Presented by MCG Quantity Surveyors
Geared for Growth Interview with Chris Gray

Podcast Transcript - Episode 6 Interview with Chris Gray

Chris Gray

Chris Gray

 

Chris Gray is a property investing expert and host of Your Property Empire on Sky Business. We chat about the fundamental drivers of property price appreciation and his best advice for investors starting out with a modest salary or savings record.

 

Mike Mortlock:                 Welcome back to Geared for Growth. This week we're chatting with Chris Grey. He's a property investment expert and the host of Your Property Empire on Sky Business. We have a chat about how he got into property investing, including a conversation with his mother about a pub curfew, and his lifestyle about a Lamborghini driving, high-end boat piloting property investor. I hope you enjoy. Thanks for joining us Chris Grey.


Chris Gray:                 Hi, how you doing?


Mike Mortlock:                 Wonderful, I'm doing really well. For those of us that maybe haven't heard of you Chris, can you give us a bit of a background of who you are and what you do?


Chris Gray:                 Sure, So I'm basically a property investor that does quite a lot of kind of talks and media around property and I guess my 30 second story was: started in the UK as an accountant, started buying property at 22. Moved to Australia at 27, retired from full-time work out of Deloitte's at 31. Took a few years off and played, and had a lot of fun and then everyone asked me how I did it, so I started teaching people. Then basically from there that led onto TV, and then people said, "Can you just do it all for me?" So, I built a business, like a buyer's agency in a way, that builds property portfolios for other people and I guess the masses then, I basically teach them for free.


Mike Mortlock:                 Yeah, and It's not an uncommon story, is it? Someone achieves success in life and then suddenly their friends are saying how do you do it, and then you get the idea of, well there's a business in this, or at least I should have to start charging for it because it's taking up all my time.


Chris Gray:                 Yeah and so I guess for the sceptics out there quite often they will always say if you're making that much money from whether it's property, or shares or business why would you teach other people? I think a lot of people do that for giving back; and basically, educators love, I guess when people do actually take action and then they email them, or ring them, five or 10 years later and say, 'Hey I read your first book and this is what I've done.' It's really reassuring because after a while, once you're worth a certain amount of money, you don't need to do everything for money and not everything has to be paid. I'd say probably 90% of what I do is completely unpaid.


Mike Mortlock:                 I guess once you get to the point where you're comfortable and you've made enough money there are some different things in life that really have more value for you, like spending time with your family and also helping other people that you can maybe see a little bit of yourself in when you were starting out.


Chris Gray:                 Yeah, so look probably the highest amount I ever got to charge was about $1,000 an hour for doing some coaching and mentoring, and what I found with that then even though it's a hell of a lot of money, and you'd never turn it down, I was actually kind of dreading that I had that commitment in my dairy that I had to then go and do something. A lot of the time I'd almost rather do stuff for free then be paid that kind of money and after a while then putting deals together we can make a lot, lot more money, or even just my portfolio growing 10%. That's where the real money is and so I'd rather have the flexibility not to be forced or have to have commitments that I don't necessarily want to do. Then I can choose to do things just purely because I like doing them.


Mike Mortlock:                 Is that the sort of intoxication for property with yourself? You can basically stay in bed for a day and you're still making money.


Chris Gray:                 Yeah or even a year or a couple of years, that's the reality. Because It's funny, I always called myself naturally fairly lazy, and my school report said it all the time, that I'm always trying to do the quickest route and almost the laziest route but then a lot of people said, "Well Chris you're not really lazy because obviously you performed, and you worked twice as hard in your 20s to get the results." I still say I am naturally lazy but I can work really, really hard to try and get a result that then allows me to relax on the boat, or travel, or do whatever else. I guess it's kind of work hard, play hard mentality but yes, even though I've got a business the majority of my money, or all of my wealth, actually comes from my own properties rising in value and doing what I say, I'm suggesting other people to do.


Mike Mortlock:                 I think there's virtue in that laziness, it helps business owners to systematise because they realise they don't want to be spending their time on recurring tasks, and I guess property feeds into that as well. You've found a way to generate wealth without it taking too much of your time to manage. Is that fair to say?


Chris Gray:                 Yes, so I think the most valuable resource is basically time, because it's not something that we can ever buy more of necessarily, or get back. So, I've always wanted to create wealth just to give me freedom and choice because I think that's the ultimate wealth that you create rather than material things. I've just been super-efficient with my time, so for instance when I was working in Deloitte I had to deal with my boss, that basically if I could get all my work done and all my internal/external customers were happy I could then property invest on the side. I reckon I was one of the most super-efficient people there, because if I got my work done in 20 hours I then had 20 hours to invest. I had to make sure everyone around me was happy because as soon as someone complained that I hadn't done something suddenly all those privileges would be taken away.
So, I didn’t, I think Facebook was only, I don't know if it was even there, but on emails and the rest of it, I wasn't hanging around chatting with friends all the time because I was trying to get my work done. This is what I think a lot of employers don't do is there is no motivation for someone to work super hard. Sure, you get a 10 or 20 grand bonus but that's not going to change your life. So, I didn't need the rewards of promotions and things like that. They said, "Look, Chris when we give one of the other staff five or 10 grand reward, or bonus, they go on holiday, and they love us, and the rest of it, you just buy another set of tyres on your Ferrari to go racing. So, It doesn't make any difference to you." Again, that was the hard thing, the motivation to me wasn't monetary it was to give me my time.


Mike Mortlock:                 Let's get a bit of an insight into the young Chris Grey, if we can. Obviously, you started investing at 22 but what were the posters on your wall as a youngster?


Chris Gray:                 That's a really hard question, I really don’t know if I have a clue. It was probably something like Spandau Ballet or something about that, in those days. I wasn't really into music, I wasn't necessarily into anything, like I'm not into football. I'm more of a generalist, I like a lot of things, a lot of variety but there's not one thing or one person that really necessarily inspires me or controls my life. I'm not one of these mad fans unfortunately.


Mike Mortlock:                 Right, No that's all right. You've got a few of those yourself now, which we'll get into in a minute. Can you give us an insight into the 22-year-old that start investing with 35k? Where did the 35 come from and why was 22 the age where you decide that this is what you were going to do?


Chris Gray:                 Sure, so basically, I gave up school at 18, didn't want to go university, and then my dad was really trying to push it. Became a courier in London, I think I started off with no money and ended up 5,000 pounds in debt after being a courier for nine months. Came to Australia, had no money, did some backpacking for a while, worked seven days a week. So, the real turning point was, I went back to the UK and going out on a Saturday night with my friends to the pub, and mum gave me a curfew. Said, "You've got to be back by midnight," and I said, "Mum, no look I've travelled all the way around the world. If I can get back from Australia I can get back from the local pub." She said, "No it's my house, my rules, so midnight it is." So, then that was the catalyst to get me to leave home.
Now we were lucky enough that we had inherited I think 10 or 20,000 pounds in those days, just through a relative. I earnt 10,000 pounds then, and so when you invest in the UK in those days you could borrow three times your income, so I could borrow 30,000 pounds plus say 10,000 deposit, so 40,000. It was a lot of money in those days but it wouldn't get you anything. It would get you a horrible little one-bedroom unit in the worst part of town. So, I started looking at doing all these opens. I just thought, no I don't want to live there because my parents lived in a good area and a good house. I fell in love with this house right in the middle of town, right the corner from the pubs. Absolutely beautiful bachelor pad. I thought this is what I want, and this is where my skill is.
Just the goal setting: this is what I want, how do I do it? I basically crunched the numbers, which again is really my skill base and basically worked out that as long as I could get a mortgage for it if I rented two rooms to two friends I could actually live for free.
So, I then went to my dad as more of a business case in a way to say the number are showing that if I go and get a one-bedroom unit I'm going to have no money, I won't afford to be able to go out; but if I could get a mortgage on this place was 100,000 then I could actually live for free. In the end, he bought into that. I wasn't after a handout, I was really after his signature to say he would cover the repayments in an emergency. We managed to get a deal on the place, so we got it for 80,000. I saved two years' salary, effectively, and then I lived for free. That was the clincher, Suddenly I've got a free house, and I've made two years' salary. This beats working hard for a living.


Mike Mortlock:                 Exactly, that flipped the switch for you I'm guessing.


Chris Gray:                 Yes, we actually did the same thing the next year. The same agent that got me this deal, I used to go drinking with her on a Thursday and became good friends with her; she said, "Developer's got this other stock. We think he's under-priced it. We think it's worth a lot more than he really wants." I went 'round to see it and it was almost exactly the same, a three-bedroom kind of townhouse type place right near the station. I said, "Look I'll take it but you need to give me a few days." Then I went to my dad and I said, "Look dad you know how much I've made on this other property, why don't we do a father and son thing? Like a bit of a venture together. Obviously, I've got the time, I've got the knowledge, I can go out and do all the work. You haven't got the time but obviously you've got the finances to get the bank to lend us money. Why don't you put some money in? We'll pay you the same rate as we're paying on the mortgage and then we'll get the rest of the money from the bank and I'll do all the work." He said, "Fine, go and find a property." I said, "Well, I've actually already found one and we need to sign for it tomorrow."


Mike Mortlock:                 You got him onboard with the concept and then slid in that you'd already pretty much decided he was going to say yes.


Chris Gray:                 Exactly and so again, we made 20,000 overnight. He didn't need the money, he didn't want the money but it was more he was doing something for the family, having a bond with his son, and doing something together. This is the thing I find, because I speak to thousands and thousands of people these days, and a lot of my older clients, like the parent's generation, they say "We want our kids to get into property. We know it's going to be super expensive later on and we know it's better doing it at 20 than delaying it until 30, 40, or 50 but how do we get out kids motivated?".
I think so many parents want to give their kids a help but they're not going to give them a handout because we all know a handout's not going to educate them, and it will turn them into spoiled brats. I think this is the biggest question, and I go to a lot of ultra-high net worth conferences, how do you teach kids the value of money; but parents want them to have a start. If you're a kid out there and you think my parents aren't going to help me, they haven't got the funds, and the rest of it don't ask for a gift but go out there and put a business case. A bit like I did on that one bedder versus the three bedder, or buying in a much better area that's got more chance of growth and less risk of going downhill, and a lot of parents will actually help out.


Mike Mortlock:                 Yeah, I guess if there's a bit of strategy and they can see that you've put the effort in then they want to help you succeed. A handout is no guarantee of that, is it?


Chris Gray:                 Yeah and so look I learnt a lot of my stuff in my 30s when I started doing property courses, because they weren't around in my 20s. I didn't know what a joint venture was. Then when I learned what it was I realised I'd actually done one at 23 doing my second property, and I'd done all these different things but I'd just done it from a logical perspective rather than reading it in a book and being educated about it.


Mike Mortlock:                 Now after nine years, so nine years after that first investment, you had a portfolio worth around 3.5. Was that just replication of the same strategy? When you then got that to $10 million after another six years, did the strategy change or was it fundamentally the same thing?


Chris Gray:                 Yeah, no it's amazing because I guess the last 10 to 15 years I've done so much education on property, we've done 300 or 400 interviews on Sky but my strategy is actually exactly the same that I had at 22. I don't know if it's luck, or timing, or whatever else. Effectively what I did, I bought those two in the UK, and then when I emigrated to Australia at 27 rather than sell those properties, for some reason, I didn't sell those properties I kept them. In the UK they were positive cash flow, so I just actually thought that's actually paying me money every month and that will afford for my trip to travel the world to then come to Australia. When I came to Australia again I'd just been brought up to live in your own home so I bought my first one in Coogee in '99. Again, it was just by using the equity in the other properties to then leap frog, and just continuing on. It wasn't something that I've learnt it was just more of a logical thing that keep accumulating rather than sell and pay all the taxes.


Mike Mortlock:                 The difference in say selling those UK properties when you came over to holding onto them would be worth an absolute fortune now in retrospect, wouldn't it?


Chris Gray:                 Yeah, cause now I think they're probably four or 500,000 pounds. I'm just going through a refinance now and that’s the thing is they've gone through GST’s but because they were good properties in good areas with no more supply, because there's two or three-story height limits, it's where all the young professionals live so they've always got jobs so no one's selling. Suddenly prices aren't dropping. It's the same philosophy as Sydney, in the GSC they're almost unaffected because you're buying right at the median price in blue chip suburbs by people that can afford to hold them. So, I think that's been the luck of what I've bought into, because I was that young professional I then bought what I would want to live in and I just happened to be a good demographic that was pretty solid wherever you are in the world.


Mike Mortlock:                 Yeah, Fantastic. Chris, for the people that do know you I guess you've got a big profile as the host of Your Property Empire on Sky Business. They've probably seen you on social media on a super yacht in Sydney harbour, or flying business class, or driving your Lamborghini around Coogee. How much of that would be happening without property, and is that what your life is now, practising what you preach in lifestyle and property?


Chris Gray:                 Yeah, look I don't think I could have ever dreamed of any kind of life like this at all, not even Australia. When I came to Australia when I was 19/20, as I said, I was maybe 5,000 pounds in debt so I worked as an accountant in North Sydney. At the weekends, I lived in Manley and worked in a petrol station. Effectively, I went down to the beach from like seven to one at the weekend, then worked in the petrol station filling has from two 'til 10, then when to the pub for a few hours, and then home for sleep for a few hours and then repeat. I thought if you've got no money in Australia you can have an amazing life because most of it's based around the weather, and if you like the beach, and the sea, and the water lifestyle then it doesn't cost you anything. It's an amazing place.
Certainly, if you have got money over here then you can have an exceptional life, all of that was paid through property. To get into some of those things then it is a lot of money, and to try and do that from post-tax from wages you're just never going to have the money. There's also a smarter way of doing things. So, when I was 22 or actually 24, I learnt how to refinance my house and I bought a Porsche. Now I couldn't afford a Porsche because a brand-new car was very expensive, and over a three year lease I couldn't afford it, but by using some of the equity, some of the profit I'd already made from that property, I bought a second hand 10,000 pound car that probably three years' later when I went to sell it was worth nine or 10,000. They don't really depreciate. I bought a 360 Ferrari before for 160 grand that was a 400-450 grand car, and in three years it went from 160 to 100. The depreciation's almost gone on these cars, so even the Lamborghini. The Lamborghini is $750,000 which is a ridiculous amount of money but I bought it 10 years old for 250 and now it's risen in value to 300 or 350. This car is actually making me money. It makes more money than it actually costs me.


Mike Mortlock:                 That's a difficult thing to get right as an investing niche, but even in the worst-case scenario you're paying so far under market price. You're famous for an article where you were talking about it's cheaper to own a Lamborghini than a BMW, I guess that's what you're getting at there isn't it? Looking at a brand-new BMW that just loses so much of its value the day that it's driven away.


Chris Gray:                 Yeah and so If you spend 200 grand on a car it'll be worth 100 later on, but everyone's after that brand new thing. In Australia, it's not as much whereas in the UK they would have a letter of the alphabet to denominate that this is the letter for this year, so on the first of August everyone wanted to have the new number plate, because it just showed all their neighbours that they're rich and they can afford a brand-new car but I'm saying, who cares. Anyone that knows Lamborghini knows that it's a 10-year-old car, and they appreciate it for what it is. The people that don't know, don't know so who cars. The same thing goes for boats. We've got a $1.5 million boat, but we pay 50 grand a year rather 350 grand a year because we own an 1/8 share in it, because if you don't drive it every day don't pay for it every day. Some people might laugh and say, "You're poor, you can't afford your own a boat." Well, I'd rather pay 50 than 350 when I'm not going to use it all the time.


Mike Mortlock:                 Exactly, and you probably can but just because you can it doesn't mean that it makes financial sense because you can untie that money and invest in property that going to appreciate. The boat's not going to do that.


Chris Gray:                 Yeah, and I use the boat for entertaining a lot of clients so it actually makes business from it. We don't get a tax deduction, so in case the tax man's listening, it's not a deductible expensive even though I think it should be. Effectively we use it as business tools. We then go and rent super yachts that are worth $10 or $15 million but we rent it for 24 hours, we have two lots of parties, I then get five partners in there. It costs us something like $200 or $300 a head, which in corporate entertaining is very very cheap. We don't want the 10 to $15 million super yacht every day just sitting there rotting away. The whole idea about, now with property, with your own home, is rent vesting. They say you can't afford to own the home in the suburb you want to rent it instead. That's what I do with my cars, my boats, and all the rest of it. You really can have the multi-million-dollar lifestyle but without actually being that wealthy.


Mike Mortlock:                 Last time I saw something online you were living in a property that you were renting, and the rationale was that that would be a poor investment, that property, but a great place for you to live.


Chris Gray:                 Yeah and the way I describe it these days is almost like Monopoly. If you go and rent the hotel on Mayfair or Park Lane, the most expensive in town, not many people can afford to rent it, and the people that can afford to rent it don't rent it because they want to buy because they think poor people rent. That's the stigma in Australia. Effectively what happens is the price comes down and some super expensive properties the rental yield on that could be as low as 1%. Whereas if I buy lots of one, 1.5 million units in the Bondi or the Coogee there's lots of demand for that so the rent's quite high. Normally a long-term rent around 4-5%, so basically the mathematics are whatever you can afford to buy you can rent somewhere three times more expensive for the same money, and then you get a tax deduction because all of the mortgage is against investment property.


Mike Mortlock:                 Awesome, now Chris, I wanted just to talk about how you retired from full-time work at 31. We're talking about property replacing the all eggs in the same basket salary. Is there a magic level of equity or number of properties that can replace say 100 or $150,000 salary?


Chris Gray:                 Yeah so look, I roughly worked out on doing it at something like 3-5% of what you need, you need that roughly in assets. Let's say you had a million dollars in assets and if they were good properties you might expect them to grow at 5 or 10% a year, so 50 or 100 grand. You might say look, let's cut I back a bit and let's call that 20 or 30,000, so you need x million dollars to give you that certain kind of income. It's not quite as basic as that but it gives you a ballpark idea. So basically, for me then I had six properties and in the boom of, this was 2001/2002, they were growing at about 20% a year, so about 100 grand each. I was roughly making 600 grand a year for two years in capital growth, and at the same time I was earning 80 grand at Deloitte, or about 60 after tax.
The thought process was I couldn't spend 600 grand a year in those days, and that was the good old days of the low dock loans, so I could effectively pull 80% of that out from the bank. Roughly 500 grand in cash. Obviously if I spent it all then that would be pretty stupid, I'm just digging a bigger and bigger hole, but if I put aside 50 or 100 grand and lived off that, and reinvested the other 400 then to me that was reasonable financial plan.
That's when I thought, after a while, maybe I'll get out of work. A few years later I suddenly realised that when you don't work then you've actually got 24 hours a day to spend, so you spend more money. I suddenly thought, look the market isn't always going to grow in value so I actually need to build a bit more of a buffer, and maybe get to a $10 million portfolio just to make sure I've got plenty of money for the rainy day.


Mike Mortlock:                 Yep, so you work with, obviously, some high net worth individuals, and some super high net worth individuals, but you say that a salary, even an exorbitantly high one is unlikely to make you rich, and this is a bit of an a-ha moment for you I think. Why is this the case?


Chris Gray:                 Ah, look It seems such a first world problem. I was actually just in the pub with some family friends yesterday, and this was a barrister; he said, "Look I earn 800 to a million dollars. I went to see a financial planner and they told me to sell my house and invest in some savings plans or something like that." It seems ridiculous that someone on a million-dollar salary is potentially still needing to work hard to get the money going, but it was really from my Deloitte days. What I did at Deloitte is, even though I was an accountant I worked for a recruiting arm. So, we use to get candidates and put them in to our client's, like on temporary contracts. So, I interviewed 10 people a week, over two years that was a thousand people.
Now all of these CFOs and finances directors they could already do their jobs, and they were cleverer than me accounting wise so we just talked about personal wealth, and property, and what's going on in the world. This is what I got to realise is a lot of these guys earn a quarter of a million, half a million but a lot of them weren't wealthy. As they got older, into their late 40s and 50s, quite often they might get made redundant and it might take them another year to replace that half a million-dollar salary. Quite often they have partners that might be out spending, kids at private school, a couple of new cars, overseas holidays, and that half a million-dollar salary did literally disappear.
I know there's no one out there feeling sorry for these people or anything, but that is the reality. Your boss is never going to tell you that the seat at the top isn't necessarily laden in gold because they want all the workers to keep on working and try and get the bonus. Everyone thinks the bonus or a wage increase is going to change their life, but in reality, it doesn't. It doesn't create wealth because you pay tax on it and the more money you earn the more money you spend.


Mike Mortlock:                 It's these incremental lifestyle changes that seem to ratchet in direct proportion to the salary increase, isn't it?


Chris Gray:                 Yep and so you're just basically going to spend that extra money. I think the only way you do it, and obviously I'm into property but other people could be into shares, or to business. Property isn't the only way but the bottom line is you need to invest other money in assets, because quite often then you're leveraging those assets. If I've got $100,000 I can normally buy 500 grand or a million dollars’ worth of property. Even if it grows at 5 or 10% it's almost a 50 or a 100% return on your money.


Mike Mortlock:                 Now Chris most investors only have one property, that's unlikely to give them a huge change in their lifestyle or to enable them to move away from the salary reliance. Why do you think that is the case and why so few people getting enough properties to fundamentally change their financial position?


Chris Gray:                 The hard thing is ultimately people have got to sacrifice, and so If you want to move ahead and you want to buy more property most property is negative geared and you've got to save a deposit for it. For every 10 grand you save you might think, well I could go off to Bali or Thailand, or whatever else. So, everyone wants things now. Unless you've got a massive drive or a will to change then most people won't change. It's like losing weight, for 90% of the people if you exercise more and eat less you'll lose weight. Are most people super fit? No, because they see a pizza, or a they go to the pub, or they go and do this, or they can't be bothered and they go and watch TV. None of this stuff is rocket science. You've just got to have a big motivator. My motivator was I didn't want to work, I didn't want to be told what to do. I like the material things in life and my motivations were big enough for me to get off my backside and do something.
People say you're lucky you're an accountant. Well, it's not luck I did a full-time job and I spent five or six years at night college. I was out from seven in the morning 'til 10 at night four or five nights a week. Then I had to study on top of that at the weekend. In hindsight, yes, I was lucky I was an accountant. I've been in debt since I was 18 and so sure, I might not work a lot of hours, and I might not work that hard but my current debt is over $10 million. That's quite a weight on your shoulders, and especially when we've had 10 or 11% interest rates.
Again, people will say, "You're lucky Chris," and yeah, sure I am lucky but I've paid the sacrifice for that. I think nothing in the world is for free, and there's plenty of people out there that haven't been educated, that haven't got a wealthy parent that have helped them, and they've gone out and got five jobs and they've worked really hard and studied, and they've made the money and I think good on them.


Mike Mortlock:                 That's awesome, it’s nice to hear someone driving a Lamborghini talk about working in a petrol station. I think obviously you're a lover of the finer things in life, and European sports cars are a fairly expensive purchase, but such was your desire to reach that level that you lived a very stoic and modest life just to set the wheels in motion I guess.


Chris Gray:                 Look it's balanced, last year I did a super car rally, and there was 180 super cars from Lamborghini, Ferrari, Bugatti, and we raced from London, Paris, Leon, I think Monaco, Barcelona, Valencia and stayed in five and six star hotels. A trip of a lifetime, absolutely unbelievable. Now I'm doing one called Mystery Box or Ship Box Rally in Australia in November and we're doing it for Cancer Council. I bought a 25 or 32-year-old 1985 Cadillac limousine and we're going to be racing it in the Outback. Well, not race it, drive it in the Outback. We're sleeping in tent and swags, it’s going to be steaming hot, probably rainy and the rest of it, to go to completely another extreme. Whether I'm driving the Lamborghini or this clapped out old Cadillac I don't care, because I just love driving. I think my next dream is a Model T Ford that's 100 years old, but you can pick them up for 15 or 20 grand again. I've just got a passion for doing stuff, I don't really care if it's five star or one star it's just taking part and being around good people.


Mike Mortlock:                 I want to talk about the specific nuts and bolts of the property that you select. You're a blue-chip man, I guess. Can you talk us through the types of properties that you purchase for your clients here in Sydney and across Australia?


Chris Gray:                 Yep, typically my thought process has always been if you want people to pay their rent you need to get good people with good jobs, because if their boss finds out then they won't be happy. Those guys will pay their rent. It's not 100% of the time but I think it's reasonable. I guess with all the knowledge there's affordability problems all around the world, so people continually say how can property keep rising. One of the guys, John Edwards from Residex who always predicted capital growth, he said, "Chris look the market finds a way to sort these problems out, but the bottom line is supply and demand." If you buy in areas where there is no more supply, I.e. they're close to the CBDs and there's height limits. There's lots of demand from young people that have got high disposable incomes and are in jobs that they're not going to lose necessarily, then the price goes up.
So, if you take Bondi Beach as an example there is no more property in Bondi Beach, it's fully built up, you're right on top of your neighbours. People are spending 10, 20, or $30 million on penthouses, so a million-dollar 2-bedroom unit with parking 500 metres from the beach is worth house best reaped philosophy.
On a summer's day, there's queues and queues of people that will buy it or rent it, and that's what's pushing the prices up so that's what I bought. They're not cheap to afford, they're negative geared so it might cost you 10 or 20 grand a year to hold it depending on how much money you borrowed. I think on average it should go up 50 or 100 grand a year over a 10 or 12-year period.


Mike Mortlock:                 Do you select properties based on the client that you're representing? For example, a high net worth is going to be a lot more comfortable in managing that sort of negatively geared property. Do you adjust the strategy depending on the individual?


Chris Gray:                 We do a tiny bit but most of the people come to me saying "Chris you've made the money, if it's good enough for you it's probably good enough for me. What would you suggest I do?" It will be tailored, slightly. Our youngest clients are probably in their late 20s and they maybe earn 100, 150 grand joint incomes, like as a boyfriend-girlfriend type thing. Our wealthiest clients are in the hundreds and hundreds of millions, but typically the super wealthy buy the same thing that I would buy, or we'd buy, for the 20-year olds but they might just buy a whole block of them because then it's easy to manage. They might buy a block of 10 versus just buying lots of individual ones. Effectively they're all betting on the same thing, betting that we're not sure if it's going to go up today or tomorrow, or if it's even going to go down but we think in five or 10, or 20 or 30 years it's going to be more expensive than today. As long as we can hold on in the short term, and 99% chance the tenants will always be in there, then we're going to make money.


Mike Mortlock:                 How emotional are the high net income earners compared to people on a lesser salary? Is there a difference in mindset and their attitude to investing?


Chris Gray:                 Some of them their attention to detail is unbelievable. They can spot a dollar missing from a mile away. Not because they're tight, just because they're used to seeing financial reports and seeing those kinds of things. It's amazing working with some of those people because they are very very intelligent. On the good side, a lot of them are very very big picture, so even though they can see that dollar they won't scrimp and save over it. Some of them will let us spend hundreds of thousands on renovations and I can make decisions for them because I've got their best interest at heart. That's what's really nice working with them when you've built up that trust, but ultimately, they are thinking long term and they're never thinking of selling. They just think you've got to spend money on experts, and hire the professionals, and do things properly rather than trying to pick the cheapest person because you pay for the cheap things and it's going to break down.


Mike Mortlock:                 Is that part of the reason why you think that most investors only have the one properties? That they might not be getting the right advice or they're just looking at a property based on ... I think you mentioned in your book dinner party type investing.


Chris Gray:                 Yeah. The unfortunate thing is the people that really need the financial advice are the ones that can't pay for it, or don't pay for it. Your typical financial planner you'll get for free. That's what the advice is worth effectively, and that's what the average Australian gets. Whereas a proper financial plan where they're paid by you and there's no commissions, or back handers or anything like that, could easily cost you five or 10,000. Now if you're trying to make money a lot of people say, "I can save that five to 10 grand and keep that towards my deposit and I'll get the free advice." No one works for free, the free advice is always going to be biased. It's quite often the free advice is the most expensive advice.
I pay some of my advisors a thousand an hour, and it's the best money I've spent in the world. Obviously not everyone can afford that, and it takes time to build up to that but the whole idea is it's a journey. When you're young you can't afford the advice but you get some and maybe you need to read more books and do more courses. Then reinvest in yourself. One of the advisors I had before he said, "Reinvest five or 10% of your wealth into educating yourself or paying for advisors because effectively you're reinvesting it into your portfolio to then get a better return, or to de-risk it."


Mike Mortlock:                 I think that's just fantastic advice. Chris just go through a scenario of someone who is, say, on a much more modest income. They're looking at an investment property, maybe the Bondi million-dollar units are out of their league. Should they be waiting to save up for a higher deposit or what's the best strategy to getting in the property if you don't have that big capacity or that built in equity in your principal place of residence already?


Chris Gray:                 Generally my thought process is property's always more expensive tomorrow than it is today. I understand there's more volatile parts of Australia where that's not always the case, but there's always a reason not to invest so if you put it off today and say I'm going to save for a bigger deposit most of the time the property's rising by quicker than you can save. I think it's much better to get into the best suburb that you could possibly get into and it's all about location, so I'd much rather run down pretty crappy property right in a good suburb than a pristine one that's a few Ks out. Just get in the market and then let that grow, pull the equity out, and then keep repeating. It's using things like lender's mortgage insurance. If you can pay 10 to 15 grand extra on top of your loan cost to put a 5% deposit down, then a 20% deposit you either get into the market quicker or you get more for your money, you get a better property, and that will more than outweigh the cost of the mortgage insurance. I think the main rule is concentrate on how much money you're making as a net return rather than what things actually cost you.


Mike Mortlock:                 Fantastic advice Chris, Look I just wanted to wrap this up shortly. How do people get in touch with you if they want to get in touch with you, and how do you help investors building their portfolios?


Chris Gray:                 Sure, the quickest thing is Google me or the website is YourEmpire.com.au Probably the best resource in there is the effortless empire books. I've written about four or five books but the one book I put together after I did my coursework, so that I didn't need to spend two or three hours with every single person, was called effortless Empire and that's really how to build a portfolio into the 10, 15, 20-million-dollar level even if you're starting from nothing. That really gives you all the tools that you need to get out there. I guess what I then do for the people that can afford it or see the value in paying a 2% fee to buy is that we can actually implement all that and do it for them.
If you're starting out, you haven't got those kinds of funds there's so many resources. Again, Google me on YouTube there's probably 200 videos, educational videos, on there. There's so much free information out there. Not all free information is good but just see where the people make their money from and that'll really give you an indication of how independent they are. As I said I make the majority of my money from my own portfolio and then I'm make it from the people we use from the buyer's agency, so I don't really necessarily need to have a vested interest for the rest of the masses to turn them in to do different things. I just share what I do and if people like that then they could follow on.


Mike Mortlock:                 Fantastic. We'll share some of those resources as well to put people in touch with you. Just to wrap up Chris, if there's one piece of advice you could impart what would it be?


Chris Gray:                 I think the main thing is just go and do it. Like the Nike ad is. You're going to make mistakes, it's not always going to be easy, but if you don't give it a go you've got 100% chance of going nowhere. You've got to make a start. Quite often if things go wrong it's not as bad as you expect it to be, and at least you've got a chance of moving ahead somewhere. If it does go wrong look you've learned a lesson and hopefully you won't repeat it. You've just got to be in it to win it I think.


Mike Mortlock:                 Awesome. The best time to invest is yesterday.


Chris Gray:                 Exactly.


Mike Mortlock:                 All right Chris, Thanks very much for your time, it's been a pleasure. Really much appreciated.


Chris Gray:                 My pleasure.

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