Short history of losing a fortune Part 1

In this comment Rob Rooland asked

Anyhow back to your site – I have enjoyed reading through the last two yeaars of your journal but want to know more regarding yourself, your history, brief details of how someone looses a fortune, and what your goals and aspirations are. Do you have a brief autobiography writen?

I’m gathering some notes for a biographical post. Until then here is a short timeline.

1979 I read SMH real estate pages at 14 years old while working a checkout in a convenience store.

1983 Got excited about the floating of the Aussie Dollar and other changes to the Australian economy.

1984 At uni started reading the Fin Review on a daily basis watching Robert Holmes a Court revolutionise Australian Boardrooms (with help from Ron Brierley, Alan Bond, Christopher Skase, John Elliott, Larry Adler, Warren Anderson, Garry Carter, Laurie Connell and Allan Hawkins).

1988 buy my first property with $5,000 life savings. It’s a 1-bedroom strata unit in Kings Cross/Potts Point for $46,000. That was after getting gazumped twice. I eventually have about 10 of these little units.

1989 Add to portfolio with $5,000 of Nella’s life savings. Quit my job as a trainee economist to start property investment and development company. My boss said I was crazy – the worst time for property was right now. I quit anyway. Oh and Nella and I got married.

1990 Grow the portfolio with easy credit and a mountain of debt. Cashflow is tight but maximising rents keeps me afloat.

My Advance Bank manager has my file permanently on his desk, and OK’s a $1.2Million loan in principle over the phone (lots of “subject to’s” but it’s a deal). Hell I’m 25 and don’t have a real job or a car.

I sign a deal for a multi-unit development. Use solicitors funds and an exotic cocktail of financing to make it happen. Cashflow now difficult.

1991 Cashflow significantly negative. Go through worst 3 months of vacancies coupled with about $20,000 in special levies and repairs. 18% first mortgage rates. My bridging finance hits 33%. As rates rose I could fix them only at even higher rates.

1992 Recession we had to have. Bankruptcy. Many friends’ with successful export businesses fail under 18% interest rates with vanished local demand.

While my accountant and lawyer at the time said many clients lost their businesses in that recession, I need to take responsability for my decisions. I bragged to a board of advisors meeting that no federal Labor government would allow first mortgage interest rates to hit 18%, so I bet the farm and lost. That is why I say I “foolishly misplaced” my first fortune.

These days I’m a lot more conservative and always keep an eye on the exit strategy. That has cost me considerable profits over the last five years as I rebuild. But I have children now and am not willing to risk them being evicted by a sherrif. So I chose to grow more slowly and pass deals which look fantastic but don’t have an exit strategy if things go pear-shaped.

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