How I hired Warren Buffet as my Mentor | These will be the “mining town” type of investments this decade

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By Michael Yardney 894074 and Michael Yardney; Australia's authority in wealth creation through property. Discovered by Player FM and our community — copyright is owned by the publisher, not Player FM, and audio is streamed directly from their servers. Hit the Subscribe button to track updates in Player FM, or paste the feed URL into other podcast apps.

Who are your mentors?

Who do you turn to for knowledge, to help you set goals, to help support your growth, to help you keep accountable, and to offer encouragement?

It’s impertinent to think that you can achieve the type of success on your own that took others decades to achieve.

I guess mentors are a shortcut to success and they also stop you’re going down the wrong path and point you in the right direction. Stand on the shoulders of your mentors and you’ll be able to see a lot further.

Despite having a very substantial property portfolio, and a very successful national business, I still have coaches and mentors in today’s show I’d like to discuss with you how I got Warren Buffett as one of my mentors.

I’m also going to have a chat with Brett Warren about the type of properties that could end up the equivalent of the disastrous mining towns that we saw a couple of decades ago so that you will avoid them.

How I Got Warren Buffet As My Mentor

I found the perfect mentor early in my investing career: Warren Buffet.

In fact, Warren’s been mentoring me for quite some time now and it’s been inspiring.

But to be honest… I’ve never actually spoken to him. And he’s not really a property expert.

But he’s generously created a means for me to get inside his head and learn how he thinks about investing.

We have access to his way of thinking through his annual letter to the shareholders of his company Berkshire Hathaway.

One of the early lessons I learned from my mentor was:

“Be greedy when others are fearful (like now) and fearful when others are greedy.”

Here are three lessons I took from his thoughts:

  1. Fear and greed drive our markets and cause them to cycle – all too often too far in both directions.
  2. Trying to predict these market cycles is a fool’s game.
  3. As an investor, you simply need to know that these cycles keep recurring and be prepared not to overreact.

WARNING: What Will Be the “Mining Town” Type Investment of This Decade? With Brett Warren

I’ve been investing long enough, close to 50 years now, to see many fads come and go.

I’m old enough to remember timeshare – the ability to buy a week or two’s worth of property if you couldn’t afford to buy the whole property and share the property with a bunch of other investors who simply couldn’t afford to own a property. We did turn that into a disaster.

Then there was the fad of investing overseas – I remember there was a time when you could buy a property in the United States for the price of a car here – 30 or $40,000.

Of course, you can imagine the type of property you would buy at that price and how naïve investors lost out, but promoters made a fortune.

And then there was the mining town investment fad of the late 2000s.

It began in around 2003 when prices for commodities like iron ore and coal began rising, and this led to significant mining infrastructure construction causing a property boom in many mining cities and towns around the country.

Property hot-spotting websites popped up and many naïve investors bought “investment” properties in places they’d never even visited.

Unfortunately, when the boom ended and infrastructure spending in these tiny one-industry towns stopped, and there wasn’t a requirement for tenants in these small one-industry mining towns, property prices in these locations began to free fall.

So, what will it be this time around?

Warning signs for inner-city high-rise apartments

There are already some major warning signs that these apartment owners may face:

  1. Structural Defects – Newer high-rise apartments are not like the old “solid brick” construction blocks from the 1970s or ’80s and builders now opt for cheaper products to cut costs and boost profits.
  2. Fire Issues – The inferior cladding being used is a case in point for above, with 629 buildings in Vic and nearly 450 across NSW at risk.
  3. Water Issues – While more of a nuisance, the leaking balconies, showers, and roofs can usually be fixed, but it comes at a cost.
  4. High Commissions and costs – Kickbacks, commissions, champagne sunsets, and rental guarantees are all built into the purchase price.

COVID Changes

COVID has also forced a host of changes, in particular closing our borders and the way we want to live.

The high-rise, inner-city apartment is often in high demand from overseas investors, new arrivals, and students that come to study here.

This means that many new planned projects may not have enough presale take up to even get off the ground.

In Summary

Will the inner-city, high-rise apartment, become the mining town type investment over the next decade?

There are ample examples of structural and building issues on top of high commissions and demand for certain spaces post-COVID.

Despite that, some investors and homebuyers will be drawn in by perceivably cheap prices.

These types of properties are cheap for a reason and that will remain so moving forward.

Resources:

Michael Yardney

Brett WarrenNational Director Metropole Property Strategists

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Shownotes plus more here: How I hired Warren Buffet as my Mentor | These will be the “mining town” type of investments this decade

Some of our favourite quotes from the show:

“Evidence is overwhelming that we know much less than we think we do.” – Michael Yardney

“The lens through which you see the world shapes your world.” – Michael Yardney

“There’s a whole generation of new people coming in who don’t know the hard-luck stories that people have experienced in previous cycles.” – Michael Yardney

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