From Zero to $5.4 Million: My Journey to 6 Properties and key lessons

Hey Property Chat fam, welcome to 2024!

It’s been quite the 10 years+ journey since Somersoft forum days – white hairs, a life partner and a kid in tow is my proof!

Throughout the journey, I’ve made a bit of equity, some wins, and of course many mistakes. For me, it wasn’t the properties that were memorable, but the people. I’ve had the chance to become friends with some incredible investors along the way.

I’ve learned so much over the past decade as a property investor so in this thread, I’d like to give back to this amazing community, and start off with:

• The ‘What’
• The ‘How’
• 10 lessons I’ve learned in 10 years of property investing that I wish I knew from the get go

By sharing my own experience, I hope prospective investor that are new to the scene, or mid journey ones can learn something from it – just as I’ve learned from the ones who came before me.

It’s by no means a perfect strategy, although it has helped us generate more wealth than we could from just working a PAYG and bringing the option of retirement a good 15-20 years earlier.

Brief background:
We are a millennial/Gen Y couple, the first purchase was in 2013 and we are now in our mid 30s, with 1 child. Both our parents are 1st gen migrants, who worked really hard and came to Australia with nothing.

A breakdown of our portfolio:
Total # of properties: 6 (5 IPs + 1 PPOR)
Bank val: $5.4M
LVR: low 60s.

Income at the start: approx $65k-$70k p/a, which increased over time.

Timeline of the property portfolio:



Have questions or comments about the process, the properties or anything else? Feel free to ask!

 

When starting out or even a couple of properties in, I’m often asked or hear the question “what’s the most important points when it comes to property investing?”

Here's a visual model of property investing that I have put together based on personal & professional experience, as well as discussions with successful investors over the decade.

The 6 key resources – the black factors are what we want to grow, whilst minimising the red factors.




Borrowing Capacity:

This is more than just the amount you can borrow. It involves understanding how lending structures and servicing limits work for each person’s unique situation and goals.

A well-structured loan can provide flexibility and potential tax advantages, crucial for long-term investment success. It's also about foreseeing how future investments might impact your borrowing ability.


Deposit/Equity:

The size of your deposit or the equity you hold in existing properties can significantly influence your investment journey. Buying quality assets and/or holding/adding value are the key ingredients here to build this, along with time.


Growth Mindset:

Embracing a growth mindset in property investment means continuously seeking knowledge, being adaptable to market changes, and viewing challenges as opportunities for learning.
It's about not just settling for 'good enough' but striving for 'what's better'. It’s about mental discipline which translates to living below your means, looking for opportunities to grow, learning from mistakes and being comfortable with being uncomfortable.


Time in Market:

The duration you hold your investments can dramatically affect your returns. Property investment is typically a long-term game where you get rich slowly. Buying poor quality assets, and selling them too soon will hinder your wealth journey.


Committed Action:

The journey of a thousand miles, begins with one step. Consistent daily actions towards your goals is all that’s needed.
This involves moving from planning to doing. It's about making informed decisions, based on thorough research and analysis, and then taking the plunge.
Committed action means following through with your investment strategies, even when the market is challenging, and not getting paralysed by analysis or fear.


Last but certainly not the least -

Dream Team:

Building a team of property experts — like mortgage broker, accountant, conveyancer, property manager, buyers agent — is crucial.

Choose someone that you gel with and walks the talk. For example, if I wanted to lift heavy weights in the gym, I wouldn’t choose a PT that is out of shape and never lifted or competed.

Especially critical at the start, getting the right team who have your best interests at heart is how you go from good, to great.

My broker was a huge part of my lending strategy, and for that I’m forever grateful and inspired. Now that I’m well into my business journey, I’ve lucked out and have an incredible mentor in the business space where our values connect, but that’s a story for another time.

From a bird’s eye view of property investment and lending, I’ve found these six factors work in tandem to create a solid foundation for success.
It's not just about excelling in one area, but working on all these aspects to create a sustainable and profitable investment journey.

The beauty of it is if you get stuck on one area, you can work on another point of the Hexaflex and then come back to where you were stuck before.

And that folks, is how you get unstuck and keep moving forward.

 

Great work. Congrats!

That's a chunky PPOR making up almost half your portfolio value. How much debt do you have on the PPOR compared to investment debt?

 

Timing is everything

 

Yeah it's a big boy PPOR, about 40%/60% PPOR/IP debt.

During COVID, we had been rentvesting in a cute 2 BR apartment for while, and had our kid which made things bit difficulty with both my partner and I WFH.

Back then, we were constantly reminded how there were no vaccines on the horizon, this could go on for 10 years etc. This caused us to change directions, as if we kept buying IPs, our PPOR would be out of reach for another cycle at least.

Luckily with the rate cuts we were able to get our own home without selling anything, which was always one of our end goals. It just came a bit earlier than we expected.
It is a hit to cashflow for sure, but having a home that's ours and giving some certainty for kids is hard to put a price on.

Timing is definitely important, but having helpful members like you on PC is just as, if not more important in my opinion as it makes timing just that little bit easier. Still need to get you that beer when I fly over to Perth again!

 

Did you have to go with Liberty or Pepper to secure the PPOR given you had all the IP debt?

 

Absolutely. Nothing beats security for the family.

You need some decent family income to meet the banks serviceability criteria for $3m+ borrowings, particularly when 40% of that is non deductible PPOR debt. Well done.

 

So what is your yearly net cashflow position at current interest taking into account your ppor interest and ips Most likely negative due to the high value ppor as mentioned?

 

PPOR is with a tier 1 lender that we had fixed at <2% rates, in terms of the timeline the PPOR was after 3rd IP, and before 4th and 5th IP.

Good question - when we first started we targeted neutrally geared properties, e.g. $265k purchase renting $330/week in 2014. Costed us basically nothing to hold, which allowed us to hold on even when they didn't do much for a good 6 - 7 years. The 3x QLD IPs are mostly neutral after depreciation even at current rates, rents have increased a lot but I've kept them under market mostly. Going by original purchase price, yield would in the 9-10+% range.

Thornlie is the most negatively geared of all the IPs, as it's a corner development block that will likely be rezoned into duplex or triplex - so bit of a value add play. Costs us maybe $5k/year to hold, but gone up about $100k already. Longer term I'd expect similar things to happen, rents go up, maybe rates go down and holding costs will lower. Cost of business.

PPOR is definitely negative cashflow as it doesn't generate an income - but it does generate some good feelings that you can't find living in a dingy 1 or 2 BR apartment with a child. No noisy neighbours partying at 3am, no strata, no rental inspections...also CGT free in the future.

We do plan on debt recycling the PPOR to make further investments.

 

That is a great info share @Justin_Z – and knowing you personally I can sure say this is fairly typical that is you’ve been very humble in sharing your story and the transparency around your numbers.

You’ve always been happy to help others. I can see this personally and professionally, both in your prior working life and current working life as a broker which is a really great approach to have.

I noticed that your humility has meant you have not posted up some of more public media you’ve attracted – so I’ll happily share them here on your behalf!

News.com.au feature:
https://www.news.com.au/finance/rea...n/news-story/3c878bf7454230c6e27824caa0a96804

Pizza and Property (great topic- on reflection I've nailed this one haha):
https://www.pizzaandproperty.com/po...-your-partner-a-financial-fit-with-justin-zhu

 

Is there anything you would have done differently with the knowledge you have now

 

From a purely financial point of view, like most investors with the benefit of hindsight, I should've believed in my own research and bought more in Logan.

After the first 2 IPs didn't do much for several years, we were hesitant about buying more because of thoughts like 'what if I got it wrong?' 'What if it stays like this for another 10 years'?

Having said that, in between IP2 and IP3, I managed to do a lot of traveling with my partner and friends. We went to around 17 different countries around Asia, US and Europe including having our wedding in Santorini with friends, so no regrets there.



No way we can do it these days with the commitments that our friends and I have (kids, families to look after, less energy etc), the memories we made are priceless!

By the time we got that out of the way, our first 3 properties had grown in enough equity to roll into IP3 - and bought again in Logan after looking at other places and chatting to other experienced investors. The numbers were just too good.

So yeah, if you're all in property, back yourself and buy where the numbers make sense.

 

Haha thanks Rick, wild times last year with the news article. Didn't think our story was all that special, quite a few investors I've worked with have done even better.

 

amazing journey, thanks for sharing! super cool thta u built up from a very modest income.

Question - why dont u sell some of the ones that doubled/triplled in price to get ppor debt reduced?

 

Thanks for sharing. Congratulations on your success and marriage

 

Thanks for sharing, great write up. What's the next move?

 

10 lessons I have learned in 10 years of property investing

1. Property investing is, on the surface about acquiring properties. And to a certain degree it is. Let's say you hold $2M of properties and if it doubles, you have $4M. Holding $4M of properties, and if it doubles you now have $8M.

Now with benefit of hindsight, properties disguise what the hidden game is – and that’s lending.
Investor’s 2 main resources are borrowing capacity and deposit/equity, which chops and changes over time.

Getting the lending plan and structure right based on these 2 ingredients is what can separate 90% of Aus investors who have 2 or less properties, to those who have 3, 4, 5, 10, 50+ properties. Many people stop when the tier 1 lenders say no, which can really stunt your growth in the acquisition phase.


2. Timing the market
This is where you look at entering markets that have indicators and numbers to suggest growth will occur. I call this value investing, as not all areas move at the same time, there are markets within markets.

Simple example:

Area A: has just doubled over the past 3 years.
Area B: is still below previous all time highs, with demand > supply

Whilst there’s no guarantee of either going up, I’ve found going with B has more upside reward and less downside risk compared to A. Lately, Perth has been a great example of this - by buying in Perth when we did led to much larger cap gains than if we invested in virtually any other state. And that was all due to paying attention on this forum and speaking to investors.


3. Time in the market
Property is a marathon, not a sprint. Generally speaking, the longer you hold a good asset, the more compounding does it’s magic. See the last 30 years of property below:



Understanding market cycles and having the discipline to hold properties through these cycles can lead to significant capital growth. Like I mentioned previously, our first 2 IPs moved slowly for the first 6 years, then in years 7 and 8 they doubled.

Purchase properties that allow you to hold long term without losing sleep at night. On which market to buy in? No one has a crystal ball, but you don’t have to invest in your local neighbourhood or city. Often, the best opportunity is in a different state, depending on it’s spot on the property clock.


4. ‘If you want to go fast, go alone. If you want to go further, go together’ – African proverb I love that highlights how property investing (among other things in life) is a team game.

If you’ve ever watched Formula One, you know that the driver is only a piece of the puzzle. Similar in property, it’s often a game of finance and picking good spots to buy. Both are better done as a team that you’ve done DD on, and get along with. My broker was a key piece of this puzzle, and other investors who have skin in the game was another key part.

5. How do you deal with uncertainty?
When you’re driving through the darkness, you can only see as far as the headlights shine, but you can make the whole trip that way.
Focus on what’s in your control, allow room for uncertainty. You are more resilient than you might think.

6. Wealth is more about behaviour and beliefs than income.

The book ‘The Psychology of Money’ emphasises that the key traits to financial success is: frugality, patience, perseverance and discipline.
We can accumulate wealth over time regardless of our income level. Countless examples from PC members on this forum. Some helpful books that have influenced my beliefs in property investing include Margaret Lomas, Jan Somers and Mindset by Carol Dweck.

Some beliefs that are unhelpful in the property investing space during the acquisition phase:

• "Rates is the most important thing"
• "What if it the market crashes?"
• "I've missed the boat"
• "Debt is bad, I'll invest when I pay my PPOR to 0"

This leads to the next point…

7. Persistent action and perseverance: whilst having the correct mindset is needed, translating it into committed action is needed.
Actions I’ve found helpful:

Networking - talk regularly to other investors, find a mentor, push your comfort zones, and don’t stop educating yourself.
Make a plan – failing to plan, is planning to fail. Make sure the first steps are realistic, and the last ones are moonshots.

If you wrote a book called 'My Property Journey' - what would the last page look like?


8. What’s your plan when things don’t go to plan?

Property investing isn’t all sunshine and rainbows. It’s not really that passive, plenty of things will go wrong.
I’ve found focusing on things I can control is the most helpful. Examples include having a buffer account for unexpected expenses, have good insurance policies, and zooming out on the bigger picture has been helpful.


For those who are still reading - next 2 points, not specifically property investment related, but more from leveling up in life.


9. Delayed gratification vs living in the present: there has to be both

It’s important to be able to make sacrifices and to delay your ‘wants’ to achieve your goals. With the nature of property, unless you’re flipping or doing a development, generally speaking property is measured in 7-10 year cycles.

Successful investors generally are able to wait for what they want, and occupy themselves pursuing other meaningful activities whilst their property portfolio grows.

Delayed gratification taken to the extreme is unhealthy. As you and your loved ones age, health and unexpected events can and will happen. I’ve personally come across this in my personal and professional life.

‘Die with Zero’ is an interesting read by Bill Perkins that takes a deep dive into this. We are not guaranteed tomorrow.

This leads me to the next point:

10. Balance – We are all going to die. No one goes to their death bed wishing they had 1 more investment property.

Studies show that on their death beds, people remember their relationships, experiences and how they made others feel. In the game of life, what you should solve for is how to maximise fulfilment, not maximum networth. Property is simply a tool and vehicle to that fulfillment, whether you have 1 or 100 doesn’t change that.

Push hard, be kind to others, and remember to enjoy life before it passes you by. You only get one go at it!

Thanks for coming to my TedX talk.

 

Thank your for sharing your experience/insights.

 

You need to write a book. This is one of the best piece of advice I have seen anywhere!

 

Just on this bit, are you at all concerned about the repayments when the rate reverts back to ~6%+?