What were my clients investing in 10 years ago
and how did it work out?
Do you regret not investing in property 10 years ago? Do you feel like you have missed the boat and
wonder if it’s still worth investing now? What separates successful investors from the rest? History
leave clues… so read on.
For the last 14 years I have met with at least one prospective investor every business day, on
average. By my calculations, I have probably had well over 3,000 conversations. No wonder I feel old
and tired! After this much experience, you start to notice some patterns that separate the people
that successfully build wealth and the ones that don’t. I can solidify these differences down to two
behaviours.
Firstly, successful investors do not procrastinate. They make the decision of whether to invest or not.
Either way a timely decision is made. Investing in property or shares and managing it takes no more
than a couple of hours of your time per year – so “I have been busy” or “I don’t have time” are just
stories we tell ourselves – after all there are 8,760 hours in a year – you can’t find 2? Often, the real
reason people procrastinate is fear – fear of doing the wrong thing, looking like an idiot and losing
money. What they don’t realise is that doing nothing can be just as bad as doing the wrong thing.
Successful investors don’t let any fears delay them… which brings me onto the second thing
successful investors do.
Successful investors let other people help them and don’t try and do it all themselves. They realise
that the best source of knowledge is from experience – so they consult with the people that have the
right experience to help them with their decisions. They know that their success lies in the ‘who’
question not the ‘what’ question. That is, who is the person that has the relevant experience to help
me with the answer to my investment question? Not, what is the answer to my investment
question?
I thought it would be an interesting exercise to randomly pick a handful of properties that some of
my clients purchased 10 years ago to see how they have turned out – and, more importantly, why
they turned out the way they did. I can assure you that these example property acquisitions were
selected at random by a staff member – no ‘cherry picking’ here. Let’s begin with the good news…
The good

East Melbourne, VIC: Purchased house for $1.9 million in 2006 – current value is over $4
million = > 8% p.a. growth – East Melbourne is a small and very desirable suburb with wide
streets, period homes, few high-rises and a short walk to the city. The clients received advice
from a reputable buyers’ agent when selecting this property. I recall that when they purchased
it, $1.9 million seemed expensive to me (not too much but certainly on the high side) but it looks
very cheap today. I would not be surprised if this property is worth close to $10 million by 2026.
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

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This property has a strong land value, perfect location and very strong historic performance (i.e.
growth of circa 10.9% p.a. between 1981 and 2006).
Concord West, NSW: Purchased house for $780k in 2006 – current bank value is $1.8 million =
> 8.70% p.a. growth – This house was purchased mostly for land value (about 70% was land
value). The past growth (between 1991 and when the clients purchased it in 2006) was very
strong at over 8% p.a. Historic capital growth is often a strong indicator of future growth and this
is no exception.
Hawthorn, VIC: Purchased a one-bedroom unit for $330k in 2006 – current value is at least
$650k = 7.60% p.a. growth – This property is a single level group of 10 units – which means that
it has a very strong land value component in a fantastic suburb. The property was purchased as a
pure investment and a buyers’ agent assisted with the acquisition. Historic growth of this
property since 1979 (to 2006), some 26 years was 9.20% p.a. So it has strong historic growth,
strong land value component and scarcity.
Mont Albert, VIC: Purchased 3 bedrooms home for $510k in 2006 – current value is
approximately $1 million = > 7.0% p.a. – This California Bungalow house was initially purchased
as an owner-occupier home (for the clients eventual return to Australia) but has been used
mainly as an investment property. I couldn’t find any past sales data. The property is mostly land
value in a desirable suburb. A buyers’ agent assisted with the acquisition.
The bad


Glenwood, NSW: Purchased a 4 bedroom home for $455k in 2006 – current value close to
$550k = 2.60% p.a. growth – Glenwood is a suburb 40 kms west of Sydney so the first problem is
the lack of (excessive) demand for land in this area. You want to invest in a location where there
are 20 potential buyers for every seller. Secondly, the house was constructed in the year 2000.
Therefore, more than 50% of the purchase price probably would have represented building
value. In summary, the problems with this investment property include; low land value, land is
not in a highly desirable location and no scarcity.
Southport, QLD: Purchase 3 bedroom home for $395k in 2006 – sold it in 2013 for $405k = lost
money – The historic growth of this 1970’s home was quite strong up until around 2004 – which
demonstrates that assessing a property’s quality requires both an objective and subjective
approach. Since this time, the property has had little to no growth. I suspect that the problem is
the lack of scarcity and quality of the area i.e. if you have more money to spend you would
spend it in a better location. Southport and the Gold Coast are not investment-grade locations as
demand is too volatile. In summary, good land value, good past growth, just the wrong location.
The lessons history teaches us
I think these property acquisitions make for interesting reading and there are 5 lessons we can learn:
1. The aim is to double your money every 10 years. The aim of investing in property is for the
property to have strong future growth prospects. Essentially, you want the property to double in
value over 10 years at least (which requires a growth rate of 7% p.a. or more). Probably the
biggest objection or question that new clients have is “how do you know if a property is going to
double in value every 10 years?” The short answer is to find someone with many decades of
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2.
3.
4.
5.
experience in buying property in that location and pay for their professional advice. The longer
answer is that there are three things you need; scarcity, land value and growth historic growth.
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Asset selection is absolutely key. Leading on from the first point above, it is critical that you
realise that 80% of your financial outcomes will be determined by the quality of property (assets
for that matter) you invest in. You cannot expect above average returns from an average
property. My advice is to obsess about quality and take advice on the rest.
All good quality investments need time – so start as soon as possible. There are only two
ingredients required for a successful investment strategy; quality assets and time. You cannot
take short cuts without exposing yourself to high risks. So that’s why it was important for you to
invest 10 years ago. Failing that, today is the second best time.
One thing that’s guaranteed – an investment-grade property will cost you a whole lot more in
10 years’ time. You can either invest today or later. However, you have to realise that if you do
not invest today that you will have to pay (a lot) more for the same property. That means it will
be harder to make a start, you’ll need to borrow more and you will not be able to make up for
lost time.
You can do it too. There is nothing special about the clients that invested in the good property
examples above. They are not smarter than you, earn more money or have more time. The only
thing that separates them from you is that they knew what they needed to do (had a plan) and
they took action.
Where will you be in 2026?
If I asked you to write down what you would like your net worth to be in 10 years’ time – a realistic
amount that you would be happy with – what would that number be? If you double the value of
your current investments assets (property, shares and super), does it get you to that number? If not,
it sounds like you need to invest more.
Learn from the above experiences and don’t procrastinate. Either way, you need to decide if you
are an investor in 2016 or not. If you are an investor, feel free to contact us and we can help you get
started. I am confident that after 14 years of experience, we can guide you in the right direction to
ensure your hopes and dreams become reality.
By the way, it is important to note that we have no investments to sell you. We don’t take
commissions from investments nor accept referral fees from anyone, so our independence is always
maintained. When it comes to advising what you should invest in, our only interest is ensuring it is
investment-grade. We sit on your side of the table.
Contact us
ProSolution Private Clients
Level 8, 31 Queen Street
Melbourne VIC 3000
Ph:
Fax:
Email:
Web:
(03) 8624 4600
(03) 8624 4699
[email protected]
www.prosolution.com.au
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