Property Investment Is An Asset Producer, Cars and Lifestyle Are Asset Reducers!

'Propery Investment... (many properties), always have a plan, invest in growth assets not depreciating, budget and live within your means…' Dominic’s story.

Tom before I tell my story about my undisciplined approach to investing, I should have actively listened to two people in my past. Both gave me sound advice; however I led with my heart and not my head.

The first was my father, friend and mentor. I suppose in my adolescence I thought I knew better, or was it my rebellious nature trying to prove that I knew it all! I’m not sure. The second, and I say this without doubt, was you Tom.

I remember the day we met. It was onboard a flight to Sydney. We were sharing anecdotes about purchasing residential property. Till this day I clearly remember our conversation. You really did know what you wanted to achieve. You shared your plan with respect to your property investment plans.

I can also remember the two bedroom little dump that you started out with but more so the house warming you had when you finished the reno’s. Can I say, well-done Tom. I should have listened. What’s done is history. I’m damn sure I’ll never make the same mistakes again.

For better or worse, ones upbringing certainly plays an important part in blue printing or designing initial patterns in ones decision-making processes. However, objectivity in my experience, this has been clouded by heartfelt subjectivity and clearly the reason for my poor investment performance thus far.

I am the proud son of an Italian migrant. A builder by trade who immigrated to Australia in 1954 at the age 23. One of many skilled migrants offered passage assistance from Europe, Dad met mum and married in December of that Year. By any standard he was a workaholic. He was also my life’s teacher as he was to all the family and my best friend.

Dad would work 12-hour days 5 days a week and then each weekend as a tradesman. Never can I remember dad coming to watch me play football, it was always work, work and more work. He always maintained that hard work would pay off in the end!

There were 5 children and dads plan was that he would assume the role as workhorse and mum as the homemaker.

Dad laid the financial plan and Mum administered it to the best of her ability. Mum and Dad had limited education and so it was my responsibility to master all three ‘R’s from a very early age. To this end I would read all postal correspondence, keep a basic ledger of income versus expenditure, write out cheques and translate Italian to English and (vice versa) and attend all business meetings.

Dad’s savings and investment plan was simple. Always have a plan, invest in growth assets, budget and live within your means. All capital investment expenditure to be in long term assets which are income producing. He has an absolute passion for all property, with a leaning toward commercial and the development of these properties.

Mum and Dad’s dream was that they would leave a legacy of one income producing commercial property for each kid. This was achieved many years ago. They purchased 4 properties over a period of 10 years, the 5th coming a few years later. Dad always believed in establishing and maintaining sound business relationships with all tenants. To this end he now has 2nd generation tenants and yielding excellent returns.

I was 19 years old and needing to impress. With substantial savings I bought a brand new car for $8500. Much to Dad’s disgust! “Live within your means” he’d always say. A new car is a liability even if you do pay cash for it. I soon found out what he meant. The realization or should I say hurt came when I saw the new car value disintegrate. Not only that, running costs, maintenance, fuel, insurance, registration and depreciation quickly depleted my savings. In hindsight what a horrific investment! I blew a sizeable deposit for a house on a bloody car!

May 1983, armed with a 10% deposit of $7,500 I purchased my first home. Hell I married a red head sophisticated bombshell that melted my heart and soul. We held on to that property for 18 months spent $5000 on restoration and beautification then sold for $115,000.

With $40,000 in hand we purchased a property for $108,000 in Greensborough, Victoria. We held this property for 4 years then sold it for $191,000. Our reason for selling was bloody crazy in hindsight. We sold for an opportunity to move to the country and improve our quality of life. I should have had my head examined!

We purchased a Californian Bungalow in Daylesford, Victoria. It was a magnificent old boarding house in need of extensive renovation, about $100,000 of work!

This was a purchase of love.

This decision made dad cringe. Not as bad as when I bought the car though, but almost! Dad had an uncanny ability to recognise a lemon and dump it. I found them and fell in love with them.

During this excursion of ours to the country we experienced interest rates around 18.75%. The family was growing, our son David was 2 years old and my wife was expecting number Two. I had gained employment with Ansett Australia, and was traveling 3 hours return just to get to and from work. I also held a second job. Pressure mounted. Barely put food on table, struggling to pay bills. Wife threatened to leave. Resentment sent in. House sold to highest bidder. Made an embarrassing $5000. That country outing cost us financially and emotionally. We went on to rent for 12 months.

I thought I knew it all. All in all a subjective and undisciplined approach to property investment! I had a great mentor in dad and had access to Tom at work if only I wanted to ask. If I had stuck to their sound property advice I would have been financially independent years ago.

I know I’ve squandered a lot of opportunities by not maximizing on my previous investments. I should have made a small fortune! As Dad always said, “learn from your mistakes and be guided by those that are successful”. This is why I am telling my story.

If you can learn from my mistakes then it could at least save you a small fortune. Since 1990 I have strategically invested in residential property, retail business and the equities market. Each foray into the property market has been successful, slightly less in the equities arena and disastrously so as a retail operator.

Easter 1993 we purchased land in Eltham South, Victoria which was all the flavour then. We started to think a little more with our head and did some logical homework outside of the “feel good in love factor like Daylesford”. This was located in a great position with elevated views and was in close proximity to all amenities.

The house and land package was $ 210k.

Although this property had all the ingredients of a great home and top investment we decided to move. We sold Eltham during 1996 for $275k. What I believed then to be a terrific opportunity to dramatically increase our cash flow was in fact a financial nightmare, a bloody disaster.

I looked to make a quick buck in an area I had no previous experience in and blew the lot!

I uprooted the family and moved to Queensland, blindly invested 50% of our savings ($50k) into a fresh, untried retail business and gone, gone, gone it went!

However my saving grace was to be well located in demand residential property. Something that Tom had chewed my ear off about years ago! (This happened to be a successful part of my investment journey.)

I put $50k into a waterfront residential property on the Gold Coasts North Shore and I also purchased 2 investment properties in Brisbane. I did the homework on these properties and made sure that I could reason exactly why I thought they were going to be a good investment. I started to view investment like my dad would. While I focused on capital growth, I was keen to keep my holding costs low by making sure that I bought the right property. (Daylesford really taught me a lot!) So far have I have reaped the rewards. In 4 years (1998 – 2002) the Gold coast property doubled in value and it has been slightly less in Brisbane.

Due to unexpected personal reasons however we had to quickly liquidate two of the properties. My marriage disintegrated and I lost my job when Ansett went belly up! This saw me take another financial hit. With tasteful renovation and a well-timed marketing campaign I feel sure we would have achieved another $150k.

I gotta say I felt pretty bloody ordinary and had a few tough days there for a while! I was forced to reassess the basics. It was time to reign in a lifestyle I couldn’t afford and get back to the grass roots. A minimalist life style with a view to quickly regrouping (meaning get my act together) then steer a course that would allow me to achieve my long term goals, happiness and financial independence.

Tom without your recent assistance I may have financially self-destructed. Once again your wealth of experience and unquestionable practical knowledge has guided me along a path to achieving my goals. I have been able to quickly minimise and consolidate debt, successfully establish myself in property investment and substantially develop my equities portfolio. You have been a terrific mentor and mate. I know that my future investment decisions are my responsibility but without your assistance and logical thinking, financial independence for me I think would have been but a distant dream. Now my light has been turned back on!

I suppose a summary of my story would be to live within your means and keep things simple. Do your homework and invest for a purpose and learn as much as you can from other people because making mistakes yourself is bloody expensive. I suppose the other glaringly obvious thing is to listen to a mentor with experience.

Sincerely Dom

Toms Comment

While I thought I knew Dominic fairly well, I have discovered not quite as well as I thought!

Dom has certainly had some varied situations and challenging circumstances that have all but wiped him off his feet but Dom has not let the past or present hold him back to achieving his life goals.

His lifestyle adjustment and the saving discipline drummed into him by his dad have seen him pull through the tough bits. While it has been good from my perspective to be a bit of a sounding board recently, the amount of work that Dom has put into justifying his latest investments based on logical research, I am sure will see him do well in the not too distant future.

Dom also made a point of learning from other mistakes and finding a mentor. I can only fully agree with him because mistakes have also cost me in two ways. One is in making the mistake in the first place and the other is the opportunity cost in making the original mistake!

The mentor issue is one that I make mention of in the manuals. Finding do as I want to do people has paid dividends for me from my very first investment.

My newfound mentor at that time actually gave me confidence to invest in that first property. Having a mentor takes you away from being a teacher to being a pupil and as I progressed with my investments, another mentor came along (among many) and he has further taught me and helped me achieve what I have today.

I think Dom has summed it up well when he said, “I know that my future investment decisions are my responsibility but as Dad always said, “learn from your mistakes and be guided by those that are successful”.

Dom is also very determined to do what it takes to achieve his sizable goals and has been very proactive about his opportunities. This alone puts him on the front foot.

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