TAFE and just enrolled in an advanced diploma in accounting course. I made the decision, and this was quite an important decision at the time, like, the course was a two year full time course. But I made the decision to do a part time over four years, with the plan of coming out then going and getting a full time job, just starting at the bottom, starting with any company that would take me in some sort of accounting role. Starting as a junior [and] telling them that I've committed to study and coming out four years later with not only the advanced diploma, but four years work experience, as opposed to doing it two years full time, and coming out with everyone else with no work experience. 

[06:53] So that's what I did. And that worked out well. I got a job with a large Australian insurance company and ended up working with them for seven and a half years. Post that diploma, I then obviously got into university and basically had a year exemption because I had this Advanced Diploma in accounting. 

[07:14] So I did my Bachelor of Commerce majoring in accounting, and then went on and did my CPA. So [I've been] a certified practising accountant for the last 20 years. Actually, they sent me a little recognition pin this year.

Raiti credits his dad as a key influence for his early career in finance.

[7:55] Maybe it's in the blood. My dad worked for Westpac for 30 years. And it's funny with accounting, because the first thing people think is, ‘Ooh, you're a tax accountant. Can you do my tax?’ And I'm like, ‘No, I hate tax! I have an accountant for myself, who does my tax for me’. So it's quite interesting. There's also the chartered accounting and the auditing side of things. And I remember I did, going back to year 10, I did a weekend in a chartered accounting firm. And I didn't like that [and] I didn't like the audit side of things. 

[08:30] So I went into, I suppose the commercial corporate side of accounting, and that's where my career took me. Later on, through the years, I became a chief financial officer for various companies. So, look, I'm very analytically minded. I like numbers. As a child, I used to play games with dice and things. And so I suppose I like numbers. It was always going to be an office job. Like I said, there was always… you know, every company needs accountants. And the other thing I liked about it is that the skill is transferable.

[09:05] I started off in insurance. People said, ‘Why did you choose insurance?’ I said, ‘I didn't choose it, it chose me, there was a job going, I applied’. When you were a junior looking to get taken on, you didn't have much choice, but I loved it. I loved the people I work with. And then from insurance, I broke out and went into various companies along the way. Every company needs accountants, and so I thought, ‘Well, I'm always going to be employed’.

He moved around and accomplished a lot during his career in finance, particularly with insurance, IT, sports, and hospitality companies. 

[10:24] I never wanted to get into any particular field or industry, I suppose. Like, I started, as I mentioned, in insurance, and then I had a few small stints [of] two or three years with certain companies. I worked for a small Australian IT company that was listed on the ASX, I worked for a large American company [I] reported into. My bosses were in the US, and they were listed on the NASDAQ. 

[10:57] I got into sport, I ended up the financial controller for the West Tigers NRL team from 2007 to 2012. Then I got into the hospitality industry and worked for the likes of Penrith RSL Club and the Blacktown Workers club group. So that's sort of the type of industries I [worked in]. 

[11:17] I had a small stint with Impulse Airlines, actually, I recall when Impulse got taken over by Qantas, so [I] was there sort of through that transition. So it was quite interesting. I've learnt something from each and every one of those industries and companies I've worked for. So that's been great.

Coming up after the break, we’ll delve into Frank Raiti’s transition into the property industry…

[12:27] It was one of those things that sort of came about and thought, ‘Well, if I don't sort of follow my passion now, when will I ever do it?’

The development of his own investment portfolio… 

[20:33] My current wife and I, we have nine properties. So that's eight investments, and obviously one principal place of residence.

Lessons learned along the way.

[21:56] Great lesson: don't try [to] get rich quick! I found out about this beautiful thing called margin lending.

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

Once again following a suggestion from his dad, Raiti began investing during the 1990s, close to home. 

[16:53] The story I tell people is [that] I started working, as I mentioned, in insurance, and that was probably when I started working there in ‘92 or ‘93. I was literally on $17,000 [per annum]. Now, at that time, that was the going rate for juniors, and it was more money than I'd ever earnt before. The only other job I'd had prior was working in Maccas, for a little bit of time there during school. So it was only $17,000. 

[17:25] And then just one day out of the blue, my dad just came to me and said, ‘So what are you doing with all this money you're earning?’ And I said, ‘What do you mean, all this money?’ I said, ‘I'm earning $17,000 per annum!’ I laughed, and he said, ‘Have you thought about buying a property?”’And I said, ‘What? Not really’. Anyway, he just left it with me. He's very smart, my dad. And he just left it with me, just planted the seed. And I thought nothing of it. 

[17:49] On Saturdays, I [went] and play[ed] soccer. And then about six weeks later, from memory, I came back to him and I basically just said to him, ‘So are we gonna buy this property or what?’ And he said, ‘Oh, so you do want to buy one, do you?’ And I said, ‘Yeah, yeah. Look, I'm not interested in going and doing inspections and looking at it’. 

[18:06] So I'd go out and play soccer on Saturdays, and my mum and dad would go out and do inspections. And then basically, one day they came to me, I still remember I was playing soccer and they're screaming out from the sidelines, ‘We found one! We found one! Let’s wait until halftime’. 

[18:23] So I went to look at it, it was a little small two bedroom unit in Croydon Park. We lived in Strathfield. So they didn't venture too far. It was a typical, ‘We know this area, let's just look around the surrounding suburbs, something that obviously [you] could afford’. And obviously my dad had done the sums, being a bank manager. ‘You can borrow this much, if you can get rental income of this much this will help service the loan’ at whatever the current interest rates were back in 1993. And we ended up buying this little two bedder for $83,500. [It] sounds cheap now. Yeah, so that's how it started. So my dad was… I still credit him planting that seed. And I took it from there, if you like.

His parents also dabbled with investing. 

[19:21] I can't remember if it was before or after I purchased mine that they also purchased an investment property themselves. But then, like most people, they didn't go any further than one investment property and for whatever reason, I can't even recall now, they ended up selling that. So yeah, I was the one who then built on that and you know, went from one to two to three to the multiple I have today. 

Raiti talks about his portfolio but also reflects on investing mistakes and challenges in the past. 

[20:29] My current wife and I, we have nine properties. So that's eight investments, and obviously one principal place of residence.

[21:10] My worst investing moment was not property related, property listing related, [it] was more share related investment. I did dabble in shares there for a while. And I think before I even invested in property, I had some shares. So as I mentioned, my dad worked for Westpac. So I think from memory, I had about $3,000, probably the first $3,000 I earnt, he said, ‘Have you saved $3,000 yet? Buy some Westpac shares’. 

[21:37] So I remember I had some Westpac shares early on, and he basically just said, ‘Just hold them, don't sell them. Tick the box for the dividend reinvestment plan. So don't take the money, let them reinvest. Through compounding growth, they'll buy more shares for you’. 

[21:56] So I held Westpac shares for a long time, but then post that I ended up getting into,—and this was circa the dotcom boom, so I got caught up in that hype. Great lesson: don't try [to] get rich quick! I found out about this beautiful thing called margin lending. The bank will lend you money and you can leverage up and multiply your gains. And that's all well and good while the stock market's going up until something like the dotcom boom hits. 

[22:27] I still remember, I was on a harbour cruise for work. And I got a phone call saying, ‘your LVR is a bit down, we need $20,000 odd in two days' time’. And at first I'm like, ‘Oh shit, okay’, wracking my brain where I'm going to find this $20,000. And obviously not wanting to sell any shares, which were obviously down at the time. 

[22:52] Now, thankfully, being smart, I didn't leverage myself too much. And I knew that these margin calls were a possibility. And so I obviously had some savings set aside, so I was able to make the margin call from memory without selling any shares. But yeah, that was a great lesson in volatility, I suppose, as to how volatile that share market can get. And having been invested in property at that same time showed me just how resilient the property market is. 

[23:25] One thing that I've learnt over the past 29 years of investing— and if we call a property cycle every 10 years, this is my third one now, my third cycle, if you like— I've just seen how resilient the property market is. Whether it is a dotcom boom, whether it's a GFC, whether it's threatened changes via an election of capital gains tax rules, or any old or negative gearing rules, I always like to throw that one up. Interest rate rises or decreases, you know, the market just keeps on keeping on, as they say. 

[24:03] And as long as you have the patience to hold long term, I can only recommend property investing. You will do well. It's worked for me. As long as you're buying quality properties in quality locations, I might add. 

Raiti also shares with us how he managed the complications of the property market during the pandemic. 

[24:26] How could I forget about the pandemic? Like, nobody ever saw that coming. And then there was [the prediction that] the property market [was] going to drop 20 to 30%. What happened? It did the opposite. 

[24:38] So, again, resilient. Post pandemic, there will be something else. I mean, that's not a property related thing. That's life. One thing I know is life throws us curve balls and you have to manage those, but there will be something else. And I'm sure the property market will be resilient to that as well.

Expanding on the resilience of the property market, Raiti gives us some important assurances that are critical to know when investing in property.

[25:22] That's the beauty of it. As long as you keep making your repayments, the bank isn't going to come knocking and say, ‘Hey, that LVR at 80% that we lent you, your property value has dropped. So your LVR is actually hovering above 90% now. And that's uncomfortable for us’.

[25:39] Because unlike the share market that gets valued every second that the share market is open, your property that you own or invested in doesn't. I know when things are good, I love reading these articles when they're saying how much money people are making overnight in their sleep. And I joke about that and say to the guys at work, ‘I made another $10,000 last night just from going to sleep!’ 

[26:09] But property doesn't get valued like that. It probably should be valued on an annual basis only. And [if] you keep making your monthly repayments on your loan, the bank is going to not worry about what value your property is, or what your loan to value ratio is.

When dealing with property on the other hand, Raiti has seen nothing but success due to his experience as a landlord.

[26:36] I must say, I have been pretty lucky in that regard. There's nothing that comes to mind where I've had a disaster, as such. You get some repairs and maintenance issues, with all this rain especially. There's tenants [that] have reported a leak. Other than that, what is it? A new hot water system, a new dishwasher, things like that.

[27:00] Tenants wise, I've always been of the mindset about looking after tenants. My number one thing is, if I look after the tenants, they’ll look after my property. Whenever tenants do report any issues, I've told my property managers upfront, ‘Get it fixed’. They keep me up to date, of course, we've had to send out a plumber, we've had to send out an electrician. But I don't want my tenants to be inconvenienced whatsoever. 

[27:29] Like I said, it's their home. In regards to their living there, I want to look after them. I've never been too greedy or bullish on rents, if anything, $5, $10, or knowing what the market rent is, and sort of not being at the top end of that. Because I don't want to be in a situation where I'm upping the rent by so much and forcing people out and then I’m without rent for one or two weeks to chase an extra $10 or $20. [It] doesn't make mathematical sense to do that.

Throughout his journey, Raiti has learned so much about investing in property, but it’s when he realized his great returns on his investments, he knew this was the right path for him. 

[28:37] When I think back to buying that first property [for] $83,500 and I actually sold it 10 years later. And the only reason I sold it is because at the time, I was about to get married. So you know, I was looking for a deposit to buy a principal place of residence. 

[29:00] And the thought there of using equity was sort of like… I can't recall to be honest, whether that notion was around or why the bank didn't tell me that etc or why my dad did it. It was sort of like, ‘If you want it, yes, if you've got some capital growth there, we sell it, we take that money and we use that for the deposit’. 

[29:20] Because if I knew then what I [know] now, I probably wouldn't have sold it, to be honest with you. Because although I have nine properties now, I've probably bought and sold for various reasons over the years as I was educating myself, I suppose. 

[29:35] That first property in Croydon Park, I bought it for $83,500, 10 years later [I] sold it for $180,000. Now I remember at the time the agent was telling me, ‘Wow, $180,000 is top dollar. Similar ones to this are only selling for $170,000’. 

[29:48] And during that 10 years, I purchased the second one. It was actually a studio apartment. I remember I saw it in the Sydney Morning Herald one Saturday morning, a studio apartment in Ashfield. And I bought that for about $110,000 and sold that one— pretty much sold them both— to fund this principal place of residence. [I] sold that one for about $170,000 [to] $180,000 as well. So looking at that, I'm going, ‘Wow this Croydon Park property, I've just made $100,000 in 10 years for basically doing nothing. I didn't have to work for it’. 

[30:21] And that was, I suppose, that aha moment where [I thought], ‘I've just made $100,000 here. I started 10 years ago, I was earning $17,000’. Who knows what I was earning 10 years later, probably $35,000, I don't know. And I've just made $100,000 for basically not doing anything. Just buying the thing, paying the interest, collecting the rent, [and] attending to a few repairs and maintenance’. And $100,000 was a lot of money back then, it was more money than I'd ever seen. So that was that moment that really got me going, ‘Wow, this property investing does really work’.

Such great insights from Raiti throughout this episode, and we’ll be getting even more next time as he tells us about the strategies he uses…

[13:29] Managing the admin and financial teams of those businesses, obviously, looking at ways to increase profitability. 

The mentality needed to be successful in the financial world… 

[14:34] The CFO role has evolved over the years from, you know, being your typical number cruncher to being now very analytical and very much an adviser to the company owners. 

Tyrone Shum:
He discusses the mindset needed to be successful in your property portfolio.

[24:18 transcript 2] Never put off till tomorrow, what you can do today, it's relevant in life, it's relevant in your jobs in your career, and it's definitely relevant in property.

And that’s next time in a future episode of Property Investory.