With over 600 purchases during his 50 years in the market, Young has seen and tried every trick in the property investor handbook. Aiming to create 90,000 millionaires out of average Australians using property as a vehicle, he openly divulges his expansive knowledge of the market and what you can learn from his journey as a successful investor.

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I bought and sold 664 times before I retired at 27 and then I realized that while I had a lot of activity, my profitability would have been greater had I just kept a couple of dozen.

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

 

I’m Tyrone Shum and in this episode on Property Investory we’re speaking with founder of the millionaire's Property Club, Kevin Young, who retired as a millionaire at the early age of 27. You’ll find out how he accumulated over 600 properties in his portfolio and about the amazing life he’s able to live now he has fulfilled his goals!

Young has been in the Australian market for over 50 years. During that time he has purchased more than 650 properties, become a millionaire under 30 and started his very own property club. 

I’m dedicated to achieving my goals and I think most successful people have written goals and when I started The Property Club 23 years ago, my goal then was to create 90,000 millionaires so I think we actually have created wealth [inaudible 0:00:19] record it’ll be in the Guinness Book of Records soon with over 5,000.  So, that’s what’s driving me.

With so much experience under his belt, what does an average day look like for him?

Emails, emails, emails unfortunately, phone calls, texts... but I love it because it’s a free club I’m always getting people to come to me with questions of how to do this or how to do that, and it’s great at 70 to be able help so many people.

He is famous for being Australia’s most successful property investor, but it didn’t start out that way.

I’ve got more properties than anyone else in Australia and I started out poor and I had to learn the correct way to do things which is not the way that people are taught at schools or banks teach you or even magazines and what you see in the press teach you.  So, I reckon I made more mistakes in property and finance than everyone, but from those learnings I’ve been able to pass them on to club members.

Young’s portfolio sits in the hundreds, a feat that few of us could ever imagine.

I bought and sold 664 times before I retired at 27 and then I realized that while I had a lot of activity, my profitability would have been greater had I just kept a couple of dozen.  So, I changed my philosophy when I was retired and I stopped selling and just kept them and then I drank the rising equity in those properties, which is really the fundamental lesson we’ve got in the club is that you buy and hold, never sell.  You just borrow at increased equity and that way the money you’re spending is completely tax free and as Kerry Packer said, Australia’s richest man, you can’t get rich paying tax. So, what you going to do, you’re going to do it legally not illegally.

His advice for any investor is to keep a balanced portfolio.

I think the second biggest mistake that investors make and I’m talking about eight out of ten of them, they only retire on two or less properties which means they’re on a park bench in a poor life.  You’ve got to diversify and therein lies the big problem for the average investor.  Because they are comfortable with their own postcode, very uncomfortable buying outside it and extremely uncomfortable and vulnerable if they buy interstate.

Whereas you know with the experience of the club I look at all states, all the time and we have the ability to rotate to where we think it’s coming out of a sleepy period and into a buy cycle whereas in the wrong area, like an example is a Sydney boom between 2000 and the one in 2004 the rise in prices then is greater than the price rise we had experienced recently.  But then it was going to enter into its slow period because we knew there was a whole lot of growth coming through in construction and with more supply it would flatten out that rate of price growth.

With over 50 years of property investing experience and the well-established education base of his Property Club, Young is the definitive voice of authority for those looking to buy investment properties.

So, we moved our people away from Sydney for about five or six years into other areas but if someone was investing in Sydney they would have no other choice rather than keep on buying in Sydney and seeing no growth for that five or six years until it started to come around again.  So, diversifying is the second biggest tip I can give anyone but it’s fraught with danger and you really need a lot of research.  There’s so many real estate agents out there, the property marketers that are vultures that get big commissions from selling overpriced properties in the wrong area for capital growth and the wrong area for tenants and with the marketing money they can get a lot of people to be little bunnies in the spotlight, really had the track coming at them. 

They sign up without that research now since 1999 we’ve been putting submissions to state and federal governments that would stop this completely.  We’ve asked them to do what we do in the club and that is print off everything that gets sold in that radius of the property and it’s in writing so we can sue if it’s wrong but it gives a buyer good comfort that they know what prices are and various state and federal governments, just refusing to introduce that very simple law, which would stop people getting ripped off, would enable people to buy outside their own postcode with confidence because they wouldn’t get trapped.

Young moved around a lot in his childhood, but this only brought him experience with more properties and even more people.

My dad always rented and was a serviceman in washing machines and refrigeration.  Moved around a lot, I think we moved about 16 times.  I went to school first off in Kandos, then Cessnock, then in Hornsby, and then for my last two years in primary school and all of high school I was in Bega.  Still got mates from primary school and high school from Bega. In Bega I lived down East Stripe in the Australian school history, by the way, but that might be another story.

So, then I left school in ’64 and I studied in the main roads [inaudible 0:06:55] for about 12 months and then I came to Brisbane for a holiday in the summer thinking I’d be extremely hot and uncomfortable and found it actually is cooler is Brisbane, as long as you get near the water and it brings in a nor-easter.  So, I moved straight into Brisbane and lucky for me, I was always poor and my parents never had anything so I had to work three jobs to get the money.

By working hard, he eventually saved enough of his own money to begin his property journey.

But when I did I was just lucky that I bought at the right time and you always get buyer’s remorse and for six months I worried that I had bought the wrong sort of property.  I bought [inaudible 0:07:35] hadn’t done before research.  I was compulsive, compulsive and I got contacted by someone who offered me double what I had paid for it and so I just picked, luckily, the right area and the right part in the cycle.  Then I went and bought again and again six months later doubled again.

Wow, and what year was this?

That was about 1968 or 1969, around there.  

Was this in Queensland or Brisbane you’re talking about?

Yes, it was in Brisbane and I bought right on the outer edge, which I don’t recommend.  I didn’t have a list of rules then and I just bought compulsively.  I bought what I could afford I suppose as well.  So, luck was on my side because I had a positive view of property beforehand but it really, really motivated me to get more involved in property then.

At such a young age Young had to really work hard to even begin his property investment journey; but luckily things began to pick up from there.

I was 21.  So, yeah I had three jobs to get the money together to buy those first two properties, then I bought some more properties and I had built a milk run up and sold that for money and built a bigger one up and sold that for money and that cash flow, I had $2,300.00 in the bank and I thought I’ll go selling property full-time so I gave my notice at social security and for three months all I earned was $230.00, I’d made one sale and my $2,300.00 was gone. Luckily again, I was due to get the sack, I didn’t know it, but I was due to get the sack because I only had one sale in three months. 

I could have walked away with my tail between legs if that had happened but that weekend as it would happen I made four sales and I was away and within probably six months I’d been continuously the top salesman for the organization and they promoted me to sales manager, the youngest they’d ever had.

As some of our other expert guests here at Property Investory have thought, he believes that the best education you can get in property investment is through life, not university.

I went to high school in Bega and I was good at economics and math which you always use for the rest of your life.  Had a great time there.  I never went to university.  I think people go to university so they can be employed by people who don’t.  [laughing] University of hard knocks is the best university, you learn on the street.

Although his father was never particularly interested in property, Young was never short of mentors in his youth.

My mum was all very keen on property and urging dad to buy a house and of course he never would and we had a friend, George Britton who was a real estate agent in Bega and I just loved going there and listening to his stories, I think he thought I was interested in his daughter.  I was more interested in his stories and he’d tell me that someone had bought this shop or this farm or this house and how many years later they’d turned around and doubled again within ten year.  He had records going a lot back before the second World War.

This influence from an early age gave him the inspiration and the information he needed to begin his property investment journey.

So, I’ve got a really good grounding in the facts that property does double every seven to ten years and it amazes me now to look in the media and see them getting all hot and bothered about a property boom, will there be a bust because properties doubled in the last ten years and it’s a joke because it always has and it always will because population is going which is the demand but there’s no more land and what’s left they want more money for it and of course the capacity to pay is always going to go up. So, don’t believe what you see in the papers obviously.

The media tends to have a different point of view compared to what property investors do. It’s good to keep a finger on the pulse, but at the same time you need to do your due diligence.

We have national conferences every year and I think we’re coming up for our 23rd this year, next year rather, in March.  But we’ve had some good speakers.  One of them was Mark Bouris from Yellow Brick Road and the TV show.  Also, Dave Koch and both of them said the same thing.  When they’re writing an article for TV or radio or newspapers they’ve got to entertain and the more sensational it is the better and they don’t see their job as an educator.  So, this is straight from authority, you know don’t get your education from the media.

So, where does the average investor get their education from and there’s nowhere.  We tried to get a course into the New South Wales School System and we tried for six months.  I was going to get an economics teacher who we’d made a millionaire to go around all the high schools and teach them good debt, bad debt and how to manage their money and how to focus on creating wealth early.  It took six months and then it came back from Minister, no, and I was going to pay his fee and his car and his time to go around.  They came back and said no because you might give someone advice, and they might leave school and they might get bankrupt and sue the education department.

So, we were just dumbstruck, it was like having these many hundreds of thousands of kids churning out every year, keep them dumb.  Don’t educate them in how to get on in life and create wealth and avoid the traps, because someone might come back and sue you.

Yeah, I totally understand from that point of view and I wish, as well when I went to school I was taught those basic foundations of money, money management debt and also assets as well, assets and liabilities.  I think it would be a great thing if the school system just educated on the basics of those things because there are so many kids out there right now who don’t understand and they get themselves into a lot of debt and don’t save.  Then that’s where they kind of get started investing in property, especially if you’re living in Sydney or living somewhere in Australia that has a very high cost of living and the average price of properties are over a $1 million then you don’t know where to start because people go wow.  If you’re earning an average of $70,000.00 a year and you see the properties are a $1 million how do you get into a market like that?

It’s very simple to explain too Tyrone because they got very complex things they’re supposed to be teaching you in schools like state schools and all the other calc class.  I’ve never used that again since I left school.

But, we find no matter what the IQ of people who come into the class, they grasp the principles very quickly because they’re very basic simple things and people say wow, that’s pretty logic.  Like when I was saying either buying or owning a home, the great Australian dream is the great Australian nightmare.  Yet from the time they’re even in school before they even leave school they’re drummed into them the first home buy, you must get your first home.  It takes you 25 years to pay it off and you’re using after tax dollars to pay it off and you got all the repairs and maintenance that goes with usually a poorer place that you bought, the cheaper place, an older place and you wonder why you retire on a pension because you’ve just gone down the wrong street.

Tyrone Shum:

Coming up next you’ll hear Young’s journey to becoming a property investor...

But with no money, I had to scrimp and save - and it wasn’t enough to get the deposit.

The worst investing moment he ever witnessed in 50 years.

At the same time, he stopped paying the mortgage and never contacted the bank, never said a thing to them, eventual break-up of his marriage, she left him.

As well as the a-ha moment that sent Young grinning.

We predicted Sydney in 2000 and between 2001 and 2004 it went up about 23% every year.

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

Enjoying this episode? Subscribe to Property Investory now on iTunes to listen to more of our guests’ inspiring stories and strategies for success! Don’t forget to leave a great rating and review for us while you’re there, to spread the good word about the podcast. For more information and more of our content, you can visit our website at www.propertyinvestory.com. 

The beginning of Young’s investment journey was rocky. With little money and even less time, he had to use all his skill and knowledge to get into the market.

It was just that I had that yearning from when I was a kid because I had the knowledge that we wanted to give everyone and picks the kids’ school.  Keep an eye on the prices and you’ll see it’s pretty normal they double every seven to ten years.  With low inflation now we’re saying it’s more like ten to twelve years but with lower inflation you don’t need as much capital growth for the same good lifestyle so it sort of balances itself out.

But with no money I had to scrimp and save and it wasn’t enough to get the deposit so I went and joined the Citizens Military Force so Wednesday nights I got paid tax free dollars for that.  Once a month I’d have the weekend away and I’d get tax free dollars for that.  At the same time, I got on with this guy that was selling his milk run and I got him to finance me and so I worked six days a week on the milk run, come home have a shower and go to work, finish work, come home go straight to bed, wake up at midnight and go out on the run, that was six days a week.

On Friday nights, there was no sleep at all because by the time you came home you had to get ready to get the car and go in and load up with milk and go do a double run for Saturday and Sunday as well.  So, at the end of that 12 months I turned around and sold the milk run which then gave me the cash to buy the first property and I was still there working Citizens Military Force and my day job and then I sold that for double the money that I paid for it and used that cash to then upgrade to a better property and again it was a bit further out and I was breaking the rules that I know now. But again, I was just lucky that the tide had turned in Brisbane and it was going through its up cycle and of course all areas go through up, flat and down.  I could have bought when it was going at a down cycle and still be working at Social Security.

Was that a residential property that you bought, firstly?

The first one was an industrial one and the second one was a residential one.

It’s unusual for a property investor to swap from industrial to residential, let alone as their first purchase. But he believes that as long as you’re careful, anything can be achieved.

Well I don’t recommend they do either but I do like commercial and industrial but you should be very, very, very careful in choosing it because if you get the wrong sort of property, you could be without a tenant for six, twelve months and go belly up.  Whereas, with the residential property all you got to do is halve your rents and you’ll have them line up around the block to take the property so I’m aware that I’m using other people’s money and they’re future in the club so I’ve got to be careful or I just recommend the goldbricks to them rather than more risky type of investments. So, that rules out commercial and industrial.

Although he eventually doubled its profit, Young faced the challenge of finding tenants for his first property.

No, I had to find them and didn’t take long and luckily both times fortune smiled on me I guess, obviously if you work hard you make your own luck, I think, and I was very lucky.

It would be interesting to know because obviously from 1960’s all the way to 2010’s, now obviously, as you say, it’s doubled over time so it would be actually interesting to see has you said, it proves the theory that properties doubling every seven to ten years and its goes exponentially quite some bit.   

Both those properties have been subdivided since and completely changed in character so had I not sold I’m sure they would have been outstanding investments.

A goldmine I guess you could say.

Because the thing is I guess though with this is that there’s an opportunity cost in keeping it.  Because I sold it I was able to cash out and then grub stake myself into real estate with that $2,300.00 and had I kept them, I wouldn’t have known to go into property because I wouldn’t have been able to pay my bills and live without any sales coming through.

Young attributes property as the investment vehicle that made his success, which was fuelled by the passionate obsession behind it.

I think you stick to what you know and I’d spent, Thomas Levin [ph] and I had a dream to get seven properties.  I’d feature the properties on my wall, when we shifted I’d take the photo with me and so if you have an aim you get there because there’s 100,000 bits of information hits your brain every second and it just goes and gets into a resub department of your brain somewhere.  But once you’ve written down a goal, it suddenly has a place to put relevant data so it’s all done subconsciously so as the information comes along through to you it sticks.  Because I had the goal of the properties, every time I’d hear or see something about property, it would hit my brain and stay there and I’d write it down.

I think this is why people are fixated on achieving success.  They’ve written it down and they’re getting all this information that makes it easy for them to be a success in their business.  So, I think if I was keen on selling ice creams I would have written it down and then I would have got a whole of information on successful people selling ice creams and I would have been successful selling ice creams.

This ability to sort through and retain any important information or goals is one of Young’s principal teaching topics in Property Club.

That’s one of big things we teach our members is log analyst, we call it the backup list.  Things you want to achieve today but things you want to achieve this week, things you want to achieve this month, things you want to achieve in six months, things you want to achieve in 12 months and five years and ten.  Then, put it in your sock drawer or your toilet drawer wherever you want it, maybe you can see it every day.  That reinforces it in your mind and it reinforces your subconscious to keep looking for these things that are relevant and when I first met my wife I got her to do that and she did separate to me and then we put it together and she said we’ll never achieve that goal of what we’ve written down and agreed on in 12 months.  We’ll never achieve it.

But, because we had it written down we focused on things that made it easier to achieve.  We actually achieved the 12-month goal in six months so she became a quick convert to writing things down and having goals.  Your goals can be all sorts of things, they can be money, they can be business, they can be family related.

This habit of writing your goals has proved effective over many of our guests and the people that they help; and it’s all down to your subconscious.

Particularly if you see it every day, that’s why it’s got to be in your sock drawer or your toilet drawer, wherever you shave, whatever that you see every day.  You’ve only got to scan it because your subconscious reads quicker than you do and it just reinforces all those things on your list without taking the time to actually read them.

The worst property investment moment that he has witnessed as leader of the Property Club was during the GFC.

Only thing I can think of had a bad investing moment, I’m busily trying to think of some but in the club, we have had one.  It was quite an expensive development down on the Gold Coast overlooking the whole of the Gold Coast and to the ocean, it was a first-class development but then had a premiere, opened it and it was on the 6 o’clock news and he said, I think, best investments are high on a hill, pretty expensive, because they’ll always be the most expensive and the views you can’t beat them.  Everything was fine and I think our club members probably bought about half of the estate.

Then the financial crisis hit.  We never had a GFC, I can’t believe that people keep saying there’s a GFC. You go overseas and they say what terrible financial crisis, it was just a northern hemisphere financial crisis primarily America, it wasn’t Canada and Europe. It wasn’t in South America, it wasn’t in Asia, it wasn’t in New Zealand, wasn’t in Australia, wasn’t in China, wasn’t in India, rather overreacted and caused a banking monopoly here and they misused their powers and they foreclosed on a lot of people who had shares in the banks, in the stock market.

So, it caused, one guy who wasn’t a club member, he was a truck driver to go bankrupt.  So, it was mortgage in possession on his property which I guess he learned his lessons.  At the same time one of our members with mortgage in possession as well and he just hadn’t listened to the advice that we’d given him.  What we’d said to him was, I think he was 72, we said look, all you’ve got is your home and if you want to get into property it’s risky, given your age and all the circumstances but we said we’ll do is get you into a good quality property that will double in the ten to 12 years.

Young helped this member out financially through opening a line of credit so he could make ends meet. However this would be where it all really went downhill for him.

We did a cash flow on it and he might have been $100 a week short so we said what we’ll do, we’ll organize a line of credit just for the $100 so it’ll put change in your pocket, it’ll cover all your outgoings and you’ll be fine.  So, I think that came to about $50,000.00 as a standby line of credit.  The place came in and valued about $200,000.00 or $250,000.00 more than the price that we negotiated.  Unbeknownst to me he extended that line credit for $250,000.00.

Then, here’s a bit of a lesson for you.  He did a silly thing, he was an architect, he went and resigned, he contacted in son in Canada and said I’ll fly you out business class and have a look at your debt and he then also went about and spent $60,000.00 upgrading his home which was in a regional country area.  Which is overcapitalising it and never got that money back.

At the same time, he stopped paying the mortgage and never contacted the bank, never said a thing to them, eventual break-up of his marriage, she left him, and of course then the banks moved in and went mortgage in possession.  So, those two event, mortgage in possession sales, right with the Rudd financial crisis really put a burning tire around that development and prices are still stabilizing now as a result of that. Because once the values go around in the future and they see something sold for two-thirds of what it should have then that becomes the line in the sand that they use for valuation.  So, it’s difficult for someone selling in the future to get more than two-thirds of their purchase price.  That is definitely the worst experience that I’ve come across.

He then learned that you really need to do the right research and have the right information before making property investment choices.

Well this is a problem of buying outside your postcode because if you’re paying over the market you haven’t done your research properly or the seller has kept you from that information and that’s why surrounding sales should be made, it’s easy to do, we do it with every single property.  What we do, we get three independent lending agents to estimate what the rent will be and that’s where some people are confounded, which is that truck driver, I don’t know his circumstances, he wasn’t a club member.  But two things would have happened.  He wouldn’t have got the rent that he thought, the Office of Fair Trading wouldn’t have been able to sue the market because they normally do these things verbally and the second thing is that his cash flow hadn’t been done properly I would imagine and he didn’t have a piggy bank.

The piggy bank is a great thing to keep and we send an email out to our members twice a year, saying the piggy bank is not to be used for your own personal use, it’s just there as standby money if you lose your job for six months or six weeks or whatever, there’s no panic, you can dip into your line of credit, it’s a tax deduction and you keep your property.  So, he obviously didn’t have that piggy bank, couldn’t make his repayments and with mortgage in possession and that hurt everyone else.

For Young, his several a-ha moments over 50 years have all come from predicting the booms of Australia’s capital city property markets.

Goodness me, I’ve been in business 50 years so, I think I’ve worked for everything that I’ve got so it hasn’t been an aha something’s come to me like I won the lottery or something.  I think capital growth, I put a lot of research into the area before an aha moment so I know it’s coming.  For instance, when we started the club in 1994 and 1995 I picked inner Brisbane and I said it’s going to be flat for the next four or five years and then it’s going to double in the next four years.

I had based that just on the supply that was coming into the market, the prices and the population movements and stuff.  Because I was new to the members at that stage, when we passed through the four to five years of pretty flat growth, I think the prices were $136,000.00 and going to about $186,000.00 they wondered whether that boom was going to come. Between 1999 and 2003 property prices doubled and then I turned around and said well they're going to double again between 2003 and 2006 and they did.

I’ve done that for every market around Australia.  We predicted Sydney in 2000 and between 2001 and 2004 it went up about 23% every year.  We did that in Melbourne, Perth, Darwin - not Cairns, Cairns was a disappointment for us because it was caught by the Rudd Financial Crisis and the three major developers up there invested heavily in the share market.  So, when the banks used their monopoly powers to margin call they had to sell everything to meet the capital that they had borrowed and the capital was then listed on the value of the shares.

Therefore that’s the reason why they couldn’t succeed in that development.

They had to forsell all their Cairns developments at foresell prices to avoid going under.  Two of them did actually go belly up.  So, with the flood of this stock on the market, Cairns really suffered and we had a number of investors that had bought Cairns, not for an investment but they liked the high standard construction up there and the idea of retiring there, or having a property they could go to for six months of the year or whatever.

So, it didn’t hurt them financially because it was part of portfolio properties and was organized around their retirement so they had a pretty few lean years, about four or five years where just nothing happened.  Cairns now has just been rising over the last three years.

This aptitude for market trends resides with Young’s high school love of maths.

Yeah, I did higher maths in high school, I did Math 3 which is Math 1 and Math 2 combined, not many people do that.  So, I love math, I love trends, I love using historical data and overlaying it over a lot of associated influences on prices and basically a few instances like this I call it the story of bananas. Bananas are selling for about $2.00 a kg but then the cyclone comes through and wipes out Queensland bananas, you’ve only got a limited supply coming on the market from New South Wales but the limited supply, and you had a rising population, what happens to the price?  It goes from $2.00 to $7.00 a kg.  But next year with there’s no cyclone and the batch of bananas are taken down they come into the market and the price returns to $2.00.  So, that really is the understanding of everything.  It’s the supply and demand.

So, back in 2005 at our national conference, I was on stage, I was videoed so I’ve got the proof I became the only person in the world that would predict the American financial crisis and knew the cause of it.  I said it’ll happen three years from today, then I said three years and five months from today the Australian Sheep Market is going to crash and on song in November in 2008 the Australian Sheep Market crashed. I believe that’s the only time ever that it’s crashed in November and in 2011 I predicted this last Christmas shear market crash.  Although I was a little bit out, I said it would crash before Christmas day and it didn’t, it crashed in the week after Christmas.

That was pretty close.

Yeah, so I have all my predictions now up to 2021, but your listeners will have to come to my conference to hear that.  So, I give my predictions out to club members who are bored or go to my conference.

That would be good.  Well, maybe we could actually talk about that in the later part of our podcast here and share with them about your conference as well.  Well, we’re getting pretty much close to the end of this pod.  We’re actually probably wanting to come back.  I’d like to probably invite you back again for a second part of this interview Kevin to talk a little bit more about your strategy that we’ve been talking about and how you’ve been able to accumulate so many properties in the period of time that you’ve been in the market.  

So, maybe what we could do is on this particular episode we’ll wrap it up right now and then also too we’ll come back at a later stage to talk a little bit about your strategy.  How’s that sound Kevin?

Well Tyrone we’ve both got the same aim.  You want to make people wealthy, I want to make people wealthy.  I want to crack 90,000 millionaires.  Our conference is only in March and I’d love you to come along and you can talk with as many people as you want and get their stories because each and every person has a different story on the way to wealth and I find in the club they are always happy to share their stories and amazingly their finances.  They’ll tell exactly what they started with and what they’re worth now and that camaraderieship isn’t about ruling the world with people wanting to help others with their knowledge and give their own financials out to that new person trying to get that knowledge.

There’s nowhere in the world where you can get this rubbing shoulders with people who are more successful than you and picking their brains so, you’re welcome.

Young says that initially, poverty was what held him back from investing in property, saving the money over a period of time in order to place his first deposit.

 

Kevin Young:

At our second BBQ in Sydney back in 1994 there was a policeman and his brother was a bus driver.  They wanted to get started and they realised they were paying a lot of tax and I said well what sort of equity [0:00:37] have you got and they said we haven’t got any shares we haven’t got any money, we’ve got kids we’re bringing up and we’ve got second hand cars. Luckily their mother was there and I said well do you own your own home? I said you can get a guarantor for the boys to get them started.  She said no, I rent too.  She said but Dad died at Dubbo [0:00:55] and he’s got an old shack out there that I’ve got and we were estranged so I never ever got the chance to see the shack but I think it’s worth something. We had it valued and it valued at $70,000.00, she nearly fell over.

 

But she was a big guarantor for her boys and they were able to buy two properties each. So, they went from having nothing and no way to move to being well off and not paying tax and their mother was able to save them without costing her a penny. Set them up and on their feet and progressing well.  So, that wasn’t an opportunity for me because obviously mum and dad didn’t have anything.  I bought them their first home when I was 21.  So, I had no one to borrow from.  I had to save the money so I think that’s a bit of a lesson for people who think property’s too dear today. It’s not. You’ve just got to work hard for it and you always deal in the past as well.  The first property I bought for mum and dad was $7, 200 and I can’t remember how much money I was earning but I had to save up a 10% deposit in those days, which was $720 and I think it would have taken me all of 12 months to save that, if not more.

 

I can tell you that was in a Brisbane suburb and today that same suburb to buy a property, a new property, it was fairly new, you’d be probably looking at about $460,000.  So, that same property, it was on a large block and so they knocked the house down and they built two houses on it so it would have got more than $460,000 but if had stayed as the property, $460,000. [In] 1980 Sydney was $71,000, ten years later it was $173,000, ten years later it was $309,000 in 2000.  That’s why I love property.  If you buy good quality stuff and ignore regionals, you ignore regional cities, regional town, mining towns, they’re just too risky.  Go new and go close to the city centers it’s a good safe investment.

 

He has also experienced setbacks throughout his property investment journey, which he says have shaped him into a more persistent person.

 

Kevin Young:
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I had a long conversation, about a two-hour conversation with a journalist when I was driving across Tasmania to Launceston [0:21:42] and he asked me all sorts of questions about my background and I had a long conversation with him about the club and I’d been in the game about five years and the next thing I know I was back in the Gold Coast and I had a phone call from him and he said call off your dogs.  I said what do you mean?  He said I’ve been flooded by emails about the article.  I said when did you print it?  He said, this morning and I was in bed and he said the first one came at midnight from London, would you believe.

 

So, I quickly got dressed went down and bought the paper and I was on Page 2 and Page 3, the whole thing.  This guy had thought I was a shyster because just at that time the Bulletin journalist had won an award for uncovering Dudley Quinlivan and the two-tiered marketing operation he was running on the Gold Coast.  So, this bloke thought he’d found another Dudley Quinlivan and so he sort of said is he Dudley Quinlivan and pictures of my office and saying is this where people get trapped? Now this is an article in 2000 and it was headlined “Former Bankrupt, Is He Running a Two-Tiered Marketing Scheme”?  All my friends knew about the bankruptcy because it was a joke.

 

Anyway, he did that, I mentioned that I’d been divorced so he had mentioned that I’d been divorced, I had custody of my two young boys which was most unusual in those times, didn’t mention that, didn’t mention any of the positives or anything that I told him about the success of the club.  At that stage I think we’d created 800 people that had become millionaires.  We were quite surprised and see they had picked up two booms in that period.  We were quite happy with that fact.  That was just completely missed.  So, that was a big setback.  I was happy that the members rallied around and he never persisted with any follow-up stories.

 

One of the journalist said to me, we hid behind Murdoch’s millions and this is a problem.  I was wrongly quoted on the ‘730 Report’ with a mistake that a totally unrelated business deal and I was sued for it and I don’t even know where their office is, but they confused the issue and got me and I didn’t do it at all.  The 730-reporter refused to apologise, they’ve still got it on if you Google me.  We’ve gone to the government agency that controls it and they’ve said sue them.  We’ve gone to the Commissioner for the ABC who didn’t even both responding to us.

 

Now when in England when the same thing happened and that was a report that I was referring too. I was trying to start the club in England they came out with all of Page 2.  [0:26:53] They were saying all this garbage again, and over there it was quickly fixed up with a process that they should introduce in Australia.  I took a small claims court out for £5,000. Initially I had complained to the paper [0:27:10] and said well sue us, knowing that it would cost me a $1 million, I wouldn’t be able to do it and the retraction would probably be in five years-time on Page 73.

 

But the small claims court meant that this journalist without representation had to front me and barrister at the Magistrate.  Thirty days later to justify his story and why it wasn’t libelous and misleading and of course he had no justification at all, so the paper came back and said look, we will be happy to withdraw on the basis that we sacked the journalist.  So, I said okay.  Now, wouldn’t it be good if we had that in Australia and we couldn’t have this willful stuff that goes on with journalists.

 

I don’t buy papers anymore or magazines because I just can’t trust what’s in there. I guess it sort of reinforces the persistent bit of a successful person because I could’ve just run away and hide, I could have just come back to Australia and I just thought no the back of it’s wrong, a lot of people are going to think it’s the wrong thing to do.  I was ready to launch the club over there with the Martin Roberts was the biggest TV personality, he loved what I was doing and was happy to get up on stage and endorse the Club.  Because of this thing on Page 2 it threatened his position with the BBC, he had to withdraw.  So, there’s a lot of ramifications when mud’s thrown beyond what you originally think.

 

Relying on statistics rather than take advice from other investors, Young says that it is important to always check the validity of any potential mentors’ credentials.

 

Kevin Young:
Kevin-Young-02.wav [00:17:26,290 --> 00:17:32,970]

I actually had a mate that used to bring a lot of overseas speakers, motivational speakers and wealth creation speakers on a tour of Australia, on a circuit.  I could get in to see these people because he was a mate.  But he’d say don’t bother coming to them  [0:17:24] because it’s all, froth and bubbly he used to call it, there’s no substance to them. That’s what we say to these people that are trying to get educated. Make the people who are giving you advice give their credentials in writing you know. I reckon about 200 properties. Get a list of all the properties and where they are.

 

You know I got a list of where my properties are and I’m happy for people to see them.  Heck, I’ve been in business for 50 years and I tell them that.  I think if that was compulsory by law we’d see a lot of these so-called gurus rapidly disappear off the scene.  So, I’ve never taken advice off from anyone, I think it’s just I rely a lot on the facts and figures and when I was learning it, when I got into real estate I had a nickname being called the facts man.  Because I just had a thirst for knowledge and if people wanted to know anything about an area they’d come to me and some of the prices in this area like and I’d tell them, or when’s the new beach going in or when are new hospitals going to go in or new shopping center or whatever.  All these things influence prices.

 

 

Talking to Young about his property investment strategy, he says that the secret is to never sell. He shares with us how his advice helped a retired couple - who had also invested in property - live a better life.

 

Kevin Young:
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I’ve got over 5,000 people in the Millionaire’s Club now and we went on a five star tour of Africa and we started in Cape Town, went on the Blue Train, which is on the bucket list and then we flew to Johannesburg and then took a light payment [0:04:35] to the middle of Savannah and we tented in style with hot and cold showers and crystal glasses and all sorts of things and we met a couple that were retired.

 

He was very tall, he was about 6”7 inches and appeared to be about the same age.  We noticed him when we flew, we were business class, he was in economy which would have been very uncomfortable for him.  So, on the safari we were there when the migrating herds run so we saw all different animals together, it was a fantastic trip, it really was, a bucket list [0:05:08] job.  I said why you going economy everywhere?  He said well I’ve spent my life savings and it’s just part of my nature.  So, I said what do you reckon is the profit that you’ve got in your properties that you’ve accumulated and I think he said something like $2.5 million or something or other and I said well at some point in time that’s going to double isn’t it and he said well yeah.

 

I said so you’re going to have something like property $7 or $8 million dollars at some point in the future and he said yeah.  I said why don’t you just borrow half of last year’s capital growth, which was something like $120,000 I think, something like that anyway.  I said it’s a safe loan for the bank, selling half of last year’s capital growth and we worked out that that would have kept him below a 60% loan evaluation, that would have satisfied the banks.  Then, I said you never pay that back because their payment terms at $100,000 might have been $5,000 a year and I said take out borrowings the following year and the following years and once they saw it the light came on, they changed their travel plans.  They didn’t go back to Australia in economy, they went business class up into Dubai and went shopping there in Dubai and then went around the world and back into western Australia.

 

That’s the secret of what our plan is.  Never sell, but borrower conservatively your past annual increase for one year, which are very, very conservative.  Never sell.  Selling is akin to chopping down your apple tree to get an apple.  What do you do next year?  So, it’s simply never sell, borrow, until retirement.

 

If you have the golden goose, never kill the golden goose but just keep letting her lay the eggs.

 

Kevin Young:
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Yeah, unlike bananas they don’t go rotten.

 

 

Coming up after the break, we will delve further into Kevin Young’s strategy…

 

Kevin Young:
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Now, it’s a good strategy, I’ve used it all my life, I retired at 27.

 

How he built a successful portfolio...

 

Kevin Young:
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This is the philosophy that I eventually had to come up with because I was selling my properties and then I realised that soon I’d have to get back to work because I’d be out of property. So, then the only alternative was to borrow...

 

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

 

Are you enjoying this podcast? You can subscribe to Property Investory on iTunes, Android, Stitcher, Google Play or TuneIn. Feel free to help us out by leaving a top rating and a great review so that more people can listen in. You can find more of our podcasts and more about who we are at www.propertyinvestory.com. 

 

 

Enabling him to retire at the ripe young age of 27, Young explains how his strategy works through buying and holding properties, then using the equity to live off.

 

Kevin Young:
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With my total year your debt to equity is 50% or less and then it’s an easy lend to go up to 60% land or value.  So, if you’ve got $4 million worth of property and $2 million worth of debt to take it up to 60% you can borrow $400,000 which gives you a very, very good lifestyle for a year.  Probably for four or five years’ lifestyle because this is tax-free money.  In the four or five years, that portfolio would have gone up possibly 30% or 40% if it’s in a boom period, probably would have gone up more than that.

 

Then you simply revisit it again and your line up is at 60%.  Now, it’s a good strategy, I’ve used it all my life, I retired at 27. Incidentally I’ve got a book coming out or it should be out in January called Broke at 20, Retired at 27.

 

Oh, that would be an interesting read.

 

Kevin Young:
Kevin-Young-02.wav [00:08:48,480 --> 00:08:52,410]

This is the philosophy that I eventually had to come up with because I was selling my properties and then I realised that soon I’d have to get back to work because I’d be out of property. So, then the only alternative was to borrow and luckily, I had a very good bank manager at the time who held my hand with this process and he helped me overcome a lot of the bad principals that I thought I had picked up at school and reading in the paper and all that sort of thing. But the problem I’ve got right now is that I predicted the credit squeeze that Australia is in five years ago, and for the last six years we’ve had a credit squeeze brought on by a banking monopoly here in Australia.

 

I don’t want to get political with you but these backdrops are changing all the time.  If you understand them it makes it easier to do predictions.  If you get your predictions right that’s where you can make money, it’s back to the banana story again.  So, what we’ve got out of buying banking monopoly and this credit restriction, we’ve got ill-informed APRA forcing the banks to only lend to 10% of investors so normally investors are 35% of the market so they want banks to only lend 10% and they’re not telling the other 25% of investors who can’t get money what to do to avoid the pension, they’re just saying oh you naughty boys. 

 

What these people normally do is invest in our plan or new properties and that’s more bananas in the store.  What is effectively done is stop bananas getting in the store.  So, developers, builders who’ve got store projects around there because they can’t get these city investors because the banks have been told not to lend to them and they’re saying to people I can’t guarantee that your approval will last two years when it’s finished, I might change the rules on you and suddenly you’ve got to come up with $500,000 or $600,000 or $700,000 and we’re not going to lend it to you.

 

So, it’s led to a catastrophic drop in the production of the rights properties and it’s fooling the market because the commentators are looking at the total number of properties being built and saying isn’t it great but it’s the wrong sort of bananas.  It’s the inner city high-rise and that’s being made up by only a handful of builders in each of the capital cities.  So, the vast number of builders are really being squeezed, can’t get funds and the vast number of property investors can’t get funding.

 

Now for some unknown reason APRA forced this on and so if you and I were a banking monopoly we’d say well we can only expand our investor mark 10% instead of 35%, we will just lend to the cream.  So, we’ll say to people well we want a high deposit off of you and we want to see that you’ve got a high income and so they’re scooping the cream of investors and that means that the rest of the people can’t get into the market and can’t bring more supply into the market so how do you make money out of that?

 

You look forward to less bananas in the store, increased prices so right now people should be finding some way to get money to get into the property market - the new property market, not older properties because they’re problems - knowing that this APRA is actually not containing prices it’s inspiring prices and so the Sydney boom has continued all this year, it should have stopped and will continue all next year as well.  To a lesser extent Melbourne market will be continuing for another two years that the market can’t correct.

 

The biggest market in Australia in the next twelve months will be the Gold Coast market.  Simply because the demand for bananas there is greatest in Australia, it’s 3.5% population growth which is more than double our national average.  Yet you look at the supply of bananas coming in and the mayor of the Gold Coast opening a conference last year and he was saying to the audience that normally they produce 15,000 bananas, using that analogy, a year but for the last five years they’ve been producing less than 5,000 in that market.  So, rents are rising, prices are rising and my properties are down, they went up between 7% and 20% last year.

 

By accessing a line of credit, you can borrow from the accumulated wealth that your properties have accumulated. This can sustain a savvy investor’s lifestyle for many years.

 

Kevin Young:
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With that you get a line of credit and then you only pay interest on the bit that you’re drawing down. So this month you might want to go business class around the world, so you draw out $30,000 or whatever is needed and when you come back you need [0:14:12] $5,000.  The month after that kids want to go to university so you got to find out what that’s going to cost and draw that money out and shoot them off to university so wants and needs never stop, it can be insatiable.

 

But the good thing about property and that line of credit is that you can now satisfy your bucket list because you’ve got the wherewithal.

 

In my book, I’ve got the property prices going right back to just after the second world war.  It’s like playing a game of monopoly.  In fact, I’ve got a computer program I did up and we call it Independence Day.  People actually plug and play historical data into that to see that the plan works, and what sort of properties to buy.  So, in the beginning that’s a free service that we give people.

 

I’ll give you an example, we’ll imagine it’s 1980 and you’re in Sydney, the average price for $71,000, ten years later it was $173,000 and you’ve still got a $71,000 debt you’ve got $100,000 there of equity and you know the banks will lend you 60% so that’s $102,000 so you can borrow another $31,000 which is about half of the original cost of the property in 1980.  In my book, I’ve got the wages that were around at the time to see how well you could live on that sort of money.

 

But, from the bank’s point of view it was a very safe lend because they have $102,000 on that property, but ten years later it was worth $309,000, so this security was always nice and safe. That’s the thing that APRA’s got to realise. They’ve got to allow these lending back into the market. Otherwise if people can’t get their 60% lend on their assets, they’ve got to sell. Again, that’s akin to wanting an apple but APRA told you to cut the tree down, what do you do next year? Someone else has the property, someone else has the capital growth, not you.

 

Young elaborates further, stating that there are 13 critical factors to look for in an investment property in order to ensure its success. These factors have been recorded in a checklist on his website, which enables you to compare properties when looking to invest.

 

Kevin Young:
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There’s a bit of finess in there and we got a lot of quips on our website but one I just started putting out there, when we choose a property you can have two brand new properties side by side.  One we’ll endorse and the other we won’t and there’s 13 different critical factors that we look at in a successful investment property and we’re happily giving that out free on our website.  So, we got a checklist of 13 that we’ll give out to anyone so they can get that list and go around and it’ll help them compare different properties to get the right sort of property.  The end result of all of that, if you do it right, is that the extra tax that you’re not sending to camera and the tenants money pay all your outgoings.

 

That’s why we have people to point it’s so easy to get three, four, five, six, seven, eight, nine properties because they’re not putting their hand in their pocket.

 

Having stated a preference for buying newer properties, he explains that part of this strategy is also tax related.

 

Kevin Young:
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Well, we use the 13 checklist to make sure we get properties that have got a lot of tax credits in them so the builders pay for the carpet but it comes off your tax, the builder pays for the kitchen but it comes off of your tax, etc.  So, you can’t depreciate land but you can building and the contents so no two houses are the same and so 90% of new houses or units or townhouses will reject you because they can’t kick enough of those 13 items.  But when they do you find the tax that you were paying and now you’re not goes in the take home pay.  You add that to the tenant’s money and you’re paying no money at all so when you’re driving around and you see a nice property and you know it’s going to cost you nothing you pop it into your portfolio.

 

We got a software program that I’ve devised that makes it very easy because you work out what your income’s going to be next year.  It works out how much tax you’re going to be paying and then it works out the number of properties you need to bring your tax back to zero.  So, I’ve used that program and I haven’t paid back since I was 27 and I’ve been investigated every three years by the tax department.

 

Legally?

 

Kevin Young:
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Legally, yeah. Now, most people don’t do that because it would cost you a fortune to get these depreciation reports on a number of properties before you made the right decision and that’s where that 13 checklist comes in handy.  It directs you towards, if you’re going to get big quantities of reports, just get it off one or two properties rather than 20 properties that you may be looking at.  So, eliminate a lot of the costs.  Also, we, where we can, we’ll get the builder to pay for that depreciation report and it depends where the market is but right now the market’s good for buyers and we can screw some really good deals off from them.  That’s one of them that we say you pay for the depreciation report.

 

Another one we’re doing is before we settle we overcome a lot of problems that could arise later because we know once the tenants in there they doing a lot of things, the builder never comes back.  Next thing you got an unhappy tenant, stops paying the rent, next thing you’re bankrupt.  So, what we do in our contracts we have clause that we don’t settle until a professional has gone through and checked for these things that a tenant might be unhappy with.  That costs us about $350.00, and we get the lender to pay that as well. It means he doesn’t get his money until it’s complete and ticked off.

 

Buying new properties also means that there should be minimal upkeep needed. Acquiring a builder’s guarantee will ensure the property is maintained where necessary, which in turn provides sustainability in the future.

 

Kevin Young:
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Another thing we’re doing here we’re actually for a first we’re getting the builders to personally give us a guarantee for ten years, how about that.  So, they sign a form that says I’ll personally warrant the next ten years to maintain the property against any water ingress and that’s where most of the problems arise in time.  You know the bathroom leaks or the outside leaks to the inside or somewhere.  Well now they escape that because of the six-year structural in some places only three-year structural and they say that’s not my problem.  So, the body corporate will [0:36:18] have to pay that amount which can be quite substantial.  But now we’ll have the builder first orienting and [0:36:25] what I like about how that is if they give that guarantee you know they’re going to build a really good product, because they don’t want to come back.

 

 

Young says that the fear of failure has motivated him to persist and diversify. This personal habit has greatly contributed to his successful property investment journey.

 

Kevin Young:
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This is an unusual one and it’s always motivated me and it’s the fear of failure.  That’s my struggle when you want to know what had gone wrong so I’ve had a lot of setbacks, but I’ve just persisted and won.  So, one of the lessons is diversify but another one is habits if you’re a failure so that you persist and I think everything that’s come my way is an ill way.  I’ve persisted and I’ve won.  So, if the property market is down for three or four years I haven’t got demoralised and sold, I’ve said historically it’s going come back again and it will and so I sort of persist.

 

I never really got involved with older properties after my first couple when I realised you’re constantly putting your hand in your pocket for surprise cash and surprise is what sends you broke.  So, it’s new ones and I think the fear of failure has driven me to make sure I look at all the things that can go wrong first, do as much as I can to overcome them and then when something comes up by surprise I don’t want to be a failure whether it’s a business or a relationship or a particular, even the Property Club.

 

I think you can learn a lot of people who have failures because you look back at their story that they’re telling you and you think, you didn’t persist. You really just didn’t persist or you didn’t diversify.  So, they’re probably the two big ones along with research of course which probably goes into those two traits.  You have to have researched in order to beat them.

 

The 13-point checklist is available for download on Young’s website at propertyclub.com.au. If you have any further questions or want to find out more from Young, he tells us the best way to get in touch with him.

 

Kevin Young:
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I’ve got is ‘Ask Kevin Young’.  I’m talking technical stuff that I don’t know but I get a lot of questions from people and I do about a three or four-minute response and I think we’ve got about 120 episodes out there now answering these questions so I do get a lot of compliments from people that it’s free, that they learn a lot from them.

 

 

Thank you to Kevin Young, our guest on this episode at Property Investory.