John Pidgeon: 00:01 When I say away they go, there’s two things that stop people from buying property. The ability to lend or have a deposit to go and put down, and their psychology. Now, usually the second one is the most prohibiting, as in, “I’ve got some fear or some roadblocks that I can’t overcome and I haven’t for the last 10 years overcome them, so I’ve done nothing.”
Fraser Jack: 00:27 Hello and welcome to the Goals Based Advice Podcast, where I have conversations with pioneers of the new world of financial advice. Thanks for tuning in today and a big shout out to all the feedback and comments I receive, like the LinkedIn message I received this week from people like Kiersten James. Thank you so much, I do love getting your feedback. I’d also like to thank our supporting partner, Advice Intelligence, for powering this podcast.
Fraser Jack: 00:51 In this episode, I chat with property coach, John Pidgeon from Solvere Wealth in the Central Coast of New South Wales. John works with his clients to coach, mentor, and advise on all things property, focusing on helping them achieve their goals. Now, I get that many financial planners or advisors may see property consultants as either competition or someone who may not be aligned to the advice that they’re providing. However, in this episode I do encourage you to open your mind and think about how financial planning, coaching, or external consultants like John, can work together.
Fraser Jack: 01:27 If you want to continue getting insights from John about property you should also check out his new podcast, My Millennial Money Property. Let’s jump into my chat with John right now. Welcome to the show, John.
John Pidgeon: 01:42 Thank you for having me, Fraser.
Fraser Jack: 01:44 Well, I’m used to hearing you on a different podcast. It’s really good to have you on ours for a change.
John Pidgeon: 01:49 Yeah, yeah. It’s good to mix it up a bit, isn’t it?
Fraser Jack: 01:51 Yeah.
John Pidgeon: 01:53 Yeah, coming from my office to yours, and not Glen’s podcast room.
Fraser Jack: 01:58 Yeah, it’s a little bit different. Do you want to give the listeners a bit of an overview of just yourself and what you’re doing at the moment?
John Pidgeon: 02:04 Sure. Yeah, for the listeners, I run a property and finance coaching business called Solvere. We specialize in, I suppose we’re an independent conduit for people that want to take action with property, and residential property as a focus. Whether that be, or mostly investment property, but some may have roadblocks finding their own principal place of residence so we assist with that. But we, yeah essentially hold their hand through the process, right through to the advanced client that wants to take on the world with some mini developments, so we run feasibility studies with them, and holding their hand through that process as well.
John Pidgeon: 02:54 More importantly, overall we’re educating and coaching someone through so that my aim is to out coach myself from that position. I don’t want them long term, that’s not my business model, so we run two year programs essentially, for most of that in part, and that’s pretty much how we roll.
Fraser Jack: 03:17 Fair enough. How did you get started or how did you end up doing that?
John Pidgeon: 03:24 Yeah, good question. Property investing has always been a passion of mine right from university, I think. I bought my first property when I was straight out of university, 21 I think, and had some pretty good results in the first couple of years and I thought, “Oh wow, this is easy.” Soon realized that it wasn’t that easy and over time, through some successes and some failures, I found out that obviously a lot of research and knowledge needs to be put into creating a better outcome than most.
John Pidgeon: 04:02 That’s when yeah, essentially the last 6-7 years I started to coach others to do the same, based on the back of my experiences and what life has taught me in the property investing world.
Fraser Jack: 04:16 So you’ve always pretty much doing your own thing, or have you ever worked for anyone else or done anything like that?
John Pidgeon: 04:23 Look, I’ve always been property investing, so that’s always been at the back of my mind. Or, not at the back of my mind, mostly at the forefront of my mind, but I came out of university as a qualified phys ed teacher. Had a passion for sport and coaching in general, so I did that for five years, and then ran my own personal training business. All through that time, as I mentioned, continuing to upskill in the property investing space and continuing to invest.
John Pidgeon: 04:54 When I sold my personal training business probably nearly 10 years ago now, I always asked myself, “Well, what am I passionate about doing?” It was either sport, AFL coaching, or property. So I thought, “Well, how can I do this thing full time and jump out of bed each day and love what you do?” Essentially that’s when I designed my own business. I did work for a coaching firm for a while, but then rolled out into my own.
Fraser Jack: 05:28 Wow, so it’s pretty much been teaching or coaching all the way through, and whether it’s been sport or property, your two passions.
John Pidgeon: 05:37 Yeah, and they go very much hand-in-hand. When I sit down and goal set with clients, and look holistically at their situation, I think it all rolls into one another. Whether that’s your own health, whether that be your physical or mental, whether that be your financial wealth, it’s all very cross-sectional. I think it was an easy transition for me. I had that, I suppose the ability to be able to coach and mentor people quite comfortably, which is half the battle I think, and understanding someone’s situation and applying it.
Fraser Jack: 06:12 Yeah, fantastic. Now, I’m just thinking, there’s going to be a lot of financial advisors listening to this and in this conversation thinking, how’s property coaching relevant to them? Essentially, it’s really to me, I see it, it’s a way that you’re helping a client focus on their goals, helping them focus on the things that they need to do to achieve their goals, and using that coaching and then the outcome as an investment product, if you like, which is very similar to advice. It’s just a very different industry, so they sort of work, they could be very similar in a way.
John Pidgeon: 06:58 Yeah, that’s right. We do get that quite a bit. Some see us as a friend, some see us as a foe. Glenn and I, as you know, work very closely together on a podcast, separate. He’s a financial advisor and I’m the property coach/expert. Outside of that, he was wanting to help his clients that wanted to purchase property and didn’t know where to go. But he wanted to be able to send them to someone that he could rely on and trust, I suppose, so that’s where that synergy worked really well.
John Pidgeon: 07:36 There is a little bit of crossover, you’re right. I think the goal setting and maybe the cash flow management and [inaudible 00:07:43] future financial outcomes, but essentially where he hit the roadblock was, “Well, property’s not my expertise, I don’t live and breathe it. Where is someone that can help this client with that, in that particular space?” That’s where it works.
Fraser Jack: 08:02 Yeah. Now, you mentioned success and failures and that’s obviously how you gain experience. The first one worked out well, you’ve had some failures. What were some of the great learnings you [inaudible 00:08:14] along the way?
John Pidgeon: 08:16 Yeah, look, I think the biggest ... I mean, and they weren’t groundbreaking failures, like it didn’t sit me on my bum and take me 20 years to recover from, but I think when I look back at the performance of all of my investments in the property space, the biggest mistake I made was early on, I got some growth from a property in a certain region, and without any real knowledge or research said, “Well, why don’t I buy a second property in that region?”
John Pidgeon: 08:48 It’s the biggest pitfall I see with my clients today that come and see me. “Oh, I’ve got two properties in this area. I bought this one at the right time, I bought this one at the wrong time.” It was purely out of the first one’s performance driving that emotional desire to say, “Yeah, I’m going to get the same outcome from this second property.”
Fraser Jack: 09:08 Yeah, so this standard diversification conversation.
John Pidgeon: 09:12 That’s right, yeah. It’s a massive positive for diversification, isn’t it? But it’s also a case of not always buying in the areas that you know or the area that you grew up in either.
Fraser Jack: 09:24 Yep. You mentioned a two year program. Do you want to talk us through how you set that up and where you start, and what are the things you go through with that two year program?
John Pidgeon: 09:34 Yeah, sure. Look, when people ask what I do, it is a niche area but I liken it to personal training in the health and fitness space, where we take that person and based on what their needs are in the property space, hold their hand and educate and coach them throughout that two year period. Now, some need handholding more. Some will ask more questions, some will want to meet more, some will want a phone call, email, whatever it may be.
John Pidgeon: 10:04 But essentially it gets them to that end result in two years where they can take reasonable control of their own finances, or at least have the ability to go and do it if they needed to from the education that we’ve given them throughout that two year period in the property and finance space. An example might be understanding how to set their own strategies, so we have an eight point property strategy that we work to, and understanding what’s available to them in the residential space in Australia, and how each strategy might apply to them at different times in their life.
John Pidgeon: 10:44 Are they having kids? Are they married? Are they single? Are they living at home? And what’s their journey going to look like over the short term, but also the long term? And why I set it at two years was I think we get given a lot of information and say, “Right, let’s go and apply this” but two weeks later, something could change in their life that takes them off that course and we’re back to square one again. We like to get in the trenches and see them through a piece of their life where they can make adjustments based on their life scenario.
Fraser Jack: 11:24 Yep. We talked a bit about goals in this scenario, and I mean, I think a lot of people have that goal of one day owning a property or starting a portfolio of investments. How do you help your clients define and really nut down and work out what their goals are?
John Pidgeon: 11:45 Yeah, it’s a good question, Fraser. A lot of clients that come to me haven’t set goals to begin with, and I like to expand it a bit greater and look at their habits. I think if we create habits in our life, whether that be daily, weekly, monthly, I think the goals will take care of themselves. I try to reverse engineer it, and say, “Well, what’s our long term goal or our short term goals in our life?” And all aspects of our life, not just finances. Whether that be health, mental, occupation, whatever, family.
John Pidgeon: 12:22 And then say, “Well, what habits can we set ourselves that are going to keep us on track to achieve that goal?” And I find people relate to that a lot better than just simply saying, “Well, I want to retire in 10 years’ time” and not really have the pieces to the puzzle in between.
Fraser Jack: 12:41 Yeah, habits are a great thing, and obviously bad habits or old habits can be hard to break, and then new habits can be hard to start, and continue. So, how do you go through that? Do you become a bit of an accountability buddy for actions?
John Pidgeon: 12:57 100%, yeah. Look, and most of our, well all of our one on one coaching has a system whereby we’ll always hook in the next meeting point at that meeting time. And we’ll always have action steps as a result. We might meet today, you and I, and we’ll have four action steps that we need to address and overcome, and we’ll also set in our next meeting time.
John Pidgeon: 13:25 The accountability is, “Well, we’re meeting in a week’s time, how are we tracking with those four action steps?” That really, it forces them into action but there’s also the motivation of, “Well, I want to change the course of my life because what I’ve been doing up until now, I’m not satisfied with.” Although there’s the long term goal in mind, it’s never a quick fix, “Let’s get this done in two year’s time.”
Fraser Jack: 13:52 Yeah. I guess a lot of work, is a lot of that work around cash flow and credit history, and making sure that you’ve got a good cash flow, good position to start from?
John Pidgeon: 14:04 Yeah. The foundations are obviously very important, aren’t they? We call the foundations, “Well, have you got your backend in order in terms of your insurances and your wills and estate plan and things like that? And then, what are your goals and what is your cash flow management system?” There’s no way am I going to take you to the property market in six months’ time if you haven’t got any of that in place. It’s a forced habit of theirs to change and they know they have to change it, otherwise we’re not going to buy property, simple as that.
John Pidgeon: 14:37 When we look at, well what I see as the pitfalls for investors, it’s they haven’t got the backend of their life in order before they went and bought, and hoped that it would work itself out. I heard a saying years ago, property works, people don’t. Meaning that well, property will perform for you over time. Sure, you can buy at the right time in the market, but essentially people make the mistakes of either buying at the wrong time, but also selling prematurely or not understanding their cash flow in the first place to be able to handle the yield of the property, as an example.
Fraser Jack: 15:19 Yeah. It certainly can be one of the issues, being for sale, for example, at the wrong time. You work with other professionals then, to look at things like making sure they’ve got their insurances in place, and their estate planning and wills and everything in place?
John Pidgeon: 15:37 Yeah. I went full circle on this. A lot of companies that I’ve seen in the past have their whole in-house of professionals, where their accountant might be under the same roof, along with the mortgage broker, finance advisor, et cetera. I actually went the reverse and wanted to keep my model nice and lean and unique, in the sense that we only do the coaching and we’re the conduit for any independents that they’ve got in their life, whether that be your accountant or your finance advisor, or your mortgage broker or whoever that may be.
John Pidgeon: 16:14 What that does is it allows us to act very independently and they can choose their own team of people, but we’ll help them choose them based on the key questions that they need to be asking. I spoke to a client this morning, it’s like, “I need a new accountant because my old accountant’s moved on from the firm they were with, et cetera. I’ve had them for 20 years, and it’s like where do I start?” Well, here’s 10 key questions to go and ask of accountants in your area, and away you go.
John Pidgeon: 16:45 I think it gives the client education and involvement to know that they’ve got the right person on their team, but also it gains respect from the professional to say, “Well, this client of mine means business because they’re asking some key questions.”
Fraser Jack: 16:59 Yeah, okay. So then you help them get all that in place, get their foundations sorted, and then what’s the next step?
John Pidgeon: 17:14 Yeah, so the next step is basically they’re here to buy property and they want to go and buy property, so away they go. Now, when I say away they go, there’s two things that stop people from buying property. The ability to lend or have a deposit to go and put down, and their psychology. Now, usually the second one is the most prohibiting, as in, “I’ve got some fear or some roadblocks that I can’t overcome and I haven’t for the last 10 years overcome them, so I’ve done nothing.”
John Pidgeon: 17:45 We go on that journey and the way that we overcome those roadblocks is usually through knowledge and education which gives them confidence. I think there’s a lot in the industry that say, “Well okay, here’s a good option. It’s on RealEstate.com. It fits your price point, go and buy it,” without any real research or know-how. It’s more of a structured approach then to say, “Well, let’s set an eight point strategy, gain the knowledge to overcome the fears or the roadblocks” so their psychology is in a position where by the time they start looking on RealEstate.com or off market, or talking to vendors or whoever it may be, their confidence is fantastic, and they’re in a really strong position to buy. They know the reasons behind buying.
Fraser Jack: 18:34 So there’s a big education piece to this then. Is it like teaching around regions and areas and where the growth is going to be?
John Pidgeon: 18:42 Yeah, 100%. Through my experience in coaching athletes and school kids, I think there’s A grade students and there’s those that just float along. It’s no different in this field. Even though they’re grown adults, I think there’ll be some that’ll continue to put the hand up and ask amazing questions that’ll fast track their knowledge, and those that’ll do the bare minimum to get them through to the end result of buying a property.
John Pidgeon: 19:13 Essentially, those ones that are going to ask more questions and drive the level of support they need are going to get on average, a better outcome for their own knowledge. I was talking to someone last week about this, they wanted to have some money put aside for their kids in 10 years’ time, when they turn 18. I said, “Well, that’s well and good, but what’s more important to them? To hand them a check for 10 grand, or to hand them knowledge over the next 10 years so they can go and do this stuff themselves?”
John Pidgeon: 19:52 That’s where the value is, I see, is that they can empower the next generation from what we do with them over the next two years.
Fraser Jack: 20:02 Yeah, it certainly makes sense, isn’t it? Bringing everyone along on the journey and for them to be able to pass that knowledge down to their kids.
John Pidgeon: 20:10 Yeah, for sure.
Fraser Jack: 20:11 Are you doing mostly one on one training coaching, or it can be groups, or?
John Pidgeon: 20:17 Yeah, that’s been our niche, probably the first few years of running the business. As a result of that, it’s branched out into a lot more corporate work, so the CEO of the company or the HR will come and say, “Look, come and give a 90 minute lunch and learn to our staff.” My big motto with that is this is not taught in school, and being a school teacher, or an ex school teacher, I know it isn’t. I speak to year 11 and 12s, I speak to corporate groups. We speak to professional sporting teams, and it’s a real cultural thing, too.
John Pidgeon: 21:00 I think if, I don’t know about you Fraser, but growing up, money wasn’t spoken about at the dinner table. Let’s put it out on the table and let’s share our experiences and all of a sudden, the water cooler conversation at work becomes a little bit more comfortable.
Fraser Jack: 21:19 Yeah, I think that’s exactly right. The taboos that have been around money and the cultural aspects of it, the aspects around not wanting to appear like you’re gloating type things. There’s so many different things that we need to just throw out, don’t we? And just say, “You know what? It’s okay to be different from the next person, we don’t have to compete on this sort of stuff.” How do we generate that conversation to happen more often?
John Pidgeon: 21:51 That’s right. Yeah. It’s amazing, it’s one of my I suppose motivational factors in the corporate world workplace, is to walk out of that room in 90 minutes having heard 10 or 15 different conversations about their own money experiences, and the look on other people’s eyes, it’s like, “Oh wow, they’re sharing their personal experiences here.” That’s only got to be a positive for the culture of the staff, number one, but number two, they can all work this thing together and be motivated by people’s own experiences moving forward.
Fraser Jack: 22:27 Yeah. Do you find that the fear of failure and the fear of admitting failure is a big thing that holds us back? And I guess we get scarred when we make mistakes, and instead of talking about them we hide them and don’t want to tell anyone?
John Pidgeon: 22:40 Yeah, 100%. You’re right. I don’t want to sound as though this is all a podcast about school being no good, but I really see that as a school kid, we’re put into a room with seats and chairs and there’s crosses and ticks against our performance every day. I just think it has scars for everlasting, where if we’re seen to be doing something wrong or not the way that it needs to be done by the teacher or the parent, we’re always condemned to it, and by the point in our life where I’m actually not going to tell anyone about anything, because through fear of feeling as though I’ve failed, or I should be at this point in my life. I’m now 35 and I haven’t got anything against my name, so I’ll put my head in the sand because of all that. I think, yeah, you’re absolutely right.
Fraser Jack: 23:39 Yeah. I think in looking back and regretting, “Oh, I regret that decision,” or you regret not acting on an investment when it came along, and then all of a sudden, you start losing your confidence.
John Pidgeon: 23:50 Yeah, correct. Yep.
Fraser Jack: 23:51 It sounds like a lot of the work you’re doing is really in the headspace as well, with just getting people into a positive, purposeful focus on their goal.
John Pidgeon: 24:04 Yeah, it is. I’m not saying I’m an expert in running life, that’s for sure, but I think when I look at my experiences and the results that I’ve had personally, it’s because of that positive attitude and the ability to can-do versus cannot-do. I do focus heavily on that in our coaching, because I think there’s a lot of areas in our life, especially with the introduction of online, there’s a lot of negative talk around. You can easily be intimidated or put down in and around your circle of influence.
John Pidgeon: 24:42 I think that’s the first part of what we do as a foundation, is well, “Okay, it’s great that you’ve addressed the issue. Now let’s move forward” and if we see it’s not going to be a clear pathway, we’re going to have some obstacles and roadblocks, it’s not retracting back to where we were. It’s about moving left, right, or overcoming them somehow. I think yeah, that’s why I’m so big on habits and relating to our goals, but I also encourage them to read a lot and read a lot of the right stuff.
John Pidgeon: 25:17 Not the tabloids, reading books that empower you and not hold you back. Reading autobiographies from people that have walked the path that you might be going to walk, and massive on that, absolutely.
Fraser Jack: 25:31 Yeah, I like that, too. Filling my head with positive things, rather than drama, which you tend to get if you watch commercial TV. Not a big fan of that.
John Pidgeon: 25:41 Absolutely.
Fraser Jack: 25:43 Now, tell me about your business. Is it just you? You mentioned keeping it lean earlier, but is it just you, or do you have other stuff?
John Pidgeon: 25:49 Yeah, thankfully I’ve fattened it a little bit in the last couple of years, otherwise I would have blown myself up. I’ve got a full time marketing, media manager. She does an amazing job, so everything you see online is courtesy of her. I’ve also got a full time admin person for backend logistics, and I’ve also ... One thing I wanted to do in the beginning was be the sole coach. Because of my high expectations of what the clients needed to see.
John Pidgeon: 26:28 But in saying that, I’m just about to employ a, I call it a graduate I suppose, where I’m going to take them on that journey for the next three to four years, to basically create some sort of mold of the systems that we’ve got, and purely because they’ve got a passion for property and their attitude is second to none.
Fraser Jack: 26:54 Yeah. I was going to say, coaching’s a difficult one, isn’t it? Because you feel like you need to be there and do it, but I guess to scale your business, you really need to work out a way of understanding how you can then get somebody else to do the coaching part, or create a community, or something like that where you’ve almost got graduates coming through to do it for you.
John Pidgeon: 27:14 That’s right. That’s my model that’s going to be enforced going forward, is that graduate model where they’ve got a blank template to be worked with, but in saying that, we’ve got an online academy where someone doesn’t need our actual coaching. They can go on and take on that academy, and get similar education and knowledge through that academy. They just won’t get the actual coaching in person, or online from us.
Fraser Jack: 27:43 Yep. So you don’t have people there doing finance or people there doing the actual property sales themselves?
John Pidgeon: 27:51 No, we don’t. We have spoken about that numerous times. A number of advisors have said that we should be doing it, to I suppose recession proof your business. But at the moment, it’s not on the agenda. That may change down the track, but at this stage, no, we outsource all of that. Definitely we have key relations because I think our clients need to be well and truly looked after in all of those spaces, so we do have key relations that we work with, but having them external to our business means that we can hire and fire without any precedence and also remain independent.
Fraser Jack: 28:35 Yep. If somebody then finds a property, do they tend to find them, or do you tend to find them for them?
John Pidgeon: 28:43 A bit of both. We have a buyer’s agent service as well, but I think it’s probably 50/50. I love it when a client takes on the knowledge and goes and finds a property themselves. I think that’s great satisfaction to be able to see that through, but it may be the second or third property for them that they do that, maybe not the first.
Fraser Jack: 29:07 Okay, so then they’ll go and find it and bring it back, and then you’ll sit down with hem and go through the pros and cons?
John Pidgeon: 29:12 Yeah, correct. Without fine tooth combing every little part of it, hopefully our knowledge and coaching has given them the ability to shortlist four or five, and pull the trigger on one. Yeah, they can be in their own hands.
Fraser Jack: 29:25 So for you it’s really about setting people on a path that they can continue to buy, continue to buy, and just never stop?
John Pidgeon: 29:37 Yeah, correct. I think that’s what I was searching for when I was early 20s, was yeah, I’d made this great win early days and then the next couple were mediocre. Who can I go to? Like, my mortgage broker will get me a loan, my accountant will tell me how much tax refund I get, and maybe what type of property I focus on, my financial advisor will give me a Statement of Advice for general wealth and retirement and estate planning and things like that.
John Pidgeon: 30:06 Where can I go for someone to rebound this off? Because mom or dad didn’t have a knowledge or a thirst for property like I did. My friends weren’t doing it, and if they were, they were biased and it didn’t relate to my situation. I felt there was a real gap there that i needed to overcome personally, which is really why I do it today.
Fraser Jack: 30:33 Yeah. That’s fair enough. You were your own target market, and worked out the things that you really needed and go and build the business around that.
John Pidgeon: 30:41 Yeah, absolutely.
Fraser Jack: 30:43 What do you say to people when they first, or if they’re thinking about coming in, or they’re not sure whether they should talk to a coach, or what sort of tips would you give to people out there thinking about getting a coach? Whether it’s a coach in anything.
John Pidgeon: 30:58 Yeah, look, I’m very big on I suppose getting someone from the outside to look in on your life. And whether that be your health or your financial wealth, I think that not necessarily a third opinion, but it’s easier to make decisions or help someone make a decision when there’s no emotion attached to it. It’s very hard to run your life when you’re emotionally involved in it yourself. I think the more outside assistance you can get through trusted advisors in any part of your life, the better.
John Pidgeon: 31:41 Now, if you think that your life is rolling along okay without them, then fantastic, that’s your decision. However, if you’ve got roadblocks and you continue to see roadblocks, and you’re not able to overcome them, then something needs to change. I think the key part of that is emotion.
Fraser Jack: 32:00 Yeah. It’s a bit of a confronting moment, isn’t it? Recognizing a roadblock and going, “Oh, maybe I don’t have everything together” as you thought you might have, and then to put your hand up and then go, “Well, can somebody help?” It’s a pretty confronting moment for a lot of people.
John Pidgeon: 32:14 Yeah, and you’re never the expert, are you? Well, you shouldn’t see yourself as ever the expert, but I mean, take Ash Barty. She’s just gone to number one in the world and she’s not rolling around thinking, “I don’t need a coach anymore.” She’s actually going to the next level and saying, “I need further assistance to enhance my game even further.” For those who aren’t tennis fans, she’s the number one in the world, and yeah, that example should be applied everywhere, shouldn’t it? That outside influence.
Fraser Jack: 32:47 Yeah, very good. How do you see markets, I guess, at the moment? You don’t want to talk too much about markets, but there’s been a lot of growth in the last few years. It slowed off a bit in different regions and held in others. What sort of things do you see happening over the midterm? Mid, short term?
John Pidgeon: 33:08 Good question. I probably get asked that question every three or four hours, but I think in general, we had some great results from 2013 up to 2017 in the Melbourne and Sydney markets generally. To a lesser extent, Newcastle, Wollongong. In that time, I think we saw, it was unusual to see Sydney and Melbourne go at the same growth rates for that period of time, at the same time.
John Pidgeon: 33:43 What that’s done is I believe it’s turned its attention to more affordable, larger locations. So, for example, your Adelaides, your Canberras, your larger regional towns. I suppose as a result of Melbourne and Sydney having that great growth over the last, 2013 to ‘17 effectively, turning attention to smaller locations, to those two, is a priority, I think. A number of factors, affordability is one, so for investors they can say, “Where can I buy now for 500k? Because five years ago it was all good, but now I can’t buy in either of those locations.”
John Pidgeon: 34:30 Majority of investors come from Melbourne and Sydney, but there’s also that, a little bit of shift in people’s desire to live in an area where they feel as though they’ve got a bit more space. I think that’s where, and I live on the Central Coast of New South, so we’ve seen a massive amount of migration out of Sydney, because people want maybe a simpler lifestyle, crossed with that affordability.
John Pidgeon: 35:00 I think that’s where our focus is in the next three to five years, is as a result of that doubling effect of the property markets in Sydney and Melbourne, it’s made people think, “Well, do I want to have a million dollar mortgage? Can I go and buy somewhere else for half the price?” If that means I commute for a little bit longer, then so be it. Now, the good thing about that is, and I’ll take like Ballarat for example, in Victoria. On a speed train, you’re in the city of Melbourne in an hour from the Ballarat station.
John Pidgeon: 35:37 You can buy property there for 350,000, right? And reasonable property, not just a one bedroom apartment. You can be in your car for an hour in Melbourne and be still only 10k from the CBD. So, when we look at those and people start to realize that, think, “Well, we can have a better lifestyle. I’m only an hour in the traffic anyway, and my mortgage maybe has one less zero on it.”
Fraser Jack: 36:04 Yeah, it’s pretty incredible. What was it that caused that, in your opinion? That huge growth that we saw in just those regions, and why just those regions?
John Pidgeon: 36:15 Look, I think the property market, and I take probably Sydney as my example here, the market in Sydney was reasonably flat from 2009 to 2013. Four years of very little growth in a capital city like that is a little bit unusual. So, there was a tipping point of rent versus buy. Now, so that’s obviously seen, the launch of the prices moving North, but coupled with interest rates starting to reduce, and the supply of people needing properties meant that the growth started to occur naturally in Melbourne and Sydney.
John Pidgeon: 37:06 The hot phase, or we call the boom phase, that always occurs when there’s too many people at an auction or an open home, and the fear of missing out is prevalent with that emotional behavior. That always gives us the extra 5 or 10% in any growth market anyway.
Fraser Jack: 37:24 Yep. Now, just while we’re on that auction phase, we’ve all seen the auction, the shows where they’ve got the people in the person’s ear saying, “Come on, don’t miss out. Don’t miss out on your dream for 5000” and they’re pushing the price up. How do you coach against that sort of stuff?
John Pidgeon: 37:43 Generally my coaching is don’t buy at auction. In saying that, I did it 12 months ago for my owner occupier, so do as I say, not what I do. But nah look, to be honest, can I start by saying auction clearance rates, which people hang their hat on, make up around about 20% of the total properties sold in the country? So, whilst auction clearance rates are an indicator, they’re not the be all and end all of how a market is tracking.
John Pidgeon: 38:15 Auction is a very emotional day, and trust me, I was in it 12 months ago. Now, I suppose from a coaching point of view, we always say, “Look, if you have to buy at auction,” and there should never be a have to, but if you’re adamant on buying this property, you must have a ceiling on your property price. You cannot go a dollar over, because as soon as you go a dollar over, you go 1000 over, you go 10,000 over, and it’s all over.
John Pidgeon: 38:47 I think that’s the number one key rule, is have your price you’re prepared to pay and not a cent more. I think you can stick to that, and you end up paying less than what you’re prepared to go to, then you might think you’ve had an emotional win, but in most cases, you’ve probably paid what the property was worth or maybe even still a bit over.
Fraser Jack: 39:09 Yeah, it comes back to any investment, doesn’t it? You’ve got to make the investment based on logic, not on the emotion.
John Pidgeon: 39:16 Yeah. It’s like a 100 meter sprint. You see everyone else on the start line, and you see them halfway up the track. You see who’s still in the race and who’s not, and the competitive spirit of most Australians say, “Well, I’m not going to let that person beat me.”
Fraser Jack: 39:34 Yeah. Definitely the wrong way to go about it, but it’s the way that the industry tends to want to push people into, isn’t it? They want to get people at auctions so they spend a bit more.
John Pidgeon: 39:45 Yeah, especially in Melbourne. Melbourne’s the auction capital, isn’t it? It’s usually great for the agent and it’s usually great for the vendor, but the person losing out in most cases is the purchaser.
Fraser Jack: 39:58 Yep. Now, how do you see those regions then faring now that they’ve had such high growth? How do you see them faring over the next few years?
John Pidgeon: 40:05 I think the blue chip locations will still be going okay. It’s the middle to outer ring that may have some sort of flattening, or even slight decline. But think those that are desirable places to live, and still have access to good public transport and those sort of things will still do okay without being outstanding. I don’t think we’ll see too much double digit growth in those regions for a little while.
John Pidgeon: 40:40 We talk about most property cycles being 12 years roughly, so if the last four has been pretty solid, maybe the last 12 months has flattened off a bit, or in some cases declined. On average, it’s telling us that four or five years going forward may be reasonably slow. Melbourne’s an interesting one, though. If we’ve got time to chat about that, I think it’s a three tiered market. There’s the $3 million plus range is actually going okay, because you’re dealing with cash buyers. They don’t need too much loan, which is outstanding.
John Pidgeon: 41:22 But it’s that one million to three million where people are mortgaged to the hilt, and can’t move on their properties. That’s where the Melbourne market is flattening off a little bit, and the sub million dollar range, well that just, it’s affordable for people in most cases. That’s still actually tracking okay.
Fraser Jack: 41:44 Yeah, it’s interesting. I guess most regions have that similar aspect where they have pockets of first home buyer homes for example, may always be a market for, and then you get that level where maybe the house isn’t quite worth what it was sold for, and then that could be a bit of an issue.
John Pidgeon: 42:04 Yeah, playing catch up for a bit.
Fraser Jack: 42:06 Yeah, no, there’s certainly a lot of different things to take into consideration and understand. I think probably it seems to be to me a lot of long term buy strategies with property, rather than short.
John Pidgeon: 42:22 Yeah. Look, in general, in my mind, whether it shares property or whatever, it’s got to be a long term view. I don’t think, I definitely don’t coach my clients to think that it’s a 12 month to three year plan. Whilst the acquisition might be in that period, we’re definitely not looking to turn that property over in that period, unless it’s a really well thought out, structured, thorough development project, where the actual strategy is to sell them on completion.
Fraser Jack: 42:58 Yep. Finance has changed a lot over the last, well couple of years, and interest rates have come down and are low, but finance is still hard to get, and getting harder in a lot of cases. How do you see all this playing out?
John Pidgeon: 43:15 Yeah. Look, the stimulus on the economy is still pretty low, isn’t it? I can’t see the cash rate going North anytime soon, and I don’t think banks are in a position where they can lift their rates too much too soon, either. So, I think the next couple of years may be stagnant, in regards to interest rates. I think lending will be okay. I don’t see any real issues with that now. Since APRA’s guidelines changed a few years ago, lending or servicing has definitely tightened, but we’ve adjusted to that now, so we know who can and can’t get loans in general. I think it’s just a case of getting again, your foundations in order, knowing that you haven’t got bad debt in your life. You’ve got good savings plans, and you’ve got buffers in your life, and you need to look favorably to the banks.
Fraser Jack: 44:11 Yeah, fair enough. Now, what would you say to financial advisors out there that don’t have a relationship with somebody in this space? Or, could work a bit more closely with somebody that does what you’re doing.
John Pidgeon: 44:27 Yeah, we can be friends. We’re not enemies. Our hearts are in the right spot to help the client. We’re not in the business to tread on toes and take people’s business from them. It’s actually an enhancement. I do the same, if someone comes to me and says, “Look, I need something in my life sorted” that I can’t help them with, then I’ve got no hesitation to sending them onto someone that I can trust. Because that means that they’re going to get looked after comfortably and not be taken by the wolves sort of thing.
John Pidgeon: 45:10 Yeah, it’s just having the mindset, isn’t it? I get it, that we could be seen potentially as treading on toes, but it’s totally, there’s a niche there that needs to be filled, and if there’s a financial advisor out there that doesn’t specialize in property, then there’s a space to be filled there.
Fraser Jack: 45:33 Yep, fair enough. John, if you could go back in time and give yourself some tips or advice, where would you go and what would you say to yourself?
John Pidgeon: 45:43 Good question. Look, I’d probably say, I took a few years off investing to run a business, and whilst I don’t have any regrets around that, because I had an itch I needed to scratch in the business world, I think I would have tried to have continued to invest through those years. I’m saying the same to people now, we’re in a time ... If you want to look to find doom and gloom, you’ll find it, won’t you?
John Pidgeon: 46:18 I think we’re in a time now where interest rates at the time we’re speaking are around 4%, I suppose. You can get sub 4% for owner occupier stuff. We’ll look back in 5-10 years’ time and say, “Gee, that was cheap money. We should have taken more action.” I’m a massive one for action, but I just think there’s a few, there’s probably about four years there I didn’t take any action as an investor. It might have cost me a couple of hundred.
Fraser Jack: 46:48 Regret’s a great thing, great motivator, hey?
John Pidgeon: 46:53 Well yeah. I never look at something as a true regret. It’s more a case of, “Well, what decision would I have made?” I definitely don’t regret running a business or starting up a business back then, but yeah, it was just the decision I made at the time.
Fraser Jack: 47:09 Yeah, fair enough. Brilliant. Thanks John for coming on and sharing your life’s work with us, and just all the sort of things that you do in life and how you help your clients more importantly. Because I think there’s a lot of misconceptions around what other people do in the space, and I’m a really big fan of coaching and any way that people are helping other humans to be better people. Thanks for coming on and sharing all of your wisdom with us. I really appreciate it.
John Pidgeon: 47:36 Been a pleasure, Fraser. Thanks for having me on.
Fraser Jack: 47:39 Now, just before we go, if somebody wanted to get in touch with you, how could they find you?
John Pidgeon: 47:44 Ah yeah, our website’s SolvereWealth.com.au, or yeah, Facebook, Instagram, LinkedIn. John Pidgeon, and yeah, we can have a chat.
Fraser Jack: 47:55 Fantastic. Thanks very much, John.
John Pidgeon: 47:57 All right. Thanks mate, cheers.
Fraser Jack: 47:59 If you haven’t already, I’d love you to subscribe to the podcast on your podcast platform of choice. And to continue the conversation, head over to our social media channels. We’ll catch you next time.
Disclaimer: This document is a transcription obtained through a third party. There is no claim to accuracy on the content provided in this document, and divergence from the audio file are to be expected. As a transcription, this is not a legal document in itself, and should not be considered binding to advice intelligence, but merely a convenience for reference.