We also discuss his genius strategy that made him $425,000 without having to build or buy anything, and how you can apply the same strategy. We explore the secret behind his success, and the mindset that kept him moving when he lost $115,000. This is an episode you don't want to miss!

Timestamps:
00:04:54 | Personal background
00:06:32 | The power of gentrification
00:14:07 | From electrician to investor
00:18:49 | The benefits of commercial property
00:22:29 | You just lost $115,000
00:27:57 | Joint ventures and manufacturing growth

Resources and Links:

Transcript:
Harry Charalambous    

[00:30:24] I'm never the owner of the property. I just build the dwellings, the owner keeps one, we sell one and we take our profit.

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 talk to self-made millionaire Harry Charalambous. He unveils the unique secret behind his success, discusses how he transitioned from electrician to investor, and details the story behind a $115,000 loss on an unfulfilled subdivision. All that and more on this episode of Property Investory.

Charalambous made millions through property, but he started out as an electrician, proving that property is a goldmine for anyone who is willing to do the hard work and dig. 

Harry Charalambous    

[00:00:26] I am one of the directors of plan assist property team. And we currently run a business which is geared for helping property investors to purchase properties as well as develop those with a real focus on manufacturing equity in your investments.

Tyrone Shum  

While Sydney markets are booming right now, It’s still a good idea to manufacturing your own equity as it’s a great way to minimise your risk of low growth 

Harry Charalambous    

[00:00:59] I think, particularly for your Sydney listeners, they've had a pretty good run over the last few years. And obviously, the different parts of Australia have done reasonably well. All at different stages in the property cycle. However, what we do find is that by manufacturing some equity, it just takes you away from the reliance on growth, and we use growth as a bonus. And we certainly want to be buying in areas and buying at the right time in the property cycle. However, if we can use that and couple it with some manufactured equity strategies, can really spur on the... the portfolio and spur on the investment to a much greater, greater heights and much faster. 

Tyrone Shum  

Charalambous spends his time split between his clients and his team. This ensures everyone gets the help and guidance they need.

Harry Charalambous    

[00:01:52] because I'm a director of the company, as I mentioned, I suppose my days split between looking at. So we certainly have clients that we are searching for properties for, so I will oversee that. So I'll check in with our team here that is looking for properties for our clients and ourselves. And just to take a step back on that we certainly started initially because of doing our own investing and developing. And then it just grew into clients wanting us to assist them with theirs. And so my day as you asked is split up between looking for properties for our clients and checking with our team on that, as well as our property managers. So to check on our approvals that we have running, and we'd be getting approvals for anything from extensions, renovations, granny flats, townhouses, and up two blocks of home units, for our clients, and, and then also checking in with the finance team on any finance for purchases, as well as construction loans, we have a real focus because of what we're doing, we have a real focus and expertise in the construction loan area.

Tyrone Shum  

With such busy days being pulled between managing people and property simultaneously, it's important for Charalambous to find a balance so things don't get messy.

Harry Charalambous    

[00:03:19] I try, certainly try and get a balance. And we've got to have a situation where I certainly have quiet time and blocked out time where I'm not answering any... any messages or taking any calls and that sort of thing, because you need time to focus and focus on the next transaction that we want to do as well. So you certainly have to have that space. Otherwise, I find you get too caught up in the doing and not enough in the creating and the planning, which is equally as important as the doing of the current transaction you have going.

Tyrone Shum   

He describes himself as a passive-aggressive investor that uses unique thinking for a win-win situation.

Harry Charalambous   

[00:04:02] I believe I have some aggressive strategies that we implement conservatively. So if that makes sense. So we're, our strategies are quite a little bit creative, a little bit outside the box. However, at the same time, we need to look at those quite conservatively to make sure that we've you know, we've dotted the i's and crossed the T's before going into the transactions. 

Tyrone Shum    

Charalambous grew up in the hustle and bustle of inner-western Sydney where his parents started a family business 

Harry Charalambous     

[00:04:54] The early years were In the inner west of Sydney, so sort of anywhere between the we had a couple of different places that we were living in, and schooling started off in the Ashfield and Concord area. So at the time, we're talking now in the 60s and 70s. And probably into the 80s, for that matter, there were probably 60s and 70s. Living in those areas are fairly, you know, middle class, I suppose you'd want to call them, but we were, you know, typical migrant background, with my parents having at that point in time, fish shops that they were running, so the fish and chip shops that are probably typical for the migrants of that era. And, you know, I was growing up and that's what I knew, and just watching what they were doing is where we grew up. And we moved in, it was in the late 70s. We moved to Turramurra, also in Sydney, but a very different feel, you know, much bigger blocks of land, much leafier aspect and outlook. A different field, different demographic totally. 

Tyrone Shum    

Over the decades, the areas he grew up in have changed drastically, Charalambous explains the most notable changes he’s noticed 

Harry Charalambous   

[00:06:32] The Ashfield, Concord area has probably gone from being in those years more, more of a lower to middle class to the so gentrified now. And it is the land values and the property values now have immensely changed. And they're in much greater demand. And probably a lot more favourable than they were in those years. So it's changed immensely. And certainly, the style of housing in those areas have changed again, typically, in those years, we had some, lots of your bungalows and your post war bungalows that were probably typical, again, for that area. But a lot of those now it's much higher density we've had with zoning changes, and governments wanting to create more housing, much, much higher densities in those areas of the inner west of Sydney, as we move to Turramurra, which is more on the North Shore of Sydney, the blocks were bigger in those days and still are bigger today. The Council in that area, which is Ku-ring-gai Council, is probably more stringent on maintaining the feel, the vibe and feel of the place, there's still much bigger blocks in that location. The feel is more family, probably more family to mid-late teens, that would be in the families, because of the schooling in the area, lots of very good private schools throughout the North Shore of Sydney. And lots of good public schools too throughout the North Shore. So really good schools generally tends to attract families to that area, predominantly for the schooling. Is what’s there.

Tyrone Shum   

Seeing his parents operate their own business and have their own house inspired him to follow suit. 

Harry Charalambous    

[00:09:08] I only ever knew of my parents having their own business. So to me that was a natural progression. It was just what they did and what I did when I left school and I left school at the age of 15. I went on to do an electrical apprenticeship and then by the age of 19 was running my own electrical business. And I had that business till I was 35. And that gave me a really good grounding on property and on renovating and actually how that works, and I did a lot of investing during those years, investing and renovating and selling. And again, typical for you know, the migrants of that era. My parents were buying property, running their business, saving their money buying property throughout that time, and hence, my progression into that. And I actually bought my first property at the age of 18, whilst I was still an apprentice electrician, and that's very much influenced by, by my parents and watching what they did.

Tyrone Shum   

By 35 he had stopped wiring and started buying! He built his property business steadily with the help of a business partner 

Harry Charalambous   

[00:10:53] I got out of the electrical business in 2003. After having said 16 or 17 years, and then actually had a year off, and was doing a little bit of property investing on my own at the time. And I actually got involved in a programme that was geared towards investors and showing people how to invest. And then by 2004, 2005, I was actually helping run and facilitate that programme of teaching, invest investors. And it was just a natural progression. For me, I actually met my current business partner at one of those programmes. And he had a finance background. And we started doing some property transactions together. And then it was from there, we actually put his finance business and what I was doing together and set up planning assist in 2005 and just sort of grew from there I suppose. We kept getting more and more calls for what we were doing. And we started by purely doing finance and a little bit of project management. And that led into then people asking us to acquire the properties for them. So we started doing the acquisition. And then about five years ago, we found that we were struggling with trying to keep the building side of things flowing consistently. So we actually added a building company to ours as well, about five years ago. So it's all sort of grown naturally. And sort of as the demand has required it as well.

Tyrone Shum    

[00:12:39] Fantastic. So it sounds like the company grew quite organically over the years due to the demand, and you're able to meet the supply over a period of time. 

Harry Charalambous   

[00:12:49] Well, yeah, absolutely. Sorry, just on that it was the demand, and it was also probably a little bit of, I suppose meeting a frustration and a little bit, some sometimes with our clients frustration, in say not being able to source properties, and sometimes was our own frustration into not being able to source, you know, consultants or builders or, you know, things to that we needed. And then we were heads, we're meeting our own frustration, we're solving a frustration for our clients, too.

Tyrone Shum   

After saving for three years, his debut into the property game finally came at the ripe age of 18 

Harry Charalambous    

[00:14:07] The first one, as I mentioned, I was an apprentice that was 1984. So I would have been a third-year apprentice at the time, and it just literally been saving for three years. And it just sort of felt like that was the natural next step. And certainly, dad was encouraging me. Dad was a huge influence on you know, my property investing journey. And he was certainly encouraging me to get out there and buy something. And I think at the time, I had a grand total savings of about $20,000. So I went out to see what I could do with that money, which $20,000 was a lot of money in 1984

Tyrone Shum   

[00:14:49] I was going to say, even today $20,000 is still a lot of money.

Harry Charalambous     

[00:14:54] However, I'm not sure $20,000 would buy you a lot in the inner west of Sydney today. But I went out and started looking and what I found was a property in Auburn pretty much the heart of Sydney or the geographical heart of Sydney as it is today, and I bought a fairly typical three-bedroom, single fronted home in Auburn on a standard block for the area, which was quite small, probably sort of 400 or 450 square metres at the time, and purchased that for $59,000. And use my $20,000 to make up a 20% deposit plus some stamp duties plus some legal fees. And then I think my $20,000 was all spent. And that property I actually kept for quite some time, had it rented out for the whole time. And really did some renovations, initially certainly was doing those renovations, myself, and myself and Helen, Helen is my wife and I met Helen in 19...1987. So I owned that property already. However, as tenants were moving out, we would go in there and give it a coat of paint or, you know, when it was time for a new kitchen, we'd organise a new kitchen, buying flat, flat pack kitchens, or buying kitchens that were out of kitchen showrooms that were no longer needed, and doing the renovations ourselves. And we kept that property until 1995 or 96. I think we sold it in 96 for $142,000. And went on to buy other properties with those funds. But it was I think, initially at a $59,000 purchase, had a rental of $80 a week. So it was quite modest at the time, but it certainly, certainly served us well. 

Tyrone Shum    

After a few years in the game, Charalambous is expanding his business beyond the domestic market and is transiting into a bigger ballpark

Harry Charalambous    

[00:17:31] We’ve actually sold quite a few down just during the last few years because we felt the timing was right. And we've put currently a lot of our funds and we shifted into commercial property. So we're probably more focused on commercial and on our transactions that we're doing, we're doing some property options, which we may talk about a bit later. And we have done quite a few of those. And we do continue to do those that we've probably got, I think at the moment, on the commercial side of things, there would be probably 12 to 14, sort of that sort of stage, we've got a couple of offers in there and one or two at the moment that we're selling as well. So we're at that around that sort of level. We're actually just working on a couple too with some rezonings, working with Council on some rezonings and packaging those for development and redevelopment. And I'll again, happy to chat about how we do that. 

Tyrone Shum   

[00:18:40] So are you saying that you've sold off all your residential properties and moved it into commercial? Well, what was the reason behind doing that?

Harry Charalambous     

[00:18:49] We were finding with residential the returns were so much lower. And our opportunities, we actually had a few that we had some good opportunities for on some rezonings and getting some DAs. And we did that and sold them. But we just found the opportunities were better in the commercial sphere. So we moved across into the commercial, we're just, again, as I mentioned, just manufacturing that equity. We were just finding some better opportunities in the commercial sphere so that's where we've shifted at the current time.

Tyrone Shum    

[00:19:20] So to clarify, would you say like in terms of commercial, you had better capital gain or capital growth and also but better rental return? 

Harry Charalambous    

[00:19:32] Absolutely, the rental return is far greater. And we're finding that because of the development upside of what we're doing, then our ongoing equity and manufactured equity is also a lot greater. And because of the level of, you know, we're talking, you know, commercial properties, probably to the value of 20 odd million dollars depending on you know, valuations and the like. You know we can, we can make a difference to those quite substantially pretty easily. We can increase, increase zonings, or increased floor space ratios or increased rents. In our commercial leases, for instance, we've always got annual locked-in rental increases, you know, they just go on every year. And that is increasing our bottom line on an ongoing basis without needing to worry about, you don't get the phone calls from your commercial tenants asking for, you know, tap washers and asking for, you know, blocked toilets or asking for blown globes and that sort of stuff, you just don't get it, they just deal with it themselves.

Tyrone Shum   

The new venture is bursting with opportunity and is an exciting step for Charalambous and his company

Harry Charalambous   

[00:20:52] So we've gone a lot into the commercial end into some cash investments as well, at the moment that we just want to see exactly what this market is going to do with where we're sitting with interest rates. And where we're sitting with the marketplace, we are seeing some opportunities coming back in the resi market. But I feel I'm probably still 12 months before I’d be comfortable to get back into some of the resi stuff. I think we've just seen things start to level off a little bit at the moment. And again, I'll probably be more opportunistic. So I'm just looking for a couple of more opportunities that we'll jump into there. Yeah, but it's and I suppose some of the resi that we do, you know, with what they are, I still consider them their commercial transactions, even though we may be holding residential property. So we may amalgamate two or three neighbouring properties and, you know, do DAs for townhouses or blocks of apartments. And they're what I consider very much commercial transactions, even though they're, you know, on residential land.

Tyrone Shum   

Knowing how much you can risk in an investment is a vital step to ensuring good capital gain. Although Charalambous knows what he’s doing, there have still been some investments where things turned sour.

Harry Charalambous    

[00:22:29] Look, essentially, I'm actually very, very grateful for my time in the industry. And that starts from, as I mentioned when I was doing my apprenticeship because it taught me a lot about the property market. And then my investments, again, we've been, for whatever reason, you know, I consider it very lucky to have generated what we have done out of the property sector. So but one thing that I'm really clear on, and one thing that I always share with people particularly, you know, if I'm presenting on stage, is that I'll tell people that we... there is always risks. And you know, you only need, I only ever invest what you're prepared to risk. It's just you do need to be very, very careful. So some of our transactions if I were to share some of those that went not necessarily the way we wanted them to. We actually worked on a site that was in northwest Sydney, in Kenthurst, so in the hills, area of Sydney, hills district of Sydney, Where we were looking to do a subdivision. And we were working with counsel on doing that and everything complied. The land size was right, the zoning was right when we purchased this property. And then by the time we submitted our DA with Council, they had actually changed their minimum lot size. And it was a real issue for us. We were suddenly holding a block of land that we'd purchased or was a block of land with a house on it, that we'd purchased with the intention of subdividing and on selling. And then we were told by council that that block did no longer comply for a subdivision. It was a major issue for us. 

Tyrone Shum   

Just how did he overcome such a huge problem like that?

Harry Charalambous    

[00:24:33] We ended up doing some work to the existing home and ended up there was certainly a possibility for a second dwelling on the house, which we did. And what that did was recouped some of the funds however, we couldn't subdivide. So those two dwellings had to sell, had to stay on one title. It probably in the end I think was in the vicinity of, we still lost about $115,000. Overall on that project, wow. And it was, at the time, it hurt, it was, it was a lot of money. It still is a lot of money. We’re now talking, that would have been early 2000s. So 2002 2003. So we probably weren't helped in the Sydney market by the fact that 2003 was the top of the market. So we had to get out because we could see the market was going the wrong way. And the lesson from that, for us, was always about understanding that we've purchased this property to do subdivision. And hence, now why we're a lot more careful going into our transactions. And we will just about always set up some form of a due diligence period or some form of an option to give us the time to be able to do our due diligence with counsel and get some answers from counsel and our consultants on what is possible. And to give you an example, that there is one on the market today, a residential block, which we believe is subdivisible. It's, we certainly haven't purchased it and haven't even put an offer in. But it's currently with our town planner, to make sure that we can do what we want to do before we submit any offers. So we just, you've got to be very, very careful. A lot of people just feel that oh it’s a big block or someone's done it next door or someone's done around the corner, or I've done it before, doesn't mean that you can do it today. It was a real concern for us at the time.

Tyrone Shum    

[00:26:55] So counsel changes these things without notice. Is that what happened? Is that why it got caught out? Unfortunately.

Harry Charalambous   

[00:27:02] Yeah, look. They, they generally will give notice, but it depends on where they're at in their planning process. So, unfortunately, with this one, their planning process was quite a way down the track. And they presented it after we'd bought it. However, we hadn't lodged our DA yet, so had our DA been in, our application, development application had been lodged with council, it may have been a different outcome for us.

Tyrone Shum   

When Charalambous took the plunge into joint ventures, his opportunities really began to open up. He used that Aha moment to manufacture more success.

Harry Charalambous     

[00:27:57] What we have done. And what we did do, a lot of and still continue to do is joint ventures. And we've done joint ventures with people, for instance, that have sites that are either subdivisible, or you can do multi-dwelling housing on it. And we actually go in and work with an owner to unlock that potential. And we've done several where, for instance, we've had a property where you can build two dwellings on and we will go in and do that now. The aha moment there came in where we were looking for all these, we're looking for a property looking to do subdivisions, and we could never get the feasibility to work or rarely get the feasibility to work. Then all of a sudden, we went in and started talking to the owners. And in this particular instance, what happened was, I went into an open home, and the agent had to leave. And literally, we got there and the owner had just arrived home. The agent was just leaving, however, I knew the agent, and they said, Is it okay, you know, we've got to go and I said, Yeah, I'll just have a look around the outside. And as I was just finishing up, the owner turned up back home. And then I started talking to the owner. And so I asked her what she wanted to do. You know when she left when she moved out, and she said I look really I want to stay in the area. However, I'm just looking for a smaller home. And the aha moment was, well, if she wants to stay in the area, and she was looking for a smaller home and I feel I can build two on this block. Why doesn't she keep one of these? And so we worked with her and actually built two she kept one and we kept one. However, what we did there, we actually created a recipe of these and said, Well, if this works and people like it, why don't we do more of them. And we've gone on to do 10 or 12 of these now with owners and one of them we actually built four homes and did a profit split, and these work really well. And what I like about them is that they're repeatable. So I can have a formula that I work to, we can tick the boxes. We know what land size we need, we know what the sales are going to be, we can control our construction cost. And we minimise our risk, really important to minimise the risk and learning from that previous experience that I mentioned to you. In these examples, I don't ever buy the land. In fact, I'm never the owner of the property. I just build the dwellings, the owner keeps one, we sell one and we take our profit.

Coming up after the break we discuss the vital importance of mindset has on one's success in property 

Harry Charalambous  

[00:01:52] if your why is purely just because of wanting to create money, then I think you're losing something along the way

The genius way Charalambous found his money-making pattern 

[00:09:22] we paid her a fee to secure the property or to take that property off the market for 12 months. And she retained that fee, even if we didn't proceed with our purchase.

The personal habits that allow him to work more efficiently  

Harry Charalambous  

[00:32:29} you get that time you come back with a clear head, you come back with an open mind, and you're able to think a bit clearer

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

 

Tyrone Shum   

Charalambous got into the property game at a young age but he didn't let fear get in his way. However, there are always going to be external pressures that could derail a beginners' mindset. 

Harry Charalambous    

[00:00:21] Look, it's interesting, at 18 it's probably all okay, I actually found that quite the simple process, other than having the dollars to actually go and do your purchase. I found that quite a simple process. What happens is, though, when you're 18, and you're single, and you do your investing, and you buy a property, that's all going well, as you start to A - get a little bit older, and B - start listening to what other people are telling you. And start getting concerned about what if things don't go well, the fear kicks in, the little voice kicks in, but the doubt kicks in. And I think it's also what I call them, and you may have heard the term before the barbecue talk, you start getting concerned about what if I succeed in this, you know, what happens then, and what if my mates don't like it, or what if you know, the family, the extended family don't like it and all that, the doubt, fear and judgement kicks in. And I think that's where it becomes, you've got to be a bit more careful. 

And also be more careful with the internal dialogue as to why you're creating what you're creating, while you're creating your property portfolio. It's all about the reason why and I actually believe that your why will be 80% of your success. And if your why is purely just because of wanting to create money, then I think you're losing something along the way. It's really stupid. If it's, if I look at my mission, which really is now all about to help others turn their dreams into reality, the Why is just ongoing. And when I get a phone call every day from someone that wants some assistance. You know, when I get an email from someone that says, hey, can you help here, to me, that's all about what's our mission. 

However, in those days where, you know, we've got to understand that some of these investments were done, where we were having 12 and 15 and 16 and 17% interest rates and the fear comes in. It's a very different time. So I think that there's a point there, and I call now to a lot of my clients, because I do some coaching with some clients, and I call it the growing pains, it's the growing pains of your portfolio. So whilst it's quite small, and it's like a child, whilst the child’s small, that's all good, their life's good. There's not a lot happening there, and you're going through the younger years and your formative years. And that's all great, however, as you, you know, hit a different stage of life, and you start getting through some growing pains, it gets quite awkward.

Tyrone Shum    

There will always be people pushing you down, but the most important people to take notice of are the ones pulling you up. Charalambous had a great influence pushing him to do better for himself. 

Harry Charalambous   

[00:04:04] probably the biggest influence, or definitely the biggest influence was my dad in particular, and certainly both my parents just watching the way they did things and watching the way you know, probably with much less education, much less technical knowledge and skill. But watching the portfolio of properties that mum and dad built during those times. That was just a huge influence on me. Certainly, it moulded both my investing journey, as well as my business journey, as well as me personally. It was to be able to see that and to be able to see the values that they hold because you hear a lot of people talk about the property industry and there's this person and there's that person and in the wrong thing by you? Well, I certainly know that the people I've come across in the industry, whether they be real estate agents, whether they be consultants, whether they be builders, we've come across some great people, and we've built a lifetime of friends in the industry. So I think it's, it's an, you've got to, if you're going to seek out some mentors, just seek out those that resonate for you and for your values. And the biggest thing is, you've got to have the similar value. Otherwise, if, if your mentor is suggesting you go left, but you know, your gut instinct is to go, right. It's, there's gonna be internal dialogue, that doesn't work for you there. So you just sought out mentors that have the same values as you do?

Tyrone Shum   

His best advice comes from both people and experience 

Harry Charalambous  

[00:06:16] I think some of the things that have stuck with me is, you know, to keep it simple. You know, start small, you know, without trying to change the world and recreate the wheel, you know, with your first transactions, just get the learnings, the learnings is really important. So it's, I've seen people that, you know, come into their first property deal and you know, may have a home or it may even be before they've bought their own home, and they're looking to do their first property purchase. And, you know, they're looking for that first purchase to be their retirement fund. Just start small, treat it, treat your investing journey, like you do your business journey. So, for me, I started as an apprentice, and I ran a four-year apprenticeship. 

Then when I get into the property industry, I see that as another apprenticeship, you've got to learn by that. You've got to learn from that. So it's invaluable to be able to do that. And I suppose what I shared earlier about, you know, a lot of people believe that you know, their journey is all because of them. And I, as I said earlier, I think it's really all about your team and all about the mentors and all about the people around you. Have a look at the people that you're surrounding yourself with. Make sure your goals, what you want them to be. You know, if someone said to me, what would I do differently? It's probably going to be, you know, start earlier and set bigger goals. Other than that, there's probably not a lot of change. 

Tyrone Shum   

Charalambous has a very unique and interesting way of doing things. His company approach deals as a way to meet owners needs as well as their own. 

Harry Charalambous   

[00:08:49] so there's probably the two main strategies we would run and have run is our joint ventures and our property options and we run them hand in hand. So the example I used in the previous podcast was, you know, where we turned up to open home. And the lady turned up while the owner turned up, just as I was leaving, and we had a chat about what her needs were. So what we did there, we actually took out an option to purchase the property. And we took out a 12-month option, we paid her a fee to secure the property or to take that property off the market for 12 months. And she retained that fee, even if we didn't proceed with our purchase. What that option does is give us the time to one due diligence, but two, because we had 12 months on this particular one, it actually gave us the time to actually do the DA’s and get our approvals for which in that case was going to be two new dwellings. 

So by the time we got to the end of the 12 months, we'd had our approvals in place. Which meant that we could get our property valued based on building two new dwellings that was now a property that had approval for two new dwellings as to a property with just one house on it. So we actually got an increased valuation before we even purchased the property. So from our point of view, the risks the transaction, it makes, it means that we're able to pay the owner in a lot of cases a little bit more because we're not having to pay holding costs for the 12 months. If you imagine paying... I know rates are a bit lower right now. But in a lot of cases, you're paying six and eight and 10% holding cost. And years ago, a lot more. As opposed to just paying the owner we could pay the owner an extra three or 4% on their asking price. However, we haven't had to outlay that money until we've got our do approvals. Yeah. So huge difference.

Tyrone Shum   

[00:11:02] How would an owner Say, for example, she put it on a market to wanting to sell but then have to wait 12 months before she can move? Why would she actually agree to do a deal like this?

Harry Charalambous  

[00:11:14] Yep. So with her, what we did was we actually agreed that in the end, when it came time to actually - the right term is to exercise our option and purchase her property. What we agreed with her was that we actually, rather than purchasing the property and building the two homes, we were actually just going to build the two homes on the land. And she kept one and we keep one now to give you some numbers on this so that the listeners can understand that her home was actually on the market. This is in St Ives in Sydney, her home was on the market for $895,000. We offered to pay her $900,000. And we wanted a 12-month option. And we paid her a 2% option fee. So $900,000 2% is $18,000. Pretty good. So we paid her $18,000. And we've got this property off the market for 12 months. And we can buy it for 900,000. At the end of it. By the end of the 12 months, we got a valuation on the property. And it came in at 1,000,050. So our bank, if we wanted to buy would have lent us the money based on 1,000,050 purchase price or 1,000,050 value. But what we did was we went back to her and said now we can buy this now. And we'll build the two homes and make a profit and everyone's happy. Or if you like we'll build the two homes, you keep one and we'll keep one. And she went that path.

Now she may not have and we were happy to buy it. But she did go down that path where we then turn that option into a joint venture. We built the two homes, those two homes on completion were worth one was worth a little bit more than the other. So one was 1.15. And the other was 1.18. So she actually kept, she stayed in the one worth 1.15. So she went from a property that she was selling for 895,000, 2 years later, because let’s say took us about a year to build it. So two years later, she's in a brand new home in the same location worth $1.15 million. That cost her nothing to build. And we sold the other property for $1.18 million. Now the two properties from our point of view, were about I think was about an 850 or $900,000 investment into that deal. So we've invested 900. And we came out with 1.18. So we make $280,000 in profit. She's moved into a brand new home with $250,000 more than what she was in two years ago. And it's in the same location.

Tyrone Shum    

[00:14:13] And it's her own land as well. So she didn't really have to change addresses.

Harry Charalambous  

[00:14:17] She didn't do anything. She kept the same address. One thing she did need to do was move out whilst we were doing the build. In her case, she actually moved in with her daughter. She was happy. And that's a typical example of how we go from an option to a joint venture. Now we've done somewhere at the end of our option period, we just exercise the option and buy them and do the building ourselves. We've done others where we actually gone straight into a joint venture and never done an option. We've just gone straight in and explained the joint venture to the owners and gone straight in and done a joint venture with them with the intention that they were going to stay there.

Tyrone Shum   

So what exactly does the owner get out of this kind of deal? Why would they undertake this process rather than just selling the house? 

[00:15:08] For instance, had one in St. Ives, we're also not far from that same one, where we were looking to build. We actually had a property, took an option out, it was actually to a bigger property $2 million purchase price. It was a $20,000 option fee. And what we did was we got an approval to build five dwellings on that property. And the owner just wanted to sell. When we went in to look at this property, the first time, the owner was getting offers between 1.8 and 1.9 mil, however, there were people that were just coming in to buy the property and buy it outright. And I actually had a meeting direct with the owner, the agents in the area got to know us quite well. And so the agent was very happy for me to go in and sit down with the agent and the owner and have a meeting. And the owner kept saying to me, that he really wanted $2 million, and he really wanted $2 million. And he repeated that several times. 

And the thing was, you have to listen to what people are saying. I think a lot of people will forget that you know, we're all born with two ears and one mouth, so you should be listening twice as much as you speak. A lot of people just want to keep talking. But if you listen, and this guy kept saying that he wanted $2 million. So in the end, I said, I've come back to him with an offer. And it was all about building this offer so that I could get him $2 million. And we got almost two years under option on this property, we were paying him $2 million. In fact, we got 21 months in the end under option for $2 million. We were paying him $2 million dollars, we gave a $20,000 option fee. 

However, the reason why was during that same conversation when he was saying he wanted $2 million. This was in March of this particularly when I was meeting with him. And he told me that his daughter was in year 11. So I knew that he would want to keep some stability for his daughter until she finished her HSC a year and a half later. So I suggested to him that we would let him stay in the home for a year and a half not disturb his daughter. At the end of that time, he gets his $2 million. And that gives us the time to get all our approvals in place. And he was wrapped because it meant that it gave him certainty that he was going to get these $2 million. At the end, it meant that he could go looking for a property. And in fact, when he was buying a property, he went and bought acreage, when he was buying a property, he actually asked me to go and have a look at the property for him and give him my thoughts.

Harry Charalambous 

[00:18:11] Because back then I was very happy to do it. And we just do this, we built a relationship. And all this is about relationships. When you've heard me talk about my team, you've heard me talk about mentors. And now we talked about doing these joint ventures and I talk to you about speaking to the owners directly, working out what the owner wants seeing if... we can’t always deliver. Sometimes if people have an unrealistic expectation and we can't deliver, we've got to walk away. But all this is about relationships. And with that $20,000 option fee that I paid him. I actually paid that in instalments I think it was $5,000 every three months or something that I was giving him for the first 12 months to give him his $20,000. And what it meant was every three months, I'd go around and knock on the door. And I'd have a check for $5,000 for him. 

And so, by the time the three months rolled around, and I'd knock on the door, he was very excited because Harry was turning up with $5,000. So he got comfortable with the fact that I was just turning up and I was giving him my money as I told him I would, and they’d have the kettle on he’d and sit down and we'd have a cup of tea or a cup of coffee and a bit of afternoon tea together. But we built a relationship so that he trusted what we were doing. It's just all relationships. This whole industry is relationships. And if you can build that. I now get some of these people that we've done joint ventures with, I now get phone calls from their friends and their family and their relatives and all that their neighbours saying oh look you work with a neighbour or you work with my friend or referred by this person. We'd be interested in doing something similar

Tyrone Shum   

If you thought that was amazing, wait until you hear the outcome! Charalambous made a tidy profit on the deal without having to build anything! 

Harry Charalambous   

[00:20:08] we actually settled it at $2 million. And we were going to build the five dwellings. But last minute, we got an offer from someone else that actually bought it or about to sell it for $2 million. We actually never ended up settling we're very close to we told them, we would. But last minute, we got an offer from someone that came in with the DEA approval that we had for the five dwellings, and they bought our option. And they bought they paid us or they paid for the whole property 2.425. And what that meant was the owner got his 2 million, and we got the 425,000

Tyrone Shum    

[00:20:47] with a very small outlay of around $20,000 $20,000 plus your time involved in doing the DA That's right, that is an amazing success story.

Harry Charalambous  

[00:20:58] They’re good fun, I like those.

Tyrone Shum    

There are a few aspects needed to implement a strategy like this yourself, Charalambous shares the secret behind the strategy. 

Harry Charalambous   

[00:21:40]  I mean, we now run a business where we do our own DA’s. So that's quite a simple process for us. However, initially, we were just outsourcing all that we were just going to town planners and going to our architects, and working out how to do it. So it was, you know, certainly can, a lot of it can be outsourced. And when I started doing it, I mean, I was doing some of this, you know, whilst I was still running my previous business. So again, because I'm suggesting that people start slowly and start small. I got an email from one of my clients yesterday, who I actually have done a little bit of mentoring with him. And he's now sent me an email yesterday and he said, I've got someone that's ready to do a joint venture with me, can you just assist me with getting the initial documentation in place, so doing the joint venture documentation and his agreement and things like that. So he's, he's off doing his own thing. In fact, he's an architect, so he'll design the dwellings. However, he knows when to ask for assistance. 

So if you've got the skill in say doing the designs, just get assistance in putting the agreements in place. Or if you're, if you understand legals, and you know how to do the agreements, however, you just need some skill in design, and just outsource that piece. stick to what you're good at, stick to what you enjoy doing. And just outsource the others. It's a bit like, some people with investment properties, like to manage it themselves. Other people get a property manager. So it's the same thing, just stick to the bits you enjoy doing. That's really important. It's, for me, for instance, in our business, I don't do the accounts. It's not what I enjoy doing. And it's not to say that someone doesn't, the person that does their accounts, enjoys doing accounts. And I'm really grateful that I have people that enjoy doing accounts. 

I enjoy being out there, getting out there talking to people, finding out what people's needs are and seeing if we can meet them. You know, and a lot of time, people say you can create these transactions. I don't actually believe I create them. I believe I'm just putting myself in a position where I'm attracting them. So you've got to get them to do that. You've got to get clear about two goals. You've got to get clear about what you're looking for. And you've got to take the action. Now, initially for us, as I mentioned, we were out there looking at open homes talking to agents on a regular basis. We actually did, because we did a lot of these joint ventures in Ku-ring-gai Council. So through Turramurra, Wahroonga, st Ives through that area. We actually did in the local paper, which is the National times which is the most widely read paper in this area. We did 10,000 leaflets and we actually just put them in every newspaper that went out and we got the North Shore times as an insert with one of our brochures.

 And yeah we outlaid a little bit of money. However, those brochures we were getting calls off them for the next six months. People kept those brochures, and just called us so it's about taking the action. We did some brochures and just went around and look for the blocks that we thought were suitable and did letterbox drops? Again, people just pinned their our brochure up on their fridge and just kept calling us. You may not want to walk the streets and do the brochures, so just get someone to deliver them for you. Depends what works for you. And depends how serious you are about it. 

Some people don't want to do that some people are happy just to buy a couple of investment properties and have them grow for them. But as I mentioned at the start, I wanted to manufacture some equity, and I wanted to accelerate the portfolio a lot quicker, the commercial sites that were involved in, they've, you know, they've got the potential of - far out this residential stuff is I really enjoyed because it helps me help others. But the commercial things I mean, I'm negotiating on some sales at the moment. And I negotiated one where I increased the price of the sale price of one of them by a million dollars whilst I was driving home. Just in a negotiation in the car on the way home. 

Tyrone Shum   

[00:26:11] We touched a little bit that you switch your portfolio from residential, mostly to commercial transactions. Can we talk a little bit more about the reasons why and also how you've done that as well?

Harry Charalambous 

[00:26:26] Sure. If I give you an example of and I'll use the one where our offices and we're sitting at the moment. And it's we initially when we started our business, we wanted to find somewhere where we could run the business from, however, we said, if we're going to do that, let's have that be something that we can add some value to. And we went out and I was actually just driving, driving down the highway in Turramurra and saw for sale sign. And it was on a property where I happen to know the owner. And the reason why I knew him it was because a few years earlier, I had done electrical work for him on a shop that he owned that used to be it used to be a takeaway. So I literally went and knocked on his door, and his name was Bill and I said, Hey, Bill, how you going? And we had a bit of a discussion. And I said, Look, I see you selling your property. And he said, Yes, I am. And I said look, I'm looking to buy property in the area. So we had a discussion and probably took us a week or 10 days and with a toing and froing. And we came to an agreement on buying his property.

Now we then arranged to get access during settlement. We had a three-month settlement, we agreed on price, we had a three-month settlement. And during that three months, we went in and refurbish the property, he was actually running a business downstairs and living in a unit in an apartment above the business. We've closed, we've got rid of the stairs, close the flooring renovated the two, top and bottom, we run our office from upstairs, and we've had a tenant downstairs, since the very first day in 2005, when we bought the property, the same tenant that's been there. And the difference is that's been great from a cash flow point of view. And we've actually since gone on to buy properties both sides of this as well. And we've amalgamated this site now to become its own development site. 

However, the difference is what we bought was a shop with an office above but the intention was that we knew we could work with Council on getting the rezoning done. And in the time that we've owned this has gone from being shopped at what's known as shop top housing to being a commercial zoning with a six-storey height limit. So this property has gone from the from...  just talk of stick to the one property has gone from having a value of a purchase price of $820,000. Today, looking at being sold for somewhere in the vicinity of $4 million dollars, and it's probably more than that. And really we've run our business from it for the last 10 or 12 years. We did a renovation in 2005. But where the value added has come in, is because of the rezoning that we worked with council to get on six stories and then amalgamated with next door and now on selling it to someone that wants to actually develop it and do the six stories. And that, to me is really minimising my risk from just having one tenant down there that's basically paid the mortgage since 2005. However, when we sell it, we end up with a 400%

Tyrone Shum   

[00:29:57] that's a huge upside is Especially, it sounds like going from say residential or mixed residential or mixed commercial I should say to a full commercial has a huge upside then when you work on these kinds of projects is that what would be the ultimate goal most of the time to actually take these kind of properties and turn them into

Harry Charalambous    

[00:30:19] I suppose simplistically, the biggest upside comes in increasing your density. And to keep it simple, so people can understand that it's just increasing the density. So if you go from residential on something, which is a single residential, to being able to do a subdivision, you're increasing the density. In this instance, we've gone from something that was zoned two storeys to something that is now designed for six storeys. And it's also gone from a floor space ratio of one to one, which means if you've got a block of land, which is 1000 square metres, in size, you can build 1000 square metres of building, we've rezoned this from one to one, to two to one, which means we've got 1000 square metres of land, we can build 2000 square metres of building. So and obviously that's over multi-stories, not on the ground. So the increased density is where you make your manufacturer equity, it's always about the increased density. So whether that is floor space ratios, extra stories, or subdivisions, it's always the same outcome. It's increased density will - generally increased densities, increased equity.

Tyrone Shum   

Personal habits are essential when it comes to self-care and keeping a clear headspace. Charalambous has unlocked the perfect pattern for him that gives him extra time and clarity during the day. 

Harry Charalambous   

[00:32:06] Time, I mentioned earlier about blocking in the previous podcast blocking time out for myself in some quiet time. And my business partner often talks about the times where the is successes created the most is actually when I go on holidays. Because what happens is, you get that time you come back with a clear head, you come back with an open mind, and you're able to think a bit clearer. And the way I do that day-to-day is every morning, 365 days of the year, my alarm clock goes off at 4:50 am. And that time, I'm normally out of bed, then out the door by about 10, past five, quarter past five. And between 5:15 and 6:15. I have one hour and I'll go for a walk. And I'll be listening and it could be listening to my podcasts, it could be listening to a motivational speaker, but it's my time. It's whatever I choose to do during that one hour. And in my walk my morning walk my morning exercise. Start the day with my exercise, start the day with some quiet time. And also with some form of motivational. And it could be something of interest or motivation to me. That one habit and you know, people talk about how they get so much done. And if you add one hour a day, to your day, that’s giving you 365 hours a week. That is 365 hours a year sorry, that extra, that's actually 9 40 hour weeks extra that you get over a one year period, which is equivalent to two extra months. Yes. To get so that one hour or one hour of quiet time to me. And for me made a huge difference. And I on the odd occasion if I miss it. Yeah, my wife knows by the afternoon, she says you better go for your walk. You're getting grumpy.

In his free time, he loves listening to motivational speakers and shares some of his favourites 

Harry Charalambous    

[00:34:47] Look, I mean, a lot of the motivational speakers you know that you would hear out there certainly guys like Bob Proctor. I like from a motivational point of view. Brian Tracy's great business-wise, you know, most of your listeners, I imagine, would have heard and listen to some of the Tony Robbins stuff. You know, they're just, they're just classics, I think they are timeless messages that have got so much to teach us. And the more you listen to them if you want to, if people want to drill down a little bit deeper into their own personal habits, you know, guys like Wayne Dyer, and Deepak Chopra, really, really good from a personal point of view. 

Thank you to Harry Charalambous, our guest on this episode of Property Investory.

Also, head over to our website at propertyinvestory.com to get the show notes for a secret segment about getting through those growing pains of starting out in property.