Property Fit author Luke Harris on how to build a real estate portfolio By Sarah Sharples
The Queensland man has purchased more than 29 properties, yet spent a decade living in a two-bedroom apartment and insists money doesn’t make you happy.
Despite a massive property portfolio of over 29 homes worth a combined $18 million, Luke Harris insists his huge haul of residences is “boring”.
The entrepreneur, who owns Property Mentors, a Melbourne-based agency that helps people
grow their property portfolio, admits he first got into the property market to get rich inspired by a wealthy uncle who drove a red convertible with a car phone back in the 1980s.
He purchased his first property at just 20 – a four-bedroom house in Perth near the beach in 2000 for $157,500, which he lived in and described as a party place for his mates on the weekend.
However, despite a deposit of $20,000 his parents still had to go guarantor as he was running his own electronic security business and the banks didn’t look favourably on self employment.
“As a 20-something I wanted super yachts and fast cars and holidays that a lot of people associate with wealth,” he said.
“But during my 20s chasing those luxuries I realised it’s nice to have a fancy car but you don’t need it, it’s nice to have a big house on the beach but you don’t need it and you can still have quite a comfortable home without having the best home. I think a lot of people wrongly associate luxury items with wealth.”
His second property was a two-bedroom apartment in the now affluent suburb of Wembley in Perth, which he snapped up for $115,000 in 2004.
Living in Melbourne at the time, Mr Harris and a friend flew to Perth with tools and equipment, renovating the place in less than two weeks.
“We literally gutted the apartment and redid it in 11 days and it was a record, but it enabled me to go back and borrow more money as it increased the value substantially,” he noted.
This made his run to dozens of properties a lot easier as he could draw on the equity from his previous homes, he said.
For his third property, be bought in the Tasmanian suburb of Queenstown on the west coast for $79,500. He rented it out for $120 a week and sold it for just $20,000 more than 10 years later.
“It wasn’t great for capital growth, it gave me $20 or $30 a week extra in pocket, but it was not enough to be doing star jumps and high-fiving friends and family,” he said.
The 41-year-old admits at the time he didn’t have a plan or strategy but was just zigzagging from place to place based on “what felt right”.
Since then he has added a heap of properties to his portfolio around Australia, but insists there is no single game changer in his ownership.
“The properties I bought in my portfolio are boring and I say that because they are there to do a specific job — to increase the cash flow position or to add capital growth into the portfolio. As I do that there is nothing that stands out as an amazing property or super great deal or outperformed others, they are there as workhorse do a job and sit there in background and not cause headaches,” he explained.
“I’ve told my clients this is not sexy and if you want sexy go and buy bitcoin and go on a roller coaster and put your money in stock market and buy and sell and trade. I’ve no interest in that, but buying boring properties that just do their job, and boring in that I don’t go and buy a $2 million house or apartment so that I feel good and wave it in front of friends and family.
“I say this is an average apartment in an average suburb in Melbourne and I’m getting $400 a week or it's a townhouse in an outer suburbs with three bedroom and two bathrooms but I've never had a day without rent. They are all run of mill very average properties, not average in quality or location, but not show off homes.”
Subsequent purchases include properties in the Melbourne suburb of St Kilda for $1.6 million and Prahan for $2.35 million and others across Victoria such as a Carrum home for $780,000, one in Seaford for $280,000 and another in Cranbourne for $549,000.
There’s also been properties in Western Australia including a Mandurah home for $235,000 and Marylands for $1.2 million
The purpose of buying his properties was for the numbers to generate average returns because “slow and steady” wins the race, he added.
“The beautiful part about doing my own property portfolio is it has enabled me to build a business that enables staff and customers to learn the same thing and we have taught hundreds of people to do the same thing,” he said.
“We take an approach to investing that is not about a get-rich-quick scheme, so many people are doing get rich quick schemes and expect 30 per cent returns on property and it makes me cringe as most of people don’t make those types of returns.”
It might surprise people that the millionaire lived in an apartment in Prahan in Melbourne for 10 years, which was originally an investment property.
“I live in an apartment in Melbourne as a house in this area is $3 to $4 million and I don’t want to spend that, I’m happy in a two-bedroom apartment,” he explained.
“It’s got a great little courtyard and in choosing that lifestyle I made some sacrifices – I love gardening and you take a little bit of a hit on your internal accommodations but a lot more of your living happens outside of the apartment.
“I see it as crash pad and do all my living out at restaurants and cafes.”
Mr Harris predicts that apartment living will become more common for Millennials and Gen Z, who want to reside in lifestyle areas, rather than in the outer suburbs describing them as generations that are used to having everything on demand from food delivery to hook-up apps.
“So people don’t want to go and buy their first home 50km from city and live in something they can afford, when they can rent in an area that has access to everything and they want friends there and they can go to brunch,” he said.
“I have friends who are in 20s and 30s that they will never buy a house, even if it’s only a couple of years in the outer suburbs.
“I’m seeing that especially across the East coast, particularly in Melbourne or Sydney, where a house is $2 million but you can get in to a suburb for a much lower price by renting and a lot more people will be doing that and giving up on the thought of buying a property.”
He’s also had a change in attitude to wealth, after a mini retirement at the age of 30, to assess what he was doing with his life.
“I worked out what was important was not super cars and yachts, but health, looking after family and having a comfortable home and as I matured a little bit more I realised chasing that never ending goal of having a $20 million super yacht is not necessary and doesn’t necessarily mean you are going to be happy,” he said.
“You don’t just need to chase money but balance that with what really makes you happy and not everyone needs $10 million to be happy.”
However, with Melbourne's constant lockdowns Mr Harris did buy a 30-year-old property at Airlie Beach for $1.35 million with “horrible terracotta tiles and funny smells in some of the rooms”, which he is currently renovating with his partner.
The author’s advice for those looking to get start in property is to buy what you can afford now and not to expect your dream home as your first home.
“There needs to be a little bit of compromise, so get into you first home instead of renting and then you’re one step ahead and you can live in that home for two, three or five years and then can potentially upgrade as life changes,” he said.