23 Nov Anything is possible when you don’t know what you are doing – Charles Tarbey
Our feature guest is Charles Tarbey, CEO, founder and owner of Century 21 Australasia. He tells us how he was able to buy his first house – in Sydney – at the tender age of 18. As he says “anything is possible when you don’t know what you’re doing”.
Kevin: My special guest this week in the show is Charles Tarbey, who is the CEO, founder and owner of Century 21.
Charles, thank you very much for your time.
Charles: Thank you, Kevin.
Kevin: You and I have spoken on many occasions about the skills of agents and what’s happening in the market. This time, I’d like to know a little bit more about Charles Tarbey. Tell me about your property investment journey. When did it start for you, Charles?
Charles: Wow. Actually, Kevin, it started before I got into real estate or as I was getting into real estate – at 18 years of age or the end of my 17th year. I was putting away a few dollars each week, and I managed to buy a house out of Sydney but still in the Sydney metro when I was 18 years of age.
The timing was perfect, not that I knew anything about timing at that stage. Within 24 months, the market had kicked on and I was able to actually sell that time and capital gains-free because it was my principal place of residence. That allowed me to open my first real estate office at the very tender age of 21.
I always tell people that I live by the philosophy that anything is possible when you don’t know what you’re doing, because Kevin, if I knew what I was doing, I would have probably talked myself out of it.
Kevin: Never, Charles. What was the branding above the door on that first office?
Charles: Interestingly enough, it was the name of the suburb, Penrith Real Estate out in the west of Sydney. In those days, it was a big thing if you own the name of the suburb because people would ring Yellow Pages, and bang, you’d get most of the leads for that town. Nowadays, it’s all Internet search-based. You could put “Penrith real estate” in there and you’d get 50 agents’ names come up, so it’s a very different scenario.
Kevin: Yes, of, the Internet wouldn’t have been around in those days, either.
Charles: It was not around. In fact, I was one of the first people to have a facsimile machine in 1977, 1978. The only problem was that people I was doing business with didn’t have one, so I couldn’t send them anything.
Kevin: They wouldn’t have had mobile phones in those days, either, would they?
Charles: That was the other thing, too. I was fortunate enough to get one of the first mobile phones in my car. They were very slick design. You couldn’t obviously take them out of your car. The prefix number was 007. When you’re leaving messages for people and they’d say, “What’s your number?” and I’d say, “007,” they’d say, “Look, mate. Just tell me what your number really is.”
Kevin: That probably would have been the old Telecom Traveler, was it?
Charles: It was. It’s fantastic. There wasn’t a traffic light I didn’t pull up at with the phone to my ear and not turn left side of my ear and not going to lift and see somebody with a shoe to their ear.
Kevin: Charles, In fact, I was exactly the same. I think I used to stand at the side of the car with the door open with the phone up just so people could see I had a mobile phone. Boy, those were the days. You might also remember carbon paper. Remember we used to use carbon paper on contracts.
Charles: Kalamazoo, that was the big thing.
Kevin: We used to call them strip lists in those days where all the properties were all on one strip list. Anyway, enough reminiscing. That first property, did you hold that for long?
Charles: No, I sold it. When I had chance to buy this real estate office, I sold the property. The market was good, and I used that equity to acquire that office. Within a couple of years, I started then buying… Penrith in those days was very underdeveloped, and I was able to buy a block of land here or there and get a local builder put a spec home on it for me. I started doing that two or three times a year to bolster my assets and my cashflow. Eventually, I started keeping one or two of the ones I was building and selling, and that was how I started building my portfolio in real estate.
Kevin: That’s interesting. Where did the learning about property come from? Did it come from your family?
Charles: It’s a big thing owning a real estate in a lot of families, but no, it came from the fact that when you are out there buying and selling properties or actually selling properties for builders to investors, you start to see a pattern, and you can pick up on that pattern fairly quickly. If you act on it, it’s a good pattern to get involved in – if you’re not too ambitious. You have to be very careful with it.
Kevin: Let’s talk about strategy for a minute. Have you always used the same kind of strategy? If so, what is it, or has it changed?
Charles: No. It’s changed over the years, because I was able to purchase different types of properties in the equity I had, and some of them can be dangerous. For example, I have a commercial strata in each capital city where my corporate offices are located. That strategy is fine because I’m the tenant. I can purchase the property and I can live in that property.
But in the last few years, if you’re a commercial floor owner or strata floor owner, that strategy could have devastated you. You could have been completely out the backdoor because commercial space got very, very hard to lease and you had to offer significant incentives to tenants. When you’re the tenant yourself, it’s so much better.
When you look at it nowadays, with interest rates so low, you can go into city of Sydney, for example, if you can find a $5 million strata or a 500 square-meter floor. If you borrow $5 million at today’s interest rates, it’s still $100,000 cheaper than renting it.
The strategy changed, but people have to be very careful about getting into a marketplace that they’re not engaged in all of the time.
Kevin: Have you got a mixed portfolio, residential and commercial?
Charles: I do. It’s a bit embarrassing to say this, Kevin, but I own a golf course at south of Sydney, in a place called Kangaroo Valley. It’s a lovely 18-hole Jack Newton-designed course.
Kevin: I remember this now. Yes.
Charles: It’s not the sort of investment you would normally buy. But having a passion for golf at the same time and a passion for real estate, I’ve been able to build villas around the golf course progressively, and the rental return on those villas becomes a convincing platform. Golf courses as a standalone are probably a disaster, so I prefer to call it a hotel with a golf course rather than the other way around.
Kevin: Did you buy it as a golf course, or did you buy it because you knew you were going to develop it?
Charles: It was a golf course sitting there, 12 holes, shut down, got into trouble. I bought it on a whim. It’s probably the worst investment I’ve ever made – I’ve had it for 19 years – but it’s the most beautiful thing I’ve got in terms of real estate investment.
Kevin: I was going to ask you maybe a little bit later into the interview what was the worst investment? You’ve probably given it to us now.
Charles: I’ve given you the worst and best at the same time. No, it’s a business now. It certainly is property, but it’s a business, and it trades successfully as a business. It’s been 19 years since I bought it, interestingly enough. All those years later, it’s something that I have pride in.
I was telling somebody the other day – and this is something interesting, too, Kevin – that owning a property is not just for the sake of owning property. With that particular property, I now feel a responsibility to that property in that in 30 years’ time, who’s going to be enjoying that property? Whatever I do to that property today will either reflect on people’s enjoyment or disappointment in time to come.
In buying properties like that, it’s not just about making money. I have now a responsibility to make that property a substantial property that people can enjoy for many, many years to come, and that means it’s going to cost me more. I’m going to have to build a better clubhouse down there and things of that nature. That may not necessarily be great for my return but in the overall scheme of things, I’m hoping, it’ll turn out to be one of the most beautiful golf courses in country New South Wales.
Kevin: If that was your worst deal, what’s your best one?
Charles: Buying Century 21 Australia, that would be when you look at it from that perspective.
Kevin: Best property deal.
Charles: I think buying my family home is my best deal. Again, this brings into play not just a growth in asset or capital gain. It’s very hard to put your own property on a balance sheet because if you sell it, you have to go and move somewhere else. But there comes a time in people’s lives where if they buy a home and a decent home and look after it, they will probably sell it and scale down. The better your property now, the more capital growth you can have tax-free down the track.
My property, I bought 31 years ago, the house I’m in now – just almost 32 years; my daughter was just a few months old when I moved in. I paid money for it that people thought was ridiculous, but I saw something in that property. Today, my home sits in suburban Glenbrook, Lower Blue Mountains – and I mean suburban. It’s a building block area. My house sits on five 800-square meter blocks in suburbia. Realistically, when I downsize in the future or do something else, there is a potential massive upside, capital gain-free.
Kevin: You could almost put a golf course on there – but you’ve already got one.
Charles: I’d upset my neighbors if I start chipping golf balls very badly, Kevin.
Kevin: Help me now with a bit of advice for property investors. How do they go about picking the best suburb to invest in, Charles?
Charles: That’s an easy one. That’s probably how I learned to buy property. The first property I brought was in an area that most people wouldn’t buy. It was one of those areas where people talk badly about. There’s plenty of suburbs across Australia where you hear a lot of negative news about.
I remember a property in Mount Druitt – which was considered one of those down-market areas – selling last year for $1 million. It broke through the million-dollar barrier. Just recently, a $1.5 million sale in Sunnybank.
Kevin: Is this Sunnybank in Brisbane?
Charles: Yes. Now, you go backwards to Sunnybank ten years ago or maybe even less.
People have this tendency to follow the hot suburbs, and my advice is that’s the last place you go. My advice is to buy properties in between the hot suburbs, in between them, where the postcode may not be exactly a hot suburb, but it doesn’t take long for gentrification or the process of expansion to take place in suburbs to make what seems like an average suburb in between two good suburbs become a great suburb.
Kevin: Yes. Good advice. Tell me, would you invest in property outside of Australia?
Charles: No. I say that only because I don’t have total control over my property investments but if you’re in the same country, you have some control. You’re aware of what’s going on in that culture. You’re aware of what’s going on in that government. You have a fighting chance to move a property on if you need to.
Changing laws especially in countries that don’t have the same structure that we have of government here, the same Torrens title, of the same unique ownership of property that we have in this country would scare me.
We don’t have title insurance in Australia because our title system is so young. But anywhere around the world you go and buy real estate, in most cases, you need title insurance because you don’t know somebody’s going to turn up from three generations ago and claim ownership of that property.
I think I would stay very much in Australia, and I think all capital cities in Australia will always have potential. They’ll always have their ups and down cycles but they’ll always have potential for growth.
Kevin: Tell me, Charles, is this a good time to be buying property to renovate and flip?
Charles: No, because it’s too hard to buy a property to start with in some areas. It’s too difficult to even get into the market place in some areas. Some people are buying properties to knock down, to rebuild, let alone renovate, and that’s what you’re competing against right now in most places. If there’s a shortage of stock in certain areas and an average home that you could maybe renovate, people are buying them to knock the house down, Kevin.
Kevin: Charles, great talking to you, mate. Thank you very much.
Charles: Thank you very much.
Kevin: I admire your work. Every time we see a Century 21 sign, we’ll think of you, Charles.
Charles: Good on you, my boy. Thanks for the opportunity.