You’re in for a treat today because I’m going to chat with one of my very early mentors when I started my property investment journey.
I bought my first investment property in 1971 without much money, having saved a little deposit and going halves with my parents and I definitely didn’t understand the rules of the game.
I just knew that wealthy people owned property and I wanted to be wealthy.
At that time, I didn’t have any books on property investing and clearly there were no podcasts. There weren’t even investment tapes or CDs available in those days.
One of the first books I read was by Robert G Allen, an American author who wrote the book Nothing Down.
Obviously, the concept of buying properties with none of my own money – nothing down as the Americans would say, or no deposit – seemed a very attractive proposition.
While it may well have work in the United States, those principles did not work here then or today, even though some people still suggest you can work your way around the system by investing in property with no money down.
Let me make it clear: I don’t advocate that strategy and never have.
However, Robert Allen went on to write 10 books including five New York Times bestsellers and I kept buying them and learning from him.
Especially his great book Creating Wealth which explained how to retire using his seven principles of wealth – this book, which we’ll be discussing in my chat with this legend of real estate today, changed my way of thinking about money and property investing
Robert’s subsequent books and training courses also were part of my early investment learnings and still stay with me today, so I was excited to have the opportunity to interview Robert Allen recently. I’m sure you going to get a lot from our discussion.
Robert does mention his concept of buying property with nothing down and that you can go and find distressed vendors and take over their mortgage and buy a property at a huge discount.
I was going to cut that section out of the interview but decided to leave it in, not out of courtesy to Robert, but because while these principles may work in the United States where the economic situation is very different, they definitely won’t work for property in Australia.
However, I decided to leave that segment of the interview in so that you can hear how some people think and how others in the property market in Australia are incorrectly teaching these principles to naïve investors today.
Let me be clear, our housing markets have moved on and the next property wave has commenced.
There are very few mortgagee sales happening, and there are very few distressed property owners who would let you take over the mortgage as Robert suggests.
As I said the situation maybe different overseas, but this particular aspect of his investment strategy just doesn’t work in Australia should be very wary of those selling courses trying to teach you those techniques here. There are legal and stamp duty reasons why this doesn’t work here.
It’s another example of how many overseas gurus just don’t understand the local market here in Australia and why their teachings are not necessarily relevant here.
The fact is, there is a shortage of investment grade properties in the market at the moment with more buyers than sellers.
You won’t get a bargain if you look for the right type of property – an investment grade property - that will grow at wealth producing rates of return.
It is often said you make your money when you buy your property, but it’s not because you buy a bargain, it’s not because you buy a secondary distressed property cheaply as Robert will recommend, it because you buy the right of the property – one that will grow at above average rates of capital growth, a property that will be in continuous strong demand by owner occupiers and tenants who can afford to and will be prepared to pay you higher rents.
Over the years I have had many mentors, and as I explained Robert Allen was one of my early mentors but like with everything in life I’ve chosen to select portions of his learning the applicable to Australia and discard others that are not.
Of course, this is easy for me today with the perspective of close to 50 years of investing – I know what works and what doesn’t, but I can understand why beginning investors get lured by the concept of nothing down – remember Real Estate investing is not a get rich quick scheme and wealth is the transfer of money from the impatient to the patient.
Now that you’ve heard that disclaimer, there is so much great information in my interview with Robert Allen, so please let me know and welcome to today’s episode of the Michael Yardney podcast.
- Robert started doing research on how to buy property with little or no money down because he had little money when he started
- According to Robert, the reason Nothing Down became so popular was because people were so skeptical about it.
- Robert’s advice for people facing challenges in the COVID era
- More people are highly motivated to sell and can’t wait because of the pandemic
- It can be beneficial to work with a partner who may have better financials
- Safety vs. Freedom – entrepreneurs like to go outside their comfort zone
- Most people don’t think like entrepreneurs, because they’re taught by employees
- Diversification isn’t necessarily the goal – it’s better to focus and become an expert in one thing
- Win/win is a fundamental principle
- How to build enlightened wealth
Find out more about Robert G Allen
“Most people don’t believe they can make it, they can do it, whether it’s real estate, internet businesses, even relationships.” – Michael Yardney
“If you avoid risk, you’re also avoiding opportunities.” – Michael Yardney
“You shouldn’t necessarily diversify, you should concentrate on something you’re good at, and become a real expert.” – Michael Yardney
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