Property Fit author Luke Harris explains how to build a real estate portfolio

The entrepreneur, who owns Property Mentors, a Melbourne-based agency that helps people

grow their real estate portfolio, admits he first entered the real estate market to get rich inspired by a wealthy uncle who drove a red convertible with a car phone in the 1980s.

He bought his first property at just 20 – a four-bedroom house in Perth near the beach in 2000 for $ 157,500, which he lived in and described as a party spot for his friends on weekends. .

However, despite a $ 20,000 deposit, his parents still had to vouch as he ran his own electronic security business and the banks were not in favor of self-employment.

“At 20 and over, I wanted super yachts, fast cars and vacations that a lot of people associate with wealth,” he said.

“But during my 20 years chasing these luxuries, I realized it was good to have a luxury car but you don’t need it, it’s good to have a big house on the beach but you don’t need it and you can still have a comfortable enough house without having the best house. I think a lot of people mistakenly associate luxury goods with wealth. “

His second property was a two-bedroom apartment in the now affluent Wembley suburb of Perth, which he bought for $ 115,000 in 2004.

Living in Melbourne at the time, Mr Harris and a friend flew to Perth with tools and equipment, renovating the place in less than two weeks.

“We literally emptied the apartment and remade it in 11 days and it was a record, but it allowed me to go back and borrow more money because it drastically increased the value,” said he noted.

This made his run to dozens of properties much easier because he could leverage the equity in his previous homes, he said.

For his third property, to be purchased in the Tasmanian suburb of Queenstown on the west coast for $ 79,500. He rented it $ 120 a week and sold it for just $ 20,000 over 10 years later.

“It wasn’t great for capital growth, it gave me an extra $ 20 or $ 30 per week in my pocket, but it wasn’t enough for star jumps and friends and high-five family, ”he said.

The 41-year-old admitted at the time that he had no plan or strategy, but zigzagged from place to place based on “what seemed right to him”.

He has since added a bunch of properties to his portfolio in Australia, but insists there isn’t a single game changer in his possession.

“The properties that I bought in my portfolio are boring and I say that because they are there to do a specific job – increase the cash position or add capital growth to the portfolio. Like I do, there is nothing that stands out as an amazing property or a really good deal or that outperforms the rest, they are there as a workaholic doing a job and just sitting there in the background and do not cause headaches, ”he explained.

“I told my clients that is not sexy and if you want sexy go buy bitcoin and go on a roller coaster and put your money on the market and buy and sell and trade. I’m not interested in that but buying boring properties that just do their job, and boring in that sense I’m not going to buy a $ 2 million house or apartment just to feel good and wave it in front of my friends and my family.

“I say it’s an average apartment in an average Melbourne suburb and I get $ 400 a week or it’s a townhouse in a remote suburb with three bedrooms and two bathrooms but I never got a day without rent. These are all regular properties, very average, not average in terms of quality or location, but do not show houses.

Later purchases include properties in the Melbourne suburb of St Kilda for $ 1.6 million and Prahan for $ 2.35 million and others across Victoria, such as a house in Carrum for $ 780,000, a to Seaford for $ 280,000 and another to Cranbourne for $ 549,000.

There have also been properties in Western Australia, including a house in Mandurah for $ 235,000 and in Marylands for $ 1.2 million.

The purpose of buying his properties was for the numbers to generate average returns as “slow and steady” wins the race, he added.

“The beautiful thing about building my own real estate portfolio is that it has allowed me to build a business that allows staff and clients to learn the same and we have learned to hundreds of people doing the same, ”he said.

“We take an approach to investing that isn’t about a get-rich-quick scheme, so a lot of people get rich quick and expect a 30% ROI. types of returns.

It might surprise people that the millionaire lived for 10 years in an apartment in Prahan, Melbourne, which was originally an investment property.

“I live in an apartment in Melbourne because a house in this area costs between $ 3-4 million and I don’t want to spend that, I’m happy in a two-bedroom apartment,” he explained.

“There is a great little backyard and in choosing this lifestyle I have made some sacrifices – I love gardening and you take a bit of trouble on your internal accommodations but a lot more of your life is spent there. exterior of the apartment.

“I see it as a crash pad and I spend my whole life in restaurants and cafes.”

Mr Harris predicts apartment living will become more common for Millennials and Gen Z, who want to reside in lifestyle areas, rather than the outlying suburbs, describing them as generations accustomed to having it all on demand , from food delivery to login apps. .

“So people don’t want to buy their first house 50 km outside of town and live in something they can afford, when they can rent in a neighborhood that has access to everything and they want friends there and they can go for brunch, ”he said.

“I have friends who are between 20 and 30 years old and they will never buy a house, even if it is only for a few years in the outer suburbs.

“I see this especially on the east coast, especially in Melbourne or Sydney where a house costs $ 2 million but you can get to a suburb for a much lower price by renting and a lot more people will. and will give rise to the idea of ​​buying a property.

He also changed his attitude towards wealth, after a mini retirement at age 30, to assess what he was doing with his life.

“I understood that what was important was not the super cars and the yachts, but health, taking care of my family and having a comfortable home and as I grew a little more realized that pursuing that endless goal of having a $ 20 million super yacht is not necessary and does not necessarily mean that you are going to be happy, ”he said.

“You don’t just need to run after money, you need to balance that with what makes you really happy and not everyone needs $ 10 million to be happy.”

However, with Melbourne’s constant lockdowns, Mr Harris bought a 30-year-old property in Airlie Beach for $ 1.35 million with ‘horrible terra cotta tiles and funny smells in some rooms’, which he is renovating. currently with his partner.

The author’s advice for those looking to get started in real estate is to buy what you can afford right now, and not to expect your dream home to be your first home.

“There has to be a bit of a trade-off, so walk into your first house instead of renting, then you’ve got a head start and you can live in that house for two, three, or five years, then you can potentially move up to the next level. as life changes. ,” he said.