Despite being known around the world for their communication and relationship insights, it has been property that has made Allan and Barbara Pease wealthy.
The iconic duo are international best-selling authors and communication experts who work with businesses and governments worldwide.
But not everyone knows that Barbara also runs a successful property development business, which has given the couple great insights into the benefits of investing in real estate.
“Commercial real estate and residential was always our biggest income earner … but especially residential real estate in the place we live in, which is the Sunshine Coast in Australia, is fantastic. Commercial is a bit tricky, but residential is fantastic and most people don’t know that’s largely where Barbara and I today get our income,” Allan told KnowHow’s Bushy Martin on a recent episode of the Get Invested podcast.
“The bottom line is most wealth in the world is in real estate. We always knew that because everybody we knew was wealthy. Whatever business they were in, their wealth was in real estate.”
The couple talked about the thriving residential real estate markets in Australia, particularly in areas that promote the ideal lifestyle.
“The golden rule with real estate that we’ve known for a long time is you find out where everybody’s going, get there ahead and buy land,” Allan said.
“[In Australia], real estate in many places is absolutely booming. The hardware business is booming. The building business is booming. Real estate business in places like Sunshine Coast, Byron Bay and Mornington Peninsula in Australia is booming because people want to go to these places.
“How do you find your passion and turn it into an income? That way, you’re looking forward to getting up every day. And when you start generating money, secondly you must have multiple streams of income, massive income coming from other places. And real estate is always a solid place to start from because people always want to go to great places and live there.”
They went on to say that people need to adopt the right mindset of not giving up on their goals in order to generate this income.
“But people say, ‘well, yeah, but how would I get the money? How do I get the deposit?’ That’s where people are on the wrong track, they start with how they’re going to do it. If you start with how, it’s never going to happen. You’ve got to start with what that is. Here’s what I will do. ‘I will become a real estate developer. I will start adding houses, properties, whatever.’ And people will say, ‘how will you do that? You haven’t got the job, the money etc.’ Your answer is ‘I don’t know yet, but that’s what I’m going to do’,” Allan said.
But while residential property currently provides great opportunities, Barbara still emphasised the importance of diversifying your real estate portfolio.
“We diversified because when COVID hit really badly, most of our tenants couldn’t pay rent in commercial. So the residential was paying for the commercial expenses because they just could not afford to pay. Then we went into property development as well, and that property development was booming because the Victorians and the Sydneysiders were coming up [to the Sunshine Coast] and they wanted to buy development and it just sold out. So even diversifying within real estate is really important for us as well,” she said.
The couple also revealed the benefits of keeping your real estate investments ‘local’.
“We always invest in our own backyard so that we can see it, we can control it. We’re on hands to see it. So we could buy places in Sydney, Melbourne, wherever, but we buy on the Sunshine Coast,” Barbara said.
Allan added: “Remote investments are difficult to handle. They can be profitable, but they’re difficult because you don’t really know what’s going on in it.”
But the biggest lesson that Allan revealed was the ‘tenth multiplying system’, which ensures investors and property buyers ‘get rich’.
“Most people are looking at how much it costs to buy it and how much they sold it for, which is important, but it’s not the most important fact. The important fact with making money in real estate is how long does it take you to double your capital? And that’s the key to building a big portfolio in real estate,” he explained.
“So, for example, let’s say [a property] costs $19,000 and I put $2,000 into it and spend a bit of money just to tart it up because their gardens are not good and the inside looks pretty crappy. And then two years later, when it was sold, we netted four thousand dollars out of that. So someone will say, you bought it for $19,000 and sold it for $26,000, well that’s ok. But it’s much better than ok because we put $2,000 net in, and we pulled $4,000 net out. And this is the secret to multiplying real estate.
“So this is called the tenth multiple system. I’ll ask, ‘you take a thousand, how long does it take you to turn it into two?’ And people say, ‘well, I could probably do it in a month or I could do it in a week’. That’s the hardest part. So if you take one, turn it to two, then you take the two and do exactly the same thing and buy a bigger house or two houses and turn the two to four, then you do the same thing again, four to eight, sixteen, thirty two. And the tenth multiple is one million and twenty four. And that’s how you take a thousand dollars and turn it into a million.”
Listen to the full interview here.
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