Last week in the show we chatted to Brad Beer about his personal philosophy on property investment.
Now we ask him to give us his top tips for successful investing. 5 great pieces of advice.
Kevin: Brad Beer joins me from BMT Tax Depreciation.
Brad, we normally talk to you about tax depreciation – and why wouldn’t we – but I’m keen to get your tips on becoming a successful property investor. What have you found?
Brad: I have a few of the top tips. I’ll probably start with moving outside your comfort zone. I think I’ve definitely been guilty in some ways of buying properties around where I know, and there have been certain reasons for that – it’s good because you can manufacture equity and renovate – but I think outside of the area is sometimes a very good way to go.
A lot of property investors in Australia only buy one property, and often it’s just around the corner from home or where they want to go on holidays, but it’s not necessarily the right thing. So look wider, outside of your comfort zone.
Kevin: Yes, I remember talking to you recently, and you mentioned that the bulk of your portfolio – or quite a bit of it – is in the Newcastle area, I think. Is that what you’re referring to, is that you’re comfortable with that area because you knew it?
Brad: I was comfortable, I knew it. Now, I had another reason: I was renovating and trying to get equity quickly, and sometimes renovating is a way to do that. It doesn’t always have to be the way to do that. But you know, I should have gone outside the comfort zone earlier in life probably, as well.
Kevin: Yes. You mentioned off air before we started this that you see a lot of people follow the herd. That’s also a big mistake, isn’t it?
Brad: Absolutely. I think this country seems to have a herd mentality in investing in property. If prices start moving somewhere and everyone buys, it’ll push the prices higher and we keep buying, and then we overcook the price and then it goes backwards. You almost need to be going and buying in the areas after it’s gone backwards, but no one likes those at that time, do they? So not following that herd mentality is a good thing to think of, absolutely.
Kevin: How do you get ahead of the herd?
Brad: A very good question. Unfortunately, no crystal ball exists. However, looking at some of the fundamentals about why areas should grow into the future: do they have some of the important things? Do they have infrastructure, jobs, education, health – the things that are going to mean that population growth in those areas will happen? Why would someone move there? Is there something that’s going to drive demand in that area? That’s kind of what you’re going to be often looking for.
Kevin: Is that like looking at the complete picture, the whole picture?
Brad: I’m a depreciation guy, and I don’t say go look at to buy stuff that’s got good depreciation; I think depreciation is one of the things that’s really important to know, but it’s a kicker at the end with the cash flow.
You have to look at the complete picture. Cash flow is important, but what am I going to make the most money out of over the next five years with everything that relates to investing into a property?
Kevin: How far into the future do you think? Are you a long-term thinker about your investments?
Brad: I am an absolute buy-and-hold guy. I’ve been holding my properties because I’m looking for growth. I think changing over costs you. I think you have to know about the cash flow on the way through, doing things like PAYG valuations.
I’m looking long term, but short term is where the cash flow comes all the way through, and short term, you want to make some money, as well, of course, but I’ve been a buyer-and-holder, absolutely.
Kevin: Yes, we all make mistakes, and I think you’ve probably made mistakes with properties, as well.
Kevin: That’s not the problem, is it? The problem is if you don’t learn from those mistakes.
Brad: One very important tip would be to learn from the experience. I like a term that I often hear called “Fail fast and fix fast.” If you’re going to do something, get in and absolutely do it, so you can learn from it and fix it fast, because the longer you leave it, the worse it becomes. Learn as much as you can about investing; continually learn.
I’m BMT since 1998 and I still go to property seminars and I listen to people talk about property, talk about investing in property so that I can actually learn about that. I’ve been investing for nearly as long as that, and I still feel like I learned something when I sit there and listen to people who talk about property and what they think is going on in the future.
Kevin: It’s amazing; I’ve spoken to a lot of successful investors like yourself, and Margaret Lomas is another one who comes to mind instantly. I asked Margaret the question about the worst property investment she’d ever made. She told me what it was, and then she told me that she still has it, and she has it for sentimental reasons. I think she probably does it to remember the pain so that she won’t make that kind of mistake again. I don’t know.
But what about you? Would you quit your worst-performing property?
Brad: Now, the thing is I still own my worst-performing property.
Kevin: That’s hilarious.
Brad: I think you absolutely should quit your worst-performing property if it stops you from investing in another one. For me, it doesn’t stop a thing, or I would quit it and sell it tomorrow and cut the loss.
The thing is you have that problem of once you realize that loss, you really see it and you have to put the money in. I think you have to absolutely be prepared. If you do learn that investing in a property in a different way means that the long-term future is going to look a lot better and what you have is going to stop you from doing that, you should cut your losses and move on.
Kevin: Yes, great advice. Brad Beer from BMT Tax Depreciation.
Brad, thanks for your time, mate.
Brad: Thanks, Kevin. Great to chat, as always.