The success story that started in a garage – Jarrad Mahon

08 Feb The success story that started in a garage – Jarrad Mahon

 
Our feature guest tells about his passion for property and how that led him to create a Real Estate Agency – developed in his garage – that is solely devoted to helping other like-minded investors.
 

Transcript:

Kevin:  My featured guest in the show this week is someone who’s passionate about property. That’s the kind of person I like to talk to. He’s the managing director and licensee of a website Investors Edge Real Estate based in WA.
Jarrad Mahon, thank you very much for your time. Nice to be talking to you.
Jarrad:  Hi, Kevin. How are you doing?
Kevin:  Good. We haven’t spoken for some time. In the passage of time, your business has grown and the property market has changed somewhat, Jarrad. But I’m really keen to talk to you about the Jarrad Mahon story more than anything. When did you decide to get into property investment? What was the story?
Jarrad:  I was actually given a book, believe it or not, Rich Dad, Poor Dad, when I was 16 by one of my friends’ moms. I didn’t have a clue about investing or business or anything at that point. I read the book, and it just absolutely changed my whole world and paradigm. From that point, it’s been very difficult to see things the same.
Kevin:  How old were you at that stage?
Jarrad:  I was 16 years old, still in high school. I didn’t know how to even begin or where to start, but I just knew that I’d have to find my way out of the rat race, if you will, and I saw property and business as a vehicle to do it.
That just started a lifelong journey of learning and implementing and taking action and making a lot of mistakes as well as having some great wins along the way. Some 17-odd years later now, it’s awesome to see where I’ve got to and also really only still be beginning, relatively speaking.
Kevin:  We’ll trace that journey in just a minute. Just taking you right back to the start, though, growing up as a child what were the conversations like in your household? Was it about property?
Jarrad:  My parents had never done anything to that point, no. My dad was just a hard worker, didn’t really seem to get ahead, and we never seemed to have enough money. That lit a bit of a flame in me to try to change things. Because he was never around, I thought if I had money, I could have more time with my family, and that’s what has continued to drive me – not the money itself but that time to spend with people.
Kevin:  Yes, what the money can get you. Jarrad, at 16 you get a book called Rich Dad, Poor Dad and that changes your life, you said. What feedback did you get from the people around you – kids at school – were they talking your kind of language?
Jarrad:  No. It was pretty difficult because a lot of people will try to put you down and say it’s not possible. I guess even my parents were in that boat, as well. I just kept learning. I joined a lot of online chat forums and got a lot of help on there. I had a number of investors who really helped me out with advice at an early stage. I started making plans to do my first deal despite all that negative feedback and people just not understanding.
Kevin:  What was the first property deal you did? How old were you?
Jarrad:  I was 21. I wrote a little business plan, believe it or not, and I took it around to all my next-door neighbors. One of them was like, “I really think what you have in here I believe in and I’d be happy to give you the money, Jarrad.”
I told my parents that and they just freaked out thinking, “What the hell is in this business plan?” They ended up reading the plan and deciding that we’ve never done anything in property but if the neighbor is willing to give Jarrad some money, why don’t we go 50/50 with him. We ended up doing that, and so I got them into the property market, too, helping me making the first step.
Kevin:  What an amazing story. That’s wonderful. Jarrad, tell me, do you still own that property? What happened to it?
Jarrad:  That one, we put together some flyers because I had in mind to do a renovation. We put some flyers together and I paid my youngest brother – who’s five years younger than me – in lollies to go and drop them around the suburb that I’d chosen. He dropped them in all the houses that looked the worst in the suburb needing renovation.
I had a couple of people call me, and I ended up buying one of them under market value – and that was even by bank value. I think I bought it for $180,000-odd – and this is in 2004 in Perth, just off the top of my head back when prices were a lot lower – and the bank valued it at $240,000 at the time.
We did just a basic cosmetic renovation, and of course, it took longer than you think when you’ve never done it before and was harder than I’d thought. I thought, “Oh, yeah. Paint the house. We’ll do it in a weekend.” Four weeks later, you realize what the cost of your time and the cost of the professionals can be worth when you add up that time.
Kevin:  A great learning experience, though, isn’t it?
Jarrad:  Yes. There’s nothing like getting your hands dirty.
Kevin:  That’s amazing that you actually turned that around. Tell me, what was in that letter that your brother dropped off?
Jarrad:  It was basically “I’m looking to buy a property in your area. I have money ready. Give me a call. I can make a fast decision. Jarrad,” kind of thing. It was as basic as that.
Kevin:  You were 21 at the time?
Jarrad:  Yes.
Kevin:  Goodness. That is amazing.
Jarrad:  I’d only just got my first job that I could get some borrowings with, but I didn’t have a deposit or anything or money for renovation. My parents put in that money, and I got the loan in my name.
I think the value on completion – just off the top of my head – was $320,000 from that $180,000 purchase price, and we spent about $25,000 on the renovation. It was a good first step and helped me move forward. We ended up selling it three or four years later for $360,000. Yes, it was a great first deal for me.
Kevin:  Tell me what happened when you turned up at those first people who responded to your letter and said, ‘Okay, come around and see us,” and a 21 year old kid turns up. What did they say?
Jarrad:  I just panicked a bit, too. I actually purchased my second property the same way, and the people who rang on the second one – this is the next renovation I did – they rang from interstate and they said, “We want you to buy our house. The keys are in the mailbox.” I did the second one just completely over the phone and told them what price I’d be willing to buy it for.
In each case, I helped both of them out with moving forward quickly rather than having to go to the market and not be sure of what they’re going to get.
Kevin:  When you think about it, your method of approach was one that’s probably going to draw those kinds of people – the people who are not necessarily desperate to make a sale but definitely want to sell – and you’re probably going to find that that’s pretty easy.
Did you use a solicitor to take these through the process?
Jarrad:  Yes, I used a settlement agent, and I got their advice on the contract beforehand. Our system over here is a little bit different to the east, but settlement agents can provide you with all the conditions and clauses and other stuff. Then again, you don’t know what you don’t know when you’re starting out, so I didn’t have any of the more comprehensive conditions and other stuff that I include these days to protect me.
Kevin:  Sometimes as you get more experienced, there tend to be more obstacles in the way. I’m not suggesting that what you’re doing now is wrong, but sometimes the simplest way at the start is the best way, isn’t it?
Jarrad:  Yes, naivety and motivation can be your greatest strengths. I often think, “Gee, when I put all of my baggage and blockage and different thinking in the way, it does hold me back.” So I keep stripping it back to “How do I take action on this now and get as much as I can to make an informed decision about if it stacks up and you can pull the trigger on it” kind of thing.
Kevin:  Of course, all of this was the foundation for Investors Edge Real Estate. When did you start that, and how did it kick off?
Jarrad:  I’d worked a number of different strategies. I did renovations and then I moved into doing small subdivisions and a couple of small developments. I’d put together a group of fellow investors, and we all bought an apartment in Melbourne off the plan just as that was kicking up its growth period, as well.
In one of my deals, I made more than I had made in the whole year through engineering, and I thought, “Wow, if I can do this on the side of engineering, what could I do with all of my time rather than just spending a bit of time here and there?”
I had four property managers at the time, and I was also really frustrated because I was having to manage my managers and having to follow them up all the time. You’d send them an e-mail or call them and you wouldn’t hear back for a week. It was like “What am I paying these property managers for? They don’t think like an investor. They don’t understand investment. They waste my money. They cost me money by a whole range of things.”
It just inspired me to think. I looked around and there were no other investment real estate agencies in Perth. There was only one at the time. And I thought, “Wow, we can really focus on property management and help people make smarter choices when they invest.” That’s what we naively went about doing, too. I’d never started a business or done anything like that.
Kevin:  A nice niche market there. What year was that, and how has the business grown since then?
Jarrad:  It’s been an amazing journey. Put it this way: when I first started, I thought we’d open the doors and everyone would rush in. We prepared for six months and opened the doors and no one came.
Kevin:  Funny about that.
Jarrad:  Six months later, we had very few clients still and I ran out of money. I’d put a lot of money in to start the business, and we didn’t have any cash flow from the start. I’d run out of money, so I had to move back home. My parents had given away my bedroom, so I had to sleep on the lounge room floor. It was very humbling. It was winter. It was cold. Everyone would go in and out of the house through the lounge room, so there was no privacy.
This point, where it was testing me, I had to decide “Am I going to push through this or go back with my tail between my legs to engineering?” I just had that moment where you decide that regardless, I’m going to keep doing this and I love it. And thank God, I did have the parents’ floor to go back to because not everyone has that.
Kevin:  Those moments when you have those voices in your head of self-doubt, you really have to punch through that, don’t you? Full marks to you for doing it. Was Investors Edge Real Estate the business at the time and you went back into it?
Jarrad:  It is, yes.
Kevin:  What changed? What did you do differently?
Jarrad:  We went to that handful of clients and we decided to ask them how they wanted our service to be. We got feedback from them on all their frustrations with other property managers and sales agents in the industry, and we just started to design the service to give them what they want and really zone in on guaranteeing the right things to them because it kept us focused on it.
Probably the simplest thing that we’re most known for is our proactive communication guarantee where if we don’t return a call or an e-mail in the same business day, we pay people $100. All my team delivers to that, and it’s really altered the whole way we go about things.
Kevin:  Quite amazing. So the business has grown, things are looking good. What would you say looking back now was probably the best deal that you have done?
Jarrad:  I thankfully get to go through a lot of learning cycles with our clients. That was part of the reason I wanted to own a real estate agency. I still keep coming back to the small deals that you can control, that you don’t need commercial financing for.
The best one was probably one I bought in High Wycombe. I bought it just before a zoning change went through, so it immediately went from not being subdividable to being subdividable – not immediately but over six to nine months. We bought it just before it went through.
Once that zoning change came through, we were able to build a house on the back. And timing was just right for the area. There wasn’t much new housing in there yet. The shopping center was being upgraded. Some of these things we knew; some of them hindsight is beautiful and it’s nice to be on the right side of it.
Kevin:  I guess for every good deal like that, there has to be a bad deal, too.
Jarrad:  Yes. I could also fill up half an hour to an hour just telling you about mistakes and bad deals. You actually learn more from those of what to look out for.
Kevin:  We learn a lot from other people.
Unfortunately, we are just about out of time, Jarrad. It’s great talking to you. Could I just ask you, then, what would be your advice to anyone who wants to get started to build their own portfolio? What would be the best advice you could give them?
Jarrad:  The best advice is find other team members who you can leverage but don’t give away your decision-making to them. So learn, grow, get experts on your team, and speak to other investors, as well. The times when you’re down or you’re needing motivation, it’s great to hear someone else’s story and pull something from that.
I continue to do that today and keep finding better team members for my team, and I can be a lot of help for people here in Perth and be on their team for property management and property investment. That’s what I get a big buzz out of, too.
Kevin:  We’ve had a great lot of fun talking to you and a lot of learning there, too. Jarrad, thank you very much for your time. Jarrad’s website is InvestorsEdge.com.au. Jarrad Mahon, thank you very much for your time, and all the best for 2017.
Jarrad:  Thanks, Kevin. Cheers, mate.