Unlocking Wealth through Co-living with Ian Ugarte

In this inspiring episode of "Ten with Ty," host Tyron Hyde speaks with Ian Ugarte, a leading figure in the Australian property industry, recognised for his innovative approach to addressing the housing crisis through co-living spaces. His company, Invida specialises in developing co-living properties that offer financial benefits to investors while easing the housing burden for tenants. 

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Ian shares his insights on how co-living can deliver cashflow-positive investments while providing affordable housing for renters. This episode uncovers Ian's personal journey from plumbing to property investing, emphasising the profound life changes that arose from his introspective battle with depression—ultimately leading him to a path of helping others.

Ian explains how investors can achieve high yields and capital growth by investing in strategically converted rental properties. Tyron and Ian also discuss the fallacy of negative gearing and explore alternative lending options that accommodate different investment appetites. Alongside investment advice, Ian provides a heartfelt account of the importance of community, family, and time, striving for a balance of wealth and well-being.

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Key Takeaways:

• Co-living properties present a lucrative investment opportunity by doubling or tripling investor income while providing affordable housing options.
• Ian's personal experiences with depression shifted his investment focus toward community-driven projects with meaningful impacts.
• High-yield and capital growth properties can coexist, debunking the traditional belief that investors must choose one over the other.
• Developing an investment strategy with a positive cash flow focus can offer more sustainable long-term gains.
• Engaging closely with experienced mentors and learning by doing are essential strategies for anyone starting in the investment world.

Resources:

• Check out Ian Ugarte's company Invida or head to ianugarte.com.au
• For more on property depreciation: Washington Brown
• Lifeline for support on mental health: 13 11 14

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Tyron Hyde is the CEO of Washington Brown Quantity Surveyors

Chapters

• 1:40 Ian Ugarte's Journey to Co-living Developments
• 9:15 Co-living and Positive Cashflow
• 14:15 What Makes an Ideal Conversion?
• 20:16 Ian's Best Investment
• 23:33 Ian's Worst Invesmtent
• 24:12 Most Valuable Investment Advice
• 26:13 How to Invest 20K at 20
• 29:55 How to Invest 500K at 50
• 31:31 Advice to 20-Year-Old Self
• 32:48 Ian's Legacy
• 34:48 Co-living Marketing Traps
• 38:00 Definition of Success
• 38:59 How to Minimise Loss as an Investor
• 40:48 Ian's Solution to the Housing Crisis

Transcript

Tyron Hyde: Hi, I’m Tyron Hye, the CEO of Washington Brown, the property and depreciation experts. Now I’m a qualified quantity surveyor and also a best-selling author who’s helped hundreds of thousands of property investors over the years pay less tax through depreciation. I’m also an avid investor which is why I created the podcast series Ten with Ty where I asked the smartest people I know the same 10 questions to unlock the keys to their success and hopefully leave a playbook for my family and your family too about investing.

Now this podcast is general in nature and not specific to your financial circumstances. We always recommend you sit down with an accountant or financial planner before making any investment decisions. Now let’s get on with the show. 

Hello and welcome to Ten with Ty. Today on Ten with Ty I’m joined by one of Australia’s most passionate voices in the property industry. Ian Ugarte. He’s single handedly trying to solve the housing crisis by providing co-living properties that have the added bonus of being cash flow positive for investors. Now I’m warning you, this could be a love-in. I’ve known Ian for a long time and have a lot of respect for him. Welcome to Ten with Ty, Ian.

Ian Ugarte: Hi how you going?

Tyron Hyde: Thanks for coming. Now tell me a bit about your company in Invida and how it helps property investors and renters as well.

Ian Ugarte: Well it’s actually a win-win-win across the board. So Invida is a co-living company. So what we do is we either build brand new or take existing properties, convert them, put little studios inside them legally with full compliance we furnish them. Everyone has their own bathroom, kitchenette, sitting area. The people that rent the properties, they save themselves 1/3 to 1/2 off their normal weekly rents which includes utilities as well. So they’re better off. The investor themselves goes from, they double and triple their income. But more importantly what we do is we, as a property management business as well because we’re an end-to-end service, we look after the middle class. So no one in our properties are unemployed, no one’s on social welfare, They’all middle class people just trying to save some money to buy their own home. And that means that the government can then have the pressure lifted off the bottom of the market and the government can look after the bottom of the market and provide housing for social affordable outcomes. So I think it’s a win-win across the board.

Tyron Hyde: But don’t we all need, like, 5-bedroom 3-bathroom homes for families?

Ian Ugarte: Oh the myth, the fact that the Australian home went from, in 19. Well, I mean if we started in 1881, a standard home in Australia was 35 square metres total space with five and a half people. In 1960, the standard home in Australia was a two-bedroom, one bathroom home built by a guy called L.J. Hooker, which was 85 square meters, there was 3.8 people in that. And we now build the largest house in the world at 240 square meters average. And those homes have four bedrooms, two bathrooms and we’ve only got 2.38 people in them now. So we don’t actually need five bedrooms, three bathrooms. It’s something that the market has engineered to be able to get us to that point. And the unfortunate part with that is that investors think that that’s what the market wants and it’s quite the opposite.

Tyron Hyde: Backtrack a bit. How did a plumber become so passionate about co-living and fixing the housing crisis?

Ian Ugarte: Suicide probably is the answer to that. So this may be a sore point and a touching point for some people. But I’d become a plumber. I worked in the family business and I always knew that property was the way that I was going to go. I always knew I was going to invest in property. So thankfully with the help of my parents, I got into an investment property really early and young. In my, age of 18 I think it was the first property I bought. They helped me with a deposit. I then extracted the equity after a couple years, paid them back. It actually got me into my first home and so I just started buying properties and I got to a point where I started doing negative cash flow, went to a bad flow through that, worked out that you could do positive cash flow, started becoming a developer, became full time in property and most people would have looked at me as a successful person and I’d always wanted to be successful in property, but I, when I left work I sort of started doing what we call a big block developer where we buy large plate portions of land and they were farmland or caneland or whatever it is and chop it up into small rectangles and then put the largest boxes on those rectangles and sell them off.

And I woke up one morning with what I would have 10 years earlier thought was successful. And it was the worst day of my life because I realised that becoming rich made me the unhappiest I’d ever been because I wasn’t giving to anyone. I had lost time with my family and it happened, it was a slow progression over three or four months and that I woke up one morning after, I didn’t really sleep that night. We had moved to Queensland and I had put myself into a position where I decided that morning that I was going to, regardless of how many zeroes were in my bank account, I was going to drive my family home to Queensland. And when I got to Queensland I was going to let them go to bed and I was going to end my life that night. Thankfully for me, something happened on the way home. We stopped at a place called Pottsville and I had a meeting with my life and business coach and my ex wife, she was my wife at the time, and my coach just picked up that there was something wrong and she had the tools and she, she just got a little bit deeper into, into me and the psyche and asked some questions and realised that I was in a really dark space. So you know, I always say to people that the one thing that I didn’t think about or didn’t know at the time was that I could reach out and that I could ask for help.

And when you’re in that state of mind it’s not really something that comes to you like you know, everything looks so bad. And so anyone who is listening, who’s listening to this and in some way is being affected by this. I ask that you just find the first person that you can find and let them know that you’re in this space because they want to help you. Everyone wants to help. The plus side is that everyone wants to help but it’s only you that can pull yourself out of the hole. But it helps when someone’s throwing a rope down. Really helpful.

So the reason I got into this place was because I realized that there was a quote that I read really early on in property investing. And you know there’s some people want to be rich and other people want to be wealthy, and rich people have a lot of money and wealthy people have time to spend it. And I’d become rich and not wealthy. So we started looking at finding ways that we’re going to help the community in a positive way and as well on top of that was going to make us a profit. And that’s how we landed on co-living by default. We found a property strategy that not only was going to help the community but secondly was going to actually make a profit. And the irony of all of that was that we made more money and we were helping people out.

So I always stick by the statement that I’m incredibly grateful for the worst day of my life because without it I wouldn’t be here talking to you.

Tyron Hyde: I’m glad you are. I’m really glad you are. Are you wealthy now as well? Having more time as well.

Ian Ugarte: So it’s the one thing that changed in my life. The question about what do you see as successful? I see success being that you have children and grandchildren that want to see you. You know, they want to spend time with you and they don’t care in the end how much money you’ve got in your bank account. They don’t care in the end how many property deals you are doing. They just want to spend time with you. And I think success is knowing that your family wants you around. And that’s a real big positive for me.

Tyron Hyde: Was negative gearing part of the problem of how you got into this bit of a rut before?

Ian Ugarte: No, I had actually got myself out of that rut of negative gearing. I mean, back then, when I was negative gearing, it was the norm. Right. You know, I had fairly, at a very young age, seven properties, $36,000 negative cash flow on a $96,000 wage. You know, you take the 36 off that, you’re down to 60, you take the tax off that, you’re down to about 30, and then you’re claiming back 12 grand. Now, back then, I was so simple in my investment strategy, I didn’t even understand that I didn’t get 36 back. Like I thought that I would get $36,000 back. That’s what I thought. And until one day someone in there said, man like, are you sure you got that right? And so of course, I then started to smarten up a little bit. And so I’d done everything wrong. You know, I’d bought negative gear properties, I’d bought them in my own name. I’d cross securitised, you know, everything that you could possibly do wrong, I’d done wrong. And I went to a seminar where someone talked about positive cash flow. And I said, that’s ridiculous. How can you positive cash flow? And then my eyes opened up. So I managed to get myself out of that. But back then, negative cash flow, everyone talked about, everyone said it’s the only strategy you should do.

And now it’s actually the opposite. If you’re negative cash flow now, there’s going to be someone in the room that’s going to say, what the hell are you doing? Like I always say to people, I don’t go out of my way to buy a business, to lose money in that business just so I can get my tax back. You know, that’s the most ridiculous concept in the world and you take that to America. You go to America and say I buy a property on purpose so I can lose money. They’ll go, you got rocks in your head. Insert American accent.

Tyron Hyde: You know, it’s just but with positive cash flow, don’t you need like for one of your deals, don’t you need like 30% deposit? Bit hard for some people to get that much money.

Ian Ugarte: It depends which way you do it. There are second-tier lenders that are doing up to 95%. Obviously the interest rate is high. Yeah, yeah, yeah. You know, the way lender structure happens and I’ll tell everyone, Columbus Capital is one of the bigger funders of the second-tier lenders that do this product. And you know, there’s Granite and there’s Blue Horizon as well, there’s a few that do it. But they use Columbus Capital money and you want to do an 80% lend, good interest rate, 6.5%. You want to do interest only. Good, it’s now 6.75%. You want to do 95%. Well now it’s at 7.5, 7.6% P and I, you know, so there’s levels and steps that you want to go to. Regardless though, there are products out there and that can only mean one thing and that’s that a big four lender is coming into the market soon because they realize that this is actually something that they can lend against and it’s got security. Their concern has always been that what’s the risk if the mortgage, if it happens to mortgage in possession, we have to take back the property.

And you know, talking to one of the big four lenders recently,  you know, they said, oh, we’ve got to get all the people out and then we’ve got to resell the product. And I go, what are you talking about? Like why would you move people out of a cash flow positive property? Like if a commercial property went under, would you move the tenant out or would you sell it as a going concern? They said, well, it’s a going concern. I said, what’s the same with this product as well.

Why wouldn’t you sell something that’s already positive cash flow returning and you can sell them at an 8 or 9% cap. So they’re starting to open up and realize that there are others. You can go for commercial lending which will be 60 or 70% but really there are, there are products out there that do it as residential lend.

Tyron Hyde: What yields are your properties getting? If you’re getting borrowing at six and a half. And the positive cash flow, what are you, is it different from a conversion, type one or a brand-new build?

Ian Ugarte: Slightly different. It depends if you can hit the market. I mean at the peak of value in the Perth market, we were getting new builds at 14%. Like that was absurd, like they were outliers. But we were generally picking up, you know, between 11 to 13% new builds in Perth. Obviously the prices rose and you know, the yield dropped out. But at the moment I can go to Victoria and get 11% return on a conversion, probably a 9.5 to 10% on a new build. So you know that the market’s there and it’s doable.

Tyron Hyde: And good depreciation.

Ian Ugarte: Depreciation. I wouldn’t know much about depreciation. And I can send you. I know a guy, I know a guy who knows a guy. So. But yeah, I mean you’re talking in the first year of, you know, you’ve got sometimes more, but on average there’s going to be five or six kitchens. Kitchenettes, five bathrooms. Six bathrooms. You know, the higher depreciable items  in a property. Plus you’ve got a furniture package that’s got a one year depreciation on it. You know, you’re looking, you know, you’re now looking at, you know, you can tell me.

Tyron Hyde: You want a job?

Ian Ugarte: But 40 to $45,000 in the first year of depreciation. Yeah.

Tyron Hyde: And what makes an ideal conversion? What are you looking for when you’re buying these? Or is that a trade secret?

Ian Ugarte: It’s pretty simple. I mean learning how to design them is one thing. So like I can tell you what I’m looking for. I’m looking for plumbing points because I need to put more bathrooms in. I’m looking for a floor plan that doesn’t require what we call a split room. So a split room will be, will you have the actual bedroom on one side of a hallway and they’ve got to leave their door to go to their bathroom. I will never do that. So the floor plan has to make sure that it meets that requirement. And people always say, yeah, but what about, you know, you’re going to have to dig up concrete floors because most of the projects we do we’re on slab, but we do all our plumbing above ground. So if I’ve got a laundry in the garage, well that means I’ve got a bathroom point, that I can convert the garage into a room with a bathroom and a kitchenette and we run all the plumbing above ground so we have a raised floor in the bathroom. And that means that the wall behind the garage will also be able to have a bathroom put in too. So I’ve already got two bathrooms out at one point. So, you know, they’re the things that we’re looking for. We’re looking for a like 20 or 30 year old, 4 bedroom, 2 bathroom slab construction home with a good floor plan and good plumbing points.

Tyron Hyde: And would you choose, if you had to choose one, whether there’s a new build or a conversion, what would you choose?

Ian Ugarte: If it was four years ago, I would probably choose a new build. At this point in time, in greenfield estates in some areas of the country, I would stay away from a greenfield build. And when I say greenfield, greenfield is that type of big block developer. They go and buy a piece of farmland and they get approval to chop it up into little rectangles. The reason I want to stay away from that at the moment is that we’re finding in some areas. So, because again, we’re property managers, we’re finding in some areas that it’s not. We could drop our price to $100 a room and they’re generally averaging 350, but we wouldn’t be able to fill them at $100 in , because there’s no eyes on it and they’re too far out and there’s an oversupply in some areas. Okay, so we consult to a number of builders and we say to the builders, look, we’ve done this estate, we’ve done the checks, we’ve done the zones, we’ve done the overlays. We’re all good. You can sell that block of land with co-living. I suggest you only sell three in this release. Now that’s well and good, except that I don’t have control of every builder in the country. And every builder in the country has jumped onto co-living and they’re building 5, 6, 7, 8, 9, 10 of these properties in the same estate. And so I don’t have eyes on that. So for me right now, the answer to the question is I much preferred to do a conversion on an existing property for two reasons.

One, because I can get in and out of the property. So our construction, my builder’s license, my plumbing license, my real estate agent’s license. So I decided if I was going to do three professions, I’d probably choose the three that are the most untrustworthy professions in the industry.

Tyron Hyde: Good job. Why don’t you sell cars on the side?

Ian Ugarte: I’ve been thinking about taking up prostitution too. 

So the reason is because our construction team takes 21 working days on site to do the conversion from a four bedroom, two bathroom to a five, five or six, six and then another nine days of furnishing. So within six weeks we will have a fully converted product. So it means you’re out of and generally have one or two people moving in the day it gets advertised.

So you’re not out of pocket for more than let’s say eight weeks. Where generally a renovation of this size and I’ll tell you the renovations are $200,000 plus that’s what it costs. That sort of renovation would normally take four to five to six months for a standard builder to do. But we just cookie cutter, you know, everything’s the same, everything’s in and out. We do it with quality, we do what we need to do to get the rent we have to get. 

There’s no use putting granite benchtops into a property when it’s not required. Right. And so we’re unemotional about that part of it. We’re emotional about making sure that the people that live in it are actually getting better off. That’s the first reason that we get in and out really quick. The second reason is because of the lack of ability to oversupply. So if I buy a house in a street that has 50 houses and I do a conversion in that street, one, there’s not gonna be a parking problem, two, they’re not going to convert the 50 houses. There’s probably unlikely that there’ll be another rooming house in that street.So that means that we’ll be able to fill it quite easily. So that’s my preference at the moment. Long answer. Sorry.

Tyron Hyde: And where abouts you doing, Melbourne?

Ian Ugarte: So we currently do three states. We do Queensland, Victoria and WA. We’re adding Tasmania and New Zealand as we speak. 

Tyron Hyde: All right, why not Sydney, New South Wales? 

Ian Ugarte: I wrote the New South Wales co-living policy and the one thing that I wanted in the policy was the thing that they removed. So in New South Wales if I want to be a house or a granny flat I can go to a private certifier and do what we call a CDC approval which means a private certifier ticks off on that and then hands all the documentation to the council for the co-living product.

They said there’s no way we’re giving it to a private certifier for approval. You have to go to council. And when I’ve got to deal with council, I don’t deal, because if it’s my own personal deal, I can, I’ll take the risk but when I’m dealing on behalf of a client and I don’t know what the outcome is going to be, I won’t deal with it. So unfortunately in New South Wales we won’t do co-living, but in the other states I can go to a private certifier and get approval within 2 to 10 days.

Tyron Hyde: Awesome. Follow up question before we get into my world-famous Ten with Ty questions, is it possible to get capital growth and a high yield from your developments?

Ian Ugarte: Yeah, I busted that myth in 2009. So you can do growth and cash flow in the same deal now because of co-living and now people say, yeah, but what about the capital growth? The capital growth is exactly the same for a suburb. Capital growth doesn’t happen on an individual product, it happens on the suburb. So whilst people are getting 2.6% gross yields in metro areas, we’re getting double digit returns. So you can do growth and cash flow, you can help the market out, you can help the community out and you can help your finances at the same time and hold on to properties that will pay you while they grow in value.

Tyron Hyde: Everyone’s a winner.

Ian Ugarte: Everyone’s a winner. Take your ticket.

Tyron Hyde: Do you own an Investment Property? Washington Brown has helped over 250,000 property investors pay less tax with the depreciation schedule. Visit washingbrown.com.au to pay less tax today. 

This is my start of Ten with Ty. Question number one. What has been your best investment?

Ian Ugarte: It’s about to happen. After years of working in advocacy and spending millions of dollars, a local council that I’d worked with for co-living in an advocacy role and consulting role came to me and said, we’ve got a block of land. Do you want the three blocks of land? Do you want to do something? And I said yep. I put a proposal in front of them. They’re selling me the three blocks of land at 30% market, below market value. I don’t have to pay for them, I’ll put them in my name. I don’t have to pay for them until the occupation certificate comes through. I then designed 35 units, six commercial shops and a car park. I went to the social and affordable housing of government and said, do you want to buy some units? They said yep, we’ll buy all 35 units off you at contract price. We’ll put the money in a bank account where you can draw, the builder can draw down on that money and then at the end of the deal you hand over an occupation certificate. So the deal is going to cost me about $400,000 in DA works and I don’t have to put any funding or any money into it until the end of the deal.

Tyron Hyde: Do you need a money partner?

Ian Ugarte: There’s no money to. I don’t need a money partner because there’s no money.

Tyron Hyde: I thought you. That sounds like a cracking deal. How did that come about?

Ian Ugarte: I mean that’s just. So that’s the difference. That’s the difference between pre-suicide to post-suicide. It’s the way that you approach life and if you’re helping people out, you know, they talk about karma and I just think that’s karma. It’s coming back.

Tyron Hyde: Fantastic. I actually thought you were going to say, well, congratulations on that deal. It sounds like a cracker. I thought you were going to say your airplane ticket to New Zealand when you got locked in and ended up with Hollie, your wife. So that’s your best. 

Ian Ugarte: Yeah, it’s a long story, that one. But effectively I went over for one meal, one date and I had the chance to come back to Australia because they were locking down and I decided I’d take the chance and I stayed in New Zealand and got caught in New Zealand for four months and it ended up working out. And she’s downstairs, the CEO of our property management business and we’re married and we’re happy.

Tyron Hyde: Fantastic. All right, question number two. What’s been your worst investment?

Ian Ugarte: There’s been quite a few of them and anyone who tells you they haven’t had a bad investment is lying. The way that I can explain my bad investments is I didn’t follow my gut and I had bought like as an example, I bought a property. I bought heaps of properties in this one town. I went in there and I had a contract on a property that was not unconditional yet. I just felt it was wrong. I could just feel it and my head took over and the numbers took over and it was the worst, one of the worst investments. And yeah, every time I haven't trusted my gut, it’s gone south.

Tyron Hyde: All right, question number three. What’s been the most valuable investment advice you’ve ever received. 

Ian Ugarte: By a previous guest of yours who was told by his mentor that you can’t get hurt by a deal you don’t buy.

Tyron Hyde: Who was that? Steve. Was that Steve McKnight?

Ian Ugarte: Yep, he’s my bestie, Steve. And we sort of co-mentor each other and there’s times where Steve, Steve wears a black hat and it’s good to have someone like that that’s always showing you the downside because yeah, he, that it’s always helpful to have someone looking at the downside when you’re an optimist.

Tyron Hyde: All my life I’ve been, well for a long part of it, I always thought I had to be fully invested and as I’ve got on older with life I’ve always had a fair amount of a percentage of cash on the side just in case, but when I was younger I always thought like I had to be fully invested which didn’t help me at all. It actually had the complete opposite effect. Part of that’s greed. 

Question four, what’s your ideal portfolio?

Ian Ugarte: Obviously some co-living’s got to be in there, lots of it. So for me, that high yield and growth strategy so buy metro area, good growth and then make sure it’s positive cash flow and then a good mix of commercial industrial type setup is always the way to go from my point of view. 

I am a fan of owning a principal place of residence that has income producing on it. So we’ve got 40 acres up on the Sunshine Coast, we own a peninsula on the main river and it will have horse adjustments, it’ll have eight tourist cabins on it, it’ll have a whole bunch of income earning capability and at the same time as an asset growth.

Tyron Hyde: There’s a life goal for me, I want to be able to say once in my life I own a peninsula.

Ian Ugarte: It’s only 3 1/2 kilometres of water frontage, that’s all.

Tyron Hyde: That’s a new life goal for me. Thank you very much, Ian. 

Question number five, you’ve got children, you’ve got eight now haven’t you? I don’t know if any of them are 20 years old but if one of them came up to you, was a 20 year old and said dad how do I invest $20,000?

Ian Ugarte: Interestingly because my 20 year old works in our business I would say to her stop working in my business, go and find someone like me and a developer who has good integrity and good values and I’ve got a few friends that would be like that and I’d say pay them $20,000 for you to be their PA/EA for the next however long. So work through the $20,000 for six months until you know, become efficient for them and then stick by them for the next three to five years and be involved in the handover of information if they’re willing to do that and.

Tyron Hyde: Then come back and work for you?

Ian Ugarte: No, go off and grow your wings, do your own thing. You don’t need to be.

Tyron Hyde: I thought in one of the seminars I saw you talking, you’re hoping that one of your daughters was going to run the business one day.

Ian Ugarte: Yeah, that’s her. That’s the one that I’d tell to go away and do something else. Because ultimately what do we want for our children? Do we want our children to take on our legacy or do we want them to grow? And you know, I’d love. I want my child to take over my business. It’s one of the things I’ve always said I wanted. But if I stop looking at the selfish component of what that is, I want her to grow her own wings. I want her to make her own trail in the world and do it on her own. Because you know, I just think that there’s an entrepreneurial skill that’s gathered by having to go through the heartache of building a business and that’s something she deserves rather than given to her. Which is, which will be a downfall for her if I give it to her.

Tyron Hyde: You’re a hand up, not a hand out.

Ian Ugarte: Yeah, yeah, yeah, that’s exactly it.

Tyron Hyde: What about a 20-year-old who’s not your child? What, any advice you’d give the 20-year-old that wasn’t your child?

Ian Ugarte: I would say to the 20-year-old exactly the same thing. I’d say to the 20-year-old, approach someone like me and say I’ve got $20,000, I’m going to use that so that you don’t have to pay me and I’ll pay myself for the next six months. What I want in return is for you to be able to help me. And at the six month mark, if you think I’m worth keeping, then employ me for the next four and a half years. And at the five-year mark I want you to know that I’m going to be starting to do my own deals and I’d love your support if we can do that that way. That’s what I would say to someone.

I’m not a fan. I could take $20,000 and I could put it into bitcoin and I could put it. But the return on that is not going to do much. I’ve got a mate of mine who lost everything in the GFC. Where, you know, where are we? We’re about 18 years since the GFC. The guy after losing everything and having to do the five years plus three years. So really where we are is 10 years. So in 10 years of investing, he’s gathered all the information in his head and he’s used all the information in his head to reposition himself. And I won’t tell you how much he’s worth. He’s worth a lot. And that’s because they can’t take away what’s in your head. And $20,000 invested into a 20 year old by the time they’re 25 with the information in their head that can’t be taken away from them. That’s income-producing for the rest of their life. If you know how to run a business, sell, you could sell ice, you could do property development, you could sell caravans. If you understand business, then entrepreneurship is the thing they can’t take away from you other than Alzheimer's. 

Tyron Hyde: Question number six. So you’ve just turned 50 and you’ve got no money, but recently inherited 500 grand. What would you, how would you spend it or what would you do with it? I’m thinking with you, it might be co-living.

Ian Ugarte: Yeah, but it has to. You have to manufacture growth. And $500,000 isn’t gonna give you. So you’re at the age of 50. Right. So I’m now 50. I can’t remember. 52, I think. So I’m at 52. Right. So interestingly enough, we just finished a deal with $480,000 at a starting price. All right, so 500,000 including the stamp duty. So we bought a block of land, had an old house on it, we subdivided that through a quick pace subdivision. So there’s fast track subdivisions. You can do that. Turned, we spent 60k on that. That turned it into two blocks of land that were worth $760,000. I think we refinanced on that 760. We built two duplexes on each one. So we’ve effectively had four townhouses side by side, each one of them being co-living. Total deal cost us 1.45. The end value was 1.8, which meant that I could refinance and get all my money back and still have near $500,000 in my bank account with a yield of around 10%. That will then mean that you can go and do the same thing over and over and over again. So manufacturing growth is one of the most important things if you want to be active in your property investing, to be able to continue being able to do what they call recycle your money, get into the next deal, get into the next deal, get the next deal.

Tyron Hyde: All right, question number seven. If you go back in time, what would you tell your 20-year-old self about investing?

Ian Ugarte: I would say take less risk. And I take my brother and myself as an example. My brother’s nine years older than me. He has about the same amount of wealth as I have, but he took zero risk to get there. And I took risk everywhere. I lost money, I made money, I became unhappy and, you know, so I would say do less risk. If I had my time again, I would still take the risk because I couldn’t do what my brother does. And that’s because my life would be boring and I can’t be boring.

Tyron Hyde: So how did he get there without any risk?

Ian Ugarte: He just bought investments that were absolutely securely positive. He owns a $10 million house in, well, it’s probably worth $13 million in Little Bay. Like, he just took very little risk. And even buying that block of land in Little Bay was high risk for him, it was low risk for me. But he’s just bought investments that do well and they’ve grown in capital. But he’s worked, he’s worked hard and so have I, but he’s just worked and got to the point where he’s got to and you know, good on him, but like I said, two very different personalities.

Tyron Hyde: If you like this podcast, don’t forget to subscribe. And if you do and you leave a comment, send me an email to tyron@washhingtonbrown.com.au and I’ll send you a couple of my books for free. 

What legacy do you want to leave your family or your community?

Ian Ugarte: So when we started Invida, well, it was actually used to be called Small is the New Big. When we started Small is the New Big and Invida, we had a goal to produce 1 million front doors by 2027. And earlier this year we sat in our business meeting, our yearly business meeting and in our planning we worked out that we hadn’t achieved the million doors but someone in, our GM spoke up and said just one second Ian. Like, we never specified how that was going to be achieved. And in 2009 you individually went out, created the skill set, decided that you wanted to do something different in the community and started teaching people how to do co-living. And whilst you created competitors in the marketplace, it’s now the new buzz strategy going around in the country. And if you tallied all the doors that people have now been putting up with all the businesses, whether there be sharks or not in the industry, you’ve created the 1 million front doors. Solely because of your advocacy work and your education work and the fact that you brought this to market. 

So my legacy in a way has already been fulfilled, that I know that I’ve changed this marketplace and now the next step is we’ve got something big coming. There’s something happening in our industry that we’re next to move on. And that’s advice from Steve that you know, when a marketplace becomes flooded with competitors like ours is now, you can hold your integrity and values but they go out the window because no one really, everyone just wants returns. So you need to reinvent and do something new.

Tyron Hyde: Because I get them in my feed all the time on my Facebook feed and it’s like, you know you can get 20% yields. Is it all just a load of crap?

Ian Ugarte: Oh, 21% yield. I know the ad you’re talking about. 21% returns. Come on. Like I reversed engineered that deal and you would have to buy a block of land for $175,000, build a nine-bedroom co-living property, rent it for $350 a room in an area where you wouldn’t be able to get $225 a room. It’s just absurd. Like it’s just so ridiculous, you know. And the problem is it’s the people that sold the NDIS and the SDA products that have, have hurt investors are now moving into co-living and it’s, you know, take, you can take a bucket of fresh water and pour it into a septic tank and that fresh water is not going to stay clean. And that’s how I feel about the market and I’m really downgrading co living. So I suggest that if you’re going to do co living just at least Don, I don’t need your business but come and talk to me first so at least I, I can tell you what to watch out for. That’s the most important thing.

Tyron Hyde: Is there any institute in this industry?

Ian Ugarte: I was halfway through, I was in the throes of creating the association so that we would have members that would only sell stuff that was compliant, legal. And in the end I just, I’m going toa be it. It’s sort of like trying to control a lion with a, with a piece of cotton thread. I just can’t do it. It’s too hot.

Tyron Hyde: So what should people look out for?

Ian Ugarte: They should look out for, making sure that no salesperson is telling you that this is a three-bedroom model and if you put three people in here, you don’t have to legally be compliant as A1B dwelling. A1B dwelling is the type of building classification that you’re required to have co-living. And as soon as someone starts giving you returns that seem unrealistic, you need to be asking questions. So is it 1B compliant if it’s less than three bedrooms, I still need it to be 1B.

If it’s being sold in a greenfield estate, do you know how many other properties are being built by other builders in the same estate? And if the answer is I know the developers only selling land to us to do co-living, you need to run a million miles. If you’re getting returns above 12% gross, you need to start questioning whether that’s true or not. And like, I’m seriously, I’m happy for you to put my phone number on this podcast, my personal phone number, because I will take phone calls from people to protect them from going into a deal that’s going to hurt them. Because I don’t want people being hurt. Investments, they should be putting them in a better place, not in a worse spot.

Tyron Hyde: I love your passion always. And we will be giving links down there to you. And I think, I think the quickest warning sign is yeah above 12%. Right. Like, really, where do you get that property? I think that’s got to be the clearly obvious warning sign.

Number nine. What does success look like to you? 

Ian Ugarte: Well, I think we talked about success. I think having a. Having a family. You know, the most important thing about success is that you want a family that wants to be around you. You’ve got time, you’re wealthy, so you’re not rich. You don’t have a lot of money. But sorry, rich being, you have a lot of money, but you want to be wealthy. You have a lot of money and time to spend it. And I often go back to a nurse who worked in palliative care for 40 years. She wrote a book and she wrote down the. She would always ask people that were willing to talk to her, what are the things that you regret on your deathbed?

And it was never, it was never, I wish I would have spent more time building a business. So I should have done that business. It was always, I wish I would have spent more time with my family. I wish I would have done more holidays. I wish I would have spent time with friends. Those are the things that on your deathbed you’re going to regret not doing. And that’s my definition of success. Doing the things that when you get to your deathbed, so you don’t regret your life.

Tyron  Hyde: Love it. Final question. Now, this is why I started this podcast. Because my father lost, I’ve seen, when I was growing up he lost all his money. So. And I’ve done all right over the years. So I wanted to ask you this question. So Warren Buffett is quoted as saying, rule number one, never lose money. Rule number two, never forget rule number one, how do we not lose money, Ian?

Ian Ugarte: Let’s go back to the quote that when we started Small is the New Big and Invida it was, it needs to make that. The quote we use in the business is it needs to make sense before it makes dollars. But it has to do both, right? So if I go out to do a property deal, the first question we ask in this business is is it going to help the community first and secondly, is it financially viable? Because if it doesn’t do both, we don’t do the deal.

We can sit at the, we can sit on a couch and watch Oprah and reruns of Jerry Springer and go broke. We don’t have to go out and do property deals, right? So for me it’s making sure that it has financial sense. Now I’m really passionate about not using the word passive income. I don’t believe that passive income exists. There is no income in this world that comes to you without you needing to do some sort of work. So positive cash flow. Absolutely. Passive income is a furphy, right. So for me it has to be positive cash flow. If it’s not positive cash flow, then don’t do the deal. Because there’s a saying that an accountant mate of mine says, I have never seen anyone retire on a negative cash flow portfolio. It’s not possible. Not possible.

Tyron Hyde: Yeah, I love that. Good segue then. All right, there’s one bonus question I always ask and for you it’s a good one, we’ve been thinking about this one. Okay, the bonus question is if you were housing minister for a day, how would you fix the housing crisis?

Ian Ugarte: If I was stuck in an elevator with the Housing Minister and Planning Minister for 30 seconds, I would say exactly this. You do realize that 80% of the marketplace that’s looking for rentals right now are singles of couples and 80% of all new developments coming onto the marketplace are four, five, six-bedroom houses. To fix this marketplace, you make it easier for the investors who destroyed this marketplace to create more front doors by doing co-living. Create the pathways, the investors will fit into these pathways and by default you will have a fix to the housing market quicker than any funding that the government can put together. Do it now and I’m on your side.

Tyron Hyde: That was wonderful. You’ve thought about that before.

Ian Ugarte: I’ve said to many of them, they’re not good. They’re not good listeners. That’s the only problem.

Tyron Hyde: Oh good. Well that’s been fantastic. Thank you for being on Ten with Ty. We’re going to put all your links up there and stuff on the show notes and and best way, what’s the best way to contact you?

Ian Ugarte: Invida.com.au as opposed to Nvidia the multi processing company that would be billion of dollars worth and I’m absolutely, honestly don’t care if someone wants to call me and I think we’re going to get more than 30,000 downloads. 0419-669-319 you can call me anytime and just make sure that when you do send a message to Ty that he’s reminded that my fastest marathon time was in Berlin at 03:23:17 which was way quicker than Ty.

Tyron Hyde: I was sick! So we did do a marathon together but I was sick and that’s all I’m sticking to. Thank you very much for reminding me every time I see you. 

Thank you very much for listening everyone. And look just a quick note. Thank you. It is right, we cracked, the last little episode cracked 20,000 downloads. I can’t believe that. Which is pretty amazing. So we’re going, that’s our goal to beat this.

Thank you, Ian. 

Ian Ugarte: Thank you. 

Tyron Hyde: Now before you go Ian did speak about some struggles that he had in his life, some ups and downs of his career and if this has raised any concerns for anyone please contact Lifeline 131114. 

Ten with Ty is brought to you by Washington Brown. The property depreciation experts.