In an entertaining 2-part interview (we have joined both parts together here), we catch up 2 young skilled property experts who happen to be brothers.  One is building a strong business from managing property and the other brother is one of Australasia’s most talented and knowledgeable buyer’s agents.   In part one we ask Shannon Davis and Joel Davis about what they have learnt from working with some of the country’s smartest property investors.   In part two, Joel and Shannon discuss the construction of a property team.  Midway through our chat, Shannon gives a piece of advice that is like gold.  Listen out for that.
Transcript:  
Kevin:  My guests in studio: Shannon Davis from Metropole Properties and Joel Davis from Image Property.
Joel, I don’t know how you feel about this, but foreign buyers are constantly getting caned and investors are constantly getting caned for increased prices. What’s your take on that?
Joel:  I think it’s a lot of hype, personally. We deal with probably a hundred new properties a quarter, and out of those hundred new properties, the amount of foreign investment we see within it would make up less than 10%.
Kevin:  Joel, let’s talk about investors. Both of you deal with investors all of the time, but you get them at the point where they’ve secured the property. Then they have to go on and get it managed professionally.
How important is mindset, and do you see that changing once they become property owners?
Joel:  I think mindset is really important. It depends on what you want out of it. If you’re trying to grow a portfolio over a number of properties, then you need to have a mindset of pick the right person and then trust them to do the job and take the advice.
If you have the intention of micromanaging the person you employ to do the job, then in my opinion, you have no right to build a portfolio because:
(a)   The people who you’re working with, if you don’t trust them and take their advice, probably won’t do business with you for very long. That is certainly my experience. I won’t do business with those clients for very long.
(b)   You just won’t be able to do it logistically. The stress and the chaos that it creates will make the whole process something that won’t be conducive to getting where you want to go with that portfolio.
Kevin:  Do you find you have to educate a number of investors on that point?
Joel:  Absolutely. Certainly in recent times, it’s become probably something that we’re much more aware of and we do very early in the process. We just lay out the plan very clearly. We also cover off on what the worst-case scenario could be and how that would look. Obviously, we make them aware of the fact that there is a process for that.
I think A Current Affair has a lot to do with making people believe that you can have a tenant in your property who you can never get out. It’s just not true. There is a process and a system for everything. We know what it is. We’re professional. We know how to do the job. Trust us and then that way, you can focus your attention where it needs to be in order to get to where you want to go.
Kevin:  Those stories we see on A Current Affair are the horror stories. They’re probably one in 10,000 or 50,000 – I don’t know – but they certainly paint a very bad picture of tenants, not only of foreign investors but of tenants as well.
Joel:  Yes. Typically, it’s also a private landlord looking after a lot of those properties, someone who hasn’t served the paperwork in the timeframes that are required in order to be able to get the process carried out.
Kevin:  Shannon, I know in your case, when someone comes to you and they tell you that they want to invest in property, given the fact that we call you a buyer’s agent but you’re more of a strategist, what is the difference between a buyer’s agent and a strategist, and how do you determine whether someone is right and whether their mindset is going to be right as an investor?
Shannon:  I think a strategist get you the highest and best use of your property, be it if it’s an apartment, a house, or a development site.
Kevin:  You said there “best use of your property.” Wouldn’t it be correct to say “best use of the available funds,” because you actually point them in the right direction? They may have an idea about what property they want, and quite often, you’re going to have to change their mind on that.
Shannon:  Yes, definitely. The budget comes into it, but not so much the budget that the bank is going to give; it’s to do with their comfort zone. If they’re allowed to borrow $1 million from the bank, that might be too far, they might not be able to sleep at night. It’s really to do with what their risk tolerance is, and if they have comfort around $600,000, then we would show them how that deployed into the market would be the highest and best use of their funds.
Kevin:  The process of qualifying them – to find out whether or not you can actually help them – is that an extended process? How does that take place, and what are the questions you ask?
Shannon:  Yes, we’ll do 80% of the work before we get to contract stage or inspection stage of a property. Some people, their values are put into them from an early age, maybe from your parents. And unless you have multi-millionaire parents, then you might have some of those bad values, like “Rich people are evil,” or “I’m hopeless with money.”
Kevin:  Conditioning.
Shannon:  Yes, those limiting beliefs will affect their relationship with money and wealth.
Kevin:  That’s ingrained. You can’t overcome that, can you?
Shannon:  You can with the right sort of help. That fear of failure or the fear of success, we have to get rid of those limiting beliefs. And the best investment is in yourself, really. Once you get rid of those limiting beliefs, it opens up the whole world to opportunity.
Kevin:  I was at a function recently – in fact, it was only last week – and I heard a young person, a young investor, speak. A young lady, newly married, she and her husband had just purchased, I think, their first or second investment property. She was explaining how her friends were trying to talk it down all of the time, tell her to be careful with her money. It’s not only coming from our parents; it’s actually coming from our peers as well.
Shannon:  Yes, abundance. I think if you have that negativity in your life, you need to be finding more abundant people. Recently, Twiggy Forrest has donated $400 million. Wealthy people aren’t necessarily evil; in fact, they’re very generous and they have an abundance mentality, and that’s what has opened up so many opportunities, too. If you’re around that negative influence, you just probably have to get some new mates, Kevin.
Kevin:  That’s right. There is a saying, isn’t there, about…?
Joel:  You are a reflection of the five people who you surround yourself with.
Kevin:  That’s it. Thank you, Joel. Well done.
Kevin:  Continuing to talk to Shannon Davis from Metropole Properties and also Joel Davis from Image Property. This time, we talk about building the team.
Joel, I’m just interested to know what you see smart investors doing, how they put the team together, who’s on that team, and at what point do they do it?
Joel:  Obviously, I have the fortunate circumstances of working with more than a thousand investors who I look after personally. Probably where they start is, first of all, getting the right advice from someone in terms of strategy – so, similar to what Shannon does as a buyer’s agent or buyer’s advocacy role.
But when you’re actually at the coalface of choosing that property, I think it’s really important that you have a couple of key people. Your property manager is not just there to manage the property; your property manager is there to give you an independent assessment of what the true value of the rental return on that property will be.
I think it’s an error that a lot of people make in terms of taking the rental appraisal that the sales agent is providing. I think there can be a conflict of interests there, and I think seeking an independent appraisal is always important.
Kevin:  On that point, if you go to buy an apartment, you’re probably going to get that appraisal from an agent. Accept that, but then what you’re saying is go and get another one.
Joel:  Always, Kevin. I had one of my owners who is purchasing come to me only last week, and the appraisal that we gave as opposed to the appraisal that was provided, there was a $50,000 difference on a $500,000 property.
Kevin:  That’s fairly major, isn’t it?
Joel:  It is. Someone is being, obviously, extremely bullish with their price point and we’re always realistic with our price point. But I think that independent check is important.
I think outside of that, you should be working with someone who has a lot of experience in that local market, so having someone who has that knowledge of the local market and someone who is active within it, I think is really important also.
Kevin:  You make a very good point, and I just want to pick up on something too. Sales agents, we do know they’re somewhat ambitious. They do tend to look ahead. There is nothing wrong with that. They’re quite enthusiastic about the market, the market growing all of the time.
But when you’re looking at a property manager, there is someone who you’re going to have a relationship with for quite some time. Therefore, they want to make sure that the information and advice they give you is something that’s not going to come back to haunt them a little bit further down the road. Would you agree with that, Shannon?
Shannon:  Yes. Sales is like dating, but property management is like a marriage; it’s going to be a long-term relationship. So yes, there has to be a lot of trust there, and no one is being helped by being lied to, so it’s better to get an accurate appraisal first than be disappointed later.
Kevin:  How do you go about choosing the right people to fit onto your team, Shannon?
Shannon:  I think, make sure they’re independent. They can’t be having two masters. What I mean by that is “This is great investment stock, just buy any one of these off of this list,” because they’re obviously masquerading as just a developer’s sales agent slash investment expert as well.
We want unbiased advice and we want that advice from people who have been there, done that, and are actually successful. If you’re not successful at this particular activity, I’m not really interested in your opinion. If you are successful, then it’s someone I’m going to make time to sit down and listen to.
Some of my investors have taught me a lot of their strategies. For instance, I rent my properties at 95% of market rent and only 12-month leases because I want the long tenant stays. When you reward them with a little bit of a discount on market price, you’ll get a great tenant who is a long-term fit who is going to not give you much trouble at all.
Kevin:  Joel, that’s a very interesting point that Shannon makes there. Do you find that investors are aware of that? Do you pitch your properties for investors at about 95% of the market?
Joel:  I think it’s really important that you do go in with a price that’s not above market value. Certainly, 95% of market rate is great if you can afford that. Not everybody can, and not everybody is willing to be that logical with their approach to property.
I think it’s really important that you don’t let the vacancy happen because once that vacancy has been incurred, there’s no getting it back. A lot of the mistakes that I see made are investors calculating their rent by whatever it is times 52. It’s not. It’s how long your property was on market during that 52-week period that determines the yield.