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Luke Harris is the CEO of The Property Mentors, a business specialising in educating property investors and assisting them to grow their portfolio. Luke bought is first property at 20 and has done everything from buying in mining towns to subdivisions and developments.

Mike Mortlock: Welcome to Geared for Growth. This week we’re chatting with Luke Harris who’s the CEO of The Property Mentors. Luke started his first business when he was 19 and bought his first property at 20. After that, he’s done everything. Multiple renovations, subdivisions, small developments, bought in mining towns, off the plans, and is obviously quite actively involved with property investors and the development space. This is a great interview chatting with Luke about how he got his start, and common mistakes that investors make, and tips to get the most out of their portfolio. Here’s Luke. Luke Harris, welcome to Geared for Growth.

Luke Harris: Thanks Mike.

Mike Mortlock: Pleasure to have you in. Now, just to kick people off, can you give us a bit of an insight into who you are and what you do?

Luke Harris: I’m from The Property Mentors. We’re a Melbourne based property investment firm. What we do really is to help people on their property investment journey, so that they can help achieve their goals faster than what they’d be able to do on their own.

Mike Mortlock: Awesome. That taps in very well to our listenership I think, so I’m looking forward to this podcast. Have been for a while. What were some of the posters on the bedroom wall as a youngster? I want an insight into the young Luke.

Luke Harris: Yeah look, some of the posters I had up on the wall, I was actually quite a motivated little kid. I didn’t really fit into school and wanted to go out there and generate wealth, and make money. I was a bit different, so I had a lot of positive affirmations on the wall. Listened to a lot of Tony Robbins type stuff, and I was involved in Amway as a young kid, as well, as a 16 year old. I was involved in listening to all the tapes back then, anyone that’s old enough to remember cassette tapes. Had a lot of quotes on the wall, and one of the things I do remember from having on the wall when I was younger was having a picture of a video camera when I was 14. My dad was a marathon runner.

Mike Mortlock: Cool.

Luke Harris: So, I wanted this video camera ’cause some of these cool older guys had video cameras, and so I wanted to film dad running his marathons. I had a picture of a video camera on the wall, and saved up, and eventually bought it.

Mike Mortlock: Awesome. Now, let’s get back into you as a relative youngster. You got a strong start out of the gates. First business started at 19 and you bought a property at 20. How on Earth did you do that?

Luke Harris: For me, it was a natural progression. I moved from job to job to job, because I realised as a younger kid, there was other alternatives to making money. I tried to upgrade my career and find opportunities to advance faster, and moving out of my first real job, out of Hungry Jack’s at 14, into a security traineeship at 17, and then I moved into another job installing security alarms at 18. Then, after that I realised at 19, that I could go out there and get my own clients, and that’s where I’ve started my own business very quickly after that. Found a way to buy property.

Mike Mortlock: So, then when you got into property, you did a little bit of everything. You did renovations, you invested in mining towns, subdivisions, developments, perhaps a lot of stuff that you advise people not to do these days. What did you learn about property and the ways that you can use it to build wealth?

Luke Harris: I learned the hard way, I guess, like a lot of people, in that I was reading magazines and going to property events, and doing everything I possibly could. Ringing a newspaper and trying to find out what was the next big thing in property that was going to get me ahead. I think a lot of people out there are really looking for that silver bullet that’s going to build wealth for them, and they’re really looking for the next strategy and the reason for that is most people just don’t know where to start. There’s so much information out there.

Mike Mortlock: Journalism at large, how positive do you think it is an impact, or having an impact on property investors? Can you go and buy a magazine and formulate a strategy that’s going to win?

Luke Harris: The short answer is yes. The long answer is yes you can, but you probably shouldn’t do it that way. There is a lot of opportunities out there in property. Property investment is not the same for you as it is for me, it’s not the same for the person on the street as it for somebody else. Really, the difference is getting people to understand what strategies actually suit them, and what suits what they’re trying to achieve, rather than just going out there and trying everything like I did.
As you said, I bought my first house and then I bought an apartment, then I did a couple of renovations, then I bought in a mining town, bought off the plan, did a development, did a land subdivision, bought another off the plan property, bought in another mining town, and I just followed the strategies that I thought were going to build wealth for me without any real plan.

Mike Mortlock: And were you one of the lucky ones that did well out of a mining town?

Luke Harris: I actually did do okay out of a mining town. It was a Tasmanian mining town. It wasn’t one of the big boomers like the Pilbara or Queensland properties, and it was a property that I could afford at the time. So, like a lot of people, as property investors, they want a number of properties in their portfolio because it sounds good, if you’ve got a bigger number.
I had a borrowing capacity that allowed me to buy a property on the West coast of Tasmania. Surprisingly I’ve still got it to this day, and it just ticks along and does its thing. Never had it without a tenant. Turns out that whilst it wasn’t the ideal strategy, it hasn’t been a bad performer. However, there could have been better opportunities if I had a plan.

Mike Mortlock: Now, fast forward to you being 30 years of age. You sell your business and you take an 18 month mini break. I’m guessing you made some money out of the business, but how much of that was funded with the property, and how did that change your viewpoint around property and lifestyle?

Luke Harris: Yeah, sure. Look, that was actually my second business. I sold my first business when I was 23, moved to Sydney, and got a PAYG job, because I realised very quickly as a young 20 something, that the banks wanted you to have a PAYG job. The surprising thing for me was that my staff could go out and get a loan, because they were PAYG, but the owner of the company couldn’t get a loan to buy investment properties.
So, that’s why I thought, “Well, property investing’s what I love. I love renovating and I love being involved in property,” so what I wanted to do was go and get a job, and I thought I’d had enough of Perth. I thought I’d go and see the shiny lights in Sydney, so I moved to Sydney, got a PAYG job, and continued building the property portfolio from there.
But I guess when I sold the second security business, which I started in 2005, sold that 2010, I had a substantial amount of money from the business. I had a lot of money coming in for the property portfolio. It was paying for itself, so the money I had from the business, I was able to really do what I want. I was looking at options, “What am I going to do next?”
I thought I’d go back to Perth for a while, spend some time with the family who are still over there. They got sick of me pretty quickly, so I decided to go on a couple of extended holidays. I took a two month trip over to Europe initially and just relaxed and enjoyed all that. Came back to Perth for a little while, and I had a few opportunities that I was looking at there.
Actually temporarily worked with a real estate that I had known for quite some time, quite a successful agent there. Then, I thought, “I need to get back into property as a formal business somehow. How am I going to do this?” I hadn’t quite decided exactly how I was going to do that yet. I didn’t want to be a real estate agent, so I then, I thought, “Well, what am I going to do? I’m not going to stay in Perth, so I’m going to go on another holiday. That’s probably the smartest thing to do.”
I had the money in the bank, I had the time, so I spent a lot of the time at the gym, and the rest of the time I spent in South America, and Asia, and went back to Europe again for another trip. Quite a nice time of my life. It was challenging at times because I didn’t have the responsibility of having a business, so I didn’t have phone calls coming in, I didn’t have anything to keep my mind busy and I think as Matt Bateman, my business partner, has said previously as well, we both had mini retirements.
But when you’re an entrepreneurial person and you’re an active brain, you can’t just sit on the beach all day, every day. Once you’ve achieved that, you’ve got to keep going. You can’t just stop and sit in the rocking chair watching Oprah.

Mike Mortlock: Many of the most successful people I’ve met could have retired many, many moons ago, but they’ve got ants in the pants. They’ve got to be doing something. I’m guessing that after a while people were saying, “Luke, what’s your secret?” Family and friends, “Help me buy property.” I guess from there, is that where you got the idea for The Property Mentors?

Luke Harris: Sort of. The people that I’d helped through my 20s, they had seen me get results in property and they thought, “This guy knows what he’s doing. I don’t know where to start. Maybe Luke can help me.” I had friends and family asking for advice on which mortgage broker to use and which accountant to use, what property I should buy, what area I should invest in. I had a lot of following I guess from friends and family, and friends of friends that I would meet, barbecues and who knows what.
So, I helped a lot of people there, but when I got back to Melbourne, I fulfilled a dream of mine to buy a beachfront property. Moved into that and renovated that quite a substantial renovation, and spent time on the beach and really loved that, watching the dog and the cat run out the back gate into the sand dunes, chasing each other. That was quite a memory.
But after that, I really spent a lot of time actually realising that I need to help people in property full time. I still love property investing, I want to help people to invest because it’s done amazing things for me, and at age 30, it was able to massively help me to inject capital into my business, and to do renovations and subdivisions, and small projects, small development projects. So, what I did was spend a lot of time stripping back the property investment industry. What’s done well? What’s not done well? Really what are a lot of the companies out there doing, and how were they actually running their businesses? What I realised was that I’d actually gone to a lot of property seminars myself.

Mike Mortlock: Yeah. I would describe you as a seminar junkie.

Luke Harris: A seminar junkie, yes. And look, I’m the sort of person that would … I was the sort of person that would go to a lot of the free events. I didn’t want to pay for anything because I thought, “Well, information’s free,” right?

Mike Mortlock: Yep.

Luke Harris: It’s already out there, so why should I have to pay for it? I was a little bit naïve to think that, knowing what I know now, but this is what they say, in hindsight. But ultimately I went to all of these events and realised that a lot of the companies that were out there were putting on a free event, and ultimately at the end of the event, they would try and sell you something, or they’ll try and upsell you into something else or sell you a course of some description.
I realised that that, for me, didn’t sit right with me. There was people running to the back of the room, signing up for stuff on the day, getting their credit cards out. I just didn’t like that, ’cause I realised that there’s plenty of people out there just signing up for stuff that are just not going to make money, and the presenters and the promoters are going to make money on the day, clean up a lot of them. And I thought, “What are these people doing?”
These people I’ve spoken to them in the breaks, they’re smart people. You see them running up to the back of the room to sign up for a $20,000 course, and I couldn’t understand that. I realised that was one of the shortcomings of the property industry, whereas they’ve got, Matt and I call it, the sharks and the cowboys. There’s a lot of people in the industry that are really taking advantage of unsophisticated investors.
Now, there’s plenty of good operators out there, but I realised that if I’m going to help people in the property space, it’s got to be done ethically. It’s got to be done as a long term business, as well. So, as long term property investors, as a long term property investor I actually started putting together a consulting business so that Luke Harris, myself, would be out there helping people in a formal environment.
At that stage, I hadn’t met Matt, but I’d already started scoping out how this business was going to operate. It was during that time that Matt and I started working, consulting for another company. That’s where we met. We realised not too long into that that the ethics and the morals of that company weren’t to the level that ours were.

Mike Mortlock: And that’s a hard thing to navigate, right? I guess part of the reason why I wanted to put this podcast together is to get people in a room and chat to them and see how their strategies and ethics matches with the listeners.

Luke Harris: The thing is that there is companies out there that may appear to be good operators on the surface, but like the example that we went through, we realised very quickly that things weren’t quite right. We started the conversation around how Matt was running his operation and what he was building, and we were basically on the same path. We just hadn’t met yet.
We both had mini retirements, we’d both been out there helping friends and family. Just didn’t have a formal structure to actually help people, and so we came together and really started working on a model that would work for people long term. When we both came together, we agreed that I’m a long term property investor, Matt’s a long term property investor, we’re not going to just turn around and become butchers next week.
It’s something that we’re doing for life, and if you love property and you love helping people, then putting a structure together to actually make a business of that, that’s what we’ve done really well here, and I think that’s why we’ve had so much success in the last few years.

Mike Mortlock: Yeah, and I think you can be more successful than the sharks, because you’re getting that reputation, that name, and that repeat business as well. Let’s chat about the competition. In your presentations you like to talk about the competition, and that I guess is the people that are outside of the room when you’re chatting to them, and what they’re doing in property investing. The competition, I guess, are on average just buying one investment property. They’re not seeing that freedom, I guess that ability to have a lifestyle that they want. What can you tell us about the competition? What are they getting right? What are they getting wrong?

Luke Harris: Yeah, the competition in the way of other property investors really are your competition. When you’ve got less than 10% of the population investing in property, 90% of the population, you’re not even competing with. You’re competing with owner occupiers to go and buy property. So, with the other investors out there, you’re only dealing with another 8 or 9% of the population.
So, when you’ve got a small pool of investors that you’re actually competing with for the best property investment, a lot of the investors that are out there are not educated. They actually don’t know what they’re doing, they don’t know why they’re doing it, and most investors that are out there, even some of the advanced investors that I’ve spoken to, and when I say advanced, they’ve got significant property holdings, they may not have known how they’ve done it, but they’ve got significant holdings.
At the end of the day, a lot of those still don’t have a plan, and they’ve gone out there and put something together without really knowing what they’re doing, because they’re starting with a property, and the biggest misconception with property investment is that you need to start with the property. We go to barbecues, and Matt and I love hearing people say, that we meet for the first time, “Luke, where’s the best place to invest? Oh, you’re in property? Where’s the best place to invest?”

Mike Mortlock: “Where’s the hotspots?”

Luke Harris: “Where’s the next hotspot?” We say, well, that’s important. The question’s probably a little bit too soon, though. It all comes down to what you’re trying to achieve as the investor and it’s the biggest thing that’s missing out there, is that most investors are looking at the property.

Mike Mortlock: Now, education, is a huge part of your business. Why are you so focused on education? Why is that important for investors?

Luke Harris: Yeah. Look, for us, the education really is fundamental to investing and again, as we’ve said for long term property investing, you need to know what you’re doing. There’s a lot of companies out there that, again, this is through our process of putting The Property Mentors business together, was realising that a lot of companies are out there to do a one off transaction with you.
They’ll send the benefits of property investing or maybe some tax benefits or whatever else you can get from property investing, or they’ll be marketing a particular hotspot, as you mentioned before. Trying to sell as much stock as they can in a short space of time.
The problem with that is it’s all about the property and there’s no long term focus. It’s about getting as many transactions done and moving onto the next customer. Really, to build wealth long term, we’ve realised that if you’re following that approach, it’s the same approach that I was doing in my 20s, and I was going out there and looking at the next shiny thing, but if there’s nobody there holding your hand through the whole journey, then you’re going to be look at a different company every time you go and invest.
For me, that doesn’t really work for most investors. So, without knowing the reasons why you’re buying a particular property, you’re not really going to be able to have a connection with your long term goals.

Mike Mortlock: I think that’s such an important point. I mean, hotspotting’s great. Like, if you can find a booming area and you buy something, and it goes up in value, that’s great, but then, what do you do next? Are you chasing hotspots for the next 10 years? What is that sort of plan? With I guess people that are looking at investing, the prevalence of investment specialists, buyer’s agents is increasing, but a lot of people do decide to go it alone. Do you think that investors can do enough research themselves to achieve solid results and are they doing that?

Luke Harris: Yeah look, there is investors out there that are getting some results. I think the key thing to note really with a lot of investors going out there and trying to do everything on their own is that most people have a life. I don’t know about you, but with families and things like that, travel commitments, and work commitments. People have got sporting commitments and things that they want to do outside of their investing, and if you’re already working 40-45 hours a week, then you’ve got kids and schools and other commitments to do, not many people have the time to be able to do research and due diligence properly.
And to learn about finance and accounting properly, and to do depreciation, and learn about all of the things that they need to learn. It’s hard to be an expert in all of those fields that you need to be in the property investment space, and have a life at the same time.

Mike Mortlock: Yeah. I mean, depreciation keeps me busy just on its own. I know next to nothing about certain facets of accounting and that sort of thing. How important is it to set that goal, to work backwards from, “This is where I want to be,” rather than going, “Property, property, property, what have I built?”

Luke Harris: Yep. I think that’s fundamental to the success of any portfolio. If you look at less than 1% of property investors in Australia have more than six properties, and six isn’t a big number. It’s not that hard to have a portfolio of six or more properties, but most investors have one or two. The biggest problem with most people’s investment strategy is they’re selling the property at the wrong time. They’re buying at the wrong time, they’re buying the wrong property, and their strategy is basically affected by what’s happening in their life at that exact point in time.
So, that’s why they’ll be looking at hotspot, or they’ll be looking at a particular boom area, or they’ve read something in a magazine or a newspaper. Very much the same as me. I was reading Steve McKnight’s books back in 2004, and if you look at the purchase price, they’re all under $100,000. Bendigo and Ballarat and mining towns. Guess what I did? I bought in a mining town for $79,500.
That’s a perfect example of saying, “This is what’s going on in my life right now. This is something, one piece of information that I’ve read,” but the problem with that information was I didn’t know how to apply it to my own situation. Information about a boom area or hotspot might be fantastic for one investor. It might be a disaster for another one.
I think the biggest problem with that is that people are out there trying to navigate their through all of this information that’s out there, without knowing how to apply that information to their own situation. That’s the biggest challenge that we’ve found, is that most investors fail in their property investing because they’re not treating it as a business. They’re not working backwards from their point B position.
If you understand where you’re at right now and how you go to this financial position in your life, only then can you understand what steps you need to take to get towards your point B position. But see, most investors haven’t even identified what they’re trying to achieve. They haven’t identified their point B, they haven’t identified what they actually want in retirement, and what they need this property portfolio to do.
The question I ask most investors, if you don’t know what you’re trying to achieve at your point B position, how could you possibly go out there and sign a contract on a property, or doing any investing at all, in anything? If you don’t know what you’re trying to achieve, and how that particular investment gets you closer to your end goal.

Mike Mortlock: Exactly. On that goal, a lot of people will say, “Well, I want to make sure I’ve got enough money in retirement.” What advice can you give us in terms of hitting different portfolio benchmarks to live in various degrees of opulence?

Luke Harris: Okay. The typical thing, if I say to people, “How much money do you say in retirement?” The thing that people spit out is they say, “I want $100,000 passive income” and that’s just a standard figure. Not many people have actually worked out why. It just sounds good. It’s a six figure income, and it’s often more than they’re earning now.
So, what I ask people back is say, “Okay, you’re earning $80,000 a year now, so you’re telling me in retirement, you want to earn more than you’re earning currently? Okay, so we’re going to have to do some things differently, because up until now, you’re only capable of generating 80,000, so what do we need to do differently to get you to 100?”
One of the questions we always ask people is have they actually calculated what they need in net assets to generate that income? So, if we’re looking at $100,000 passive income, we look at the property portfolio, for example, and we say, for you to get $100,000 passive income, now this is before tax, you’re going to need a two million dollar, unencumbered property portfolio, so no debt, and that’s assuming you can generate a 5% return.
Now, rental returns in Sydney/Melbourne, you’re probably looking at 3-4% if you’re lucky, and that means you’re going to need two and a half to three million dollars, and then obviously you’ve got to pay tax out of that as well. So, a lot of people’s point B goals are in their head, and they’re unrealistic.

Mike Mortlock: Like, “I want to get 10 properties,” for example. The 10 could be in Hobart, it could be in Ballarat, it could be in Sydney. Maybe in Sydney it’s enough, but then it depends on your lifestyle.

Luke Harris: Correct.

Mike Mortlock: And then we’re talking about unencumbered, right? So, people go, “Oh, I’ve got 10 properties, but my LVR’s 90% on all of them. Is that going to be enough?”

Luke Harris: Absolutely. That’s exactly the point, is that people we’ve found, and I’ve found this myself as well, this was no disrespect to friends and family and other people that I’ve worked with over the years, but a lot of people are drifting through life. They’re going to work, and as I said before, they’re busy, they’ve got a life, and they don’t have the time to actually focus on what their long term goals are.
The biggest challenge is, people think they’ve got time. They think they’ve actually got time to actually build all of this wealth that they’re going to need in retirement, and we’re looking at the state of the government right now, looking at the pension. I’m 37 now, by the time I get to retirement age-

Mike Mortlock: Good luck.

Luke Harris: … the pension’s not going to be around. I certainly won’t be waiting for it, but there’s a lot of people out there that are going to be relying on the pension. Their super is nowhere near enough. A lot of people have got wiped out in the GFC and various other things, and they’re not taking any care of their superfund. I’ve got people my own age and older than me in my networks that couldn’t care less about their supper

Mike Mortlock: They might have eight funds.

Luke Harris: Exactly. It’s quite scary, actually, to think that people are just drifting through life and they have no plan of what they’re trying to achieve. They think they’ve got time, and very quickly you realise that you’re in your mid 40s and very quickly you’re in your late 50s, and people scramble, and I’ve seen this, because I’ve spoken to thousands of investors over the years. They scramble in their late 50s, and this happens more often than people would think.
56, 57, 58 is the time that we start getting calls from people saying, “I want to retire in the next seven or eight years. What do I do?” The biggest problem that I’ve got with that is that they think they’ve got enough time to actually fix the problem.

Mike Mortlock: One good hotspot.

Luke Harris: One good hotspot, but the problem is, once you start getting older, the banks make it harder for you to borrow, so you think that you’re 57, 58, you’re actually getting towards the end of your available borrowing capacity, with most lenders. There’s always lenders out there, but it just gets harder and harder, the older you get. I always encourage anyone, the younger you are, the more you should be investing. I guess the late gratification, which is so hard for young people to understand.

Mike Mortlock: It is difficult, and we’ve talked about smashed avocado before on this podcast. We might leave that one alone. You’re the CEO of The Property Mentors. Now, the mentors is not just flashy part of the name. You actually do have mentors. Tell us about what you do and how that mentoring process works.

Luke Harris: Sure. The Property Mentors was really established to give people the education, so the education’s one part of what we do. I’d say that’s probably the foundation of what we do. The education is the foundation to the entire business. We want our investors to know what they’re doing. We want people to understand why they’re doing it in the first place, but we want them to understand what their strategy is and how it links into their goals.
That’s fundamental to what we do. We do a lot of education through our live events and our webinars and our online workshops that we run. The second component to the business is the opportunities that we have. We’ve created some incredible opportunities that most investors have never heard of, or will never heard of. They’re off market, they’re sort of things that as a development business, as well, we’ve got opportunities that people have never seen before.

Mike Mortlock: That’s a bit different to say real estate agents that say, “I’ve got access to off market transactions.” That’s maybe someone not wanting to put their house on the internet, because they’re high profile-

Luke Harris: Correct, yeah.

Mike Mortlock: … or they’re scared about being too public about it. But you’re talking about off market transactions where developers are trying to sell stock to meet certain obligations. We’re talking about big things, right?

Luke Harris: Correct, and we’ve got opportunities that developers for example, their debt facility might be expiring, and they need to move three or four properties in a very fast period of time. Now, if they need to clear that debt facility to move onto another project that’s going to make another 10 or 15 million dollars, they’re not so much worried about giving up a bit of profit on these properties. We might be able to say, “Hey, we’ve got a membership database and they all want access to good properties, and good deals.”
So, we might be able to negotiate with that developer to get an incredibly good deal for our members. That might include a discount or the stamp duty paid, or who knows whatever else it is. It depends on the situation, but the developer will do those things for us, because the relationship’s more important to the developer than the money.
The developer can sell those properties on the retail market and get full price, but at the end of the day, the developer might be holding that stock for three or four or five months, whilst they find a retail buyer, and they have to wait for settlement. Whereas, with us, we’ve got members that are waiting for good opportunities, and when they come up, they go out to our members first.

Mike Mortlock: Yep, and developers are quite interested in finishing the project and moving onto the next one, right? They don’t want to be tied up in it.

Luke Harris: Correct. You find that there’s two different types of developers out there. One is I guess your mom and dad type developer that’s going out there, and we’re typically talking projects under five million dollars. So, anything under five million dollars, you might have one or two, or three townhouses. You might have some more high end townhouses, you might have some million dollar ones. There might be four or five of them.
But really, you’re dealing in a very competitive space because those types of projects can be done by moms and dads and small joint ventures. You might have two cousins that go and do a project as partners, and it’s a very competitive space, which means the profits are, they’re tighter in that space as well.
When you start moving into the space that we’re in, the development projects that we do are anywhere from 5 to 50 million, and we’re not competing with the big end of town, the Meriton’s and Mirvac’s, that type of stuff. We stay away from competing with those guys. They’ve got far deeper pockets than we could ever need, but then we stay away from the mom and dad type developments as well.
We’re in that 5 to 50 million dollar space, and we also have networks in that space as well. We work very closely with other developers that are reputable, and when we’re talking in that space, we’re talking with developers that are commercial about their projects. A mom and dad doing a three townhouse project, for example, they’re a lot more emotionally attached to their project.
It might be their first one, so giving up any profit is something that they would never consider, whereas when you’re talking about a commercial development and a commercial development team, they’re more likely to give up some of the profit, because it means they’re just rolling their funds over from project to project.

Mike Mortlock: Yeah, and they might be sitting on another site where they think, “We’re going to make a killing on that one,” so-

Luke Harris: Exactly. So, that’s the reason why we’ve built these relationships, and these are the types of things if you’re an individual investor and you go out there and go door knocking to developers, A, you probably don’t know which ones to talk to, and B, they’re probably not going to talk to you if you’re just going to go and buy one piece of stock, one time. They’ll tell you to go and talk to a local agent and good luck to you, but through our networks, we’ve got a massive database, tens of thousands of people on our database, and through that, the developers and the people that we work with, they know that we have a membership database that’s ready to act. If they need a fast transaction, it’s a win/win.

Mike Mortlock: Is that price point, the 5 to 50 mil, does that have better investment prospects anyway? Because I guess I always have the fear that if you’re buying a unit and there’s 200 in the development, there’s an inherent lack of scarcity.

Luke Harris: Correct.

Mike Mortlock: But on the smaller side, you can still have a nice development with maybe some good common amenities, but you don’t have that competition?

Luke Harris: Exactly. We’re very much mindful of that and we steer clear of inner city apartments and areas like Southbank and Docklands, and Fortitude Valley in Queensland, and some of the inner city stuff in Sydney that’s going up. We stay away from the inner city stuff. There’s so much supply at the moment, and the problem is if you’re on level 18 or level 21, they’re usually the same floor plan just stacked on top of each other, so there’s no differential if you’re trying to sell.
If two or three are trying to sell at the same time, the only differential is on the price. You might have a very, very similar view from your apartment, but yeah, we stay away from that type of property. We usually stay away from things like pools and gyms, and home theatre systems and all of the cool stuff they put in to sell them.
They usually make the glossy brochures look good, but once you’ve got the property, you end up with maintenance problems and huge body corporate fees.

Mike Mortlock: Exactly. You’ve got to maintain that for the tenant. So, can you … Do you want to jump in?

Luke Harris: I was just going to say then, the third component to what we do at The Property Mentors is obviously the mentoring, so we’ve got the education, we’ve got the opportunities, and then the mentoring. The mentoring, just to answer your first question on that was, the mentors in our business have got experience in the property space. They’ve already been out there investing in property, they’ve often done developments themselves.
All different backgrounds our mentoring team, but they’re all experienced property investors in their own right. They’re here as mentors to genuinely help you long term, to get from where you’re at right now, to where you want to get to. They’re not salespeople. It’s a very different relationship. A lot of people come in, talk to one of our mentors and they say, “Send me a list of what you’ve got.” For us, it’s not about sending a list.

Mike Mortlock: It’s not how it works.

Luke Harris: It’s a very different relationship and what we do in the first part of the process is to really get to know you. We invest a huge amount of time in anyone coming into our system, first, to get to know who you are, how you got to where you’re at right now, before we even really start talking about where we want to get to and how we do that.

Mike Mortlock: That’s great. That was going to be my next question, was what the process is from the beginning. Can you give us an idea about some of the maybe the clients that stand out in your mind, that you’ve helped, and what sort of results they’ve been able to achieve?

Luke Harris: We’ve got hundreds and hundreds of clients with so many different situations, but I guess some of the examples are, we’ve actually written about this in the book that’s coming out next year, we’ve got an example of a gentleman. We’ve changed his name, but we call him Joe.

Mike Mortlock: Joe.

Luke Harris: Joe was going out there and investing and for all of these years, he’d been chasing higher returns. He would only invest in development projects or any type of opportunity that would give him high returns. When I asked him about why he was doing it this way, he answered and said, “I just need to get the highest returns so that I can get the best result in the fastest space of time.”
When I asked him really, “What’s the real reason you’re investing?” We had to drill down deep into really get him to understand why he was investing. He’s in his late 60s, I think. Late 60s, 66-67 at the time, and it came down to the fact that he just wanted to leave a legacy for his kids. We said, “Okay, that’s great, but what does that mean to you?”
He said, “Well, when I leave the planet, I want to leave them money.” I said, “What does that mean to you?” What it meant to him was that, “If I leave the money, then they’ve got enough to live a comfortable life.” When we drilled into that even further, again, this is our process, is not to just accept that that’s what he’s doing and say, “Okay, well if that’s what you want, let’s roll with that.”
I wanted to challenge him on why he’s going down this path, and why he wants this particular goal. After asking quite a few more questions on this situation, what it turned out was that he actually wanted to leave a legacy for his kids, but when we asked him about it, we made him realise that what he really wanted was to be able to give the kids money, but we said, “You’ve built a significant portfolio now.
You can retire now and you can live on a good income for the rest of your life and you can still give them money.” Said, “If we restructured things way, you could actually retire now, spend more time with your kids, and still be able to give them money when you move on, but can you imagine how they would feel if you spent more time with them instead of working?” ‘Cause he was still working.

Mike Mortlock: Yeah. I think most children would say, “I don’t care about the money.”

Luke Harris: Correct.

Mike Mortlock: “Don’t worry about the retirement savings. Retire and spend some time with us.”

Luke Harris: “Spend some time with us.”

Mike Mortlock: “Spend some time with your grandkids” or whatever.

Luke Harris: Exactly. That was exactly the case, and it was the realisation that he had was saying that he had enough money to retire now, and he realised that through what he was actually doing was working full time still into his 60s, and he was planning on working until he was 75. I don’t know why or how, but he didn’t particularly enjoy it, but the reason he was chasing the high returns was because he had in his mind, a dollar figure that he wanted to leave each of his three kids.
Might have been a million dollars or whatever the figure was. Because he hadn’t achieved that, that’s why he was still working, and that’s why he was investing in higher risk strategies, to get that particular figure. Now, he was at risk of potentially losing some of his capital he worked all these years for. 28 years I think it was, that he’d been investing in property.
I think one of the examples of what we do is help people to realise that the path that you’re on may not be the best one. Sometimes it is, and it might just need some tweaking, but in this particular case, we had a really deep chat about it and I said, “What else is affecting you right now? What are your stressors?” He says, “Look, to be honest, because I’ve been so frugal with my money, I invest everything and I’m working so much, I haven’t really looked after my wife, and I can tell that she’s not happy.”
I said, “Well, what does that mean to you?” “Oh look, she’d like to go out for dinner some more and I usually say no to that, and she’d like some new clothes, and I usually say no to that.” It’s all because of this goal that he had in his mind, of leaving this legacy to his kids, and at the end of the day, he wasn’t spending time with his kids, and he wasn’t enjoying the time with his wife.
After going through a few different sessions, this wasn’t on one phone call, his plan changed slightly. It was his decision to change his plan, and now what he’s decided to do is retire in the next 12 months, he’s probably due about June next year, and he’s now spending money that his got, in his life now, rather than putting it all off for the future, and he’s agreed to go and spend some holidays with the kids, to spend some time with them, teaching about what he’s learned in his investing over 28 years.
When he does leave the planet, sure, he’ll be able to leave them some money, but he’s enjoying his time with his wife now, and he’s also spending time with his kids and teaching them. Teaching them how to fish, rather than giving them fish, I suppose.

Mike Mortlock: Yeah, that’s awesome, and that may actually put them in a better stead financially in the long term, anyway.

Luke Harris: Absolutely, yeah. It’s the education. This is the thing. Teaching people how to invest, rather than just giving them the money. Especially for your kids, if you’re a parent and you’ve got young kids, the kids are watching everything that you do. I’ve seen this time and time again where people have come into our model and they’ve got the kids involved in what we do, because they can see the benefit of actually learning about investing young.
You can teach the kids as much as you like, but if you’re doing the opposite, they’re not going to follow. If you’re out there investing and buying property and staying positive about your situation, and working towards a point B goal, then your kids will follow that. It’s probably one of the best lessons you can ever give them.

Mike Mortlock: It’s a very key point where you’re normally their hero. Doesn’t matter how spectacular you are, but you can be your child’s hero pretty easily.

Luke Harris: Absolutely.

Mike Mortlock: Before they turn into teenagers and turn horrible on you. So, just talking about the investing, you mentioned before, and in the presentations you talk about the importance of things like the location, the type of property, and that people get that backwards. They focus on the property first. What are people getting wrong there?

Luke Harris: As we say in the presentations, it’s putting the cart before the horse. I think people going out there might be investing in a suburb that’s close to where they live, or they might have read something in the newspaper about XYZ suburb being the next hotspot, as we covered before.
I think the biggest challenge with that is that you’re only looking at one set of data and there is so much data and information out there at the moment. It’s hard to know which data actually applies to your situation. Some people are looking at, “I only buy positive cash flow properties.” They’re saying, “I don’t buy apartments. I only buy something with land.”
There’s no real justification behind that apart from someone’s preconceived ideas. I had a situation with somebody in Brisbane one time, and it’s probably about three years ago now. He told me that he would never invest in Melbourne. This was three years ago, before Melbourne started to really pick up. He would have done well if he had, but he said he would never invest in Melbourne. I said, “Why won’t you invest in Melbourne?” He said, “I had a property there once and it didn’t work out for me.”

Mike Mortlock: Right, so he would have been set for life.

Luke Harris: I said, “Here’s a question for you.” I said, “Do you think there’s people investing in Melbourne that are making money investing in property here?” He said, “Well, I guess so.” I said, “Well, why can’t you?” Very simple question, and then I think people’s preconceived ideas of something that they’ve done, linking it back to the fact that it’ll never work for them again because they made a mistake, and it’s because they didn’t have the education and the knowledge that they needed to actually make that move in the first place.
I think a lot of people get stuck in that idea where they’ve got to invest in the same state, they’ve got to invest in the same suburb. They live in a house, so they’ve got to invest in a house. They heard a bad story once about somebody that bought an apartment, or that the body corporate fees are too high, “So I should never buy an apartment ‘because I’ve got to pay for body corporate fees.” “Apartments never grow in value.”
A lot of people have seen this stuff through the media, they’ve heard it through friends or family or wherever they’ve got it from, and people get stuck with these ideas in their head. If you’re an investor, you’ve got to be open to adapt and change. You’ve got to be able to I guess adapt as the market changes. There’s opportunities in every market, and we’re not property bulls or bears. We’re not saying property is always good or always bad. We know there’s money to be made every market.

Mike Mortlock: Yeah, and just on that, the landscape is pretty interesting at the moment. Interest only loans are hard to get, they’re a couple of basis points, well, 50 basis points or 100 basis points more than principal and interest. Sydney and Melbourne appear like they might be approaching a peak, maybe they’ve got a year or two to run. How do investors make solid returns in this kind of, I guess it’s a bit of an unstable future?

Luke Harris: Yeah, I guess the funny part about that is it’s always been unstable, I guess. There’s always been an uncertain future. People say, “Oh, we’re in uncertain times. It’s uncertain.” But when can you look back over the last 10, 20, 30, 40 years, when has it been certain?
This is the environment we’re in. Donald Trump has probably thrown us a curve ball and the fact that we’re rolling out Prime Ministers every one or two years at the moment here in Australia probably gives people a little bit more uncertainty. You hear a lot of stuff in the media about what APRA’s doing, making changes to investor lending and tightening up on interest only loans, and interest rates going up and down, left, right, and sideways.
But I think the main thing is stick to the fundamentals. I think regardless of whether you’re investing in WA or Sydney or Melbourne, it doesn’t really matter if you’re looking at investing for the long term. For anyone that’s investing to make a quick buck, for us, that’s not investing.
It’s speculating. It’s not something we get involved in. I don’t want to pick a market, I want to invest for the long term. So, any property I buy, I want to hold onto it, and so if you’re looking at holding the property long term, the markets will balance out over the longer term. I always use this example. It’s 2017 right now, Mike. If I could give you a property in Melbourne, any property in Melbourne, and I’ve picked it, and I won’t tell you where it is, for 1997 price, would you buy it?

Mike Mortlock: Yeah. I’d ask how many you’ve got?

Luke Harris: “How many have you got?” Would you care where it is?

Mike Mortlock: No.

Luke Harris: Would you care if it’s an apartment or a townhouse or a house?

Mike Mortlock: No.

Luke Harris: This is the thing. If we’re looking fast forward 20 years from now, I can imagine if we had the same conversation, would you buy a property in Melbourne from me at 2017 price? I can imagine you’d said, “I’d love to, how many have you got?” That’s the nature of property. It’s a house for people to live in. It’s also an invest, but the majority of homes in Australia are owner occupied. The house is the last thing people will let go.
They’ll sell the car, they’ll sell the furniture, the cat, the dog, the kids, everything else. The last thing that they’ll sell is the house. The reality is that because owner occupied properties are so much of the market here, regardless of interest rates going up or down, regardless of who’s in power in Australia or overseas, people are still going to hold onto their own homes.

Mike Mortlock: There’s that loss aversion, there’s the fact that property is such an intrinsic part of the superannuation system.

Luke Harris: Correct.

Mike Mortlock: It’s our majority wealth component for the individuals, so the government’s got a vested interest in making sure that it’s doing all right, as well.

Luke Harris: Well, we’ve got two powerful things at play. We’ve got the government and we’ve also got the banks. Now, both of those have a vested interest in maintaining the property market the way it is. Now, obviously you’ve got local government. They rely on rates to come through, so they don’t want property prices to drop.
You’ve got the banks, they’ve got a huge exposure to property here in Australia. They don’t want the prices to drop, and the government as well. The government doesn’t want to become landlords. They don’t want to take on having to house the rental population in this country.

Mike Mortlock: Exactly.

Luke Harris: There’s a lot of drivers that support property here and I think for me, the biggest thing is that it’s a roof over everybody’s head, first and foremost. It’s also a fantastic investment opportunity.

Mike Mortlock: Awesome. Now, you mentioned before, you’ve written a book. Can we talk about that-

Luke Harris: We have.

Mike Mortlock: … and when it’s coming out? How do we get our hot little hands on it?

Luke Harris: Sure. It’s not ready just yet. We’ve actually literally on Friday just sent it off to the publishers for printing. Actually, it goes to print on Monday this week coming up. We’ll have a handful of copies for our members in probably mid-December we’ll have some of those. But it’ll actually be on the bookshelves in March, 1st of March is the official launch.

Mike Mortlock: Awesome. Looking forward to that. Now, I just wanted to finish off with if there’s one piece of advice you can offer to property investors, this might be a tricky one for you, but what do you think that would be?

Luke Harris: Look, the one piece of advice I would always give to anybody, and I do get asked this question a lot, is really to set out a plan of what you’re trying to achieve. A lot of people have never done it in their lives. If I asked most people that are out there investing, whether it’s in property or in shares, or whatever else they’re investing is, is, “What is your plan? Have you written it down? Have you put in the date and the dollars next to all of the things you’re trying to achieve?” Nobody’s ever done it.
The reality is that some people have written it down five years ago. They’ve written it down two years ago, and it’s in a drawer somewhere. They don’t know where it is. The piece of advice that we would always give to people, work out what you’re trying to achieve, what’s your point B position? We call it the three Ds. What that means is the dream or the goal, the date, and the dollars.
You need those three bits of information before you can start working backwards from that. Once you’ve worked out your dream, date, and dollars, it sounds like a lot of fluff. People think, “Oh, fluff around with goals. Just tell me how I can invest and get the best return.”

Mike Mortlock: People are suspicious of you because of these positive affirmations you had on the wall.

Luke Harris: Yeah. Well, my friends were, all my friends at 17-18. They were like, “What have you got all these positive quotes on the wall? What’s wrong with you?” They did actually think that was quite strange at the time. I copped a bit of flack for it, but I kept ’em up there. But really, it’s coming down, what are you trying to achieve?
See, the thing is, in our education system here in Australia in particular, you don’t sit around with your mates. Mike, do you sit around with your mates on a Saturday night and talk about your dreams and goals, drinking a few beers?

Mike Mortlock: Not normally, no.

Luke Harris: Not normally?

Mike Mortlock: I grew up where that sort of stuff was actually frowned upon.

Luke Harris: Yeah, and I grew up in Perth, so anyone that has grown up there will know what I mean. It’s being positive and setting goals and actually achieving. The tall poppy syndrome in Australia, everyone likes to cut everyone back down to their level for some reason. I don’t know why. I think setting goals and talking about it with your friends and family is not something that most people do. It’s definitely not taught in our education system.
For me, really, there’s not many opportunities out there for you to sit down with somebody and talk through your goals openly and honestly, and being accountable. See, the thing is, if you can write down all of your goals and put them on the fridge for a few weeks, if you’re not achieving them after a few weeks, you can pull them down and stick them in the drawer.

Mike Mortlock: “Don’t like looking at those.”

Luke Harris: “It makes me feel depressed and upset,” right?

Mike Mortlock: Yeah.

Luke Harris: So, for us it’s really about helping people to set those goals, put the date and the dollars on them, and write down all of the things that you’ve always wanted to achieve. Because as we get older, we start discounting things and say, “Oh, I can’t do that. I can’t do that. I wanted a property in the country one day. That’s never going to happen. I wanted to travel overseas once a year. Maybe every five years.”
This is what people do, and they have a plan of upgrading their car every three years. “Oh, well maybe we’ll do it every five.” I’ve seen people that they’ve had the same car for 20 years. They just can’t afford to have that extra repayment come out. Unless you’re planning on the things that you’re trying to achieve, chances are, based on statistics, you’re not going to achieve them.
If you start with the end in mind, only then you can start working backwards from the end goal to what properties and what strategies and what things you need to do to get towards that goal. The one question that I would ask myself every day, I taught this myself a long time ago is, “Is this decision that I’m about to make going to get me closer to or further away from what I’m trying to achieve?” Only once you’ve identified your goals you can really ask yourself that question.

Mike Mortlock: Yeah, and I guess the answer to that will be pretty clear once you’ve narrowed it down. Luke, thanks very much for your time. I appreciated having you on. It was great.

Luke Harris: No worries, Mike. Thanks for your time.

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