05 Apr "Why I love property" – Bryce Holdaway
Our feature interview traces the rise to fame of one of Australasia’s property TV personalities in Bryce Holdaway. Bryce tells his story about growing up and developing his love of property.
Kevin: I’m delighted this week that our special guest is Bryce Holdaway. Bryce, of course, is from Empower Wealth, and we’ve spoken many occasions on this show about your television appearances on location but also your podcast, The Property Couch.
It’s great to have you on the show.
Bryce: Yes, thanks for having me, Kevin. I always like having a chat with you.
Kevin: Thanks, mate. In this chat, I want to talk a little bit about you, Bryce, what you’ve done with property and so on, and that journey. What got you involved or interested in property to start with?
Bryce: I wrote it in the book. There was an interview with Jan Somers on Ray Martin’s show back in the 1990s. She got up and just scratched a few things up on a whiteboard about the tenant and the taxman paying most if not all of your bills, and if they go up in value, you create some wealth for yourself. I remember that being a massive lightbulb moment for me.
Previously, my best made at high school went and worked for his father in retail, and I went and did the well-worn path of trying to get a university degree. At 18, he bought an investment property, and he just said, “Look, I don’t really know why I’ve done it. Dad said, ‘Do it, it’ll go up in value, and I’ll make some money.’” That planted the seed of the idea.
He really couldn’t answer too many of my queries, so as soon as I saw that interview on TV and just saw it explained – and it was really simple; it was a “back of a napkin” chat up on the whiteboard – I had two thoughts at that point. “Ah, I get what’s going on here now, and to me that sounds terrific.” And the other one was “Why isn’t every single person on the planet doing this?”
It’s not since I’ve matured a bit that I understand that there’s human mindset and psychology that gets thrown into it. But at the time, it was a massive lightbulb moment for me, and I was hooked.
I was studying accounting at university at the time. It was one of those things where I didn’t know what I wanted to do. I wanted to be an electrical engineer and I stuffed around too much at high school and didn’t get the grades. So I stumbled into commerce at uni, and my father was an accountant, so I was just heading down that path, but I wasn’t passionate about it.
But as soon as I found out about property, it felt like it was for me, I was in my flow, and I just loved talking to anyone who would listen.
Kevin: Interesting you talk about your mate there whose father encouraged him to buy property, didn’t really know why he was doing it, but just thought, “Well, if dad said it, I should do it.” You mentioned there about your dad being an accountant, too.
What were the conversations like around your table? Did your parents encourage you into property?
Bryce: Interesting story. No, because my dad was born in 1939, so he was born in the shadows of the Great Depression and also War years, as you know. So for him, he was very much the traditionalist that you get a good, safe, secure job, you pay off the home as quickly as you can, and you don’t get yourself in over your head.
My dad’s been very encouraging for me – my number one supporter – but there were some very robust discussions early on. Dad thought that it was better for me to not leverage and to not get into debt, to just go down the path, finish your university degree, buy your first home, and pay it off.
He’s really proud of what I’ve done today, but at the time, he probably would have been very concerned because I took the opposite of what he said to do. I wanted to leverage myself into property, I wanted to take risks, I wanted to get into business for myself, and everything that he valued, I was bucking against.
But ultimately, there were no kitchen-table discussions about property, hence me just trying to find as much information as I could in external sources. But he’s always been encouraging of me.
Kevin: Interesting that story you told about Jan Somers. I’ve interviewed Jan on a number of occasions, and I know you have spoken to her too. Nothing much has changed. You could still get Jan up and she’d still scratch on the whiteboard nowadays probably the same scenario. It hasn’t really changed, Bryce, has it?
Bryce: No. It was a terrific trill for me. I met her about six weeks ago, we interviewed her on The Property Couch, and it was a terrific chat from someone who is incredibly humble, who has been investing for 45 years, who didn’t complicate it.
I feel she was one of the pioneer educators in the country, and she’s the original independent voice where she never took any kickbacks, she never took commissions, she was never seduced by any of the outside influences and the influence that she had.
She said, “Buying property, correctly financed, held for the long term, is my philosophy. It’s been my philosophy from day one. It’s still my philosophy 45 years later.” And for me, it was a nice circle, completing of the loop for me, but also just to remind myself that for her, she’s created a very significant level of financial independence but she’s remained humble. You’d never know.
I like the story where she says she’ll indulge on a couple of things, she likes to have a nice, comfortable place to live in, but she drives an old, 2004 BMW. She actually flies business class to Europe, but once she gets there, she stays in a $20 a night accommodation that might not even have a shower.
Just keeping it really real and not getting seduced by some of the trappings that come from her wealth, but just looking to get her time back and her experiences back, which she’s done in spades.
Kevin: Jan, of course, was one of the first pioneers of educating investors. I know there’s a lot of that goes on. We like to think we do on this show, and certainly you guys do on yours as well. There are a number of other podcasts that do exactly the same thing. But when you think about it, property investors are really at a great risk because of a lack of protection. They don’t really have a voice, and there are many people who attack them and try and think “Oh, these guys are wealthy; let’s try and rip them off.”
A lot of dangers there for property investors, aren’t there? And a lack of protection.
Bryce: Yes, absolutely. It’s an unregulated environment, and the challenge is that the investment class is largely an emotional investment class. It’s an essential need with shelter, so for you to try and regulate residential real estate is going against some very powerful lobby groups.
For example, the Real Estate Institute in each state and across the country, because a real estate agent earns a living from transacting in real estate, and of course, they have a discussion around whether or not it makes for a great investment or to have a yield discussion. It’s hard to say to those guys that you can’t talk about investing because it’s their bread and butter, but as you point out, it makes people very vulnerable.
I always say the barriers to entry are pretty low to be in the property investment sales game where all you need is a haircut and a suit and if you have a silver tongue, and with lots of people wanting to outsource their understanding when it comes to money.
I don’t think there is a problem with outsourcing the execution, but a lot of people outsource the understanding and leave it in the hands of someone else and someone else’s agenda. I’ve been an advisor now for pretty close to 20 years helping people buy investment properties, and I’ve seen some roadkill in that time – and it’s largely where people have, as you say, been in a vulnerable position and people have taken advantage of that.
Kevin: What was the first property deal you ever did?
Bryce: It was a property in Vic Park in Perth back in 1999. I paid $199,940 for a three-bedroom apartment. I went into partnership with someone else because I was 23 at the time. I was so super excited. But Kevin, the funny thing is $199,000 sounds like nothing now, but the median price for Perth at the time for a house was $158,000, so I got massive buyer’s remorse after that. But what I know now is I was three kilometers from the city, I was in a high land value area.
It was a scary time, but I reckon that’s the best decision I’ve ever made, because I know that most people struggle. Only 1 in 12 people in Australia buy an investment property, and of that small percentage, nine out of ten don’t buy more than two. Despite what the magazines say and the people you get to interview, they’re the minority. The majority of people don’t feel comfortable buying investment properties and going into debt.
I always think that that first one is the best deal I’ve ever done, because it took me over the line. Every deal I’ve ever done since has been so much easier. But that one, the adrenaline was up, the learning curve was high, and I certainly was nervous for a long, long time.
Kevin: Well, that’s the one you measure all the others against I guess. You mentioned there that the learning was high. Did you actually heavily research that, or was that a lucky purchase?
Bryce: No, I was really young. I’d like to say that I was one of those guys who compared all asset classes, but I just loved property and I had a mentor who said, “Let’s buy a property together,” and I just absolutely jumped at it.
You learn how to play a few songs and then you learn how to read music later on. I was the guy who wanted to play a few songs before I learned the big picture. I just wanted to get into it. I just knew it was something that I wanted to get involved in.
But I learned the hard way about joint and several liability, because I bought this property with this other mentor of mine, but what I didn’t realize is that I only owned half the property but as far as the banks were concerned, I had 100% of the liability. So they considered me to be responsible for 100% of the loan even though I only owned a portion of the property.
That was an interesting exercise to understand the lending game, and it also made me realize that investing in property is not a game of bricks and mortar; it’s a game of finance. So I had to quickly understand how finance worked.
Kevin: Yes, it’s a game of strategy, too. Have you used the same strategy all the way through, Bryce?
Bryce: No, I’ve made some mistakes, Kevin. Because I had some success young, I thought I was a bit of a legend way too early and with another couple of guys, we bought two houses in Tugun on option to do a development. We were going to knock them over and build 21 apartments just near the Coolangatta airport.
It was around the time that Schapelle Corby was in the headlines. The house next door was actually her father’s house. I remember we were trying to talk to him about taking that so that we could actually build more. But that was just an exercise in taking your eye off the ball, not doing the Jan Somers method of sticking to your knitting and knowing what you should do.
I tried to make a lot of money from being a property developer, and long story short, two years of my life I was out of the market, I burned a lot of cash to get the DA approved, and because of something in council that was outside of our control, we didn’t actually get the application to go ahead. So we lost a bit of money.
Ultimately if I had just stayed true to the process of buying good assets, holding them long term, correctly financed, I would have done a hell of a lot better in that time.
I’ve done some speculative stuff, but now I’m pretty clear on where I want to buy, and I’m also clear on the fact that I have a very conservative approach now, so it’s about debt retirement. I don’t need to have ten properties, I don’t need to have a renovation exercise; I just want to finance them correctly, buy the right ones that grow in value in growth locations, and put a lot of my debt structure around retirement debt.
So ultimately I can retire with a passive income. As I said, I want to get my time back and my experiences back, and I want some freedom that comes from having that passive income. I’m pretty close to my goal, which is good.
Kevin: Good on you, mate. Is your portfolio a mixture of houses and apartments, or have you specialized?
Bryce: Yes, I’ve had everything, and I’ve been across WA, New South Wales, Queensland, so I haven’t been afraid to go across borders. If you talk to my father about apartments… I like to think of what I buy as flats rather than apartments, and the distinction being the old school 1960s and 1970s versus the new stuff. But if you talk to him about flats, he just thinks that’s low socioeconomic and you’d be mad. So he’s just quarter-acre blocks with a detached house surrounded by a garden with a Hills hoist and a barbecue.
But as we know, Baby Boomers will soon be at the tipping point where they’ll no longer be the dominant force in the workforce and Gen X will take over and then Gen Y. What we do know about different generation types is they value things differently.
For me, I’ve gone from land content is king to land value is king. I’d rather have a two-bedroom apartment four kilometers out from the CBD where the land value is high and the percentage of the purchase price of the building is low, versus some land where I have to go 30 or 35 kilometers out, where as a percentage of the purchase price, the land is really low and the building is really high.
I often see a lot of people saying “It’s all about the land, I must buy land,” and I think you have it around the wrong way. For me, you have to get the suburb first and the property second, whereas I see a lot of people go property first, suburb second.
Kevin: Yes, buying the wrong way around.
You mentioned there that you do buy across borders. Would you buy outside of Australia?
Bryce: I don’t see the need for it, personally. I know people do. My personal view is that you need to be a sophisticated investor because you’re throwing in exchange rate risk, you’re throwing in different economy risk, you’re throwing in geography risk, you’re throwing in different legislation risks.
If I go back to the fact that not many people buy an investment property and of those who actually do, a very small percentage buy more than two, let’s just get our own back yard sorted first. If you can get your portfolio up to $4 or $5 million worth of value and you have significant amount of equity, you probably have a good enough base to then consider other markets.
Let’s be honest, you can make money all around the world, but you don’t want to add complexity in the early days while you’re still trying to go through that accumulation phase to build up some equity and build up some cash flow.
For me, it’s not an ambition, but I do know that some people do. My caution would be for the beginner and the intermediate investor to probably really consider whether you do it, and then for the sophisticated investor, that’s a different kettle of fish.
Kevin: You’ve given us a lot of great advice in our chat together. Just to sum it up for me, Bryce, what advice would you give someone who’s thinking about starting an investment property portfolio?
Bryce: My number one advice is cash flows will tell the story. For me, I don’t want for someone to get into a property purely based on an equity play where they’re servicing debt with debt. I’d like to see that there’s some surplus at the end of the month, which shows that they have good financial discipline.
We want to be in the investment game for a minimum of ten years to get some maturity out of this investment. It’s a high-value transaction, high entry cost, high exit costs, so if you have to turn over too quickly, that’s going to destroy your wealth rather than grow it.
We have to plan our cash flows, take a bit of a look to the horizon and see what’s happening in our life. Are we at the early stages of life and we may have to plan for maternity leave and being on one income? Are our kids at a stage of life where they’re going to leave the nest? What’s my attitude to risk?
All these factors come into play as to what my next step would be, but my fundamental suggestion to anyone who’s starting is be a farmer not a hunter. So multi-season outlook, know that you have a plan, reap and sow at some point in the future. It’s not going to be a quick kill, whereas the hunter is looking for all those quick kills.
Let’s be honest, the television industry that I’m a part of doesn’t help, because everyone can sit in their lounge room and watch people make what’s perceived an enormous amount of money, but there’s a lot of risk involved.
Kevin: Of course, there is. It’s great talking to you, Bryce. Bryce Holdaway, of course, from Empower Wealth, Location, Location, Location, and also that podcast, Property Couch.
Bryce, thank you so much for your time. Great talking to you, mate. I look forward to catching up again soon.
Bryce: Thanks, Kevin.