Walter Nanni has worked in the real estate industry for over 25 years, and has rightfully earnt himself the title of Sydney’s top buyers agent. Starting with his first property at 20 years old, he helped his parents pay a large proportion of their mortgage, and realised this was only the beginning. He bought a real estate business at 22, grew the Harcourts franchise from 5 offices to 40 within a 5 year period, and now has $6.5 million worth of property in his portfolio.
Join us on this episode of Property Investory
where we delve into Nanni’s real estate career and investing journey, starting with his simple strategy that evolved with the help of a friend. He shares how he made a mistake early on despite having bought in the most stunning beachside location, fun facts about building in Bondi and the Eastern suburbs, and why you shouldn’t let rising Sydney property prices deter you from reaching for your goals!Timestamps:
01:47 | The Goal Was to Hit it Big
05:33 | Here’s What We’ll Do
09:47 | Partners in Life and in Business
14:58 | Making Sure His Clients Make Money
19:10 | Strategy? What Strategy?
24:11 | Supply and Demand
27:32 | Don’t Stop Believin’
29:20 | I’ll Just Take My $100,000 And Run
33:48 | The Building That Changed Our Lives
38:04 | A Leap of Faith
39:38 | He Set His Family Up
04:25 | Positively Geared Portfolios
06:15 | The First Step is the Hardest
11:12 | Recognise an Undervalued Property When You See It
12:45 | Break It Down
Resources and Links:
[00:33:50] We're about to build up and put a DA through and we can fit another two or four units on there. And the minute we go up one level we've got amazing views and that will change a $4 million investment to a $12 million investment, $10 million or $12 million, depending.
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 Sydney’s top buyers agent, Walter Nanni. We’ll hear about the most rundown house he’s ever seen, which helped him to purchase his first real estate business at 22, the lucky escape he made from a beautiful seaside location, and the surprising amount of properties sold in Australia that don’t even make it onto the market!
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Nanni has been working as a real estate agent since he was 20 years old, after being inspired by the men he saw around him who owned up to 20 properties.
[00:00:49] I started asking them and picking their brain and seeing how they do it. And along the line, I started seeing examples or opportunities, and I guess I'm one where when I see an opportunity, I don't like to let it go. And that's been a huge part of the success and also something that I need to watch as well, where I started to decline some opportunities, because you don't want to get too big or too risky, as well. So I've always been careful, even though I see opportunities. But I did start seeing opportunities. And that's how we got started. And the rest is history,
The Goal Was to Hit it Big
He ran his own real estate business for 15 years before managing several Harcourts franchises.
[00:01:47] We changed from being a company called Robert Andrew— which I was a shareholder of the group and director— over to being, they sold out to a company called Harcourts, who came over from New Zealand who, one of the biggest, if not the biggest in New Zealand. And basically, after a year or two of running it here themselves, they wanted to appoint someone more local to be the CEO. And I was running the largest company at a time, out of all the offices, so they offered me the position, which I took up.
[00:02:19] Then basically what I did was I kept my business running whilst we grew the franchise business in New South Wales from about five shopfronts to about 30 to 40. I did that for about eight or nine years, running that as well as my own, and then it was time for me to back out. It was changing management and changes up the top in the company.
[00:02:53] And I guess that was partly when I really put the foot down for probably a year or two, before I left that I put the foot down as far as on the property investing side because I realised that I needed something that was always going to provide for me, and I lost a bit of faith in running these businesses. Even though I was a shareholder, and part owner and all the rest of it, it needed a lot of my attention and my time.
[00:03:16] I guess you could say that I was disappointed with the outcome after running businesses for 20 years. I didn't think it was gonna provide for me and my family the way that I thought it would for the rest of our lives. And so that's where I really turned to property investing and thought, 'This is the way it's going to be, I've got to really focus on that.' And that's what I did for the next seven or eight years.
[00:03:50] I owned three properties up to that point. Funnily enough, I had one of those reminders on Facebook come up with the old photos that says it's been seven years today, and that was an old photo from a year or two before I left that company. So I'd say seven or eight years ago is when I realised and really put the foot down. Nearly seven years ago I bought a building of four units in Bondi and that's when I... I wanted to basically hit it big and do something that was going to be a big goal for me to to chew over the next 10 years and I wasn't wrong. But it was also going to give me the opportunities to really accelerate my goals and my plans.
Here’s What We’ll Do
His journey into real estate started with a then-12 year old brick veneer house that was the epitome of ‘the worst house on the best street’.
[00:05:33] It was just the most rundown house you've ever seen. They had 12 cats living there and it was just the wrong people with the right house. And the price had been reduced because no one could sell it back then from $120,000 [or] $130,000 down to $99,950.
[00:05:52] I offered them $90,000, they didn't take it, and we bought it for $95,000. As a young man I didn't have enough for a deposit, I'd just bought my brand new Commodore, because that's what you do when you're 20. And I thought that was the answer to all my problems. And it was the answer to some problems back then, but not all of them.
[00:06:14] I convinced my parents— it took a bit of work, but I know I convinced Mum and Dad to have a bit of work after that, to use their equity and to go halves with me. Initially Dad didn't want a bar of it. But then I said, 'Hey, look, the way we'll do is I'll do all the renovations and whatever else, and then we'll just sell it. And then I reckon this thing will be worth $150,000 and we'll get our $50,000.'
[00:06:41] They had a mortgage of $75,000, which is also a mortgage of $60,000, their home was worth $75,000, is what they paid for it, after the deposit and so forth they owed $60,000. And basically, they were faced with a 25 year mortgage, and I said, 'Well, that's crazy. What you want to do is we'll do this, and I'll give you the $25,000, and that will cut half of it off.' And so we did it. And within six months, I'd completely renovated it with some friends and friends of friends and tradies.
[00:07:13] And instead of selling it we decided to refinance against it, because we've got a very good broker. And so we still managed to refinance and pull out our money. And we got roughly $25,000 each, and I bought my first real estate business at the age of 22 with that money. And they actually paid $20,000 off their mortgage, which is great. So off the back of that, we did it again a year later, and we did another place for $88,000 and that was worth about $130,000 [or] $140,000 by the time I renovated it.
[00:07:49] Then the third property I bought off the equity that we then had was a block of land down the south coast in a place called Austinmer, just before Wollongong and that was to build my dream home. So it wasn't all about investing at that point, I thought, 'Now it's time to do the thing and all the rest of it.'
[00:08:07] But then I realised that my relationship didn't work out, for one, and secondly it wasn't where I wanted to be. And it wasn't the thing. So I decided to eventually sell that. And I got very lucky that it was a bit of a boom period. So even though I held on to it for two or three years, I managed to make $100,000 on it before I sold it, because that block would have cost me a lot of money. So that was a very lucky escape.
[00:08:32] This was going back at least in the '90s, I assume.
[00:08:37] Yeah, absolutely. Yes. I started real estate in '93 or '94. And so yeah, that was probably '95 [or] '96.
[00:08:45] A lot of change has happened, obviously, around the New South Wales area.
[00:08:50] Yeah, absolutely. Yeah. I mean, there is. Funny thing, though, is I still do a lot of speaking gigs and seminars about property investing. And the principles are all the same. And I meet a lot of people that have a lot of equity in their homes that are in their 40s and 50s. And they have teenage, or 20 year old kids and I always talk to them about that story. Because I think it not only set me up, but it's since set up my whole family. Not just my mum and dad, but my sister as well, where we own a lot of property all of us together. So that's been a huge part of our strategy.
Partners in Life and in Business
Nanni and his wife work together to form the property dream team.
[00:09:47] My wife does all the searching, whether it's realestate.com.au or Domain, and we find a lot of off market and pre market opportunities as well. My phone's been going crazy this morning because agents are actually back now from holidays so they've listed all this property and saying, 'Hey, here's all the property!' So I'm on the phone most of the day, I'm on the phone to new potential clients and meeting with new potential clients. In that we do a whole hour of strategy sessions where I deal with a lot of investors, also home buyers who want to buy their own home, but I tend to specialise more investors.
[00:10:23] That requires planning out a strategy. And then the other things I do is I look at a lot of property. And my weeks are sort of broken up into... I do weeks where on a Monday, Tuesday, Wednesday, I'm looking at a lot of off market and pre market properties, on a Thursday, Saturday, I'm looking at all the on market stuff. And on night times we're doing a lot of auctions, and on Saturdays as well. So that that's kind of the week, the way it splits up.
[00:11:05] I think what a lot of people don't realise— and I didn't know either when I was even running my own real estate business— is that about 40% of properties that get sold in Australia don't hit the market. So they're either sold as they were about to hit the market, they're a pre-market opportunity, where the agent says, 'We'll put the feelers out to buyers agents in my small database before we actually hit the market.' So in other words, they're about to come on the market next week. But they'll say, 'We're getting 10 people through, do you want to come through?' I say yep, so we go through. And if it's a match, and my buyers like it, we buy it. And so a lot of properties get sold that way.
[00:11:51] Part of the reason they do that is just to get a good feel for... the agents want to know what they should be quoting for that property. So getting 10 people through, they get a bit of a feel, so it's a soft launch, I guess. And then there's complete off market opportunities. And what they are is that there's a lot of people who don't want to hit the market, because number one, they save a lot of money in marketing. So there's $5,000 to $10,000 saving, depending on the budget, or the price of the home. The other reason they do that is they don't want all these people trampling through their home, they don't want the neighbours to know. So there's a whole range of reasons.
[00:12:31] But overall, personally, I love all the pre-market properties. They're great opportunities because the vendor is motivated to sell, we're just getting in before anyone else. The off-market opportunities, I like probably 30% or 40% of those, whereas 60% to 70% of them are overpriced, the vendor's not motivated. And so you've got to just sort out through those opportunities a bit and be a little bit more careful. At the moment there's a company that I work for, Cohen Handler, who are the biggest agents in Australia, we're buying 43% currently off and pre-market. So it's huge numbers.
[00:13:38] We've got an offer come through today. And they went through the very first open on Saturday, the agent's a mate of mine. My relationships are what is very important in the marketplace that I work in and so, funny enough, I just bought off the agent in December as well. So hopefully we're gonna do another deal today or tomorrow on another property that he's got. And it's like I said to my buyer 10 minutes ago, it's a quick game.
[00:14:05] So once we're in we're in and the less buyers that get to see it, the better. So even though this one wasn't pre-market, it was actually on the market, there are only a handful of buyers there. So we shouldn't have too many dramas in wrapping it up. And the job that I need to do, obviously, as a buyer's agent is make sure that the value is there, that we'll make $50,000 or $100,000 on this purchase. If we can't, then we'll just move on to something else.
Making Sure His Clients Make Money
Nanni’s number one priority is helping his clients purchase the right property. From there, his happy clients spread the word.
[00:14:58] 80% of my business is referral and repeat. So, in the end, the reason I get referral and repeat business is because obviously people are happy that they've made money. And all in all, what it comes down to is my clients have to make money. So in other words, we buy undervalued properties. I can count on one hand the times that we've paid market price for a property. And it's only because my buyer, my client fell in love with the house or property and said, 'I've just got to have it. I don't care what I pay.'
[00:15:30] Usually I can talk them out of that, but there's been a handful of times where they go, 'No, no.' Look, there are extreme cases where late last year, we bought a property for $6.5 million. And they said, 'We don't care. We just want to have this.' And I said okay, so we didn't get much of a discount. I still think we did well, it's an amazing, unique property overlooking Tamarama beach. But it's not like we saved $100,000 or $200,000.
[00:16:12] In the end, the job is to make sure that my clients make money. And because I said I deal a lot with investors. If we can't make money— $50,000 or $100,000 on a purchase— then we move on to the next one, because I know that I can. And so that already gives them a reason to use me. I mean, why wouldn't you? And because obviously it offsets whatever we charge by a long shot and basically it makes sure that you're buying the right property for under what you should be paying. That's why people use us, the main reason.
His company covers the East Coast cities of Brisbane, Melbourne and Sydney.
[00:17:05] The main focus is still Sydney in the sense that the company's got four or five offices in Sydney. So north shore and Western, inner west and in Cronulla, and all those sorts of areas. I personally look after mainly Sydney Metropolitan. Personally, I do all of the eastern suburbs, and some of the inner west and in the city. But I have two PAs where they also run around to ones based in Cronulla. So all the south end and ones based in Parramatta, all the West. And that works for me, because I guess I've been around this game for a very long time. And so I get a lot of referral work. And they want me to go all over Sydney. So we carry about 15 to 20 clients with the three of us. And that keeps us busy. It keeps us turning over property each month and buying well.
Strategy? What Strategy?
He brought his longtime friend and mentor to work with him at Harcourts, who then encouraged him to set, and achieve, bigger goals.
[00:19:10] He owns a very large portfolio. And he asked me the question seven or eight years ago, saying, 'What's your strategy with owning these investment properties that you've got?' And I said, 'I don't really have a strategy.' I guess my strategy was that I keep doing what I did before. And just because I'd owned the home with my parents, I found that we were just getting ahead and I could pay off my own home eventually. And that was it for as far as the strategies, I wanted to pay off my own home.
[00:19:42] He said, 'That's good, that's better than most. But you could do a whole lot more. You're a young man, you haven't reached 40 yet, and you could do bigger goals.' And I've gone, 'Yeah, cool.' So he asked me the question, and he said, 'So how much money do you need to live on each year if you didn't have to pay your rent or a mortgage?' And first I thought, 'What the hell's he talking about? I have no idea, we earn what we earn, but I don't know.'
[00:20:12] He said, 'Well, can you survive? Or are you happy to be earning $100,000 a year if you didn't have to pay rent or a mortgage?' And I said, 'Yeah, oh, hell, that's awesome.' Because if I didn't have those expenses, then I could still travel overseas each year, have dinners out, obviously run your household and pay electricity and all the bills and food and be happy days, because I've had a lot of spare time.
[00:20:36] And he said, 'Well, all right, let's work on $100,000.' He said, 'How many properties do you need to own in order for you to have $100,000 worth of income?' And again, I thought, 'I have no idea.' So we started working out of my properties, what they're roughly bringing in per annum. And the answer was $25,000 each. So very quick mathematics I went, 'Well, if I had four of those, that'll give me $100,000 worth of income per annum.' And he said, 'Yep. Cool.' And then he said, 'Well, how many properties would you need to buy in order to own four outright? Sorry, five, because you got to have one to live in?'
[00:21:13] And I said, 'Well, I don't know. Is this a trick question?' He said, 'No, it's not. But you've got to understand you've been around now for...' Back then it was probably 15 [or] 16 years in the business. And he said, 'You've seen two boom periods, two cycles of a cyclical marketplace. In other words, something that repeats every seven to 10 years.' And I said yeah, and he goes, 'Well, every time it goes through seven to 10 years, it doubles in price. So how many properties do you want to own in order to own five outright?'
[00:21:48] And I said, 'I have no idea,' and he said, 'Look, usually double it. So if you want to own five properties outright, you want to be buying 10. So that basically, when you go through one or two cycles, in other words, 10 or 20 years, then you can sell off half and pay off the other half.' And that became my plan for the next... well, I'm still living it, I guess, but my plan for the future.
[00:22:09] I owned three at the time, then we bought a block of four because I wanted to accelerate it. And since then, we bought another block of units and another two properties. So we're sitting at about 12 at the moment, and we're looking to develop both blocks. So that'll end up being probably over 25 properties and the hardest ones to buy with a first, second and third. Funny enough.
Supply and Demand
Nanni sticks to Sydney for his own portfolio due to some of the stories he’s heard from investors buying out of state.
[00:24:11] A lot of people have moved or bought property in Queensland for a very long time. When I say horror stories, not 'horror' horror but a few horror stories. The rest of them just always decided to come back so it'd always go to Queensland and always buy there and then two years later they're back and made very little money. So that's been with me for now for a long time. So I never really had any faith in buying interstate.
[00:24:41] I do believe in Melbourne because I've heard good stories from Melbourne at different times, but I've also heard some bad stories. I guess what I learnt since then, because I started investigating a bit more about interstate because as I speak at a lot of expos and conferences, I hear other speakers speak about how they should buy in Melbourne and Brisbane and all that. And when experts sort of wrote Sydney off last year, they were all saying, 'Go to Brisbane, go to Brisbane', but I started thinking a bit harder about that and reading some more articles about it.
[00:25:14] What it made me realise is that Sydney and Melbourne have the most population growth each year, led by Sydney, but followed closely by Melbourne. And as far as what creates a marketplace for an investor, or anyone, is supply and demand. And the problem with particularly Brisbane, and the West Coast as well, so Perth and Adelaide and so forth, is that they lack the population growth. And so without population growth, you don't have demand.
[00:25:49] And the problem then is that if you've got a mining boom, say in Perth, where it's led by the mining boom that ended and which was always going to end, then it means that you've got an oversupply. And that's what I'm seeing, particularly in Brisbane and now in Melbourne, that there's just an oversupply. They're just building high rises left, right and centre. Even though they've got the infrastructure, the population growth doesn't keep up with the supply. And so that's the problem.
[00:26:24] And this is the problem that Sydney will face this year, I think, as well. It always happens at the tail end of the boom, what finishes the boom is an oversupply. And that's what you're about to see in Sydney as well. But it hasn't been that case, just because the population growth and the Chinese buying in Sydney had been so that the demand has been far outweighing the supply. And that's why I haven't and I don't see myself ever leaving Sydney.
Don’t Stop Believin’
Sydney properties are averaging over $1 million, but Nanni hasn’t noticed that deterring people.
[00:27:32] In fact, it motivates them more to come into it. So I mean, affordability, till recently was there around 4.5%. So it's still been fairly affordable, because our wages obviously kept up with demand. Having said that, you look at Sydney, and I guess... it's hard to just talk about Sydney, because Sydney is broken up into three or four different marketplaces. And so whenever you hear reports of Sydney, you got to think, 'Well, hang on, what's driving that?' So you've got the east, you've got the Blue Ribbon areas of the North Shore and that, and then you've got the other tiers that are working alongside, and then you've got the West.
[00:28:13] So there's a lot of different marketplaces happening in these different demographics. The other thing to think of as far as putting all the eggs in one basket is that I've got investors, particularly one guy that owns 35 [or] 40 one bedroom units around Darlinghurst and Potts Point. And a lot of people have said to him over the last 30 or 40 years, 'Why don't you diversify?' But this has kind of worked out for him exceptionally well. And one of my other business partners owns a lot of blocks or units in Sydney, all over Sydney and that worked out for him as well. I guess I have living examples of proof of guys that have done it before. And that's where I'm getting my life lessons as well.
Coming up after the break, Nanni delves into how important his Bondi property is to him...
[00:31:42] I knew that if I got myself in trouble, I could sell off the other three properties that I owned at the time, because I'd rather keep a block of four units in Bondi than anything else that I had.
He shares the thrilling story of how he landed the units...
[00:35:39] So I rang my broker as soon as I saw the auction sign, because it was in 20 days. And I said, 'Hey, what do you think, can we get this done?' And he said, 'I'll do my best, but I don't know if we'll get it done in time.'
He reveals the way he sees some peoples’ approach to life and why it isn’t the best way to go about life.
[00:14:03] I find that a lot of people are more reactive to life and the world as opposed to proactive. And whereas I like to be, you know, I've run a business for a long time. So you have to be thinking about where you want to take that business.
And that’s next. I’m Tyrone Shum and you’re listening to Property Investory.
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I’ll Just Take My $100,000 And Run
Nanni is cautious as an investor, which has helped him avoid making any major mistakes.
[00:29:20] I think that the lowest of the low was probably that block of land where things didn't work out for me. And then I also found out that this land is on a hill and it overlooks the ocean, beautiful part of the world, it's just that because of that, I hadn't done any research. I was a young guy, and apparently in the ground was a natural water easement running down the bottom and underneath it. So it meant that for me to build on it, I'd have to really spend a lot of money doing that. So had I started... I did get plans approved. But had I started to actually hit the button and build, that could have really been a tragic thing to do. It would have sucked a lot of cash and a lot of capital.
[00:30:12] Still to today, I still drive past that block from time to time and no one's built on it. And I think it's because of that reason. And besides that, there were other problems. One of the neighbours had built his house on, was encroaching on that land. So it had a lot of challenges, a lot of problems that I just didn't see at the time, and did enough homework when I bought it. I just saw the views of the ocean and went, 'Yeah, this is beautiful.' But it had a lot of problems. So I was very lucky to duck away or get out of that.
[00:30:43] And it was because of this site I didn't want to live there anymore. It wasn't so much as a bad investment. And then what really cemented my decision to sell it was that I thought, 'It has got these other challenges. Maybe just get out of this and take my $100,000,' which I thought I'd sort of make around $100,000 and run. And that's what happened.
[00:31:02] But besides that, I've always been very cautious. Even when I bought the block of units at Bondi, I knew that that building has subsided. So I've had to underpin it, it cost me $60,000 [or] $70,000 to do that. And that was risky. But it was a very calculated risk in the sense that I'd spoken to a structural engineer and he'd said, 'Yeah, tops $100,000 to underpin it. Not that it will be 100%. But it'll be livable, and you'll be fine with that investment.' And I thought, that's fine, I can handle $100,000 loss into it, because I bought it for a lot under what value it was worth. And also, I knew that if I got myself in trouble, I could sell off the other three properties that I owned at the time, because I'd rather keep a block of four units in Bondi than anything else that I had.
[00:31:57] Underpinning just means that they dig all the way around the footings. And they literally pour concrete into the ground surrounding it. So they give it bigger shoes, I guess. And they they drill into your footings, and they put steel rods and the new concrete attaches itself to give it bigger footings. That's basically what it means. So it's now sitting on a massive tonne of concrete that's sitting underneath the building. So just means that it stops any more movement.
[00:32:31] I don't know if you know, most people don't, but all of Bondi and a lot of the Eastern suburbs are built on sand dunes. They used to be all sand dunes there. Sand is great to build on. But the challenge with it and the things you learn along the way, is that when the roads shake because of traffic— we're on a main road, the road shakes— and if there's water getting in, because the people who owned it before us, they didn't do any maintenance work to the block. So all of the stormwater and everything was running underneath the footings.
[00:33:12] And so you can imagine if you put sand in a glass, if you put water in it as well, and shake it, you'll see that it all moves. And so sand actually carries vibration. And so that's what causes buildings or property to actually subside and move and crack. So sand is amazing to build on, I've been told by a lot of engineers, as long as it's well contained. If it's not, then it can just slide down like an hourglass and that's exactly what happened.
[00:33:44] And also Bondi has fantastic views of the ocean.
The Building That Changed Our Lives
[00:33:48] The good thing is, look, we're about to build up and put a DA through and we can fit another two or four units on there. And the minute we go up one level we've got amazing views and that will change a $4 million investment to a $12 million investment, $10 million or $12 million, depending. And that just changes the whole dynamics of everything in that. That's pretty cool.
His ‘aha’ moment featured a block of units he’d had his eye on for a while, and he ended up bidding without having his finance approved so he could beat the boom.
[00:34:34] It has to be the building, because that really changed our lives. So the biggest thing that happened there was that I didn't have finance approved at the time to buy it, because what happened was I was travelling a lot for Harcourts interstate. I'd just got off the plane, caught a cab home and I drove past and I'd been keeping an eye on blocks of units because I knew that was going to be something that would really accelerate the portfolio and really get myself on the right path.
[00:35:06] So I was keeping an eye on this block, and two or three others. And it had been on the market for a long time, and the market hadn't moved yet. My business partner and mentor at the time, said, 'The boom's coming in the next 12 or 24 months,' and I said, 'Yeah, absolutely, it's overdue.' Because of the GFC and other things, it just took a longer time to get here. So anyway, I saw that they'd slapped an auction sticker on this block, and I thought, 'Oh no, I'm going to have to move fast.'
[00:35:39] So I rang my broker as soon as I saw the auction sign, because it was in 20 days. And I said, 'Hey, what do you think, can we get this done?' And he said, 'I'll do my best, but I don't know if we'll get it done in time.' So he started working on the finance and, well, 20 days later, because it was all a bit complicated and whatever, he still didn't have formal finance, or loan approval. But I knew that I just had to go for it. Because if this was going to go for under $2 million, I had to have my name on it. Because there had been no sales in the area for under $2 million for block of units like that. So if this was the opportunity, I had to do it.
[00:36:17] And I remember being at the auction. Damien Cooley, one of the best auctioneers said this time, he wasn't on my side. And basically, he said to me, 'Don't go over $1.75 million.' And I thought okay, and then I actually did, because I thought that I had it. So I had to just go a little bit over. Plus, I wanted to test him and make sure it was really good anyway. And so we bought it. And that was quite the morning when I woke up thinking, 'What have I just done?' Having that feeling, yeah, I do help a lot of my clients, obviously, because I know exactly what that feels like. But I also know that it's been the best decision in real estate. When you say when everything fell into line, that's been it. We changed the rents from $400 a week on average in the two bedroom units up to $700.
[00:37:17] Wow, that's a big jump.
[00:37:19] A huge jump, and that's without a complete renovation. It's just that they were undervalued. The tenants had been there forever. They were just rundown. So it was literally a coat of paint, new floors, without even changing kitchens or bathrooms, just a tidy up. So everything just literally fell into place. And we moved into the worst one. And we've only just finished renovating it last year. And that was probably the hardest thing to do, to live in a half unrenovated place. But the rest looked great. And it's been the best journey ever.
A Leap of Faith
He ended up paying slightly over what he was recommended to spend, making the final purchase price $1.765 million.
[00:38:04] I went an extra $15,000, thank God. And I thought to myself, ‘If it comes down to it. I'll cover it.’ Because I also got a long, four month settlement. So if anything went wrong, like I had time to either sell or do something. So it was a leap of faith. But it was a calculated leap at the same time, knowing that we had stuff to sell to make it happen.
[00:38:28] And when was this that you purchased the property?
[00:38:31] That was six and a half, seven years ago now.
[00:38:35] Wow. I'm assuming it's worth a lot more than that $1.76 million you purchased it at?
[00:38:44] $4.5 million it just got valued recently at, and that's without doing any development, so that's the next phase, and that'll really change things.
He Set His Family Up
Although he has so much to be excited about, the DA approval he’s about to put through takes the cake.
[00:39:38] One of the biggest challenges there is to work out—we've had a few architects come through and believe it or not, if you can picture a fully renovated block of units with a nice backyard and front yard and everything looks beautiful now—they were saying to me I need to knock it down. I had to get my head around that, and I still am, to be honest. But the numbers are so good. If we do knock it down, it's hard to actually ignore that.
[00:40:06] So after doing all this work and doing a lot of it myself, and having a lot of memories there, everything's got a story to it. To be faced with the prospect that we're going to knock it down is huge. But having said that, the money we stand to make, and that's where you need to put your emotions aside. The block's already set my family up. Not just that block, but a few of the other properties.
[00:40:34] But the other block of units that we own is a 1000 square metre block of land. And recently, just late last year, we bought the house next door with another 1000 square metre block, so we can develop that into 25 units. I say I won't, but that's a long term project. I don't see myself doing that for 10 years. But to know that we can do that, and that they're both positive geared, is great. Because it means that we're just sitting on a nest egg. So it's all very exciting, knowing that the future, whichever way we go, we've done the hard yards, I guess, is probably you could say.
The only thing that was holding him back from investing was a lack of knowledge on what to do, and he’s found he’s not alone.
[00:00:36] I find that with my clients as well, that there's a feeling that you've gotta do something, but just not knowing what it is that you've got to do. And that in itself, there's fear involved. There's all different things that happen. You understand that everyone's a real estate expert or advisor in life. And the more barbecues I attend now, people will ask me, because they know who I am, and they'll go, 'Hey, what do you think, this year?' Or, 'What should I do?' Or whatever else. And it's always I start telling them what I think, and then there's always someone that will jump in, and then start to give more advice. The people around me who know who I am or whatever else, they always have a laugh with me— or at me— and say, 'Yeah, you know, he was the real estate expert.'
[00:01:55] One of the biggest parts of what I've done, and I guess what really kicked me off, was having great mentors around me. And those mentors have amazing portfolios, they're very smart guys who basically worked it out. And one of them always says, 'Life is all about you get hit with a challenge, and you’ve just got to work it out.' And one of those is financial stability, and a lot of people don't work it out.
[00:02:27] The word 'entrepreneur' gets thrown around these days. My wife watches a bit of reality TV where everyone's, when they join, like on The Bachelor or something, they're an 'entrepreneur'. But when they get asked what it is that they're entrepreneurial about, it's just, 'That who I am.' Okay, but what have you done? I think for me, an entrepreneur is someone who's actually worked it out as far as financially, or worked out how to make money without my time. In other words, my money makes me money. And that's the point.
[00:03:07] When that penny drops, and you finally realise that in life, you're either going to be a slave to your job, which also makes it that you don't enjoy your job as much. Because if you're a slave to it, you've got to get up every day, and you have to show up. Then you soon realise that, hey, it's better to do something that I really love if I don't really have to, and that becomes really cool. So we can work that out and realise that it's either you getting up every day and making a lot of money, or what's your money actually doing?
[00:03:38] Because a lot of people are sitting on— especially in Sydney after the boom— a lot of equity. And when I show up and I meet my potential clients are all in their 40s and 50s, in that regard, and they're sitting on a lot of equity, $1 million [or] $2 million in equity. Their money sits at home every day whilst they get up in the morning and go to work, and they don't do anything about it. And they'll say, 'Well, why don't we get that money to start working for you?' And that's the big shift.
Positively Geared Portfolios
He extends the strategy that he uses himself to his clients, and tweaks it to suit the individual buyer.
[00:04:25] It's typically the same. What changes is depending on what they have, and what their past experiences have been, and also what areas they're looking to invest in. Because even though I'll say to them, 'I think you should invest here', they've got to feel comfortable, and I can only advise or suggest. It's really their journey, not mine. But I know that probably 80% of the time, they'll follow me and say, 'Yeah, that sounds great. Let's go with that.'
[00:04:55] The strategy doesn't change that much. You can read, I can read a lot of books on the subject. And I have, and generally speaking, it's all about being able to build a portfolio where you've got positive geared property sitting in it. In other words, not costing you money. Generally speaking, they're all interest only. And the biggest mental shift to get around your mind is that you're not actually in the business of paying off 10 homes, you're in the business of holding those homes. And what's making you money is the boom periods.
[00:05:46] The reality is that, yes, you can wait, you can do it. And there's two key things, I think, that have worked for me, besides that strategy that I fabricate my own equity by renovating. So that makes it so that I get more return on each property and also it values up to buy the next one. And so once I've got something that's positive geared, I've also got a lot of equity in it. So I can then use that to keep going.
The First Step is the Hardest
[00:06:15] So hence, the hardest ones to buy are the first, second and third, but after that, the rest becomes pretty easy. But we maintain pretty high goals. Like we said, in the last episode, in a routine of each year, we renovate two or three. We reinvest in it, I guess. And we're constantly adding more value so that everything values up and moves on to the next one.
[00:06:53] I've heard other strategies out there, and some of them is to flip. But the problem with flipping properties that I believe is you lose a lot of money on fees and costs and things, in taxes. So I find that you're better off keeping that equity in that home and using it for the next one. The other strategy that I've heard that has been around for a while, but there's different people that have come along and revived it, I guess, is that instead of owning 10 properties and selling down half and paying off half, they end up owning 30 [or] 40 or 50 properties. And what they're living off is just that, they buy them only when they're positive geared. And they buy them so that the money they're making is $100 or $200 off each property each month. But if you've got 30 of them, then obviously you've replaced your income.
[00:07:47] The downside of that is that it's not for me, so I don't tend to advise it. Because I find that it's higher risk. And I find that you just don't have the equity that I've got. We're on 50%, equity, 50% loans. We've still got $6.5 million out there, but we can cash in $3.5 million. So that's the difference, and that's what lets me sleep at night. And that's the point.
[00:08:34] It only takes one storm to come through and then you end up in a lot of trouble. And I know that there's a couple out there at the moment that are saying it's all great. But they only lived through one boom. And there's a storm always coming. And that's what you've got to outlive. Any captain can steer a ship in perfect weather. That's the thing. So I think having equity and having positive geared around you, you really... I can't say you can't go wrong, but you've got less chance to go wrong. And you can always sell one to get yourself out of trouble if you have to.
He reveals how important his business relationships are in the Sydney market.
[00:09:47] I'm amazed as well because I thought the toughest time was a year and a half ago when the market got really tough for about a quarter, and that was the hardest time because we typically cover our wage, what we charge and we usually double or triple it. So in other words, we make them around $50,000 a purchase by buying undervalued. But we still manage to do it, they still exist. I mean, we just bought one in December, where it was a two bedroom unit in Bondi. We paid $1,000,011. The valuer came through and said it was worth $1.15 million. So we made $150,000 for them. They're currently going through a renovation, where it'll be worth even more than that.
[00:10:35] So the properties do exist. How we do it? We're doing it every day. So our relationships with the agents are second to none, because they've known me for such a long time. I've been a real estate agent for 20 years. So I even help them along the way to create deals and advise them and teach them and do different things. But the reality is that we've got a great working relationship. So whenever they've got something, they'll share it with me and say, 'Look, I need to sell this for $1 million, or $950,000, you got a buyer?' And I'll say, 'Yeah, absolutely.' And we do a deal.
Recognise an Undervalued Property When You See It
[00:11:12] And out of every 10 deals that I see at the moment, there are two or three that are undervalued. The rest of them are five of those are on market, and two or three are overpriced. So that's kind of the current scenario. When the market changes and it becomes...well, when it got really tight, it was only one deal out of the 10 that became undervalued, that was very tough.
[00:11:36] But typically, it floats around those sort of numbers. And then if it becomes the opposite, which Bondi rarely becomes a buyers market, but if it did it'd kind of be more balanced. There might be five that are undervalued and five that aren't, that sort of thing. But there are undervalued properties all the time. Not forgetting that the reason why people struggle to buy those without us is that second part of that is that you got to actually recognise an undervalued property when you see it. And I see a lot of buyers that are my competitors, they show up and they struggle, they hesitate, because they don't know the market. They don't know value when they see it. Whereas I do and I know that I can get a good deal there. And I jump on it.
[00:12:29] I've lived in the East now for 17 years. So I've kept an eye on the market for that long. And I've worked it for the last seven or eight years now. So you get to know it pretty well.
Break It Down
[00:12:45] Are you able to share a personal habit that contributes to your property investment success?
[00:13:12] I'm competitive, but I like to get it right. And I guess as a habit, I like to know that I'm in a safe place. In other words, safety or security is a big thing and part of my world. So the habits that I run around my daily or weekly or monthly is, I guess what we talked about before, which is setting a goal each year, for the whole year, and then breaking it down per quarter or per month and then per week. So I run a pretty tight ship.
[00:13:42] And we're busy people, both my wife and I, and we just get through the week. So every Sunday night, the habit that I have is that I'll sit whilst we're watching a bit of TV, but I'll actually sit and break down and I'll reanalyse the yearly goals and I'll break down to see what has to happen this week. So I find that a lot of people are more reactive to life and the world as opposed to proactive. And whereas I like to be, you know, I've run a business for a long time. So you have to be thinking about where you want to take that business.
[00:14:16] I think that's a fantastic personal habit that anyone can pick up because it's reviewing your goals on a weekly basis, not just at the end of the year or beginning of the year.
[00:14:28] Yeah, that's exactly right. Or not have goals at all. A lot of people don't. So I hope my wife's listening! No, no, she's been great. But when we first met, we went and got married last year. So when first met I said, 'Wow, you could do all this.' And look, I'll tell you what, I mean, part of this is also having a partner along aside that is your actual partner. Your best friend, but also, that comes along for the journey because that's where I see a lot of clients struggle with that, because one of the two will be motivated to invest and to get ahead in life, and if the other one's not, it can be a huge challenge. So part of that is making sure that your goals all happen together, and you're aiming the same way because that can be a make or break deal, basically.
Nanni’s recommendation for books on property investing is to start with the classics.
[00:15:39] I haven't read books like that for quite some time, I used to read a lot of them. I know that probably two of the ones that really changed or got me on the right thinking was Rich Dad, Poor Dad, which I know everyone talks about, but it's such a good book for its time that the principles are still there. I used to actually get up and speak about that book. That's how I first got started speaking about investing, because I thought, 'Yeah, this makes sense.' It's all about money makes money. Either that, or you make it yourself.
[00:16:12] And I had a similar experience where we migrated to Australia when I was eight years old, and my family came out. And for me, my dad's a blue collar worker. So a tradie. So in the end, my Rich Dad was more my first business partner who was my mentor, as well. And that's how I learnt how to invest in real estate. So I could really relate to that book. And I still can.
[00:16:40] And then The Richest Man in Babylon was probably another one that also helped me recognise that you've got to pay yourself first. And the moral of that book is that you've got to invest and put money aside so that money, again, makes money, same principle, and it just accumulates. And if you don't do that, then you're doing yourself an injustice. So once you get your head around things like that, it can change your perception. And it's part of the journey.
[00:17:22] I think, especially if you're starting out and want to get your hands on a good book, I think they'd be great. And, look, I haven't read them in a long time. So even when you asked me, I've got to think back, right. But, but it's funny how they stick in your mind, you can quickly just go, Oh, hang on a minute. But the principles are in your head, basically. That's the point.
Thank you to Walter Nanni, our guest on this episode of Property Investory.