02 Jul 002 – Creating a Portfolio of 30 Properties with Keiran Foster
In episode two we have Keiran Foster telling us about best practices when creating a portfolio of 30 properties and developing a massive $1BN.
Keiran has worked for some of the biggest companies in property development in Australia and personally owns over 30 properties himself which he has built from the ground up.
In this episode we’re going to cover:
- Mentoring and the importance of mentors, even for property portfolios, it’s important to have mentors.
- Knowing your strengths and weaknesses.
- Working your own connections, know the power of your contact list.
What has been the scariest thing you’ve ever done?
Not buy a present for Valentines Day on the weekend hah! I guess I’ve kept the expectations pretty low over the past few years anyway…
I’m a 35-year-old living in Brisbane and I’ve been in the property industry ever since I finished school. I worked my way through a career in construction and development it’s all I’ve really known. For me, it’s one of the most rewarding jobs when you actually get to build an investment portfolio – it’s a rewarding industry to be in.
How did you start working for yourself?
A couple of key things to get to working for myself was my mentors. When I say mentors, I mean bosses I worked for in large companies. It was always a dream for me to work for myself and something that happened me sooner rather than later. I was working in three big business and those mentors taught me all facets of the construction and development industry which fast tracked me and didn’t pigeon-hole me into one area. To get that exposure at such a young age really helped my experience.
Finding a mentor, how did you set that up?
I was lucky that in the roles that I had, had some good people there. You never know until you’re in a role who is the right person to be mentored by. There was only one that I chased and it was probably the one that didn’t work out because it was just before the GFC. While I was working with a lot of strong people there was obviously a lot of bad behaviour too, which you could say was my biggest learning curve – seeing how people behave in different markets.
What are some tips for investors when it comes to management?
Know your strengths and weaknesses. Property and development is a bit of an ego-driven industry and the ones that excel know their weakness and get assistance. I have spoken to people who think they know all parts of the industry and they usually come unstuck at a certain time. Mine would be that I know a little bit about most things but I’m not an expert. So I surround myself with people who can help with my goals and I’m happy to pay for that service too.
With the internet now, there’s a lot of information, how do you find those people?
It’s about working your connections, I always ask people “What are you up to at the moment, who is your architect or builder? Are you enjoying working with them?”. I haven’t used Google much to source people because you then need to say can you send me through references that would speak highly of you? Finding someone you don’t know and using them straight off the bat can be risky. Australia is a pretty small market, though, so it’s not too hard to find reference points and check .
What are two or three key points to look for when picking a suburb?
Previously, I had done some work in regional, and if you don’t have to go regional, don’t do it! It has so many other factors against it. When the going is good, it’s incredible but when it’s bad, it’s really hard.
If you look at the last 20 to 30 years, at an average yield on a residential property, you might be looking somewhere between 4 – 5 % as gross yield. So if someone’s bringing an average rental property and it’s 8 – 9% there’s a reason why it’s that high. It’s obviously riskier.
Usually, it’s too good to be true, it can last for a little while but it can end in tears. If you don’t have to go regional, don’t, unless you live in that area and have an intimate knowledge and know what makes that area tick.
What was your first property that helped you get into property?
The house I grew up in Brisbane.
My Dad had bought the house next door and my Grandma lived there for many years. We were in a nice suburb but not in the best part of the suburb. The old worst house best neighbourhood scenario. Then the house on the other side of the road went for sale, I was 25 and had saved some money and was keen to get into the property market. I could see the development side having three houses side by side would be attractive in the future. So my dad, my sister and I decided to buy it at auction, which I bid at – it was a bit scary! I had no idea and just knew how much I wanted to pay, put in a few high bids and knocked a few people out.
We bought it to rent with a long-term view, we ended up fixing it up for 6 months with no income, bad idea!
When you’re buying an investment property you need to get an income from it straight away. Finally, we rented it until 2007 when the market in Australia was pretty warm, and then sold it.
We see people often buying houses and over capitalising, if you’re buying a house to rent what’s the limit you think people should spend on it?
No matter the state of the property, there’s always someone who will rent it. Look at what the median rental price in the area and what your property needs in order to get to that range.
Now there are a lot of cheap ways to renovate, like flatpack kitchens to make your place look better, it’s also about the speed you can do it in. It’s not worth spending a little bit of money but then taking six months to do it. There’s no use standing out but also no use presenting it poorly so you don’t get much back from it.
It’s hard to say, maybe $20k – $25k to get you there? Less is more, there are some really good ideas you can come up with now to make the houses presentable. But don’t go over the top.
Keep it simple, a bit of paint and a touch-up. Focus on the median rental price and aim for that standard.
What’s some advice you’d give to yourself back when you first bought your first house?
Talk to people! Never be afraid to ask someone’s opinion, particularly someone who has been there before. Ask them what mistakes they’ve made, that’s where the real learning comes from. They might only have one point you take away from it, but it’s really important.
Like my story of my first home in 2005, I would not spend six months fixing it up again. If I had asked someone they might have told me that too.
Also, if a deal is too good to be true, it probably is. Property these days is very well picked over, so it’s not like you will find an absolute bargain, it’s about finding what’s good for you at the time and what’s a good deal to you. Do your research, others might not always agree, but if it’s in line with what you’re looking for, that’s all the matters.
Four key takeaway points:
- Pick your mentors and don’t be afraid to ask them to mentor you.
- Knowing your strengths and more importantly, your weaknesses, don’t be afraid to leverage other peoples skills.
- Work your connections, you have a whole database of people out there that you already know. Just ask people about their experiences and you’ve got the strength of the network there.
- Keiran’s first property story really resonated with us – stick to what you know! It might look good on paper, like regional areas, but over time it can unravel. It’s a slow and steady philosophy.