A former Aussie economist has detailed the horror circumstances that led to him losing 12 investment properties in what he said should be a cautionary tale for others.
Rich Harvey is today a highly successful property investor and one of Sydney’s top real estate buyer’s agents, but he revealed that his early attempts to build wealth were derailed by a deal that went sour.
Mr Harvey told The Daily Telegraph in an exclusive interview that a chain of events led to his staggering losses.
He said it began with a conversation he had with a financial planner back when he first started investing in real estate in the late 1990s.
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Rich Harvey is today a successful investor and former president of the Real Estate Buyer’s Agents Association of Australia.
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The financial planner told him to consider investing in a range of projects being initiated by a developer he knew.
Mr Harvey and his wife had been involved in a few successful investments at this stage.
They had started their investment portfolio targeting units in emerging growth spots around inner Sydney such as Alexandria and had got a number of property deals under their belts.
The couple were keen to try something that promised better returns.
“We wanted to do something interesting, something with 20 per cent returns,” Mr Harvey said, explaining that they decided to get in touch with the developer they were recommended. A deal soon followed.
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Mr Harvey said he was drawn to the promise of higher returns in the investment sector.
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“We mortgaged our home and put in a few hundred thousand dollars. They were good projects in the beginning so we decided to buy more,” Mr Harvey said.
Things went awry by the early 2000s when it became clear that things weren’t as they had initially seemed, Mr Harvey said.
“The problems started when projects were stalling. It was painful. The wait was over two years.
“We discovered (the developer) misappropriated funds and spent them on his lifestyle. He was eventually charged with fraud. All those developments had to be sold.”
Mr Harvey remains wary of buying properties off the plan if for investment purposes. Picture: Chris Calcino
Mr Harvey explained some of the off the plan properties he bought were appropriated. He said he was due to lose a sizeable amount of money at this stage and would need to find a way to pay down the debt he accrued.
But instead of walking away from the developments entirely, he decided to salvage some of his losses by trying to buy one of the incomplete sites that had been part of the development sell off.
“I thought I would buy one of the sites. It was a big mistake. I bought a large senior’s site. At the 11th hour the funding pulled out. That triggered a loss.
“With one swoop of the pen, I lost a $750,000 deposit. That triggered the rest of our losses.”
Mr Harvey said his losses were now so significant that he had to cash out of the rest of his properties.
“We had to sell almost everything we had previously bought. We lost 12 properties. Luckily, we were able to keep our home.”
He said he spiralled into depression in the aftermath of the sales.
Marshal Keen (left), Shaynna Blaze and Rich Harvey pictured ahead of former TV series Buying Blind. Picture: Channel 9.
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“Our children were two and four years old at the time. I had just quit a successful career to start a business. I became very depressed. I was ready to pack it all in.”
Looking back, Mr Harvey said he should have noticed some red flags in the development deals earlier.
“We’d be promised updates ‘next Tuesday’. Tuesday never came. We got the prices of projects but the updates stopped. It lost its way … If you sense something is wrong, you have to trust your gut.”
Mr Harvey said he learned a lot from his negative experiences and some of the lessons helped him eventually bounce back and rebuild his property portfolio to bigger heights.
Mr Harvey attributes some of his later investing successes to a strategy that includes targeting properties with granny flats.
“We cleared the debt and started with a clean sheet, one house with a big mortgage.
“I was nervous to start again but you can’t cry over spilt milk. I understood there are certain things you can control, other things you can’t.
“I learned you shouldn’t bite off more than you can chew. Don’t develop property yourself or buy commercial properties. And don’t put 10-20 per cent of your net worth in off the plan.
“Deal with people who are reputable. Avoid sharks.”
Mr Harvey has also triumphed in business, establishing one of the country’s first and largest buyer’s agencies, PropertyBuyer. His other accolades include a turn as the president of the Real Estate Buyers Agents Association of Australia from 2015-2019.
Some of the strategies he has used to build wealth for others were informed by both his property successes and earlier losses.
Mr Harvey pictured a few years after turning his financial fortunes around.
“We’ve found success by buying in (established) areas with high rental demand. We look at the land component and if there’s scope to add value.
“Generally you want an area to have PIE (Population Infrastructure Employment) and there should be a high number of owner occupiers.
“You need a balance of cash flow and capital growth. I am a big fan of granny flats and dual income properties.
“Property investment is not rocket science. But there is a science to it. In fact it’s an art and a bit of a science.
“The science is that there are certain facts about properties and markets. How you apply that is the art.”
