22 Feb Chris Gray’s investment strategy
In today’s show Chris Gray, the host of Your Property Empire on Sky TV, tells us that his strategy is boring but beautiful. He says that there is a big downside for many Australians who would follow his example.
Kevin: It seems to be every week we hear another story about someone tipping that the Australian market is going to crash, just like what happened in America. Let’s get the lowdown on this. I’m going to talk this time to Chris Gray from Your Empire and also the host of Your Property Empire on Sky TV.
Chris, thanks for your time.
Chris: My pleasure.
Kevin: You probably hear this a lot too, don’t you, about the Australian market’s bound to crash? What’s your view?
Chris: We hear a dozen different stories all the time, depending on what part of the cycle we are and who needs to sell a newspaper, a magazine, a book, or a TV show. That’s the thing, unfortunately, with the media. Even though I’m in the media all the time, I actually tell a lot of the viewers, “Don’t listen to the media,” because look, everyone has something to sell, and so you do have to read into these things.
But, look, we’ve been hearing these stories for six or seven years and most of the commentators who know what they’re talking about are saying the main thing is our banks are really robust. You can’t just walk away from a mortgage and hand your keys over the desks; you’re actually liable for it. Simple things like that stops most people from just making silly decisions and taking more speculative property investments.
Kevin: It is a very sweeping statement, and I think to maybe drill down a little bit further into it as well, Chris, there are different markets around Australia and some seem to do better than others. Why is that?
Chris: I think it’s just a mixture of both the geographical location and the price points. A lot of property investors buy close to the main cities where there’s lots of industry supporting it and they buy average priced homes, and they’re typically low risk. Whereas if you buy in areas, say like, mining towns or tourist towns, and you’re buying at, say, a million dollars, when the average property price is $500,000, the chances are it’s going to be more speculative and you’re going to get into trouble.
I’m not really into the shares, but I think a shares equivalent is probably buying a bank stock or a BHP that is seen as nice and consistent and solid versus punting on a dot-com that has no profits and they’re just rating it on a bit of turnover or it’s something really cool.
Kevin: That is a good comparison. Does property investing change as demographics change, as transportation gets better and people are therefore more willing to live further out of these inner city areas, Chris?
Chris: Again, it depends on your strategy. My one I just call a blue-chip long-term buy and hold. I wrote my Empire book in 2008, and each year, we produce about 10,000 hard copies and God knows how many soft copies, but I literally have not changed a word in those seven or eight years. We’ve just reproduced it again. The only thing we’ve changed in there is the examples we used in 2008 were half a million dollars for an average property. Now we’ve changed them to a million, which is property doubling every seven or ten years, which often we talk about.
But not a single other word has been changed in the book, which goes to show that we’ve had GFCs, we’ve had high interest rates, we’ve had low interest rates, we’ve had a whole bunch of things about boom and bust, but not a single word of that strategy has changed. That goes for a lot of other people’s strategies, I think.
Kevin: There are different strategies, aren’t there? Let’s have a look at your strategy. How would you describe it in broad terms?
Chris: It’s boring, but slow and steady wins the race. I buy a property, I wait for 10 to 30 years, each year I look at it, and if it’s risen in value, I pull the equity out and keep repeating. It really is not something for the headlines, so I haven’t doubled my money overnight, I haven’t made a fortune, I haven’t gone from being poor and destitute to being a millionaire overnight, but I’ve consistently made money over the last 22 years. It doesn’t grow every year, but most years it does kind of trickle along and generally it doesn’t go down.
But the downside of that is, for a lot of Australians, my average buy price now is a million bucks. I’m buying in the Coogees, the Bondis, the Kirribillis in Sydney, which most people can’t afford and the negative gearing on that, because I’m only getting about 4% or 4.5% gross rent or 3% or 3.5% net rent, my negative gearing could be minus $10,000 to $20,000 per property.
The average income earner generally can’t afford to hold those and service those with the banks, but I just saw that there’s a lot of Australians with higher incomes who didn’t want to punt. As you can tell, I’m not from Australia, so if you mention most towns around Australia, every Aussie will know what they mean, but I don’t. But I understand the blue chips.
I think sometimes your strategy has got to be dependent on your income, your attitude toward risk, but also what you’d like and what people you hang around.
Kevin: How often do you assess your portfolio, and what do you look for, Chris?
Chris: I don’t really assess it or change it. Most of my knowledge and wealth was built from 22 to 31, and it was all self taught. At 31, I then started going to seminars and reading books and watching TV programs and all that kind of stuff. I’d always look at everyone else’s strategy and see if I can learn from it, see if I changed things, and I dabbled here and there, but pretty much over the last five or six years, I’m not going to say I know everything, but I haven’t heard too many new things that would detract me from what I’m doing.
After a certain point, then you do still keep your eye on things, but I think if something works, carry on repeating it. I know a lot of other more successful investors than me who are buying in regional towns and doing different things and I think, “Hey, that cool. If that works for you, you understand it, that’s what you want to do, that’s where you hang out and you enjoy that stuff, go and do it and maybe make $50 or $100 million and good on you.”
But I’m just comfortable doing what I do because it suites my personality and the hours I want to put in and things like that.
Kevin: Always glad talking to you, Chris Gray, from Your Empire and also host of Your Property Empire on Sky TV.
Chris, thank you so much for your time.
Chris: Thanks for having me.