02 Nov "Why I didn't want to be an outsider" – Shannon Davis
Our feature guest this week is successful investor and talented property industry entrepreneur Shannon Davis. Shannon tells us about his philosophy, how he started, why he wasn’t content to be an outsider but wanted to actively influence the industry. He has done that and a lot more as you will hear.
Kevin: Our featured guest this week is a man who we’ve spoken to on a number of occasions, but we’re going to take a little bit of a different tack with him today in trying to find out a little bit more about what makes Shannon Davis tick.
Shannon Davis is, of course, from Metropole Property Strategists and also the genius behind Image Property Management, one of the most successful management companies in Queensland for property.
Shannon, welcome to the show and thanks for your time.
Shannon: Thanks for having me, Kevin.
Kevin: What got you involved in property investment to start with? Tell me about where it all started, Shannon.
Shannon: I think I was a frustrated property investor. I had the profession of a schoolteacher – and enjoyed that in my 10- or 11-year career – but I was just wanting to be more hands-on with property and found my way in the real estate industry and, specifically, the property management side of things.
Kevin: Looking at it from the outside, you said you were a bit disenchanted as a property investor or property owner from the management of your property. How different was it when you actually got into the industry? Was it different from what you thought it would be?
Shannon: Yes, it was. There is a lot to it, to be honest. A property manager has to be a lot of different things as far as collecting rent and looking after the financial interests of an owner, but there’s a human side of things, as well. It’s not just bricks and mortar.
There are people who fall on tough times. There are tenants and owners who do that. It’s the environment. There can be extreme weather scenarios that cause a lot of displacement of people, such as the 2011 floods.
There’s always that working with people in their homes and their privacy being respected and communicating to both parties in a fair and equal measure between the both.
Kevin: You’re a very successful buyer’s agent as well as running a very successful property management company. Obviously, there are some things that you’ve done differently from others, because we’ve seen a number of companies start up that appear to be very successful but then they just don’t have that continual growth that you’ve been able to have in your company.
What is it that you do differently, do you think, that the others don’t do? I’m talking about property management now.
Shannon: I think we really have a service culture. I think we part ourselves last. When we give our owners and tenants and everyone what they want, we get what we want. It’s a bit counterintuitive. I think if you don’t operate on service, you’re going to be prone to digital disruption, the way taxi drivers were prone to something like Uber. But in real estate, again, it’s people, not bricks and mortar. If we compete on service and the culture of adding value, then no website will ever be able to replace us.
Kevin: Tell me about your own property investment journey. What was your first property deal?
Shannon: With my parents, I bought a quarter of a house in Red Hill, which we proceeded to do up.
Kevin: Red Hill in Brisbane?
Shannon: Brisbane, yes. We did up to sell like a lot of people who want to flip, but we were disappointed on auction day and ended up keeping the property. That ended up being the best thing that ever happened to me because there was the boom of 2003 where properties nearly tripled in value in a short time. What was bought for $165,000 was eventually sold for $865,000.
Kevin: I was going to ask you whether you still owned it. Are you a flipper, or are you a property investor and holder?
Shannon: I am a buy-and-hold person, but that doesn’t mean you never sell. I had to sell in order to secure a business opportunity and have no regrets on that.
Kevin: What was your second property? Did you do that on your own or, once again, with your family?
Shannon: Again, with the help of mom and dad, we bought a block of flats near Enoggera, and again, that appreciated really well within a short time – about nine years. We sold that one, too, but I would have preferred to have kept that property, but when you invest with people at different life stages, they have different goals and priorities. My parents were looking to withdraw, being close to retirement, and I was looking to still accumulate. I think that was a lesson I learned on that one.
Kevin: A great lesson to learn, too – isn’t it? – that when you go in with other people, you have to understand they have their own agenda.
Do you invest with other people now, or is it very much building your own portfolio?
Shannon: It’s just my own portfolio now. I have made one strategic relationship with a builder that I can add things that he can’t and vice versa. But we’re at similar life stages. I think if you can have that scenario where you both bring something different to the table and you have your exit strategy clear, it makes sense.
Kevin: That’s the point, isn’t it? You have to have your exit strategy there. I guess you have learned a lot from being in partnership with other people, albeit family or friends, to make sure that you have a clear exit strategy.
Shannon: Yes, definitely. It can definitely work better to your advantage working with people rather than on your own, but it can be a hindrance, too, if for some reason, there’s life dramas – death or divorce or unemployment – as well.
Kevin: Apart from the buy-and-hold or flipping strategy, what other strategies do you use to build your portfolio?
Shannon: I think adding value. That’s the biggest thing with property. You can’t go down to Woolworth’s, paint the walls, and hope your shares go up, but with property, you can add value.
I know a lot of people are attracted to new property for depreciation reasons and things like that, but I would always prefer to buy existing and add value – be it through renovations, development, subdivisions, or strata titling. That would be a better way to go, because you can actually manufacture the equity and be in control of your own path rather than just waiting on the economics of the day for appreciating prices.
Kevin: My guest is Shannon Davis from Metropole Property Strategists – a buyer’s agent – and also Image Property Management in Brisbane, one of the most successful property management companies in Brisbane.
Shannon, what was the best property deal you’ve ever done?
Shannon: The best one is probably when I was at an auction and I saw that there was a block of flats. It wasn’t an on-site auction; it was actually in a pub. There were about five or six flats being marketed that day.
For some strange reason, I was there for market research but there was a real immediate sale and it was way under in my opinion. I had it priced at early $2 million and I managed to buy that for $1.475 million, so a good immediate equity and there’s value-add that could be done there as well. It was in an excellent position such as New Farm, which is one of Brisbane’s premier suburbs.
Kevin: You have to be pretty sure of yourself to be going along to an auction like that – or any auction at all, I guess – and be able to seize on that opportunity. Did you have yourself set up for that in terms of your finances?
Shannon: I knew there was capacity, but I wasn’t there to buy that day. Sometimes you just have to take the opportunity when it comes. I wrote a 5% check and spoke to the bank on Monday, but again, I was in pretty good knowledge that it would all go through.
Kevin: And went home and said to your wife, “I know I went out to buy a loaf of bread, but I just bought an apartment block.”
Shannon: Yes, that’s right.
Kevin: How do you pick the suburbs that you’re going to invest in? What’s the strategy you use?
Shannon: I look for a high owner-occupier percentage because these people love their houses more. They’re emotionally attached, and they’re always improving them because that’s just what us humans do.
If you buy in the so-called investor hot spots, you tend to get less renovation, extensions, and improvements – hardly even maintenance kept up. The tenants don’t treat the properties as well, and you’re more prone to a correction in prices.
It all sounds well and good to get ahead financially and buy properties for investments, but when there’s a downturn in the economy – thankfully, Australia hasn’t had too many downturns in 25 years – even when there is just a bit of a hiccup or a GFC, you see a run on prices. That’s when your values collapse, especially in those investor-prone suburbs.
Kevin: In the early days, Shannon, when you first started out, new to the industry, who did you network with? How did you get going in those early days?
Shannon: I think having to find truthful people… People who walk their walk and are good to their word are hard to find, but when you do find them, it’s great. A mentor is probably the biggest shortcut to wealth, I think.
I’ve been fortunate to have mentors such as yourself, Kevin, and Michael Yardney, and Andrew Reece as far as a business mentor, as well. That really does help you. If you learn from your own mistakes, you’re on a good path, but when you learn from someone as being ahead of you in the game, you’re standing on the shoulders of giants, really.
Kevin: Thank you for that.
You spoke there about your investment properties. The ones you’ve mentioned are around the Brisbane area. Would you invest outside of Brisbane? Would you also then invest outside of Australia?
Shannon: Yes, I have invested into London. I love London as a real estate place that draws a lot of people in from other countries – pre-Brexit. But there’s an M25 that hems in the development and they don’t deal to me skyscrapers, so you always have that scarcity. You have that pent-up demand, which is good for capital growth.
I am interested in investing into Sydney and Melbourne capital cities, as well. They’re true international destinations. That adds a little bit more market depth. I haven’t done it yet just because I’ve seen better value closer to home and those markets have been really hot in the last three years. For me, when I’m buying, I prefer to buy when there’s more value and not when everyone is cramped in making it a hot market.
Kevin: You’re at the front line. You’re talking to investors all of the time. You’re a successful investor yourself. What is the most common question you’re asked by investors, and what is your answer?
Shannon: I think a lot of people are in a rush. They’re in a rush to leave their day job, buy properties that are in the short-term going to add to their lives – be it positive cash flow, or be it that it’s off the plan and heaps of tax benefits, or they enjoyed a really good holiday and they think that’s a great place to buy some property.
I would just caution against those things and not be in a rush. I think the best way to get rich is to not get rich quick. You have to be there for the long term, and there have to be lots of reasons for people to live there and market depth.
If you pick that long term and you have those reasons underpinning your property, you can’t get burned like the people did with the mining boom in the past where it was a fickle crowd, and now they’re looking at 60% off their property prices.
Kevin: Are there any books that you would recommend people should look at or read if they want to learn?
Shannon: The bloke with the beard, Michael Yardney, first bought out How to Grow a Multi-Dollar Property Portfolio in Your Spare Time, and that was one of the ones that really shaped my property investing philosophy.
Kevin: That was even before you knew him, I guess.
Shannon: Yes, definitely. Back in the late 1990s or early 2000s, I attended a seminar. I’m fortunate enough to work with Michael now in that company, but it’s funny how things happen.
I think there are a lot of people in that wealth-generation business who are trying to sell you vehicles that are bound to be around that wealth generation but in reality, they don’t actually get you there and could be taking you further away from your dreams and goals.
I think always see where the benefits lay, and I think fee for service is more ethical and genuine than someone who is getting undisclosed commissions from a builder or a developer.
Kevin: Yes. Tell me about personal development. What do you do to develop yourself and keep your knowledge space growing?
Shannon: I’m always interested in leadership and business and entrepreneurship, so I’m always listening to audio books, Facebook feeds, and things like that or people who inspire me and have walked a different direction. You find that they’re mostly generous risk takers looking to add value to the world and solve the world’s problems.
I think trying to keep your head positive, motivated, and inspired is half of the battle. It’s all between your ears. If you think negative thoughts and negative outcomes, that’s probably what you’ll attract into your life. But conversely, if you think the other way, you’ll probably get some good benefits and opportunities coming into your life.
Kevin: You mentioned earlier in our chat that you have a very supportive family and you’ve invested with them. Obviously, the conversations you had with your folks were very supportive. I know you have a young family. What is the kind of language or education you’ll be taking them through to instill in them this mindset of investing?
Shannon: I think the concept of making money work for you. I think that time is more important than money. Every currency known to man at one time has been worth practically nothing. I think time is really more important than money and how you leverage that time is really important. You do that through investing, making money work for you, and delayed gratification.
I suppose schooling institutions don’t really make our children financially literate; it’s up to us, as parents and primary educators, to take that role.
Kevin: What’s the most important piece of property investment advice anyone has ever given you, and who was it? Who gave you that advice?
Shannon: I think when I learned that the money is in the dirt and they’re not making any more land. I can’t really remember where I first read that, but it made me think much differently about property.
I think people can get carried up with the shininess of property and things like that, but it’s really about dirt – and not all dirt is equal. There are some properties that even though it’s a much smaller patch, it’s worth a lot more than, say, an Anchorage farm or something if it’s far enough away.
When you learn it’s about dirt and demographics, it’s a bit of an eye opener for you.
Kevin: Finally, the worst piece of property advice you’ve ever been given?
Shannon: Probably when I was a bit of a novice investor, taking advice from a sales agent. I think that’s probably the exact worse person to take advice from because they’re not working for you; they have a vested interest.
I remember this particularly ugly two-bedroom apartment with a triangular bedroom. Triangular bedrooms just don’t make sense when you have a rectangular bed. But how this would be a great investment and I should take it on and allow the tenants to live there in very much under-market rent. That’s all the wrong type of advice to be taking. It should be just glanced over really.
Kevin: Shannon, thank you for sharing your thoughts with us today. It’s been great talking to you, mate, and I always enjoy our time together. Shannon Davis, from Metropole Property Strategists and also Image Property Management.
Thank you for your time, Shannon.
Shannon: No worries, Kevin. Thanks again.