Your Money Show

Property investment, as we know, can be a bit hit or miss, but that doesn't mean that it's all doom and gloom. There are plenty of good deals around if you know where to look. So how do you overcome your fears of investing? We're joined now by Todd Polke, founder of Profits Till Portfolio, to share his insight. Todd, great to have you back with us once again.

Great to be here, yeah, thank you.

People have a pretty justifiable fear of investing at the moment. There are a lot of negative headlines around the property market, and more people are losing than winning at the moment in the biggest markets, certainly in Sydney and Melbourne. A lot of people are taking What's the best way to sort of overcome those fears, which can be actually quite rational?

Well, especially right now, as you said, it's mayhem out there at the moment, isn't it? You know, people are— the markets are coming down. We've got the election coming as well, which is freaking people out even more. Lending, the economy, like there's just so much going on. So it's absolute mayhem out there. I think a lot of people where they get caught up in is they get all consumed by it and they can't actually see outside the box or can't see anything apart from what is potentially the downside. But in every marketplace that is having a correction, there's always an equal and opposite opportunity as well. So I actually love these markets. I get really excited when we get into these type of marketplaces. There's so much opportunity coming down with, with the, you know, the rest of everyone else out of the marketplace. So I absolutely love it.

You could almost argue that the Sydney and Melbourne markets were scarier 18 months ago when everything was like soaring.

I was freaking out at that point in time. Exactly.

But it was also something that Even people who were enjoying being on that treadmill could start to see something happening on the horizon. I mean, there was a lot of bells ringing that that was happening. It really— the horse, you know, galloped just too fast.

How many people look at that though? That is the question, right? Because a lot of people get caught up in the euphoria of it all, that it's never going to end, it's never going to end, and they wind up buying at the peak of the market. And that's what happens.

We've been watching it, you know, really pulling back more so in the cities that did race the furthest away, which was Sydney and Melbourne. So people who are getting in fear, there are still bargains happening now, you know, clouds have silver linings. What do you think that they should be doing to get over their fears to start investing?

We're having a look now what the most common fears are, and I would say that they are fears that you should analyze and address.

100%. I mean, I'm all for positive thinking. I'm an eternal optimist, right? But if you're not looking at the downside, I think that's just lunacy. That's a recipe for disaster. You know, one of the biggest ones we're looking at here is what if I buy the wrong property and lose money? And, you know, Unfortunately, a lot of people go into the market and do that because they don't have a plan, they don't have a strategy, and they just go with the mindset, let's just give it a go.

Yeah.

And when you're investing hundreds of thousands of dollars, I think that's a really, really dangerous type of strategy to be going into the market with, that's for sure. The next one, what if I can't afford the repayments? You know, I've just had a client who just started working with me very recently, and they have, they came to me with 6 properties. So they've got quite a strong portfolio, but all of a sudden they did everything originally at interest only, At 4.5% interest rates, everything's just switched over to principal and interest, and interest rates, the banks have moved them to 6.5%, and they're bleeding $30,000 to $40,000.

That's a common scenario for a lot of people, not just the killer ones.

Exactly. And especially people go in and they overextend themselves and don't think about setting up the buffers or thinking about what can really go wrong, and that's a dangerous scenario.

And you can't really count on the market to do the work for you at the moment, can you? Because for a long time people were They just knew that it was going to follow a roadmap and everything is going to work, right? And we've had a bit of a wake-up call on that philosophy recently.

Yeah, absolutely. And the markets, I mean, the one thing you're going to know is that the market's going to change, right? That's the one thing you're going to know, whether we're talking about the property market, whether we're talking about the finance markets, whether we're talking about the economy, the market is going to change. And we've got to prepare for that to begin with. Otherwise, you kind of, you know, the tide's gone out and you're just left wondering what you're going to do.

Well, the old popular Scout term, all the Scouts out there, of which I was one, be prepared. You just mentioned being prepared. And these other fears here are really about being prepared, is, you know, the researching and understanding things like bad tenants and potential debt or risk of no rent coming in. That's a lot of being prepared to get into the market in the first place, to understand what properties you're buying and, and where they're located and what sort of people are you attracting to them to make sure that you're going to get good quality tenants and get a rental return.

Yeah, absolutely. And so, so much around when you're going into the marketplace, you've got to have a system for analyzing the deal, right? So many people wind up that is buying Buying with their hearts and not their heads, and I think that's really, really dangerous. You know, we wanna— we're investing with our hearts because we wanna create some more choices for our life. But if you're making your investment decisions based on emotional decisions, then your own bias and your own ideas and beliefs get in the way rather than actually following a checklist. This is good, this is good, this is good, this is not, and being able to go through that system, I think it's really, really critical.

So I was a little preemptive and I just asked, but how are you gonna make people not be scared now to dive in when, you know, we realize that there are deals available?

Yeah, definitely. I think the very first thing is that people have to have a plan, they have to have a strategy. If they don't have a plan or strategy, then really it's just gambling in the marketplace. And that's not, you know, hundreds of thousands of dollars invested in the market. You do it at the casino. You do it at the casino. You might have a lot more fun than that, than riding the ups and downs of the property cycles as well. I think, you know what, one of the other biggest things you've gotta think about is that you have to, mitigate against what can possibly go wrong, right? There are so many things that can go wrong in the marketplace, and if you're not planning to mitigate against them and have a plan in place that when things go wrong, what are you gonna do? You know, so much around building wealth, it's not just about how much you make and what you do with what you make, but it's how much you keep along the way. And if you aren't prepared to ride through the, through the ups and downs, then you're just never gonna get there. It's just gonna be stop and start the entire way through. And that's a, that's a really, really big thing, right?

You've got there expect failures for protection.

Yeah.

Explain that one.

Things are gonna go wrong sometimes and we need to be able to plan for those and go through it, right? Like, I don't think anyone's gone through a property investment journey without stuffing up somewhere or without something going wrong or the market changing on them. And we can, as I said before, you can be as positive as you want in the market, but And if you've got your head entirely in that spot, then I think you're asking for trouble straight off the bat. You've got to swing the pendulum all the other way and go, well, what if I really do screw up? Can I actually get back up and keep on moving forward? Because it's not about the investment, it's not about making money. This is about people handling their financial future and actually being in control of their lives.

So can we get a bit more specific then? Where is a good start? How do you set a goal? What's the first step when, in terms of getting into property investment?

Yeah, look, I think one of the big things that you wanna do when it comes to actually setting goals, you wanna make it really, really personal, right? You've gotta make it about you. And what I was just touching on before is that there are things that are gonna go wrong along the way, no doubt about it. And you need something which is strong enough associated to you to pull you through. What's the reason that you're actually gonna get back up? Most people don't invest in property to make money. If you ask a deeper question, they wanna make money because they want more time or they want more choices with their family, they want more freedom, they want more opportunity. And that's really important. A couple of my clients, Wei and Jen, when I started working with them, and this leads on to the second thing about you gotta know yourself, right? And know how you make decisions and know where you procrastinate and know where you make excuses and know what your fears are. When I started working with those two, Wei was an absolute go-getter. Like he just wanted to get out there. Let's buy 3 properties like this. Now Jen was a lot more fearful of debt and kind of scared of the whole situation.

The turtle and the hare, isn't it?

There's so much relationship counseling in doing what we do. And so every time Wei wanted to do something, Jen would freak out and then go back the other way, right? But when we dug down, you know, what Jen really wanted was to be able to, when they decided to start a family, was just be home. And that was the driver. Wei didn't want to do the commute every day. And when we actually got to start knowing those 2 as individuals, then they wound up buying 3 properties in the first 12 months. But they did it one at a time, stopped, relooked at it, did another one step by step so Jen didn't freak out along the way.

Is that advisable to buy 3 properties? Do you need 3 properties or one good one? I mean, how do you sort of tailor a portfolio to—

Yeah, it's interesting because we get a lot of people saying different questions, don't we? You've got to have like 5 houses to retire or 15 houses to retire, all these very strong goals that people create.

Yeah, I don't think it's got anything to do with number of properties you have. I think having 10, 15 properties for a lot of people is just an ego trip where they can just, I go to a party, I go, hey, I got 10 properties, that's great. I know people that own 15 to 20 properties who aren't making any money and I go, what's the point? I'm more about, well, what are those properties doing for you in your life? Like what is the income? What is the cash flow? What is the profit you're creating? And what impact is that having on you?

So everyone's situation is different.

And everyone's strategy is different. It's gotta be based on each person as an individual.

When we've had you on the show in the past, and you're a good friend of the show, your background, you had personal training and you talk about this from that training. It's very interesting how that so closely relates to this same real estate relationship.

It's the same thing, yeah.

It's goal setting, it's understanding yourself, understanding why you wanna do things, giving yourself motivation and planning.

Absolutely.

So you mentioned the goal, the case here with Wei and Jen. You obviously have a long-term relationship with them to help them gain their financial goals.

100%, absolutely.

How do you start that relationship? How does that, how, you know, this is a long-term relationship you're having with them, let alone they're having with real estate.

Yeah, absolutely. You know, the good thing about Wei and Jen now that they are actually free. Like Jen actually is at home, they've got 2 kids now, and Wei works from home, doesn't have to commute anymore. And that's a really exciting thing. It's why I do what I do. But, you know, everyone comes initially to start in the investment space 'cause they want some more choices in their life or they wanna get out of some type of pain. That's how people start. And then it's about working with them to help them long-term to achieve their goals 'cause building wealth in property investing is not a short-term scenario. It's something which you, it's a long-term journey, right? Of course you can make short-term profits, but it's a long-term journey. And so step by step, it's about building a strategy and then Reviewing the strategy, refining the strategy, taking action, review, refine, taking action. And because we're working together on such close things with money, which is very emotional for most people, yeah, I build super strong relationships with people and, you know, get to see them through the entire journey. It's really exciting for me. I love it.

And you had another client, Jan, who you sort of helped her get over her fears and get into the market. Tell us about her story.

Yeah, so when I met Jan, she's just lovely. We call her Mama Jan in our little— yeah, she's just lovely. I just love her to death. And so, um, in her situation, when I first met her, she came with this very strong thing that as long as I have my home, I'm safe. And that was her belief system, which is really, really common. But unfortunately, what was going on at the same time is that she was chewing down on her superannuation. She was trying to grow an Amazon business, which really wasn't suited to her. I mean, Amazon business can be great, but it just wasn't suited to her. And you know what, in the next kind of 3 to 4 years, she was going to be out of superannuation and living on pension. And that's certainly not what she wanted to be living her life for. And when we, you know, when we were talking about like getting caught up in fear, that's what she was caught. She was caught in that but couldn't see the other opportunity. One really important question I think everyone's got to ask themselves is, what if, right?

Mm-hmm.

Okay, well, so if I take this step, then what could it mean? But what if I don't take the step, then what is it going to mean? And, you know, I think a really important thing people have asked, if If I do nothing in the next 5 years, where am I gonna be? Am I gonna be happy with that? And when we dug into that for her, it wasn't a pretty scenario.

So what was the solution?

Well, we wound up actually working with her to sell her home. She cleared some cash. She sold at the peak of the market, so a couple of years ago, which is really beautiful timing. She wound up buying another property in a coastal area in Melbourne with subdivision potential. So she renovated the house. She built another house on the other side. She loves making things pretty. It's one of the, we call it, and she loves looking after people. And so this Airbnb, we turned one into Airbnb, just started 6 months ago and it's fully booked. And that income is now covering her life. On top of that, she's got enough to go and do some more deals as well. And, you know, she's 100% free now and doing what she loves, looking after people in Airbnb, renovating, making things pretty, which—

Yeah, that's my job too.

You got it, I understand. And she's doing some interior design consulting as well. And it's really exciting to see that.

I'm wondering, Todd, you know, you've been doing this for a while now and you've worked with a lot of different clients. Are you finding yourself that you talk about them having contingencies in place for different changes in their life and to secure their investment portfolio?

Yeah.

Are you finding yourself that you've learnt lessons or adjusted in this, in this present market? Because it's pulled back in some places much more than many experts even anticipated. Has that also adjusted your model?

My model adjusted before this because I blew myself up once before and I had already been humbled. I've already been humbled. I lost everything, had to start again.

Yeah, great.

Yeah, great. I appreciate that.

But it's great. Why I say it's great though, in the nicest possible way.

I agree with you, by the way.

Lessons learnt. You know, it's true. Many billionaires have lost money and then remade it. So it's part of that learning from your lessons rather than, you know, as long as it's It's a great process and you benefit from it.

Yeah.

It's a very strong process.

They talk about a lot of millionaires, billionaires who have lost, gone broke 3 times on average. Now I'm hoping it doesn't have to be like that. I'll just keep with one, thanks very much. But you're right, it made me a 100% better coach and more careful about my own situation. And so being just naturally eternal optimistic, I just go, everything's gonna be great. And that's what I thought. But then I was, as you said, I was humbled very quickly. very strongly. And so I'd been seeing, as you said before, and we saw the signs that were happening in the marketplace. So I was locking in equity and doing stuff a couple of years ago now. And, you know, also I think seeing the opportunity that potentially is gonna come, because I think in the next, even now, but in the next couple of years, we're still gonna see even greater opportunities. And so it's all well and good, you wanna protect yourself at the right time, but then you wanna prepare for the opportunity which is gonna present itself. And I think there's some beautiful ones coming, that's for sure.

Awesome.