Property Hub - Investment Insights & Inspiration - Get Invested: Part 1 - Mark Baker on +330% super cash flow property!

Episode Date: August 16, 2024

After struggling with the grind of running multiple businesses, Mark Baker discovered a unique cashflow property investment strategy that would change his life forever. Many property investors are also juggling work and/or demanding businesses, which create time pressures and also a big cashflow crunch. In fact, cash flow affordability might is the key make or break factor for most Australian property investors. So if this sounds like you, don't miss the next two Get Invested episodes. We're talking to Mark Baker, who after a challenging, hard working start running multiple businesses, discovered the benefit of investing in a special type of positive cashflow property over the last three decades that has allowed his family to achieve his version of financial freedom and live solely off the income from his property portfolio for over a decade and counting. As a result, Mark is one of the most knowledgeable experts in Australia when it comes to rooming and boarding house properties and the associated legislation right across the country, and he regularly consults with state government in this specialist area. He’s now a director of the Registered Accommodation Association of Victoria, which is the peak industry body for rooming houses in the state. So If you’ve ever dreamed of leaving the rat race sooner rather than later, then listen carefully to Mark's insights! This week we cover his story, and next week we get into the nitty gritty detail of his investing approach. More from Mark http://www.supercashflow.com.au  http://www.roominghouse.expert Subscribe to Property Hub for free now on your favourite podcast player. Take the next step - connect, engage and get more insights with the Property Hub community at linktr.ee/propertyhubau Book a personal solutions session with Bushy to go deeper on your specific property needs or challenges Continue the discussion with likeminded investors and experts on The Property Hub Collective Facebook group Get a copy of Bushy's book, Get Invested, for FREE, and find out what it takes for you to invest in living more, working less Get all Property Hub info here linktr.ee/propertyhubau About Get Invested, a Property Hub show Get Invested is the leading weekly podcast for Australians who want to learn how to unlock their full ‘self, health and wealth’ potential. Hosted by Bushy Martin, an award winning property investor, founder, author and media commentator who is recognised as one of Australia’s most trusted experts in property, investment and lifestyle, Get Invested reveals the secrets of the high performers who invest for success in every aspect of their lives and the world around them. Get Invested is part of the Property Hub podcast channel, your home for property investment insights, inspiration and stories from Australia’s top property experts, investors, leaders and analysts. Subscribe now on Apple Podcasts, Spotify and YouTube to get every Get Invested episode each week for free, and also get full access to RealtyTalk, Australia’s top online property show for red hot property investing news and insights direct from property industry leaders and influencers. Property Hub is a collaboration between Bushy Martin from KnowHow Property, Kevin Turner from Realty, show producer Andrew Montesi from Apiro Marketing and Apiro Media, and Australia’s largest independent podcast networkDM Media.  For business enquiries, email [e-mail] omnystudio.com/listener for privacy information.

have been investing in real estate for more than 30 years a little bit differently to a lot of people. I'd never did the negative gearing thing. It didn't make sense to me. I didn't have enough income to be able to afford properties that lost money. So I had to buy ones that made money. And yeah, that sort of evolved into, well, how can I get more and more cashflow out of it? And that's where Rooming Houses came in. Welcome to Get Invested on the Property Hub podcast channel, a leading weekly show for Australians who want to learn how to unlock their full self health, and wealth potential. I'm your host, Bushy Martin, and each week I go deep with the best investors, experts, leaders, and founders to find out what it takes to break free from the

grind, discover freedom, and to live by design. Subscribe now and join me. Get invested in the life that you really want. Let's get started. Hi, Friday Fighters. Are you a property investor that's increasingly struggling to make things work and struggling to make ends meet? Arising rates, taxes, compliance, rental reforms and the cost of just about everything make it increasingly difficult for you to keep affording to hold your investment properties long enough for you to enjoy the fruits of capital growth at the end of your journey. Because in my humble opinion, long-term cash flow affordability is the number one factor that separates sustainably successful investors from the rest.

and it's one of the major reasons why still over 54% of first-time investors end up selling their investment property within the first five years and it's because they just aren't able to live long enough on a diet of toast and two-minute noodles when their property is costing them an arm and a leg to hold on to on the quite uncertain promise of a bigger nest egg years into the future. so what can you do about it how can you improve the long-term cash flow affordability of your investment properties how can you turn a negatively geared property that's burning a hole in your pocket each and every week into a potentially super cash flow money making machine now what if you had the opportunity to convert a single tenant home with a net yield after taxes and

costs of about two to three percent that ends up costing you thousands of dollars a year into multiple income streams that have the potential to produce up to and potentially in excess of 330 percent more cash. Now imagine how this would change your life shifting from struggle town to easier street. Would you be interested? Well if this has picked up your ears and you want to know more then you've landed in the right place because our guest for the next two episodes is going to show you how he has personally done it and how you too can look to do the same. Art like most things it's simple in theory but it's not so easy in practice because the devil's always in the detail and it's not for the faint-hearted. Now I'm talking about Mark Baker who you may have heard

recently on our Realty Talk shows and as you're about to hear after a fairly challenging time running multiple businesses some years ago, he discovered the benefit of investing in a special type of positive cash flow property that's allowed him and his family to achieve his version of financial freedom and live solely off the income from his property portfolio for well over 10 years now. As a result, Mark's one of the most knowledgeable experts in Australia when it comes to rooming and boarding house properties, along with the associated specialist legislation right across the country. And he currently consults with state governments in this very specialist area. He's now a director of the Registered Accommodation Association of Victoria

which is the peak industry body for rooming houses in the state. So as you can see he's a man who wears many hats. So if you've ever dreamed of leaving the rat race sooner rather than later then these are episodes of Get Invested that you just can't afford to miss as Mark shares his inspiring story of how rooming houses have actually transformed his life. So welcome and let's get invested Mark. Thanks for having me on Bushy. We had a great chat on Realty Talk a while ago and that really got me interested in getting you on to do a deep dive on the subject which we're going to enjoy over the next couple of episodes but for those who've missed that and haven't heard about you can you sort of kick things off by giving sort of a rundown on what you do differently

and more importantly why you do what you do mate. Well how far do you want to go back I mean I have been investing in uh real estate for more than 30 years uh a little bit differently to a lot of people i'd never did the negative gearing thing um didn't make sense to me i couldn't i didn't have enough income to be able to afford properties that lost money so i had to buy ones that made money um and yeah that sort of evolved into well how can i get more and more cash flow out of it and that's where rooming houses came in uh i think we're about 14 years ago now started on that um and um yeah why i do that is basically for the income like i didn't want to i know it sounds a bit funny so i didn't want to yeah spend all my life working

however i continued to do that anyway we talked about earlier um it's kind of stopped now but uh i suppose that's yeah if you enjoy what you're doing um and you keep doing it doesn't feel like work um but it's it's it's been about you know creating the income from it so that you know um you know help my family have choices you know me have choices um all right is that that's that's yeah that's probably the you know the crux of it that's yeah yeah let's wind back then because i'd like you to sort of take us on your both your personal your professional and and your property journeys and we'll we'll leave the property ins and outs until a little bit later on But can you give us a bit of a run through, you know,

before you got involved in property altogether, what were you doing? What changed that and what triggered the move into property? So can you take us back through a bit of that history? Look, I've probably a lot of the time had businesses of some sort, you know, even go back to school. I'd be riding my bike to school, but stop at a milk bar on the way, buy some bars of chocolate and sell them for a profit at school that's like so always had that approach to um yeah it's it's not so much yeah some of some of it is about you know how you can

make money from doing things but it's also about um one of the things i sort of looked at is yeah if i wanted something how can i get somebody else to pay for it for me and sometimes for that so the margin on things wasn't necessarily about getting the money out it was about getting a product or something that i wanted so i might have wanted some chocolate at lunchtime so i might buy five chocolate bars and sell four of them for the price of five so mine's free right but where did that where did that come from mate because for someone at a pretty young age to be doing that i did some similar things because i i you know came from a pretty average background and uh you know i used to my pocket money was finding uh empty bottles that i could get the refunds on if i got enough

of them that's that was enough to keep me in lollies mate so uh you know probably a bit older than you but uh where did that sort of approach to life uh is that just engineering in you or is that something came out of your background share share a bit of that with us it probably is i mean i probably used to do the same it's like with collecting you know cans and all that sort of stuff and getting around on my bike but um look my um my dad always had businesses as well so So it's probably part of it that came from there. It was just the, yeah, I suppose the nature of, yeah, it's how I knew things worked. Yeah.

So, yeah, it probably is a little bit inherent, but I mean, you inherit that from your parents too, so. Yeah, exactly, by osmosis almost. So when you left school, what sort of businesses did you get involved in? Look, I mean, there's a few things. When I first left, I did have a couple of jobs. I was doing stuff in electronics, and so I ended up doing a little bit in fails in engineering supplies and stuff like that, but went into a business then, I was actually selling clothing, so started doing stuff effectively door-to-door, taking products around, selling stuff door-to-door, had other people doing that with the same products that I had. you know went into then wholesale and retail in clothing for a bit um from there yeah this is going back to you know we're talking back in the 90s um my and i was talking about i was always

into technology and stuff as well i'm talking about mobile phones and my wife's like why don't you just go and get a job in a mobile phone shop from a bit and you know get that out of your system so did that then ended up you know opening up a mobile phone shop and then a couple of them I mean, yeah, it grew from there. So, yeah, it evolved from one thing to another. I had a clothing store that turned into a mobile phone store. Yeah, I love that. Something I'm interested in there, because there aren't many people that would have the resilience to go and knock on someone's door and try and sell something, mate, because that's a massive exercise in rejection most of the times.

and not many people have the gumption to do it or to sustain it for any period of time. Where did that sort of, and again, those skills are transferable into property because that resilience, patience, persistence and the ability to keep going irrespective of no is a bit of a quality that I've seen in a lot of successful investors.

Again, is that something that was just part of who you were or was that something that you're initially scared crapless about but you developed the skill to be able to handle that rejection and the knockbacks? um i i think i just had fun with it it didn't really phase me i thought people are either going to say yes or no but whatever let's get the answer as quick as i can so i can get to more people and you know find enough yeses is is the basic thing and just had fun with it um yeah even when i said when i first you know went into mobile phones i still went around to all the businesses

around where the shop was to let them know i was there and all that sort of stuff and i did that until the shop was so busy i couldn't leave it so yeah yeah um i've haven't really been uncomfortable with that so i understand you know i understand where you know that feeling comes from yeah i look at yeah everyone gets it i'm sure i do get it sometimes it's like oh but what is but what's what's the worst that's going to happen is is the thing it's like the worst that happens is people say no well they might yeah i'll let you tell you to get out or whatever it's like that's all i'll do the next one and i think that that statement what's the worst thing that can happen yeah it's actually a life philosophy that that tends to separate people who do achieve

success and whatever they decide to pursue versus that are those that are too scared to have a go so i know i've shared this on the podcast before but my father-in-law that there was almost his version he's a hungarian migrant who came here with a suitcase and and did amazing things in this country before he passed a few years ago and uh he didn't believe in problems there was just challenges to overcome and when everyone come to him and say yeah i've got a problem george he'd say did someone die oh and they say oh no well it's not a problem then uh what's the worst thing that can happen it's a it's a really really good approach to life in that sense so mate um You had a pretty interesting background, and I know you've done quite a number of podcasts and presentations and whatnot in the past, but I'd love for you to share something unique or interesting about you that you've never actually said publicly before.

Have you got anything to tease us with? Look, I mean, some of that about the door-to-door sales and stuff is probably you've gone a bit deeper than I've talked about before. One of the things that I may have mentioned, and most of what I've talked about is businesses that have had and stuff like that, but in jobs working for somebody else, like I mentioned with the electronics work and sales and used to deliver pizzas and things like that. But most people wouldn't pick what my last paid job working for somebody else was. No, well, you've got a bane of breath there, mate. It was in the 90s. I was working as a bouncer at a pub. So I'm not going to pick an argument with you, Mark.

Is that what you're saying? You've got some Krav Maga moves or something that's going to put me on the floor in five seconds if I say the wrong thing. Yeah, look, again, I have done a fair bit of martial arts. I did judo when I was a kid. I've done a fair bit of karate throughout my life. I have competed in mixed martial arts as well. Okay.

So this is actually within the time that I was running rooming houses, and we'll get into that. So I had actually broken my leg, and we'll talk more about that soon, I'm pretty sure. Yeah, we will. Four or ten months after I broke my leg was my last mixed martial arts fight in the ring. Yeah, okay.

Interesting. Well, yeah, I won't be picking your fight or aiming an arm wrestle with you, Mark, but I hear you. I'm pretty unfit now. well i also hear in the in digging around that uh back in 2017 you were nominated for the australian of the year award mate tell us about that yeah and that was um that i think came about from from the rooming houses so a fair bit of what we do is yeah um in the welfare end of the market not quite you know social housing but in the welfare end of the market so people would

otherwise be homeless not an easy market to deal with by any stretch of the imagination and unless you know what you're getting into, it's a whole world that you wouldn't even know existed unless you're in there. So I think it came out of that, the provision of housing and the amount that we were doing and it brought on not just our own properties

but getting other investors involved and stuff like that as well. So there was a nomination there for Australian Year in 2017. Yeah, that's awesome, mate. And you've also sort of shared behind the scenes is that you have almost a photographic memory. Yeah, I do tend to remember things pretty well, which helps a bit with, you mentioned at the start

about how complicated stuff in rooming houses can be with the myriad of legislation and regulations that apply and the government keeps changing things. And you mentioned the Registered Accommodation Association of Victoria. so with that so we consult on the legislation and regulations and just when we think geez they've done everything they can they bring out something else um but i tend to be able to read and comprehend a lot of the legislation and remember what i've read so you know someone will say oh but it says this oh no it says this i'll have conversations with building surveyors

sometimes you know because of yeah out of if you've got insomnia read the national construction code i have a lot of that as well but just but to start with i'm reading that thinking how the hell does anybody understand this i need someone to explain it and yeah now from having read it remembering stuff in it yeah i can often explain parts of the people including building surveyors that work with it so they'll bring something up oh yeah you've got to do this and it's like no well actually it's like this is what it says i love it all right so what i'm hearing mate is that uh i i wouldn't like to be your wife amanda mate because you're probably the sort of guy that says Because back in 1999, we talked about this.

Yep. I know the limits. It's like, I can just go, okay, yeah. Happy life, mate. You're spot on there. Turning to a more, I guess, serious side of the equation then, Mark, what challenging event in your life has brought about your greatest learnings and best changes, do you think?

Yeah, look, I think, well, I mentioned the mobile phone shops before, and this is probably, well, probably it is around 14 years ago now is where a lot of the stuff changed. That's where I've been getting into rooming houses a lot more since then. My, well, you mentioned a band, my wife, so she was diagnosed with breast cancer in, I think it was May 2010. 10th um and you know again like what you said with your father-in-law i think we have the same approach to that it's like well it's not a problem it's just yeah a challenge we're going to find a

solution to it yeah so um yeah obviously you know grateful about the fact that we had you know businesses there we had you know had been buying property for a number of years of that stage as well so i mentioned started buying property and we and started with positive cash flow more than 30 years ago yeah so yeah um businesses on the other hand had been up and down and we'd had mobile phone shops for about 15 16 years at that stage and um that the margins had been you know tightened and tightened by the networks which yeah in some ways i could say look i probably stayed in too long because you know i said that that was going to happen i knew it was going to happen i'd seen track record from other countries um and it was just like oh this is great you know we'll keep

going until yeah until it wasn't um and yeah so and so really the property had sort of carried us through because whilst we hadn't all focusing on growth yeah they had gone up in value anyway so there was some equity there we'd use that to support businesses at the time where margins were tighter um and yeah the realization yeah well i'll continue on with yeah amanda's um story with breast cancer surgery breast cancer you know i said it was fairly large they would have normally done um surgery first but they didn't they had to trade at first and i shrunk down and yeah um and reduced the tumor considerably okay however one of the another thing that had happened there i mentioned my leg before this is three days after her first chemo treatment she's at home in bed

hadn't eaten for three days thinking someone's going to come home and get some food for me soon she gets a phone call from me i've broken my leg right i'm off to hospital with a broken leg i didn't realize it at the time i said oh look you know i was actually martial arts training and um and i said oh look you know i've uh you know gone down a bit awkwardly and i can't get up at the moment you know the ambulance is here they want to take me to the hospital but yeah i'll be able to get up soon i'll be right and i'll be home it's like i was wrong uh really though i had surgery um on my wife says that you know i didn't like her getting any attention so i had to get the attention back on me that's one way to do it but yeah that gave us some time like

because we're both basically at home in bed for you know several weeks i think the main yeah recovery on my leg was about six weeks it was about 10 weeks before i was weight bearing um it was a reasonably serious yeah bike did a good job yeah um but it gave us time at home to then going all right well what are we going to do what's yeah what's worked what hasn't worked um yeah what do we do and it's like well business has been up and down um fortunately you know with what happened with the networks like we had friends who went broke with what happened with you know the mobile phone networks with them screwing and screwing the margins down where they suck in leases and had commitments that they yeah committed to and yeah didn't have

anything there to back them so we had property there that backed us and then we thought well yeah business has been up and down properties always carried us through let's get rid of all the businesses um and i didn't mention that i had pizza shops at the same time too but mobile phone shops pizza shops it's like phone shop um so let's just sell all the businesses and um you know live off property without knowing how we're going to do that um it was actually you know that i'd got back you know back into the shop had to build it back up because it had run down a bit over the time that i was off with injuries and stuff like that had to build that back up and it was actually a customer in the shop that said to me um it was

where we where where the business was was they had a bit of a coastal area you know a lot of people go camping and stuff like that um holiday area said oh what are you doing with your property there because i'd moved from it i said i'll look up you know renovating at the moment we might do you know it might have a go auto rental so that goes so we thought that might be the thing and she said i don't do that do what i do you know what do you do it turned out it was rooming houses and it's like okay tell me about that how does that work the numbers sound all right went home yeah and spoke to amanda about it and first first reaction where a lot of people have it's like oh but who's going to be living in the house it's like yeah what are they going

to do to the place started talking about the numbers and she's like i mean that's like and then we're like okay where else can we do this and you know said about initially because we had a cumulated reasonable number of properties over the previous 20 years set about what ones have we got, can we convert, where can we get some other properties, bought a few properties while the serviceability was still good from the business before we got out completely. Yeah.

And set about converting those and it's been, and where I mentioned even a customer who introduced rooming houses to me didn't necessarily know a lot about them had sort of fallen into it as well and um and that was where i was like well if i'm going to do this i need to learn about it where can i go and learn tried to find people who could explain it to me and there was people who knew bits of it like i could find you know someone who knew the building side of it someone who knew you had bits in the health regulations someone who knew bits and pieces of other things um i did find the registered accommodation association of victoria then but similar thing even people

within their new bits of it no one can bring it all together so that's where i just said about reading all the legislation to do with it yeah yeah i said i couldn't find someone to explain stuff how the stuff in the building code were so i read it yeah love it love it what what i'm hearing here mate uh is that you don't put too many restrictions on yourself and yet and you happen to have a go at things because again if i if i look already at what what you've shared with us clothing shops door locking mobile phone shops pizza shop uh property uh draw a line through all of that then then there's no limit to uh your belief in what you can do and again i think as a fundamental mindset that that is a absolutely key characteristic of anyone successful not only

in property but in other areas but but also what what uh i'm liking about what you're sharing with us is that the attention to detail it's not just going right this is a great idea let's just blunder in and and and do it let's do the research understand what it's all about keep asking questions until we've got the answers and if they if someone can't give them to me i'll go and find them anyway uh that that sort of approach uh for me you know i get to talk to a lot of people it's a bit of a standout in terms of those that really start to make a difference in an area that they put their energy into. Would that be a fair comment? Oh, it is a fair comment. And I think if you're going to get into something, you do need to understand it well enough to

make sure you do it right. Now, yeah, people do see things, like even investing, you hear people talking about, oh, but isn't that risky? And it's like, well, you can mitigate a lot of those risks with enough knowledge exactly so i think risk isn't just not knowing what you're doing that's that's what risk is and as soon as the knowledge is there then it's not a risk anymore because you you've already built in what the what the risks are and what you're going to do about them so uh yeah well that's where i talk about um and you mentioned at the start and i've mentioned this before as well that around what you said it was 54 percent you know and it was around the 50 percent an investor selling five years and it's like it's an interesting statistic and yeah that comes from

probably just you know not being informed and people you know saying oh you should buy this property to go up in value when they get sick of the holding costs the market doesn't move where they thought it was and stuff like that like i look at things like um yeah there was big things years ago like investing in mining areas and it can still work i don't know people who've made money in mining areas in recent times as well so do i so do i yep but that's knowing the market knowing enough about it to do it so me personally i wouldn't go near it yeah yeah yeah well it's the old story ignorance uh and arrogance generally leads to disaster uh so if you do the homework and you know what what you're doing you've got the right team around you and you've sussed it all

out then then uh in a much better position to to take advantage but uh let's let's sort of get into your property journey then if we can and I want to go right back for a minute because one of the challenges I see for a lot of aspiring investors is the start because you know I've said this a thousand times it's the start that stops most people when it comes to property because they're too scared to take the leap can you sort of and I'm going to touch your memory a bit now because if it's 30 years ago, what was your sort of initial interest in property to start with? And then I'll get you to talk about what, if any, initial fears and feelings of concern you had about investing in property at that time. Can you remember back that far?

Yeah. Look, I can remember a bit of it because initially, yeah, I mean, there was always an interest in property. Like I said, I didn't want to work forever, although that might have changed now because i probably do want it but um the but the um so there was an interest there and i saw that if i go even go back to what i said before it's like how can i get somebody else to buy something for me that was sort of how i saw it with property as well like you can buy it rented out somebody yeah i know a lot of the time people are renting might not like that approach and feel like they're paying off a property for somebody else but yeah that's that that's that's the market So, I think one of Robert Kiyosaki's sayings is, you know, life's unfair, be on the side of benefits.

That's great. I love that. That's awesome. So, I took that approach. It's like, well, how can I benefit from this in the market? And that was where I was at. But first, initially was buying somewhere to live. Amanda was always interested in property too. So, I don't know where it came from, but she'd read the real estate section in the newspaper and stuff like that. So, we actually bought our first house before we got married, which was one to live in. It was business that then moved us out of that, where I mentioned with clothing, we decided we'd head down the Mornington Peninsula and open up a clothing store. So, we went and rented down there and rented out the house. Yeah, perfect.

Our rent vests were even a thing. Yeah. So, we did that. And at that time, the rent payments were above the mortgage payments. so we were positive on the first property. It was interesting when we went to buy the next property and decided, well, we'll buy a property down in Rosebud so we can live there.

Wife likes to sort it on this one, whether she likes it or not. This was back in the early 90s still. Might have been early, maybe late 90s, late 90s when we bought that one. um and um she's like you know um said what she wants she wanted a four-bedroom house two bathrooms all this sort of stuff and it's like said yep okay no worries the budget's a hundred thousand right and she's like you won't get one for under a hundred thousand i'll prove it to you

took me to see a few third one we walked into was that i mean i reckon it was underpriced i think it had been on the market a while and they'd been dropping the price while the market was moving up and i think we bought it for 94 000 or something like that negotiated in the driveway uh and i've done this i've actually done this a few times when she says oh you can't do that it's like all right i'll prove you're wrong red rag to a bull by the sounds of things mark what was that it red rag to a bull uh in that sense the challenge has been said and then you talk about rosebud it's interesting my uh good wife's family uh are down that way and and that Hungarian father-in-law that I spoke to you about,

he managed to get a property in Rye, which is right next to Rosebud. I think it cost them 13 grand for land and not much more for the build back, and this is in the 80s, so it was a little bit earlier. They've still got that place, and last valuation was well over a million bucks. So I love the opportunities that you've created out of that.

Where did your property journey go from there? From there, we actually only stayed in that property for a few years. Amanda's parents had bought in a little coastal village called Blind Bite. Yep. And they were heading there a bit and kids had cousins in the area and all that sort of stuff and she was wanting to buy in Blind Bite. But at the same time, so this is about the year 2000, um actually it is the year 2000 so we were i'd started saying okay business is doing all right

now we need to start buying some property so we can you know set ourselves up for retirement that was you know basically my version of superannuation i suppose yeah um yeah things have changed since then but as in you know where i was looking at that for the future now i'm looking at you know investing for now you know get a return straight away but that was the thing and and i'd be seeing ads for people selling investment properties as you i'm sure you do now as well and it'd be like oh you can buy an investment property for only 50 a week and i'm like i can't afford 50 a week it's like why would i buy one that loses money yeah so it didn't make any sense to me so i started looking for stuff that made money so i was out in regional vic you know tasmania or somewhere

over there as well um so i went on a bit of a buying spree in 2000 and um how many of you you accumulated that time uh actually in total i bought 10 properties that year so i'm guessing this is back in low dock days if you're if you're self-employed it was fantastic have you got a pulse how much money do you want yeah pretty much pretty much so as long as you had the equity for it and stuff like that but the the uh property and again yeah with finding a way that um with my wife wanted to move to blind buy and we'd go down there it's like oh look i'll i'll come to blind buy but only if we buy that house right so again yeah that takes the pressure off a couple of months later yeah a man comes to me and says oh no pressure but that property you said you'd

buy it's on the market so i um yeah we went and had a look and it's like yeah okay it's interesting they'd uh it had been painted internally like purple and green and there was hot pink feature walls and i love those i love that puts everyone else off but there's a an opportunity right there it's like a pack of fruit tingles inside and as the outside's yellow and blue um yeah so anyway so adelaide said probably did put other people off and then but the other thing was i said we just bought yeah a heap of properties that year already um and was like well what a challenge here with buying this that we're probably maxed out in what we can buy we don't have a hell of a lot of money to put into it either.

So I'd heard about this thing called vendor finance. So I didn't know how it worked. So I basically turned up with a, interesting when you go back, a $4 bottle of wine, knocked on the guy's door, and said to me, I want to buy your house, but can you lend me the money? And he's like, yeah, sure, I can do that. But it just sold the business for, yeah, it had a payment for 40%. It was probably four or five times the value of the house anyway

and still more money to come from it. I don't know about reasonable income on the handover for the business and he wasn't too fussed about it. So, yeah, sure, we can do that. So we got the lawyers to write up an agreement, paid him interest for five years until we could finance it and pay him out. so hello and just just to break that down for those uh uh watching or listening in who don't quite get their head around vendor finance what we're really saying is that the owner of the

property lent you the money to buy the property from him you paid him interest for the five years so he's getting you know and probably a better return than what he'd be getting if the money was sitting in the bank so he's making money on the money he's giving you but that's giving you access to the property that then you can then leverage off to do to do other things but that's a that's that's gold i look at how that was done at the time it was pretty interesting because he actually transferred the property to me and took a mortgage on it because i didn't he didn't know any money on it so um the title was in my name straight away which i thought extraordinary so neither really knew what we're doing but we did it anyway

i love that i love so so where do we go from there um look from there we probably sat a bit and focused on businesses i think we did buy a couple more um i did um i did have a a business coaching business for a while as well so okay just a just a thing there because i well the i'm interested here because uh yeah in the traditional property uh steer uh you know there's always this argument about, well, you're buying for capital growth or you're buying for cashflow. And then you hear the cashflow buyers saying, okay, well, I'm just going to go for positive cashflow properties and they'll max themselves out. Particularly, it wasn't the case when you're doing back in the late nineties and the 2000s because the low dock and the old

dock opportunities to finance were much more plentiful and easy to get. But I've seen it in recent times where people go, no, I'm just going to go cashflow and they max themselves out pretty quickly they might have three or four properties and it's only giving them you know 20 or 30 bucks a week when you take all the costs out so they're not going to be able to retire off that yes it's not it's not burning a hole in the pocket but it's not going to they're not going to allow them to do much either uh the uh i'd love your thoughts on what your strategy was at that time uh in the context of getting all those properties was it was it to try and get enough of them to get enough of that income to then enable you not to have to work what what was the thinking it actually wasn't at

that time it was more about how can i buy properties that is not costing me to buy them so that yeah they're there in the future and then we'll have enough income from them in the future yeah it was a bit of a yeah future play or future thought at that time got it um and yeah um i mean And interest rates were probably, they had come down after the early 90s, but interest rates were probably still around 8% or so at the time. Yeah. So you needed reasonable returns to get a decent return. So most of what I was looking at, I was always looking at stuff that was 10% plus.

Most of what I bought was probably at around 14% at the time. Yeah. Yeah. Which meant that I wasn't putting my hand in my pocket for it. And in fact, I was probably making a little bit out of it. nothing fantastic yep from there i thought well that's comfortable there's some there we'll go back and focus on business um and yeah and i thought we'll do a few more and stuff actually going back a bit one of the things that he was saying about what scared me at the time like

actually buying a property that lost money would have scared me yeah that's like yeah um but yeah development and things like that actually scared me at that time as well and i had friends doing stuff like they might have bought something and you know one of the two built two townhouses on it and whatever and it's like i'm thinking how do you pay for that while you're building it it's like yeah and i probably shut off a bit to it because it was i was a bit scared so i didn't go and learn about how it all works yeah a bit more educated about it now and comfortable with it but um but you know back then and i think that was probably a bit of a roadblock that slowed things down because you talk about how long ago i was doing that yeah 30 years more than 30 years

ago started buying properties bought heaps of them 24 years ago yeah yeah and yeah for that it's it's it's a slow game yeah a lot of people think they're doing stuff quicker i can yeah do it a lot quicker now with what i know now but yeah i think i did okay with what i knew then so i mean exactly and then that and then and here's the important point the your knowledge evolves as does your investment strategy so the the more you know the more you understand the the more comfortable you are doing different things and and as your portfolio changes and evolves so so it generally aligns with your knowledge and your comfort level and clarity around and what you're doing as part of that so and again with with your approach to life where

you're always testing the edges and and questioning and prodding and poking to understand the nitty gritties of what it all means i can understand how you arrived at the the rooming house exercise which which you know gives you the multiple income streams uh then we'll go into that and bit more detail but so talk me through so uh you had those properties you got into business uh yeah what happened then we did we did um build a couple of properties went for a couple of near-build properties where we worked with the builder and built them yeah um that i think timing on that wasn't great and again probably not knowing enough about what we were doing with that um and yeah fortunately but you know right at the end there wasn't much to finish on one of

as the other one was finished, the builder went broke as well. When was this, mate? This was in the sort of mid to late 2000s, wasn't it? Around GFC sort of time? It was probably close to that. It was probably about 2008 or something like that, now that I'm thinking about it. Yeah, yeah, actually.

It was probably close to that. Makes sense. Might have been a little bit earlier. Might have been a bit earlier. Yeah, yeah. I'd have to check, but I think it was around. No, that's fine, mate. Yeah.

Yeah. So with those, and then there was a bit of a downturn in the market and stuff as well. And it's like, well, if we sell them, we're not getting anything out of it. We're renting them. We're a little bit negative. It's like, we can support that for a bit while we wait for growth. This is one of the things, yeah, Amanda says as well, and I agree with it all. Okay. This as well, if you make a mistake in property, wait a few years. Exactly. It's very forgiving. yeah very forgiving yeah so and that's that's where we're at with those it's just like if we sold them we would have probably lost a little bit of money on them um renting them yeah they

were negative but we could see that yeah where they were likely to go so with those we we did i think we sold one fairly quickly and yeah got out of it okay we held the other one for i don't know four or five years or something like that um and ended up getting a pretty good price for it um so yeah um yeah because they would never like from from our way of investing where we're looking at stuff that's cash flow those ones were never going to be you know cash flow properties well yeah aside from what we know aside from what we know now yeah yeah yeah you're looking for quick cash returns on the on the sale of those to inject that into into something else you mentioned earlier on the you know the the triggers with the you know the unfortunate

at Cancer Exercise with Amanda and then breaking your leg and then selling the business at that time as you were sort of leveraging into the rooming house opportunity, talking to one of the clients that was in the phone shop. Yeah, one of the things I'd love to dive into because, again, the challenge in property, if you don't have an income that you can show it all back, they don't give you any money. So how did you bridge that gap from, you know,

you had the light bulb moment on the rooming houses, you're selling the businesses. How were you able to fund either the conversion of existing ones, which might've been part of the exercise or purchasing new rooming houses? Can you talk us through that? Because that's often a cliff and a lot of people are scared to jump off. Look, that was, there's been a few times where we've run into, you know, block some limits on things and i think that's one of the things that um is definitely worth

talking to and one of the things that i'll definitely talk to people about how you can yeah get through those points um yeah the first one of those i said even though there was the low dock lending back in 2000 we had run into a limit there because you also need the cash to put in and yeah yeah and stuff like that so we had run into limits there um with um yeah when we got out of the businesses into renting houses so right at that time you know before i lost that service ability we went and bought three more properties i think it was yeah right so you had financials from the business that would support the amount of lending and as for those who don't know if you're self-employed then at that time in particular banks would would still honor the

financials for a year or sometimes two uh yeah on the exercise that would give you the the borrowing capacity you need to to do what you did so that makes sense now so you sort of load it up where you still had the financial support is what I'm hearing, yeah? Yeah, yeah, definitely did that and then got those going. For borrowing from there, look, by that stage, we pretty quickly turned stuff around. When we first were going into that and when we first got out of the businesses and we looked at the properties, when we first started going

into rooming houses, where I mentioned we had bought properties that were positive when we bought them, through supporting the businesses, we then refinanced used money to support the businesses and things that were positive but become negative got it so when we said oh we're just going to sell everything and leave off property head in the sand a bit um go on and had a look at things and it's like when we did the figures on it it's like the properties were negative about negative 40 grand a year right it's like well that doesn't that's not exactly something you can live off so we knew that with yeah going into rooming houses we had to go fast yeah so um you know

we set about converting the properties we had and turned that from you know negative 40 to you know would have been over 100 a year um from i would say just from october to march wow so from negative 40 to over 100 grand a year in yeah in cash flow income that's net yep yep amazing yeah to talk to us there's a lot of things that come into that though because it's having the business background so understanding what we needed to do and what we needed to look at with the numbers and you know what was worth spending where and stuff like that and also from having a reasonable number of properties because i think we had bought more over the years i think we had close to 20 properties by then yeah so you know having that reasonable backing of having the

properties there that we could do that with it's not something that someone starting could do yeah exactly that's yeah that's nearly um yeah that was nearly 20 years into buying property so um yeah so that's a very good point i think the uh yeah just just to put some shape around that you talked about the overall position but are you able to to share an example of one of your properties that that you know free the the conversion to a rooming house was was netting this or it was costing you X, and then post the conversion, it was giving you Y. Can you give us some rough numbers around that just to put some shape in our heads? Yeah. I think of something that we had. Look, one that I sort of had in mind as an example

is one that we actually didn't rent. It was one that was bought for the purpose of converting it okay um but had we rented that you know as a house at the time it probably would have been yeah three hundred dollars a week you know we bought it for 210 000 i think it was at the time which was probably a bit cheap because it was a mortgagee sale and okay well done yeah but even so that one is probably a reasonably good example because that we went um yeah one of the rooms in that um had this is i'm going to go a bit more into the story um and it had some interesting renovations done over the time and probably by different owners that had had it and stuff like that and uh you could speculate on what was being used for the one of the master bedroom there's

like a master bedroom in the back of the house they had a big corner spa in there the red wool gold ceiling mirrors around you know lights around the mirror in the corner big spa in the corner of the room and stuff like that so disco room yep you can imagine how it looked but um the that one there that that room itself on its own that room we rented for 290 a week pretty quickly after converting the property and when you consider we probably wouldn't have got much more than 300 for the house so nodal house i think at that time was about 1400 a week around a week and what did you need to spend like you bought it for 210 what do you need to spend roughly to actually make this um what did we spend on it we spent about 40 000 on it at the time i mean that those numbers pale

into insignificance compared to what the costs are now but the ratios are probably still still similar in the context of the exercise so they can be i mean that was probably i mean the ratios compared to you yeah your normal rent compared to what you get for the rooming house yeah um You know, properties are costing a bit more. You know, percentages on the returns aren't as good as that because, yeah, if you look at that, that was probably close to 30% as a gross return. And it's like, yeah, you probably can, if you try hard now,

get, you know, 15 to 20 as a gross. That's a lot better than two or three net yields on properties. If you're doing well, if you're structured well, you're going to net two to 3%, and that means it's going to cost you money. ultimately well the expenses are higher so if you're grossing say 15 you're probably netting you know nine or something like that but before interest before interest yeah yeah that's that's still a uh a long way ahead of the the standard routine so i really appreciate you uh sharing

uh all of that uh you've obviously now put yourself in a position uh pretty much as a rooming house expert and that your business is pretty much named that and you've got the yeah super uh super cash flow developments which i i'm assuming with your son is about actually helping people to purchase design and and uh either convert or create uh roomy house exercises uh given all of that uh what do you struggle with mark is there anything at all that you struggle with yeah yeah the winding down relaxing i talked about before it's like yeah my first thought when we were talking about what are we going to do all let's just um yeah live off property we'll sell all the businesses yeah have a nice cash flow and yeah we can relax a bit i i just get

bored and do other things like even with i mentioned the business business stuff was going into the rooming houses my first thing was well it is actually a lot of work going around and managing them you know and i was doing that myself to begin with and it will say we'll say the locations like rosebud we're at yeah well we had our house that we bought living we converted that um yeah other properties that we bought were in regional dick in you know moreland or alderman places like that um so i was driving around it's like being a hotel manager spread right across the country yeah isn't it yeah so yeah from the business side of things it's like well okay how many do we need to be able to pay somebody else to do those bits for us yeah and

sort of did the numbers on it and thought well you know we probably need about 60 rooms yeah we employed someone by the time i got to 40 rooms because there's nothing keeping up um but then from there again the you know business mindset on things it's like well if i'm paying someone else to do this maybe i can leverage that and you know look after other people's properties as well and then that in your business and like yeah yeah and oh now i've got another business and i was like so that's i think i struggle with not doing things and so my sense it's like i just does can't stop good problem to have good problem to have actually uh if you if you look look back on your journey so far then what what's what would you class as your both

your worst and your best investment and and what have you learned from each of them that well best is probably the one that i mentioned before i mean bought it for 210 i mean a lot of things worked out really well with that we bought it for 210 like i said spent 40 um on you know renovating converting it yeah we um we then you know went back to the bank and said hey we've renovated this property you know we reckon it's worth a bit more we want some more money out bit of back and forth with you know comparables and stuff like that with them um we got the valuation up another 75 000 and pulled out 60 000 so so made some money on it as well um yeah so that was that's and that one has been you know really positive right from the start

rents have gone up and up you know debt hasn't gone up it's like um that one's really good uh one of the worst ones was probably one that we um yeah one of those ones that we built you know which they were over in Point Cook, so we built that there. A bit of a downturn in the market, builder went broke. If we were going to sell it, we'd be losing money. But like I said, time fixes it. Yeah. As long as you can afford the time.

Yeah, and that's the key, isn't it? That is the key. As long as you can plug the hole, if it's a small hole for long enough for the conditions to change, you're going to be okay, and that is the key piece is getting you in that one. Not overcommitting and getting started. Yeah, no, I love that. No, that's a great share.

That was a good one. And this was accidentally good. Okay. It was a guy down in Rosebud. So a property we'd bought there, planning to build a house and we're going to move back down the peninsula. We'd moved off the peninsula to Blind Bot. We're going to move back down the peninsula.

There's probably, yeah, about, and we had designs on it, So, probably about a year later, we decided, oh, we'll just sell it. We're not going to move down there. We went and had a little bit of another house to buy and stuff like that. So, we decided to sell it. And, yeah, it sold within a matter of days for a record price in that estate. And then, yeah, the first thing is, oh, has it been 12 months have we got the capital gains tax?

90 CGT, yeah. Just by chance. Well, I think it was 366 days before I ended up selling it. And that was – it would have hurt if it was two days earlier then. No, and I think we made about $65,000 or something like that. Still not a bad result, mate. Still not a bad result. Yeah.

Not bad in 12 months. At the time, that was – how long ago was that? that's probably that's probably 10 15 years ago something like that's like yeah probably more than that would have been at least 15 years ago yeah there you go there you go if you were starting out again the mark what if anything would you invest in differently uh look i think what i'd do differently because i think uh i'm chasing cash flow too soon can be a bit of a trap and that's exactly what i did yeah and yeah it's all good now but we're talking 30 years in the future um so chasing cash flow too soon is

not a fast game unless you've got the income to support it like if you've got a really high income and you just want to replace that and get out then you can do that but um that wasn't my situation so i think starting out again i'd be i'd probably sell more properties earlier um and i'd probably looking at doing something for uplifting days so you know renovations subdivisions whatever So I'd be doing stuff to build up that equity base before I chase cash flow. Yeah, I love that. And that's a really good takeaway for anyone listening in because at the end of the day, if you're only getting very small incremental positive cash flow, you're not going to retire

on it. You need to grow the nest egg at some point in time. So there's a delicate combination there of having the ability to generate growth or manufacture equity like through upgrading properties subdividing etc etc uh while while you then consider the uh tremendous uh cash flow multiple income stream opportunities that that you're now enjoying through the rooming house exercise so i love you sharing all that madam we're going to dive into the the uh intricacies of uh rooming houses in our in our next get together but uh I want to sort of give you a blindfold and a cigarette now, Mark,

and jump into what I call the bushfire ambush round where I just hit you with four fast questions. The first of those, mate, is what superpower do you wish you had and why? And given that Superman's in the background there, I'm going to enjoy your answer on this one. Well, it's actually not, you know, Superman powers. I'm not too fussed about flying or why it wouldn't be bad and, you know, the super strength and all that sort of stuff.

but I'd actually, I think teleporting would be awesome. Yes. Be able to get places faster, like in an instant. Well, given that you're clearly spending a bit of time across your rooming houses, the teleporting exercise would make that awesome. But if I now gave you a magic wand to go with it and you could change anything,

what would you change about property and investing? Look, I think this comes from the interaction I've had with government in RAV, in the Registered Accommodation Association, I think just majorly reduced the government interference. They just distort the market so much. Yeah, I think the market would work out a lot better with a lot less interference.

Yeah, I'm not saying get rid of all orders. There needs to be some regulation to maintain standards and stuff like that, but some of it just goes overboard. I think it's become an industry, Mark. I've had the privilege of being able to travel around the world a fair bit and every time I go away I realise how over-regulated, how over-legislated how over-compliant we are. We're always

seeming to cater for the lowest common denominator and assuming that we're all idiots, which we're not and as a consequence of that there's a whole compliance industry that has been built around this and promoting the fear that goes with it and the cost and imposition, frustration and time that it adds to everything that we do, I actually think is holding the country back.

But I'm getting on a bit of a soapbox now. I'm happy to expand on it a little bit too, but a lot of the regulation that has come in, like minimum standards in rental properties and all that sort of stuff, I'm not saying that they shouldn't be there, but the compliance costs on that and the increasing land tax and all that sort of stuff is leading people to exit the market.

Yeah. It also puts up the costs of rentals and the costs of supply. So instead of doing it that way, if you did stuff to encourage more supply, right, then people have got more choice about what they're going to rent and that in return will push the standards up because it'll need to be better to attract a decent renter. Exactly.

Exactly. So if instead it was focusing on pushing the supply side rather than the compliance side, you'd end up with it anyway. 100%. And again, I'd... Add a lot of cost. Yeah.

Well, I agree. And here's the thing. It seems to me that successive governments have decided that property investors and any property players are the convenient donkey to pin the tail on for all of our housing woes, but they're actually the solution.

And if governments were smart enough to embrace us as their biggest friends and incentivise us to continue to supply, all this nonsense about housing affordability and the rental crisis would disappear. Again, I won't go off on a tangent on that, but it's a bit of a hobby horse of mine. Changing subjects, if you could have a coffee with anyone and they can be alive or dead, who would you choose and why? My answer to this one, and it's probably going to be a little bit different considering what we've been talking about, but, yeah, I'm a bit of a nerd and stuff as well. I'm going to say Albert Einstein. I reckon his view on things was just different in looking at things.

And, incidentally, same date of birth, different year. All right, there you go. Date of birth. I think we'd have a bit to talk about. Yeah, no, he was a legend, mate. there's no i'd be the same i mean he he was one of those guys who were didn't worry about the little stuff i'd you know i've heard stories that he would get up and he'd have different color socks on because he couldn't he couldn't give a stuff about that but but uh when it comes

to the the reason for the universe and while we're here he was all over it uh not love that on a similar similar note who's who's the one person that you admire the most and why i i probably struggle with that one a bit um it's like where do you go with it i mean everybody i i don't like to sort of i suppose put someone on a pedestal because i think everyone is human and has their flaws and there's you know good and bad things that they've done that have happened to them so yeah whatever else so yeah i sort of you know struggle with it a bit and it's like i don't know i mean i don't where i go with it i suppose i'd say yeah my mum yeah yeah yeah that's that's a pretty good pick when you're pretty good

because it yeah yeah that wouldn't be who i am yeah spot on spot on that extremely well said mate look uh i really want to thank you for taking the time to share the insights of your own personal journey mark uh and before we close off if anyone would like to ask myself or any other property professionals any questions on their property approach and challenges or you'd like to further discuss anything we chatted about with other like-minded investors in a very safe relaxed and no pressure environment feel free to join us on the property hub collective facebook group by clicking the link in the show notes or going to facebook.com forward slash groups forward slash the property hub collective so we look forward to connecting with you and continuing the conversation

there in addition if you'd like to delve deeper into your specific property needs and challenges in a confidential environment, you can book in with me for a free, well, not for a free, but for a personal solution session by clicking the link in the show notes or by going to knowhowproperty.com.au and hitting the purple book appointment button.

And we'll get the opportunity to spend some dedicated time and undivided attention to help you solve your property challenges for a full 60 minutes. We now look forward to continuing our deep dive chat with yourself, Mark, in next week's episode,

where you're going to unpack the ins and outs of the rooming house opportunity. So remember to always get invested in your knowledge first and we look forward to talking with you again. Stay tuned for part two of this interview next episode. Thanks for tuning in to Get Invested on the Property Hub podcast channel, your home for property investment insights and inspiration.

Make sure you subscribe to Property Hub for free. Get your weekly dose of Get Invested inspiration along with every episode of Realty Talk, Australia's top online property show for red hot property investing news and insights direct from industry leaders and influencers and finally I'll see you next time