History shapes future of prolific portfolio

Property investor Luke Harris has taken his faith in the market’s historical track record of steady ascent to build a vast national portfolio comprising 29 properties with a total value of $18 million.

Luke Harris
Luke Harris says a key part of his investment strategy is eliminating emotion from the transactional process.

Luke Harris, CEO of The Property Mentors and author of two books on property investing, has taken his faith in the market’s historical track record of steady ascent to build a vast national portfolio comprising 29 properties with a total value of $18 million.

“I feel the biggest challenge really isn’t about predicting what the market will do, history tells us that over the long term, property will perform well," Mr Harris said.

The 41-year-old, who divides his time between homes in inner Melbourne’s Prahran and Airlie Beach in Queensland’s Whitsunday Region, has centred a significant portion of his portfolio on Victoria, after buying his first in middle class Perth suburb Duncraig in 2000, as well as others in Queensland.

“I hold a number of residential and commercial assets in Victoria, a bunch of properties in Western Australia, including some development sites for the future, and properties in Queensland too,” Mr Harris told Australian Property Investor Magazine.

“Some of the Queensland properties are also earmarked for development into the future. 

“The appeal for these locations has been based around doing due diligence on each area and each property, but also ensuring each property fits into the portfolio with a specific purpose. 

“These properties haven’t been sourced with emotion, but with research and by looking at the numbers ensuring that each compliments the portfolio and allows for future growth,” he said.

The move into property that has proven so successful wasn’t always looking so rosy.

Mr Harris said he “hated” school and set about starting his own business, spending 13 years in the electronic security industry.  

Financing his first property as a 20-year-old self-employed school-leaver was his first hurdle.  

“My first property, some 21 years ago was financed on a 'low doc’ loan and some savings but the banks didn’t like self-employment, so my parents went guarantor on the loan," Mr Harris said.

Recognising electronic security wasn’t his passion, he sold the business in 2010 and took a mini retirement for 18 months.  

“I spent that time learning about the mistakes I had made in property and formulated a series of systems and processes to help property investors get better results — what worked and what didn’t work, what do most people struggle with, why aren’t most property investors more successful and how can I help them?," he said. 

“It was then that I set out on my own to start a consulting business to test my processes and after that, formed The Property Mentors."

Strategy evolves 

According to Mr Harris, investors can be their own worst enemy.

While always paying attention to market conditions, interest rates and, more recently, COVID, his philosophy is essentially akin to that of a certain shoe company — just do it.

“I’ll always do it and will continue buying no matter what," Mr Harris said.

“The biggest challenges for investors in the years ahead will be the noise getting in the way of their own personal goals — interest rates will go up and down, property markets will move up, down and sideways, politicians will continue to make poor decisions and the sun will rise and set each day.

“I feel the biggest challenge really isn’t about predicting what the market will do, as history tells us that over the long term, property will perform well. 

“Having a mentor by your side is going to be crucial to understating how to interpret all this market noise and apply it to your own situation."

He said there is no one-size fits all approach to building a successful portfolio and that strategy would change over time in response to markets, performance and personal life goals. 

“My strategy is to continue to build a self-sufficient, balanced portfolio that with provide both capital growth and cashflow and in the mix are some development sites that I will park for a period of time but they all fit in with the plan.”

His three most recent purchases have been a diverse mix of commercial and residential bought this year, including a two-bedroom apartment in Craigieburn on Melbourne’s northern fringe for $389,000, a four-bedroom house Airlie Beach ($695,000) and a commercial property in Prahran ($650,000).

Banks and books 

With the equity his portfolio has built up now, finance is no longer the issue it was as young investor, to the point where he says he seems to “always be in finance offices restructuring or refinancing or for a new purchase.”

He used the big four among Australian banks but also financed through many other lenders.

As the lead author of investment books Let’s Get Real (published 2018) and Property Fit (2021), he could be excused for thinking he knew better than those around him. But from astute mortgage brokers to knowledgeable property agents, Mr Harris has always been keen to utilise the skills of industry professionals. 

“I rely on top-level property managers around the country and they are worth their weight in gold and worth paying their fee," he said.

“Too many investors buy property and then try and find the cheapest property management service to take care of their asset and really don’t understand that logic.”

The same philosophy applied to buying properties, he said. 

“I have a great network of people bringing properties to me that are off-market, which means I get to see a lot of deals before they hit the market and our due diligence process at The Property Mentors helps me weed out the rubbish ones quickly — most of what I buy, is never advertised on the big Real Estate sites," Mr Harris said.

What’s next?

Given his assertion that there’s always another deal around the corner, what was on the radar for property number 30 and beyond?

“I still see Victoria and Queensland population growth continuing in a broad sense but that certainly doesn’t mean that all areas in those states will do well,” Mr Harris said. 

“Price points that will do well in the residential markets are in the $450,000 to $650,000 range, as they will appeal to a wider range of buyers and often provide a decent capital growth versus yield ratio to assist with further asset accumulation.”

His property purchases involve looking at more than 100 check points, with some deal-breakers and others influencing price valuation or potential growth.

“Areas with good infrastructure will always have good growth potential however there is an emerging trend towards green and sustainable development, so new developments that have a focus on this will likely do well,” he said.

“There is no such thing as the perfect property but if we can have eight-star energy ratings, EV ports, smart tech and other innovations without paying more then of course that future-proofs the property and makes it more appealling to a wider range of tenants.”

And beyond property accumulation? 

“After having a mini retirement around 10 years ago, I realised that retirement is never really something I’ll ever do," he said.

“I do joke about retiring at 45, but before that I joked about retiring at 40. 

“Imagine waking up every day, teaching people how to build wealth and achieve their goals – what else would I want to do?”

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