05 Oct Recovering from misguided advice – Miriam Sandkuhler
This week, my feature guest is Miriam Sandkuhler from Property Mavens. With a background in the financial services industry, Miriam was interested in property from a young age. Starting at 23, she began building her own portfolio, but some misguided ‘advice’ from selling agents led to some very costly mistakes and this experience contributed to her becoming passionate about the advocacy side of the property industry, and ultimately led to her starting Property Mavens.
I discuss that journey with Miriam.
Kevin: We’re going to go on a bit of a personal journey with my next guest and talk about her experiences with property because we learn so much from doing that, but as well as that, what Miriam Sandkuhler from Property Mavens has learned along the way from working with the number of people she works with.
Miriam, welcome to the show. Thank you for your time.
Miriam: Hi Kevin. You’re very welcome. Thanks for having me
Kevin: Let’s talk about you and your personal journey. When did property become such an important thing to you?
Miriam: For me, it would have been about 26 years ago.
Kevin: Come on, you’re not even that old.
Miriam: Thank you. I was quite young and actually looking to purchase my first property. I was really venturing into a marketplace where I had no mentors or advisors on whom I could lean to help me go through that process. As such, I learned some really tough life lessons along the way.
Kevin: Was it because there weren’t many mentors around in those days?
Miriam: Absolutely. Buyer advocacy didn’t exist as a service to protect and educate the buyer. The market for decades – as we know – has been run by real estate agents, where they’ve educated consumers how to buy the property that they want to sell them in the way they want them to buy it. So it’s been heavily influenced by one side of the camp.
Back then, there was certainly no one representing the buyer who was in a position to advise me, and I didn’t have a family background where I could fall back on anyone there, either.
Kevin: Yes. Well, that changed, didn’t it, about 15 or 20 odd years ago when the Internet came along? That changed everything.
Miriam: Yes, definitely. And certainly more so in the last probably five to eight years in particular with buyer advocacy around the country. That’s been a bit of a slow, steady increase, but more and more, there are more licensed agents out there. And there are also people who are unlicensed and are probably operating illegally doing it, as well, so you have to be very careful who you engage. But yes, they’re slowly leveling the playing field.
Kevin: Yes, we’ll talk about that in our chat, as well. Tell me about your first purchase. Where was that and how successful was it?
Miriam: My first purchase was in St. Kilda. I bought a little one bedroom apartment off Grey Street, which was a bit of a seedy area at the time, and it was in a company share structure. Back then, I was quite fortunate; I had a fairly substantial deposit and getting some finance wasn’t an issue for me for that particular property type, whereas nowadays, people would have much more of a challenge.
At the time, I was tossing up between a house that needed some renovation in Port Melbourne on a decent chunk of land or a little apartment that was freshly refurbished but in the heart of St. Kilda. I went with the apartment, not understanding the concept of land value, and that was my first investment.
Kevin: That property type in a company like, it probably would have looked very attractive because of the price, as well.
Miriam: The price back then, we’re talking $112,000 for the apartment and what would have roughly been $130,000 for the house in Port Melbourne. The apartment nowadays with the oversupply that’s happened in St. Kilda would have dropped back in price, I’d roughly say, to maybe the $500,000 mark, whereas the house in Port Melbourne would easily be around that $900,000 to $1 million mark.
Again, it was just not understanding the dynamics of what to look for when investing, and I was a bit scared. I didn’t like the idea of taking on a renovation. I knew nothing about it. So I went for the easy option.
Kevin: And do you still own that property, the one in St. Kilda?
Miriam: No. I managed to get rid of that a couple of years later. I used that money to invest in what I would call an investment-grade property in West St. Kilda, and then one of the biggest mistakes I made later on is I took some free advice from a friend of mine who was a selling agent who instead of convincing me to keep it because it was a good asset and I should have bought my ex-partner out, he convinced me to sell it and he was going to put me in something better, which of course didn’t transpire. And here I am today talking to you professionally as a buyer’s agent.
Kevin: That’s the value of free advice, isn’t it?
Miriam: Yes. You make big mistakes. I had a couple of goes at it, again taking the wrong advice from the wrong people who had their own vested interests. That’s probably one of the toughest lessons: free advice often isn’t good advice and it is biased, and you ultimately do pay a price down the track, and in my case, poor asset performance or buying the right property but then under poor advice, selling it.
Kevin: Of course, you learn those lessons along the way. That sale that you were talked into there, is that what prompted you to start Property Mavens?
Miriam: Yes, it wasn’t actually long after that. Probably maybe five years later, I ended up getting into real estate sales. I had a financial services background, so I sold what was called managed investment real estate.
Then from there I got into buyer advocacy and actually working for the consumer, because I learnt very quickly that the nature of what I was selling didn’t perform like all the marketing materials and product disclosure statements suggested. I did more research and got a better understanding of the dynamics and the fundamentals of what enables property to grow in value and what differentiates them.
Then a few years later, I set up my own business – Property Mavens – and then not long after that wrote my bestselling book Property Prosperity as a way to educate consumers on how to go about buying property and what to look for, what to be wary of, the questions to ask, who to trust, who to maybe not trust, and how to go about investing safely and strategically.
Kevin: The book Property Prosperity, have you been tempted to write a second one or an update of that one?
Miriam: Funny you should say that; I’m actually looking at doing that right now as we speak. I’m in the process of mapping out – taking some specific content out of that and expanding it. Whereas Property Prosperity was designed really to help people safely and strategically buy property, this next book will be drilling down to some of the more DIY details of how to actually go about aspects of it.
Kevin: So you’re taking it to another level in that case?
Miriam: Yes, definitely.
Kevin: Tell me about Property Mavens. Who is your ideal client?
Miriam: Generally, I’m working with people between 35 and 50. They often want to invest. It might be their first investment property, or it might be their second or third. Often I’ll have financial planners and accountants refer their clients to me for self-managed super fund investing, which is far more complex investing in property in a super fund than outside of it. And they have anything from budgets between $500,000 and $1.5 million.
I’ll sit down with them and help them develop investment strategies, and then I’ll go into the marketplace and source and negotiate on that property for them.
Kevin: What’s the most common question they ask you when they first come to you?
Miriam: It’s not so much a question; it’s really the position that they’re in. They don’t know what to buy, where to buy it, or how to go about it. There’s so much conflicting information in the marketplace, and it’s conflicting because people have their own agendas as to what they’re trying to sell. People are selling strategies, and often those strategies lead to a product or a property that they’re trying to sell you as part of that particular strategy.
It’s generally confusion, and they need help and they need someone who knows what they’re doing and understands growth drivers and understands research and negotiation and pricing, because underquoting is still a big problem in Victoria. That’s where they’re seeking my assistance and I’m able to go out and get them investment-grade property.
Kevin: What’s the most common mistake you see investors make?
Miriam: Definitely, I think the free advice thing. They attend seminars, they go to coaching organizations or investment clubs and they become part of a group, and there’s a bit of a “Let’s all do this together” motivational component to it and they get sucked down that rabbit hole. But inevitably they’re educated to often buy the property that those real estate agents or property spruikers or developers actually want to sell them.
Again, it’s the free advice and not understanding that it’s biased. It can often be detrimental if they don’t get independent advice or do their own independent research.
Kevin: What sort of mentors should people be looking for, and when should the alarm bells go off?
Miriam: I think they should be wary from the beginning. They always want to get their own independent solicitors to look over contracts. They always want to get advice from their accountant or their financial planner first around structuring and what entity you buy it in.
There are a lot of these self-managed super fund one-stop shops out there that are putting people in super funds who just shouldn’t be, so always seek advice independently of whoever is trying to promote a particular property or structure to you because in a lot of instances, they’re not allowed to legally give that financial advice, either.
Definitely you want your independent building and pest inspectors, you want to obviously engage your own property managers, as well, but if you need help with some element of the buying process, whether it’s just bidding at auction or negotiation side or assessing if it’s a good property, then that’s when you can bring in a buyer’s agent, as well.
Kevin: You mentioned earlier that the first property you purchased was that apartment in St. Kilda. Would you buy apartments, or are you all about house and land?
Miriam: No, it’s not about apartments or house and land; it’s about buying for land value as a percentage of the purchase price. Regardless of what the actual property type is, I’m always looking to buy 50% to 70% land value. That way, it’s the land that goes up in value, not the building. That way, there’s potential to manufacture equity by doing a cosmetic renovation or an update, usually because the property is a bit older, and that gives you the best opportunity to get the best growth and to maximize your return on that property.
Kevin: Let’s have a look at regional and cap city markets now. The regional markets have had a bit of a caning. We’re hearing some bad stories around Australia about some of those regional markets. Do you steer clear of those, or are there exceptions?
Miriam: Yes, there are exceptions. I do buy in regional markets, and I’m always looking for the growth drivers within that particular area. I have some minimums. They need to be a regional center that has a minimum population of 90,000. There needs to be employment opportunities there. There needs to be fantastic public transport.
In the case of Victoria, if I’m looking in and around somewhere like Geelong or Ballarat, you obviously have to have easy access to Melbourne and usually within an hour on the train to Melbourne because that’s a source of employment for a lot of people.
Then you’re looking at affordability and you’re looking at local amenities, as well – schools, shopping, education, hospitals, those sorts of things.
If it ticks a number of boxes, then absolutely I will buy there. And it also depends on a client’s strategy. If they have a cash-flow strategy versus a capital-growth strategy or if they only have $350,000 to spend, then those regional centers may afford them to get into the market and get an income-producing property but not compromising too much on capital growth at the same time.
Kevin: Do you suggest people get their feet on the ground, physically have a look at the property, or can they buy it sight unseen?
Miriam: Never buy a property sight unseen ever. I’ve done enough inspections of enough properties to absolutely without doubt never recommend anyone do that. That is a massive risk, and why would you do that when you’re spending hundreds of thousands of dollars?
Kevin: Okay. Thank you for answering that one so succinctly.
Let me ask you then a question about first-home buyers. What advice would you give – or maybe you are giving it to – your kids, or for someone who has got children about getting into property? What advice would you give them?
Miriam: That’s pretty broad, Kevin. Save as much as you possibly can as quickly as possible and be as strategic as you can. If you need to partner up with a friend or family member to get into the market, then consider that, but make sure you have a partnership agreement in place that explains what’s going to happen if and when you decide to split and go your separate ways down the track.
I would definitely look at getting into the market at a price point that will give you a good asset, and so if someone can’t afford to buy their own home at $600,000 but they have enough to buy a good little cash-flow property with capital growth at $300,000 or $350,000, then consider those options because it’s more important to be in the market and benefit from income and capital growth than not be in the market at all.
There are always options available; you just have to be flexible. I don’t know about you, but I know I grew up and I didn’t have a new car until I was in my 30s and I had second-hand furniture until I was in my 30s. So it’s about sacrifice, and if you’re not prepared to sacrifice, then I guess you’re going to miss out.
Kevin: You mentioned there about going into a partnership with people to get into property. That’s a great piece of advice you gave, too, about the entry agreement: make sure that that’s in place. You always have to plan for your exit.
Miriam: Absolutely. It’s like business or marriage: it could all turn to muck at some point in time, and it’s easier to have that split agreement arranged at the beginning rather than down the track when there’s emotion involved.
The other thing, too, if you are going to partner up with someone, whether it’s just to buy a little asset – not so much “set and forget – that’s going to sit there and bubble away or if it’s going to be a development site or whatever the case may be, you want to make sure that your risk profiles are aligned. I you’re all going to get into developing, you all need to have the same risk profile. That way you’re all going to be able to equally sleep at night.
Where I find challenges is where someone has a low risk profile and the other person has a high-risk profile, and one person is constantly distressed because they’re investing in a strategy that doesn’t match their risk profile. That’s the first thing.
Then you want to look at risk appetite. You might want to do one whereas the other person might want to buy three or four or five properties. They are the sorts of things you want to talk about up front.
And as I said, if you do actually buy a property and before you do, you want your partnership agreement in place as to what’s going to happen if one of you needs to sell, has to sell, wants to sell – how you’re going to go about that and what the terms of that agreement are going to be.
Kevin: You said that about “set and forget.” There is a difference between that and the “buy and hold” strategy. Do you buy and hold, or are you a flipper?
Miriam: No, I’m not a flipper. I’m a “buy and hold” girl. Property is very much something that historically has grown in value substantially over time, and so you do need to give yourself time for a property to increase in value. Those people who flip usually have to follow a property cycle, and they have to be very well educated around where the markets and cycles are because that’s quite a risky strategy. So there is a difference between the two.
Kevin: Set and forget – there is a difference between that and buy and hold. If you’re buying and holding – which you are – how often do you reassess your portfolio?
Miriam: Personally, I look at it every year. I don’t necessarily feel that properties are all set and forget. The reason is that markets change and growth drivers change, government policy changes, local council planning changes, and with each of those changes, they can work for you or they can work against you.
If you buy a property and think, “Well, I don’t need to worry about it for 20 years,” and then after that 20-year period, you realize you’ve not made any money, that’s usually a consequence of not having kept an eye on it, not doing a regular review, and not understanding the growth drivers that will impact its ability to grow or maybe not grow in value.
Kevin: What’s the worst investment you’ve ever made, or have you already told us about it?
Miriam: No, my worst investment was that I participated in buying some managed investment scheme real estate, which was a holiday or resort style property attached to a resort. Probably one of the higher risk things that you can do and also with very limited resale opportunity.
It was after that investment that I went, “Yes, hang on. This isn’t working. What’s going on?” And I got into learning a lot more, getting some more qualifications, and then going into the buyer advocacy side and specializing in buying clients high-performing investment-grade property.
Kevin: What’s the best investment you’ve made?
Miriam: Gosh. I’d probably say my own home actually at the moment. I bought incredibly well. I bought off market, I bought below market value, I had every clause under the sun in my favor, and it resulted in me getting a $20,000 rebate from the vendor at settlement. It’s in an extremely highly sought-after area with a ridiculously high cost-per-square-meter land value, and it’s doing incredibly well.
Kevin: Is it one you’ll continue to live in as a principal place of residence, or will it become an investment, do you think?
Miriam: No, I’ll hold onto it until I’m ready to sell and upgrade. Providing I can stay in the area, then I’ll do that at that point in time. But at the moment, I’m just giving it a bit of a refresh, doing some landscaping, doing a bit on the interiors, and smartening it up.
Kevin: Miriam, it’s been great talking to you. Thank you for spending so much time with us. The book Property Prosperity is out now. What’s the new book going to be called, do you know? Have you got a name for it?
Miriam: I’m still testing names, so I haven’t quite got there yet. I’m literally just at the stage where I’m about to start writing it. It’s a little bit soon, but as soon as I know, you’ll be the first person to know.
Kevin: Thank you, and we’d love to hear about it, so you let us know when it’s ready.
Miriam: Will do. Thanks so much, Kevin.
Kevin: It’s lovely talking to you.
Miriam Sandkuhler from Property Mavens has been my guest, we’ll catch up with Miriam when she’s written her book, maybe even sooner.
Thanks, Miriam. Talk to you again soon.
Miriam: Thanks, Kevin. Bye.