Global Real Estate Investment – An Interview By PropertyInsight.com.my
Steve McKnight is one of Australia’s foremost experts on real estate investing. A best selling author, Steve began investing in 1999 and has since bought over 500 income producing dwellings. More recently he established a AUD$115m institutional Fund to acquire US commercial property which has since been fully subscribed.
1. Steve, can you still use real estate to achieve financial freedom?
As investors, irrespective of whether we are novices, veterans or in between, it is always useful to ask (at least annually) “How can I use real estate to achieve financial freedom in today’s property market?”
When I started investing it was a matter of buying as many cheap positive cash flow properties as possible, sometimes selling to free up capital to buy more.
That approach worked in 1999, but with property prices a lot higher today, it won’t work as well because you’ll run out of investing capital before you get rich. Today there is a better approach, and I look forward to sharing it at the upcoming seminar in November.
2. You’ve recently been to the US? If it was a business sojourn, how well were your thoughts received?
After seeing an incredible opportunity in 2009 (low prices relative to replacement cost, high yields, high buying power of the AUD) – my business partners and I acquired about 200 income producing dwellings in Florida.
Since then the Australian dollar has fallen against the US dollar, and property prices have increased in the areas I bought by 50% or more. A good result!
More recently I set up a retail managed investment trust to acquire US commercial property. That is going well thus far and has assets more than AUD$115m. It has a ten year life though so there is more work to be done to acquire and unearth value for those who invested.
The biggest issue foreign investors have in the US is finding quality management, otherwise the aggravation will be crippling.
3. What are the fundamental differences between markets in Australia, Asia, UK / Europe and the USA?
Return (yield), for sure.
The concept of negative gearing is alien in many other jurisdictions as the rent will normally cover expenses. However, yields have been compressed in Australia and Asia since property prices rose faster than rent. It’s hard to see how that will change in key population areas. Of course, business, property and tax laws vary, as do the rights and responsibilities of tenants and landlords. Those interested in investing offshore should definitely visit that location in person before committing any funds or buying any property.
4. Is there a perfect investment strategy for all times and all investors?
I have learned a lot since I started investing in 1999. Whereas I previously strongly advocated what property to buy (or not buy), I now believe it is up to each investor to find the right property for their time, money, skill and risk tolerance thresholds. What might be a good property for one person may not be suitable for another. That said, the right property will be the one that makes the most money, in the quickest time, for the least risk, and the lowest aggravation.
5. Like many small packages, your book packs a mighty punch or two, replete with pithy advice. How do you find such nuggets? Are you a constant note taker?
Experience is the best teacher, and after buying 500+ properties in 16 years, in three countries, in all sorts of real estate markets, you learn a thing or two. I once read that smart people learn from their mistakes whereas wise people learn from the mistakes of others. With that in mind my books are a gift of knowledge. Hopefully that gift is well received by wise investors.
6. Have you found on the author/financial circuit you have to adjust commentary to suit market fluctuations?
No. If you keep trying to predict the market you will sooner or later be wrong, and in a big way. That will lead to substantial losses. Rather than understand what makes the winds blow, or where they might blow next, I try to ascertain the wind’s speed and direction and trim my investing sails to suit. When change happens, I simply adjust my sails.