Inspire & Inform Show – Episode 14

In episode 14 for the Inspire & Inform Show Colin Lee shares this two most important lessons that he has learnt since beginning his investment journey more than a decade ago.

Please see below for the full transcript of this video

—

Transcript:

Colin 0:02
Hello, hello, I think I’m live. Well, good evening everybody. My name is Colin from Inspire Realty. I’m the founder and CEO. I we’ve started this live show for quite a number of weeks and months now we’re on episode 14. And I just wanted to share today on this show, two of my big lessons that I’ve learned since I’ve started investing over 10 years ago. So I wanted to share that with you. But I just wanted to say that I’m thinking about our friends in Victoria at the moment. And everywhere around we’ve got friends all over the country. It’s not been easy for a lot of us. I’ve I’m still talking a lot to a lot of my clients at the moment and giving a lot of assurances to a lot of my clients about their investment. And that’s what I wanted to share today is just some of my big learnings and I hope you take a leaf out of today’s presentation in life, which we’ll be posting up on our website as well. What I wanted to say before we get started is obviously this is, by general in nature This is does not constitute any professional advice in any way. If you wanted to go down into more of the numbers, please seek your financial advice for that.

Colin 1:27
And But anyway, I wanted to share with you a story. So my family and I migrated to Australia just after the Sydney Olympics. Actually, we didn’t quite make it for the Sydney Olympics. My family and I decided to pack up all our bags, sell our house, say goodbye to all our friends. It was very tough for for my parents, you know, having grown up in, in Malaysia all their life. I was only fairly young at the time. 19 so that tells you how old I am. And we packed everything up. We decided to sell the house that we had and decided to come to a better country and we, you know, thankfully my mom and dad decided to choose Australia to come. You know, my mom had a brother here and my dad had a brother here as well. So it’s kind of made the choice fairly easy for us. We could have gone to Canada, we could have gone to New Zealand. Those were the two other choices that we had. So when we arrived in 2000, I was still a student nails. I started University doing a electrical engineering degree. And my brother was two years younger. So he was you know, just about to, to get started. And I’ve got a younger sister who started school. And when we came both my parents had fairly good jobs in Malaysia. My dad was a banker, and my mom was doing a lot of lecturing for law. And she was you know, doing working with a local university, which which twinned with a with a university in Melbourne. So we thought with all of that It’ll be fairly easy to come to Australia and get a job and you know, settle down. But it

Colin 3:07
took my parents months and months and months before they could, you know, get anything. In the end, my dad didn’t end up becoming a bank managers, his he, you know, is most qualified to do and my mom got into, you know, an administration role within a law firm. And it was very difficult at a time for our family. I mean, we had to drop our living standards and kind of really started from from scratch again. We had some money from the sale of our property in Malaysia. So for two years, we found it really difficult to buy any property at all because both my parents didn’t have a job. And I and I started a part time job. I actually was working two jobs during my university. Three of you considered, you know, you’re running my own little side business as well. And it was tougher. We’re just trying to make money where I can but fortunately after two My parents had some track record with a work. And we were able to get a loan for a property. And it was just for fortuitous, I guess that my uncle lived in baulkham Hills. And so we naturally gravitate, gravitated to baulkham Hills. And we looked around for land. Not sure if you know baulkham Hills or the hills area, the hills area is is very well established and big homes. So it was very hard to find any brand new properties, not that we specifically wanted brand new properties, but we looked for months and we couldn’t find a property that suits you know, our lifestyle. We You know, my mom and dad had three children. So we needed at least four bedrooms or five ideally, and it was hard so so we kept looking. And finally we found this plot of land. It was a cul de sac. And it was a very big estate they subdivided into about nine lots and being Chinese Malaysian, we chose Number eight. So what you can see here is a house and land actually was a land that we first purchased. And then we got a project home built on it. So the address of the property is eight, McBurney place baulkham Hills, you can certainly look that up on realestate.com. We decided to put a five bedroom or brick house on it. three bathrooms was about a 950 meter square land. So in 2002, we bought the land we paid a deposit on the land $250,000 and then we got a loan to build a property 260,000 so all in all, we invested plus them, Judy, plus legals plus everything, we would have paid about 535 plus miners for the property. So in 2004, when the property finished early 2004, my family younger siblings, all decided to move in the property. But just out of curiosity, I’ve looked at the property in 2004, and it’s already gone up by about 50 Thousand So, you know, it was two years and it’s gone up a little bit, obviously a time of settlement, we had to do valuation on the property. And we were quite excited that the property has gone up in value. So this was our little family home, which I was paying a bit of rent to live in there as well, you know, helping my parents to, to manage this loan. So anyway, the long story is that, you know, I moved out and my brother moved out and my sister moved out and all of a sudden the five bedroom house became a little bit too much for my parents to look after. I don’t know if you can see the trees around the property. We can’t cut them down. It’s it’s illegal by the Council. These are very well established trees, but the trees were well lit physically on top of our property. And so every, I guess, three to six months, we have to do a massive cleanup. And you know, I kind of remember climbing up on the roof and you know, I did a lot of rock climbing. When I was little, and I would attach myself in a harness and rope, I don’t know why I did that I would never do that again. And I would literally be going around the gutters and cleaning up the leaves. So I couldn’t imagine my parents doing that. And there was a massive driveway a massive backyard as well with lad. So it was getting a bit too much and we wanted my parents wanted to sell it, we wanted to sell it, you know, back in 2010, and then 2012 and I went to a property seminar and one of the things I really took out of it was that never, never, never sell because properties grow in the long term. And it was it was a throwaway statement, which I thought yeah, okay, well, I’m gonna share that with my parents. So that kind of started my investment or property journey I started with very curious about property. And unfortunately, in 2014, when my younger sister moved out and you know, we were all not home and it

Colin 7:56
it was sort of like the the straw that broke the camel’s back. My mom said, you know, no, we got to sell the property and we wanted to buy a property. You know, that’s, that’s totally unencumbered and we just want to live and retire and, you know, some downsize really, so they don’t have to look after the property. Anyway, long story short, they sold a property in 2014. So that’s about six years ago, and sold it for 1.2 5 million. And with that money, they paid and bought a property out in up north shore. And, and they’re living there since then. But I’ve just looked back in history, and in that 10 years, or remember, we settle it in 2004. And then in 2014, we sold it for 1.25. Maybe we got lucky but we bought it at a fairly good time, but we made $715,000 so in that 10 year period, that probably more than doubled. So you must say that’s a that’s a pretty good outcome. I mean, you know, we we timed it to the best of our ability and to be quite frank. My parents lived in there for for a couple of years before they moved out on their own, and and so two years ago, I, you know, I just I was driving around the area, and I kind of looked at it again. And I said, I wonder how much this property is valued today. And that property is valued at 1.6 5 million in 2018. Obviously, with with COVID, and pandemic and all this that’s happening, I just recently looked at the, you know, valuation on the property, and we could get anywhere from about 1.3 to 1.5 million, let’s say it’s 1.5 million. Because I really think it’s a really good property. And there’s just really very few comparisons of the type of property that we’ve got there. It’s harder and harder to get land in baulkham Hills to you know, nearly 1000 meter squared. But I was just looking so even if we even if we held it on for another four years, five years, six years, let’s say we would have made an extra 250,000 today in a space of six years if we hadn’t sold that property. So that was one of our biggest revelations. That was one My biggest mistakes I’ve made, you know, in our property journey we could have, I don’t know how many people can save $250,000 in six years. But that’s certainly something that has happened in this property. So what I want to show you now is is just a quick snapshot of how properties have fared in Sydney in particular house prices. Over the last, say, 2022 years, you may see that this stops at 2018. But I’ve got the latest figures in the next slide. But if you rewind time back 20 years ago in Sydney, and that was around the time when we came to Sydney about 2000. The median price of Sydney properties were 276,000, that’s 22 years ago. And then it grew at quite a rapid rate. I think it grew by about 10% capital growth rate, it’s pretty significant. And then obviously plateaued from about 2003 ish 2000 to 2003. plateauing Quite for quite a while 2008 You know, there was a bit bit of a dip, but call it you know, 2008 535 as a medium price, so between 1998 to 2008, in that 10 year period, probably grew by about 6.82%. Now, I’m not sure if you know the law of 72. But basically, if anything grows at the rate of 7.2%. And basically in 10 years, that means that investment would have doubled. So it just was shy of doubling its value. So that’s 2008. We actually I looked at the valuation in 2008, on this particular property on a 620,000 in 2012, which we nearly sold, by the way this property and we lucky we held it for another two years, but that valuation was about 880, we could potentially get about 950 for that particular property. And, and so then you look at the last 10 years from 2008 ish 2010 until today, the average growth rate is about 7.6%. So that’s over double. So Sydney has kind of really run away in terms of its capital growth rates. So that’s what’s happened to our property. And then and then you look at today. So I haven’t had a chance to complete this graph. I wanted to do this presentation as quickly as I could. But in today, so back in 2019, that’s last year, the median price of Sydney house was at 1.142. So that was a slight increase from the 2018 median price. Not surprisingly, I think Sydney has always done well, but it’s not grown as fast it has in the last 10 years.

Colin 12:38
In 2020. The prediction is that it’ll be at 1.25 or sitting at about three to 5% growth from 2019. Look, this may not be you know, totally accurate. We’ve still got you know, three or four more months before the end of the year. But you can see already the trajectory of you know how Sydney property prices have fed it. over the long term. So I get a lot of questions. One of the main questions I’ve been getting from a lot of homebuyers, I work with a lot of first home buyers at the moment with all these rebates that are going on. And you know, some of the kids and the children of clients that have invested with me in Sydney, by the way, you know, 10 years ago, they’re very happy in the happy to play guarantor or be guarantors for my first home buyers. A lot of first time buyers are able to do it themselves as well. So you don’t necessarily need a guarantor. But I am getting, you know, really good feedback and just very grateful that kids now are starting to, I would say kids, but they’re in the 20s now are starting to get into the property. They’ve been holding off for a while. But with all these rebates, I just find myself naturally gravitating to working within that market, which I’m just so grateful for. So so that’s been that’s been a big, relevant revelation for me and my clients. And I just wanted to just share this particular slide because this is the very slide that I showed With my clients as they look, you know, property prices, you can never predict it. And I don’t try to predict I get so many people that say, Oh, yeah, the property is going to do well over this period and appear and they try the best to try and get the timing right. Now, I wish we all had a crystal ball. I haven’t seen one person who’s been able to predict in the short term how property prices would fare. I mean, you got all these people that say probably prices will go up. But then pandemic hitting, it’s plateaued. It’s not grown as quickly as it was. And then there’s a whole bunch of people that said property prices will drop 30 to 40%. Just in the last couple of months since COVID hit Sydney I think has only gone You know, single digit drops at the moment in terms of property prices. So I don’t think it’s as bad as it sounds. But I want to just justify that and just share with you why I think that that’s the case as well. Before I go into that, by the way, I just wanted to show you Melbourne as well because when I’m looking at helping my clients bill, a property portfolio. I don’t just look at one major capital city I look at all the major capital cities, I study them, I see how they go. And I try my best to to get some level of timing right. But that’s not my main goal. My main goal is, you know, to share with them that it’s about how long you hold the property for it’s about timing the property versus trying to get the timing right. Having said that, you know, there’s no harm in doing a bit of research and finding out how property is fared over the long term. Melbourne has gone up a little bit, I think with the latest restrictions with Melbourne, Victoria, I think that is going to show a slight dip that’s already showing that Melbourne prices are dropping a little bit. So that’s Melbourne and Brisbane, Brisbane, it’s been been coming up fairly recently 2019 2020 I think Brisbane has one of the smallest drop I think point one or point 2% in terms of its its capital growth. So it’s relatively small compared to the other major capital cities. Starting to look at Canberra as well, at the moment, I think there are some really good opportunities in camera, they’ve got very, very low vacancy rates. And Canberra I think has only been one of the very, very, I think the only capital city that has actually increased in price since COVID. So I’m starting to watch Canberra quite closely to look at some opportunities there. And hopefully, I’ll have that soon to present to some of my potential investors. But my big lesson, my one big lesson, if there’s one thing I hope you can take away from this particular video, is that property is a long term investment. It is you can’t, you can’t buy property and and keep it for the short term and expect to make a lot of money out of it. There’s no such thing as a get rich quick scheme. And I’ve learned the lesson the hard way. If you try and pick the market, right? Then you you have the probability of making mistakes, you get lucky if you hold on to the property. Let me just show you what’s happening. You know I’m always very curious. And I love research. I just looked at the median historical prices for property from 1980 to 2019. We haven’t got the 2020 20 figures at the moment. So I can only show this to you. But this is what’s happened to us in the in the City Market. But I mean, I’m showing you the three major capital cities. When I was born, I’m giving my age away. I was born in 1980. And the median price of Sydney properties was $68,000. And you believe that 68,000 I wish I bought a property when I was born. And

Colin 17:37
there were a number of events that’s happened over the years between 1980 obviously, it’s 40 years until now, but when I saw this graph, I’m a little bit more short, that property is a long term investment, and you’ve got to hold it to your best ability for as long as you can. So I got to be curious, I said, well, let’s look at what are some major events It’s happened in in our Oh, I just realized you couldn’t may see really the the slides very well, my apologies for that. Hopefully you can see this one here, or just have to zoom in. What I wanted to show you here is a slide that I that I put together just in terms of the long term viability of properties and some major events that’s happened over the last 40 years. So like I said, 1980 I was born 1987 there was Black Monday, some of you may or may not remember it. And then there was the Asian financial crisis in 1997 2000. I think everyone was the y2k bug in the.com bubble, and everyone talked about property prices and the world economy, you know, you know, just suffering. And then and then 2001 you know, September 11 happened, you know, terrorism and all that started to happen. Again, if you look at how resilient Sydney and Melbourne and Brisbane probably Australian property prices in general, it’s been very resilient over those really difficult times. 2003 that was a, you know, Iraq war and there was a slight dip. But 2008 This is the one that’s quite surprising. In 2008, the Great Recession This is where I wish I bought, you know, a few more properties because, you know, there’s a saying that goes get greedy when everyone’s afraid, by Warren Buffett, not not that I’m suggesting you get greedy, but when everyone’s thinking I should I buy Should I not buy, obviously you got to be making informed decisions. I just feel there’s some really good opportunities now for a buyer to get a good deal to get a good bargain. To You know, it’s a buyers market so you have the opportunity to negotiate. And also finding a lot of sellers now are starting to become a little bit more realistic with their prices. And I’m also finding a lot of developers are willing to sacrifice a little bit of margin to make it work for the buyers. So it’s a win, win for For for a bias now. So I wouldn’t go past and I think there’s some really good opportunities in this market to get a good good property a solid property that would, you know, fair for the long term, but 2008 the Great Recession. Okay, so overall the property prices did for a little while, but he kind of came out of it pretty quickly. 2009 The European debt crisis in Greece was happening, and then there’s the earthquake in 2011. Anyway, you get my juice, you know, we’re in 2020 now, and COVID hit in Yes, you know, property prices have suffered a little bit, but the fundamentals of property is still there, you know, it’s all about supply and demand. There’s, there’s just going to be demand people, you know, the population is growing, we may not get population growth as fast as we we have had because of international migration, but there’s still natural population growth. And we can’t forget that, you know, because, you know, for the for many years, there has been a lack of supply for properties in some of our major capital cities in certain suburbs. So I think you’ve just got to make some educated, you know, choices about where you buy as well. And that’s where we come in, you know, we, I, I’ve bought a lot of properties that I have recommended my clients to purchase, I walk my talk, and I show you some examples of some of the properties that I’ve purchased, made made a number of mistakes and not proud to say, but I am an advocate for not having to sell. But I’ve had to sell a couple of my properties, just to be able to make it work for myself. So even I’m hit. So that’s without a doubt, but I’m very confident that in the long term, the portfolio of properties that I have will will do well, eventually. And some of them have done really well already Anyway, you know, so,

Colin 21:46
so, in the long term, yes, absolutely. I’ve kind of found this out. You know, when I was looking around and back in 1980, this is just the major capital cities, other capital cities in Australia. Let’s not forget Adelaide, Perth. Canberra and Hobart but you can see the long term growth potential of properties. Sydney is a little bit of an outlier. I think it’s starting to correct but I definitely see it you know, Sydney is a solid investment. And Brisbane has just got so much room to growth and so much potential so there’s Adelaide, I think Adelaide is flat at the moment. Canberra like I said, I’m watching very, very carefully, Melbourne, I’m a little bit unsure but I’m sure if you you can get some pretty good deals in Melbourne, I think with the lockdown with Melbourne. A lot of people, sellers are willing to do deals and there’s certainly some good, you know, opportunities from an off the plan perspective as well in Melbourne that you can certainly look at. Just wanted to share before I conclude, these are just a few of the properties that I own. It’s a mixture of different cities in Brisbane, Gold Coast and Sydney and apartments high rise as well from some award winning developers Way to fairly boutique style, a, you know, unit type blocks, you know, fairly fairly unique, unique, and obviously some land. One thing I’ve learned is you, it’s always a good idea to try and buy as much land as possible. But, you know, with the amount of land taxes that you pay in maintenance, there’s only so much land you can hold because generally speaking, the yield is a little bit less than your townhouses or your apartment locks. So for over the years, I’ve made some pretty good you know, choices in investing in property. I’ve learned some big lessons. Like I said, I’ve had to learn some hard way and sell some you know, a couple of my properties just to be able to make it work. But all in all, I’m you know, for migrant that’s arrived in Australia 20 years ago to be able to build a portfolio of properties and I’m not a genius, I you know, for me, I just wanted to retire and my main reason for purchasing properties is just so I have, you know, some assets that that will, I know will go in the long term that will eventually turned to passive and something I can retire on fairly comfortably and provide for my family as well as a young family. So I want to make sure that I prepare my next generation and my parents has always said, you know, property is the way to go. So, something I’ve learned is, you know, invest in a long term. And so if you want to have a chat with me, or any of my team members about how this all works, how do you get from, you know, your first property to your second tier third, obviously, all that is in the mechanics, but I’m happy to share with you my own story, and the many stories from my, from my investors, we’ve got about nearly 85 five star Google reviews at the moment as we speak, and these are you know, some clients that I’ve worked with and people I’ve worked closely with for over the years and you know, please go check them out. You know, and and give us a call or email us visit WWW dot inspire realty.com and fill in your details to booked for a 45 minute consultation. It’s obligation free. I’ll have a chat with you to see if this would work for you. And we can go from there. The second big lesson that I’ve learned before I finish off is please know your numbers. When I invested one of the biggest, I wouldn’t say mistake, I think I got lucky that I was able to get a lot of loans across the line. Some of them I wasn’t prepared for and I’ve had to fork out quite a fair bit of money out of my savings, which I wasn’t quite prepared to use for for property and put all that into into my property portfolio. But you’ve got to know your numbers. And my recommendation is to speak with a finance broker or mortgage broker to work out what your borrowing capacity is, how can you a good broker would walk you through your property strategy and just talk about your goals. What are you trying to achieve, and then kind of work backwards from there. So here’s just some, some ideas on what you should do. You know, from a finance perspective, not not afraid to share that. I’m also So finance broker and I don’t do my finance for a lot of my clients, sometimes they use their own brokers which is fair enough. So but I I’m able to give, you know, finance and property, you know, tips and strategies and combine both property and finance together, which I think is a really good combination. But these are some of the things I would recommend that you start to think about. You know, please know what your taxable income is, it’s it’s interesting how many times I speak to a client and they don’t even know how much their taxable income is, and how much taxes they’re paying, which is really interesting. So know how much taxes you’re paying and see if you know building your property portfolio can help you minimize your tax or maximize your your your, your your taxable income,

Colin 26:45
your household expenses, more and more. I see banks these days really taking notice of how much you spend, and so they’re needing your bank statements. And so keeping a budget keeping a spreadsheet on how much you spend on your education, you groceries, your transport your insurance. All that is very important because when you go to the bank or lender for a loan, you already have all that and you’re able to provide that for the lenders, your borrowing capacity. Obviously, this is a little bit hard to work out. But that’s why speaking to a broker would really help. I just had a client who went to a bank directly, and she went to two banks, believe it or not. Now, can I just say like, it’s okay going to the bank. But if you’re rejected, if you if you’re rejected by a bank, or every bank that you go to, and you do you do a loan application, it’s actually a credit inquiry. And you may not think that that’s big, but in the end, it goes against your name. So I don’t do a credit inquiry unless I’m very confident that you’re able to get a loan and then we go through with the pre approval process. But what I’m finding is clients that they go to the bank directly, they they try and get a pre approval on that bank, they may get knocked back. And so that is against your credit file. So you just got to be mindful You know, I think, you know, whether it’s me or another broker, I think, you know, speak to a broker who earns the Commission’s from the banks anyway. But they have access to 4050, maybe 60 lenders that they can have options for, and they’re going to be able to find the right product for yourself. Please know your interest rates. You won’t believe this. But it’s true story. One of my clients is paying about 4.5% interest at the moment on their unoccupied property, and that’s, you know, that’s you can get as low as 2.19. And I just did a refinance, one of my clients, who was on 850,000 was unoccupied. Paying about 3.27 in interest and managed to refi to about 2.19 that we worked out is about $1,030 in savings every month. Imagine how much that is over the year that’s 12 13,000 over the year. Now, imagine if your loan is for 30 years, how much you really save in the long term. So understand and know what your interest rates are, what you’re paying, and then you know, just be curious. say if I’m able to get a better rate 2.19 How much would I be saving a month and I think it’ll be worth your while to look into that and investigate whether you can save some money every money saved is $1 earned as my mentor has said many times, look at your savings capacity, how much money you can put aside every week, you know, for you to save up for your deposit or your whether that’s an investment or owner occupier, value of your properties and value of your assets. Just kind of know what your assets on your liabilities as well. What your super balances are, there are a number of instances where it could be a good idea for you to consider looking at purchasing properties with your super if you want to set up a self managed Superfund. Know how much tax you pay, like I said the overall debt you’re carrying all your liabilities. Also, this is just a little bit of a thing if you already have a property portfolio, know how much rent your achieving and your property. It’s a little bit hard now to increase your rent but you working back Words and for the long term, you got to know what revenue you need to increase to increase your borrowing capacity. So all your income does go towards your serviceability and helps you to get a better loan in the future. So I want to leave you at that just something to think about. If you haven’t looked at your numbers, if you don’t know what your numbers are, feel free to give me a call, or send me an email or jump on our website. And we can certainly work out some of these details for you just know what your starting point is, and you know what your current situation is in terms of your borrowing capacity to see if you’re really in the position to invest at all or buy your principal place of residence. So I’m here to help. Thank you so much for your time, please visit us on www dot inspire realty.com for more information. Thank you and have a good night. Bye for now.