Don’t Work For Money, Make The Money Work With Michael Xia

Founder of the property advice and support company the Mortgage Channel, Michael Xia, is a conservative investor with an aggressive portfolio. He will reveal how you can use a safe approach to accumulate more for your portfolio and how to make your money work for you, not work for your money!

Slowly building his success through careful calculation and long-form strategies, Xia’s journey to building a $4 million portfolio of 16 properties will tell how he achieved financial freedom; and how property strategies will evolve as equity limits and buying capacities change over time.

There's only two resources you use in investing. One is how much the banks are willing to lend to you? And the other resource is how much savings you have? - Michael Xia

So to begin with, what do you actually do in any given day?

In any given day it’s probably just working with the banks mostly. Taking client phone calls, working with the banks, having Skype calls with clients mapping out their investment journey. So I mean a lot of people come to me for the investment advice. So I find a lot of clients when they first start out, they’ve got very, very similar questions in terms of where they should be buying, what types of properties they should be buying, what strategies they should be using. So a lot of the time I help them down that process, kind of nut out. It’s definitely not ‘one size fits all’, for some clients maybe one type of strategy works really well, and then for another client it’s a completely different strategy. So we work on that a lot, and then also, on the flip side, I do the mortgage broking side of things, so in terms of the financial aspect how, does that tie in, and how I like to work is actually I get to know your goal, so what your goal is, what you’re trying to achieve, and everyone has slightly different goals. And basically then just map the financial sides of things to reach the goal.

With his own large portfolio, Xia specialises in growing clients’ portfolios by the dozens, rather than twos or threes.

Yeah, so my mortgage business is really kind of just built up through my journey as a property investor. I’ve had quite a few people come to me asking for help in terms of building up their portfolio and that’s what I specialize in; I specialize in property investors that are looking to build up their property portfolio, so you know, people that are looking to grow 5, 10, 15 properties as opposed to just 1 or 2, and those are the types of investors that I specialize in. So very similar to what I’ve achieved, I just help other people to do the same.

Despite this impressive portfolio, Xia doesn’t actually love property itself, but rather uses it as a vehicle to his success.

And then I mean for many it’s like, you know, property investing is a vehicle; you know, like the property itself, I’ve got no fascination with it, but the only reason why I do this is what it can allow you to do. So when someone becomes clear in terms of what they really want to do, then the property piece makes a lot more sense. You see a lot of investors out there, they buy 1 or 2 properties but then they don’t progress beyond that, and I think the key reason for that is they haven’t linked how those properties get them closer to their goals and a lot of the time the 1 or 2 properties that they’ve bought actually don’t take them to their goals, if anything it takes them further away and that’s why they stop. So that’s why knowing what your goal is, knowing how the property ties into that goal is critical. When you can make that linkage between the goal and also the property, then you’ll definitely accelerate and progress a lot faster.

A man of contradictions, Xia isn’t the rapid risk taker that his portfolio would lead you to believe.

I would actually say I’m actually quite conservative. I would say if you were speaking to someone off the street, or maybe just telling them the story; that, look, he bought 4 properties in 2 years and you’re sitting on 16 properties with loans, you know, in excess of over three million dollars, they would actually think that you’re very risky and that you’ve done it very, very aggressively. On the contrary, I actually think I’m quite conservative. Why I say that is, I go through a lot of due diligence checks in terms of what types of properties I buy, I personally only buy properties that I see in person, they have to meet a whole bunch of metrics that I put in place, and only if they cover all of those do I then buy it. So from that perspective, I think the types of properties that I buy, I feel that I am actually quite conservative. In terms of as an investor, generally investing for me is very simple, I just have two rules that I follow for the properties that I pick; one is, it needs to pay for itself, so after all your expenses it needs to be positive or at the very least neutral, and the second one is I just buy as close to a CBD as I can. So I guess if you asked me what type of investor I am, I’m just those two. As far as it fits those two categories then I’m looking, okay sure, maybe I would consider buying that property.

Xia also plays the long game. Rather than the quick buy, renovate, sell strategy, he opts for the safer, and longer route.

Okay, so in terms of that, across the board it would be buy and hold, because I feel buy and hold is what creates wealth. Property’s not an overnight game. I know some people are in the game of flipping, I don’t really like flipping because I feel that that’s active income. One thing that I strive to do is only spend time on creating passive incomes streams, and I want to build up a portfolio where, through from the rent and then also from the increase of the properties, I’m generating wealth without putting time into that. So that’s why I don’t really believe in the flipping business, because you’re bound for time.

In terms of then, you know whether it’s buy and hold, renovate, pull out equity, it really then just depends on what strategy and also what you lack in resources. And we can probably chat about it in a little bit more detail later, but in investing there’s only two resources that investors use; one is, how much equity, how much savings that you have, and the other is how much servicing, how much borrowing capacity the banks will allow you. So whichever resource that you have is limiting, then spend all your time tackling that. So there were times when I was purely a buy, renovate, pull out equity, move on to the next one, investor. There were other times where I was purely buy and hold, but looking for very good rental returns. So I would say across the board, yes, absolutely buy and hold, but the strategy within that evolves over time depending on what your limit in resources is.

As a young Chinese migrant, Xia quickly grew accustomed to the Australian lifestyle, and even fell in love with one of our favorite sports; touch football.

So I was born in China, came to Australia when I was seven years old, came to Sydney, and all my interest were like, you know, Australian interests, whether it was cricket, playing touch football, rugby. Those types of interests, I guess that’s where the Aussie accent comes from. So most of the time I, funnily enough when I came to Australia, I grew up in Eastwood, and those of your listeners from Sydney would know that Eastwood at the moment is a very Asian, Korean, Chinese community but when I started out in Eastwood primary school there was only one other Chinese person in the entire grade. In all of Eastwood, there was only one Chinese grocery store, so you can see how much that has changed. So grew up in Sydney, had my schooling in Sydney, I’ve spent my whole life in Sydney in fact, and it’s only recently – in the last two years – that I’ve moved up to the Gold Coast for business reasons.

Over the years, Xia’s quiet home suburb has followed the rest of Sydney, with house prices skyrocketing to over $1 million.

It’s I mean, you know, kind of looking back in terms of – I mean, we all know that Sydney in the last couple of years has had an amazing growth on the property front. But if you look back through that entire time and I tell people the story, it’s like, my parents bought their first unit in Eastwood for a hundred and ten thousand and sold it for a hundred and seventy thousand and thought they were doing really, really well, and when you compare it to today, like how much the prices have gone up. So yeah, definitely there’s been a lot of changes.

As a young adult, Xia’s goals couldn’t have been further from property investment.

No, I definitely can’t say that I was always interested in investing; I think when I was young my interests were sport, spent a lot of time playing table tennis and also touch football. Touch football was actually one of the main reasons why I got into investing too, because I wanted to have more time to play touch football.  

And then apart from that, I just spent all my youth either playing computer games or card games, so I had no real interest in investing. I would say my parents definitely had an influence. They were always of the mentality that save your money, use that wisely, use it to invest; but their idea of investing is very different to kind of our idea of investing. Their idea of investing was almost buy a house and pay it off. But at least they were kind of pointing you towards the idea that, yes, owning assets was the correct thing to do. So my parents were always in my ear when I was growing up, going, “save your money, when you have enough go and buy a property, but once you’ve bought that property go and save up for another five or ten years then buy another property”. So that was the push that they gave me and they kind of encouraged that, but it wasn’t until a little bit later when I was around twenty eight that I actually found property investing more seriously. Going through, you know reading a couple of internet forums, speaking to other more experienced investors, that’s actually when it opened up my eyes to what’s actually possible in investing.

Prior to property investing, Xia had several jobs, but none that he ever really wanted to do.

Yeah so, went to school, I went to a pretty good high school. Academically it was a very very good school, but I was one of those kids who never knew what I wanted to do. So when I went to uni I did commerce because commerce had a very broad range in terms of what you could do afterwards; but even then, like studying didn’t really interest me. And actually it took me eight years to finish my undergrad degree. So commerce, as you know, is a three year degree, and I didn’t graduate until I was 25. So that entire time I was just really looking for what I really wanted to do and even going through, ever since I was nineteen, I’ve been working full time, and worked through corporate, worked in market research for ten years actually. I was in the corporate world for ten years but during that time I was always trying to discover what I really wanted to do, and it wasn’t until I was 28 and I found property investing that I really thought okay, this was what I was meant to do. So I guess yeah, eventually everyone finds what they really want to do.

The most interesting part of property investing is that everyone discovers it in their own time, whether you’re 18 or 58, as Xia realized, it’s never too late to start.

I mean yeah, on the flip side, I do come across a lot of clients – and you know, you’ve spoken to one of my clients who’s becoming also a mortgage broker, Taku, who found it a lot earlier than I did – I’ve come across people that at 21, 22 are very very switched on and thinking about their future, about putting in the seeds now, so that, you know, when they hit 30, 35, they’re well and truly financially free. But I feel that everyone discovers that in their own time. I’ve got some people that are finding that in their forties and their fifties, other people in their twenties. I think everyone then, you know in terms of that side, of setting up for the future, everyone comes across that in their own time.

Xia’s property investment story began with discovering another successful property investor; Nathan Birch from BInvested.

Yeah, so the person that got me started – and it was actually through his story that I became very fascinated in investing, and I’m sure many of your listeners know of him – is actually Nathan Birch.  So Nathan Birch runs BInvested, he has a really, really good YouTube channel, and I still remember sitting down one weekend, discovering that YouTube channel and literally watched all hundred videos, and I was blown away, I’m like how is this even humanly possible? So, to put it in to perspective, I was 28 at the time and he was 27 and he has 75 properties. And I’m like that is not possible. So then I tried to do everything that I could to learn in terms of how that was possible.

When Xia met Nathan in person it only made him more determined to be become even more successful.

And I know when I kind of met up with him I had 2 properties, and prior to then I thought I was doing pretty well; I mean, you know, some of my other friends didn’t have anything, so I thought I was killing it until then. You know, you see his story and it puts that into perspective. So I would say that was the catalyst, in terms of making me delve more into property investing. I bought my third property through from him and then, after that, I did everything myself; in terms of the research, searching for the properties, and so on so forth. So he was the one who kind of opened up my eyes, to push me in that direction, and then afterwards I’m like, ‘okay, this is what’s possible’, and then I started then doing a lot of that myself.

Xia used Birch’s services to purchase his third property, but it wasn’t exactly the perfect property.

Okay, so I would say that at the beginning, when you go into the journey you feel that buyer’s agents have a silver bullet, or that’s what I believed, and also that when you first go into it there’s a lot of things that you can’t learn. It purely just comes down to a confidence factor. The property that he bought me was actually in a town in Nambucca Heads. I don’t know if you know where Nambucca is?

Yes, Yes I do know where that is.

Yeah. So it’s, I mean for your listeners, it’s five hours north of Sydney, very close to Coffs Harbour, and the two people that go there is either they’re retired – it’s very nice, it’s like God’s Country up there – or you’re on the pension, or you’re on the dole. So from an investment, from a demographic, from a growth perspective; if I had my time again, I’d personally wouldn’t put my money there. So it was a good learning experience but you know, there was a lot of things through that deal and through the process that I went through, that I wouldn’t have done again. But it also kind of threw me in the deep end in terms of, ‘okay, now this is actually for real, you are buying these renovators that need a lot of work’. That property had termite damage, it actually needed a lot of work, and I actually ended up project managing all of that myself, and through that process actually gained the confidence then to move forward.

If I had my time again, I probably would have put that money up in Brisbane; in 2013 it actually would have done a lot better. But in hindsight, it was a very good experience, so it kind of taught me in terms of some of the key fundamentals that I kind of follow today; in the sense that, if you’re buying a property make sure it’s in the key fundamental area, don’t buy five hours north of Sydney in a country town, it doesn’t have it’s growth drivers. Buy somewhere that’s you know, 20, 30 kilometers from the CBD. In the long term, you’ll do a lot better.

These experiences obviously taught Xia something important, as over the next few years his portfolio jumped from 3 properties to 16.

I know that it was in a magazine after I had just left work, and, in that magazine, it was quoted as four point one million. Now I picked up 2 more properties since then, and I haven’t had any of the properties valued. So I would say, it would be in excess of 5 million. What, you know, if it’s 5.5 or whatever it is, I don’t know, I haven’t got it valued since then. Come July this year, I’ll get everything revalued, pull out the equity and then I’ll go onto my next buying phase, but I will say it’s around there. Yeah.

That’s great.

In terms of the property itself, the portfolio itself, I’ve got 2 units in Sydney, I’ve got 2 houses in Newcastle, I’ve got the 1 in Nambucca Heads, and so that’s my five in New South Wales, and the other 11 are in Queensland, mainly around the Logan area.

Despite his belief that the best place to buy is closest to the Sydney CBD, he couldn’t find anything suitable. So Xia decided that next best thing would be to buy in Brisbane.

For me it really came down to my goals; and that’s why I say the goal is so important, because it really dictates where you buy. So when I started the investing, and also knowing what my goals were, the key goal that I put for myself was to quit work. I didn’t really enjoy my corporate role at the time, and that just added more fuel, in terms of making me want to escape corporate, have enough of a recurring income stream where I could have that flexibility to do whatever I want. At that time, I’d never wanted to become a mortgage broker, actually I didn’t know what I wanted to do, but I just wanted to have that choice. You know, that choice might have even been to play more touch football. I just wanted more choice at the time.

I looked at many different areas to buy, and again, coming back to those two rules, I wanted to find somewhere where it was positively geared and also it was close to a CBD. I looked around Sydney, at that time around, 2014, Sydney was booming. I definitely couldn’t find it in Sydney, Melbourne was similar, and Brisbane was the next largest city; and Brisbane you could buy 13 kilometers south of Brisbane or even north for that matter, and you could pick up properties with 7 to 8 rental return around the $300 000 mark.

And every single property I picked up there, after all expenses positive income wise, was putting around $300 000 to $400 000 in my back pocket. So I was like, these meet my goals, and also it helps me closer to quitting work, then why not just buy a number of these? And then when I started picking up 1, then 2, then 3, everyone that I picked up, I saw I was getting closer to my goal, and that’s when it really made sense, and I just kept on buying one after the other until I could finally quit work. It was funny the day that I handed in my resignation at work was when my 14th property settled. On settlement day, I had in my hand, the resignation letter ready, and I was like see you later.

No matter how hard you try to play it safe, property investing always comes with its risks. The risks usually are; a lull in the market, an insufficient loan, or a poor property choice. As Xia discovered, another unexpected risk can be the deliberate destruction of the property.

So at that time, I was just starting out. Wasn’t very clear to me that this was actually the path that I wanted to go down, and I feel that every investor will come across this; whether it’s on your first property, second property, or on your fourth property, or even later, you will get tested. So I’ll tell you what happens. So I had bought this property in Newcastle. It was in a town, suburb, called Cardiff, and I picked it up for two $225 000, which is really cheap because the suburb average at that time for Cardiff was, you know, around about $330 000, 340 000. And I bought it from – the family that lived there before were actually hoarders. So they had 5, 6 cars in the back yard, there was a boat there, the house was in terrible condition, and I knew a lot of it was cosmetic. So if I could fix a lot of those issues, then I could then increase the value of the property.

Now, when I first started out, I wasn’t very good at project managing. I bought the property around October and it actually settled very close to Christmas. So after it settled, I couldn’t get any builders through, couldn’t get any quotes through, everyone had closed down. So it was vacant for literally about one or two months.

Oh, okay.

Yeah, during that time, the kids that used to live in that property actually got back into the property, and they absolutely destroyed the property. I’m talking about taking a sledgehammer to the property. So I’ve got some photos and, it’s like, by the time that they had finished with it, there was more holes than walls. And, during that time, we didn’t know who was doing it, the police was getting called every second day because the kids would do a bit of damage, leave, come back the next day, do a little bit more, and I would get calls from the neighbours, from the police, saying “your property is getting trashed”, and I was all the way in Sydney, and literally for about a month there, I couldn’t sleep. Every day I was freaked my property will get damaged, and that process was actually very trying.

I actually didn’t know how to really get out of it, but, eventually, the police came very close to catching the kids. They almost got them, but they saw that they were in school uniforms and then also identified which school that they were in, and we called the school and put notice to them, and after that they actually stopped. And during that process, I was actually very close to quitting because the property hadn’t been renovated, it was going to cost a lot more than I had originally anticipated to get it fixed up; I think I originally had a quote of about $20 000 to $30 000, but by the time they had finished with it, it was more like $50 000, $60 000, $70 000. So at that point I was very close to packing it in.

But the only thing that got me through was actually my desire to quite work. Whether to put up with what I was going through with that property, or to put up with what was going on at work, I’m like actually, I’ll get over this, fix up the property, and then that will get me closer to quitting work. So, once I got through it, it was actually a very good story in the end, because insurance came to the party, I actually got paid out for all the damages, and, in the end, the renovation still cost me the same that it would, and the end product was very good. So, in the end, renovation wise was probably about $38 000, $40 000, that I had to put in myself, and the property got valued over $330 000.

Despite the sleepless nights, Xia’s worst investment moment still ended happily.

That’s right, and the property got rented out at $440. So, you know, there was a couple of key takeouts for me, from going through that. One, how important your goal is; because when you get tested, it’s actually the goal that pulls you through, but if your goal isn’t strong enough, and you’re like, “freak, why am I even doing this”, then a lot of people actually just pack it in at that point. A couple of other key takeouts for me was, get good insurance. Some people, they’re like, “oh, actually, like this other insurer is $100, $200 cheaper”. Do not skimp on your insurance. I skimp on a lot of things, but insurance isn’t one of them. Another key one that I have now is don’t have the settlement close to Christmas; if you’re settling close to Christmas, one, you’re not going to find tenants, you’re not going to find tradies around time. So really, you know, project manage that thing; that settlement time quite closely. So there was a lot of key takeouts from it, but that’s like with all properties, every time you go through one you have a lot of learning, and then you just become a little bit savvier for the next one.

For Xia, the “aha” moment of his investment journey was not related to wealth or growing his portfolio; it was discovering his mentor, Rolf Latham, who would guide him through his journey.

I would say it’s, I mean, I guess it’s not really kind of a specific deal, but it was actually. So how I managed to go down this path, was speaking to and finding my mortgage broker, who also became my mentor, Rolf Latham, and the “aha” moment was actually when he linked what I was trying to achieve to my goals. Because I had spoken to other mortgage brokers prior to then, and like you said, at the top of this call, that they were very transaction-al. Every mortgage broker I spoke to, they were like, “yeah, I can get you another $500 000, I can get you another $600 000 for the next purchase”, and that was it. He was actually the very first and the only mortgage broker I spoke to, who was like, “don’t worry about the loans, don’t worry about the structure, but what do you actually want to get from this? What are you trying to achieve?” And that’s when he delved a little bit deeper, because at first my answer was very generic; “oh, I want to make money from investing”.

But, you know, money can be $10 000, $100 000, could be a couple of million. It’s really what you’re trying to achieve that’s behind that, and when we delved a little bit further, it was, I wanted to quit work. It was when he had highlighted that goal that everything made sense. All we did after that was, he then illustrated, in terms of, from a structural, financial perspective, how I could get there; and he was savvy enough from the lending space to show me that okay, I was on 2 properties, but he could then get the loans and also the structure in place to help me to get to 12. We ultimately got to 14, but when we had first, that very first meeting, and he mapped it out for me, he actually got me to twelve.

Essentially, that was the “aha” moment, because then finally I connected with what I wanted to achieve in property investing, and then for the next two years, I essentially just executed his model and his plan. So it was really meeting Rolf, and his approach to mortgage broking, goal setting, and property investing, that got me across the line and opened up my eyes to what’s possible. Because everyone else I had spoken to before then was like, “well, here’s your $400 000 for the next property”. That, to me, didn’t really mean anything, but he then approached it from a completely different angle. 

Today, Xia is most excited about reaching his goals.

I would say, at the moment, it’s reaching your goals through property investing; investing is just a vehicle. My biggest philosophy, and I kind of mentioned it before too, is you want to create multiple streams of recurring income; you know, whether it’s through rental, or the properties increasing in value without you putting your time there, maybe it’s through dividends and shares, maybe it’s through your business income. But ultimately what you want to be doing is creating multiple streams of income, because the one thing that everyone is limited in life, is time. If you had more time than everyone else, then you can go out and make more money, but unfortunately, we’re given only 24 hours in a day, and the only way that you can break free of that, is to make making money independent of time, and recurring streams of income allow you to do that. So, I guess, for me personally, what I’m excited about, is setting up multiple streams of income; then you have choice. At the moment, I love the mortgage broking business, I love helping other people go down this journey. Later down the track, I might have a different passion, then I’ll explore that, but what the recurring stream of income allows you to do, is have that choice. So that’s what I’m working towards at the moment, and that’s what I’m excited by.

Generally it’s not really about where you’re buying, it’s actually more about the deal. So when people ask me that question I’m like I actually don’t mind where I buy.

From Zero To 16 Properties: Two Resources To Help You Succeed with Michael Xia

Xia says there were many things holding him back from investing in property, such as the prospect of buying interstate and concerns about rising interest rates.

It’s actually even hard to start because everything was limiting me in the beginning. I would say that some that springs to mind was buying interstate.

I still remember going to property meet ups, speaking to people that had properties that were in Queensland and other states. I was like, ‘How the hell do you buy in another state, manage a property you can’t even see?’

Always in awe of those people that have properties in other states, so that was one of them just thinking off the top of my mind. Then there’ll be other ones where you’ll have concerns. What if the property price falls? What if the interest rates go up?

A lot of these were things that I had to grapple with as I went down the property investment journey.

Xia states that the way to overcome these concerns is through developing your knowledge over time and protecting your investments.

The best way is, through knowledge comes clarity. As you gain knowledge over time, then those questions become a little bit clearer. So if you just dived in and did it off the bat, then yes it can be very, very risky – and property is very risky. Not everyone makes money from property investing.

A lot of people lose money for property investing. In fact most of the people I buy my properties from have lost money because I’m buying them cheaper than they are, but I like the analogy that I put, is for instance, you’ve got a safe and the money is in that safe. To protect that safe you might put a lot of locks on that safe and then you put an eye sensor before you can get to the safe and so on, so forth.

So what I’m thinking is like in Ocean’s Eleven, trying to break into that safe. That’s the picture I have in my mind. As you do more due diligence and as you put more processes in place you’re basically just putting in safe mechanisms to safeguard your property investment.

It’s not always going to be foolproof. It can still fall over, but you’re just preventing that and I’ll give you examples in terms of what kind those safety measure are.

Let’s say for instance, one of them is insurance. If you have really good insurance and you protect yourself from a lot of those things I spoke about in the first podcast, another one could be getting a really good, property manager.

I actually spend more time finding my property manager than the areas that I buy in. I know if I have a good property manager I have regular income coming in and that is so important in keeping a portfolio a long time.

I bought properties from people that had a bad property manager that didn’t manage it properly and then also, they weren’t getting the rental returns and ended up selling that property.

But if you put someone that’s a very, very good property manager that can keep on top of the tenants and also the condition of the property, then the income will be a lot more regular in the future. So finding a good property manager will answer that.

Also in terms of the financial structure, how you structure it properly by not cross collateralising, maybe using different banks for different reasons. That will then add another layer on there. So the more layers you put to protect your property portfolio, then it will actually become a little bit safer and that’s how you can tackle those questions that you have. Like what happens if the interest rates go up? What happens if the property falls down and so on and so forth.

And Xia shares another good example of what happens if the property prices fall.

When I buy a property I want to make sure that I make money on the way in. I’ll give you an example, if you’re buying in an area where the average 3 bedroom, 1 bathroom is selling for $300 000, I want to make sure that I’m buying a little bit cheaper. Maybe around $260/270 or as cheap as I can get it. That way even if the property prices fall down or if I’m forced to sell, I can sell it and not make any losses. So that’s then adding another layer in terms of that safeguard.

So as long as you keep putting those in place then you can actually answer a lot of those doubtful questions that you have going into property investing.

Xia says that his mentor, Rolf Latham, was a huge contributor to the Property Chat forum – a platform where Xia learned everything he knows about property investing.

This was probably my biggest discovery in my investment journey. This was a tipping point. I said in the first podcast, Latham was the guy that opened up my eyes.

This was a tipping point – it was finding an Internet forum called Somersoft. A little bit of background in terms of Somersoft. Somersoft was created by Jan Somers, who’s written some amazing books on property investing and she developed this forum where like minded investors can go chat about property investing.

That forum was up and running for some time. In 2016 it then migrated and changed across to Property Chat. So for those listeners out there I highly encourage going to Propertychat.au and reading, going through that forum. That forum has about 7,000-8,000 members across Australia and they are just average mum and dad investors that are quite savvy in investing, have done quite well in investing, just showing what they do.

So no one really had an agenda, everyone is just trying to share their knowledge and it’s actually though that forum that I found my accountant and solicitor and also Ralph. Ralph was a big contributor to that forum and when I started speaking to people from that forum, networking with the very experienced investors from that forum, that’s when I actually learnt everything.

I still remember in my early days I would privately message experienced investors that you knew had done quite well in investing and I basically said, ‘Can I please take you out for coffee?’ You’ll be surprised at how giving a lot of those investors, a lot of those personalities on that forum were and it was through those coffee catch ups that I learnt so much more than going to those property seminars and paying for those mentoring courses.

That was actually where I learnt everything in investing.

And I kind of put it down to association. It’s like for instance, you’re speaking to someone at a family barbecue and you say, ‘Look, I want to buy twelve properties in two years.’ They’ll probably think that you’re crazy, but when you go on this forum you read other stories of people doing exactly the same. It almost normalises it and gives you that motivation to achieve a little bit more.

I think it’s actually that association that does a lot of magic and I know on that forum they regularly have meet ups. So in each of the capital cities, every couple of months there might be 20, 30, 40 investors that get together and just have a yarn. I find those meetings, that association to be so, so powerful.

Some of the best advice Xia has received comes down to knowing where you want to buy, then research and focus on finding both the best suburbs and the best deals.

I would tell you the question that I get asked the most and you might be able to guess but I can guarantee you that almost the first question most investors will ask me is, ‘Where should I buy?’

Yes I know that question very well.

And it doesn’t matter where you are. Like you’ll be at the family barbecue or speaking to someone. The question that gets asked most in property investing is where to buy.

Now, I’m going to tell you that that question is actually not the right question to ask. Now why I say that is, when you speak to investors that have done quite well or are a little bit savvier. Generally it’s not really about where you’re buying, it’s actually more about the deal. So when people ask me that question I’m like, ‘I actually don’t mind where I buy.’ You can buy in north Brisbane, south Brisbane, Ipswich, Melbourne, Adelaide. It doesn’t really matter where you buy it, but it’s actually within that suburb, it’s actually the deal that makes all the difference.

I can tell everyone the top ten suburbs that I look in on a weekly basis, but you won’t be able to go to those suburbs and find that deal because it takes time and takes effort. It takes local market knowledge to know what’s a particular deal in that market. On the flip side, if you told me to then look in Adelaide, I would have no chance of finding a deal because I don’t know that market that well.

It’s actually not the suburb, but more so the deal in itself that really makes the difference. If you can get a really good deal in a suburb then yes, you will be buying it below market value, so making some money on the way in.

Or maybe then that’s how you get a better rental return, so if the market average is 6% then maybe then you can get 7% or so on and so forth. But it really takes to knowing your market really, really well.

So then why I’d say to a lot of investors is do a lot of research in terms of getting your general area correct. So whether it’s Sydney, whether it’s Melbourne, whether it’s Brisbane but once you’ve targeted an area, focus on a couple of suburbs. Become an expert on these suburbs.

That’s how you can get the deals. But if you’re just doing macro research on the suburbs, you could buy, you could pick the best suburb but if you buy a bad deal in that suburb, you won’t be doing very well.

Xia also advises that rather than attempting to predict the future, potential investors should concentrate on asking questions about what the property is already like, such as what the rental return is.

When I first speak to an investor that’s starting out, a lot of their questions if you break it down are questions about telling the future. I don’t know if you noticed that in conversations. Say for instance at the family barbecue. But I’ll give you an example. Someone starting out will ask these questions: Where should I buy? What would the interest rates be this year? How much will this suburb go up by? Which areas do you think will do well? If you boil all of those down, you’ll find that all of those are about the future and by definition no one can tell the future. And that’s why a lot of the investors, they spend a lot of time trying to find out the future and they go in circles.

They’re getting these hot spot reports, they’re getting a thousand data points but in the end they’re confused because by definition you can’t tell the future. Now on the flip side, speak to an experienced investor. Someone that has done quite well investing and listen to the questions that they ask about the property. They generally ask how much is it below market value? What is the rental return? Is it a good side of a suburb, bad side of a suburb? How can I improve the value on that property? If you boil all those questions down to the present tense, they control all of what’s right now, right today. Because of that, in the end they’re speculating less about the future but controlling more of their destiny now.

Purely as an investor, speculate less. Try and control much of it now. To do that, ask more present tense questions as opposed to what you can tell in the future, because by definition no one knows.

Like the other example that I give is go and grab the hot spot report from five or ten years ago and look at how many suburbs they got right. A lot of times it’s 50/50. Half of them are right, half of them are terribly wrong. I still remember when I first started property investing. I was reading hot spot reports. They were telling me to buy in Gladstone and we all know what happened there.

So even the experts can’t get it right because, by definition no one can tell the future. If there was one tip, I could give you a list on this. Ask more questions in the present, less in the future and a lot more clarity will come from that.

Here Xia has touched on a very powerful strategy, as at the end of the day a lot of people need to change their mindset and look at their potential properties from a different perspective in order to get the right results. Basically, if you don’t ask the right questions, you don’t get the right answers.

This leads us into our next section of the episode; the nuts and bolts of Xia’s ‘think before you leap’ strategy that has proven to be one of the safest, and most rewarding property investing options out there.

But the thing about strategies is it’s very independent to the individual investor. So I’ll give you some tips in terms of how I break down strategy.

Xia will also share his success making habits.

Personal habit? I think one of the things that really helps me is setting goals.

As well as what book he recommends for you to learn from.

Ok if there’s one book that I’ll say is a must read, it’s actually Slight Edge by Jeff Olson.

And this is next. I’m Tyrone Shum and you’re listening to Property Investory.

Xia shares some useful tips on breaking down his strategy. He says it is important to determine the weakest resource and address it. He also gives some examples of potential scenarios.

I think a lot of people over complicate strategies. There’s people out there that are talking about these amazing strategies and so on and so forth. But the thing about strategies is it’s very independent to the individual investor. So I’ll give you some tips in terms of how I break down strategy.

It comes down to the two resources that people use in investing. There’s only two resources you use in investing. One is how much the banks are willing to lend to you – so your servicing. And the other resource is how much savings, how much equity that you have?

Very rarely are those two resources in equilibrium. Always one is more than the other. So all you need to do is identify which one is less and then focus all your time, effort and strategy on the one that is your weaker resource.

Now, a good broker can identify that for you. That will be the question I’ll be asking them is, ‘Between the equity and also the servicing, which one is my weaker resource?’

I’ll go into some examples in terms of some strategy around it. So let’s say for instance your limiting resource was equity or savings and I’ll give you an example of this. Someone who’s fairly young, starting out in their 20s in their 30s. They’ve got a pretty good income because they haven’t had the family yet. They’re on a single income. Maybe they’re living at home with their parents and they don’t have that much of a debt. From a buying capacity they’re really good. but they’ve only been saving for a couple of years so they don’t have that much savings to that investing property.

For that particular client, their limiting resource is equity/savings. So they need to spend all their time to address that limiting resource. So the strategies I’ll give for that is to renovations or do things that you can then be able to value in the properties. Or maybe buy properties that are really under market value. That way once you’ve bought that property and it’s under market value where you can access that equity will then allow you to move to the next property because your servicing is in surplus compared to your equity. So those types of buyers should focus all their time and attention on creating value.

Now I give you the other end of the spectrum. Let’s say for instance we have a family. Mum and dad. Mum is at home looking after the kids and it’s a single income earner supporting the family and they’re looking to invest. They’ve had their home for ten years so it has some quite a bit of growth and it’s got good amount of equity there for them to invest. Then for them equity is not really the limiting resource, it’s the servicing because they’ve only got one stream of income.

If that’s the case and I’m looking at buying properties. I will look at properties that improve their servicing or add to it a little bit more than they would otherwise. So maybe buying a property that comes with a granny flat, giving you a little bit more rental income. Or in those cases not using lenders mortgaging insurance, buying at an 80%. Because they’ve got excess equity then using that equity as opposed to using lenders mortgaging insurance or maybe it could even be improving that income.

So maybe the wife works two days a week to bump up the income a little bit. Once they’ve fixed that income issue, then suddenly that easily becomes accessible to them and then they can use that to progress their investing.

So depending on which resource is limiting you – then all your strategy is focused on addressing the resource that’s limiting you.

And I feel that people over complicate it. They go to all these seminars about renovation, about the other ones where I forget the name and you’re signing the contract and eventually they pay you a bit of rent.

Then it becomes your rent back and honestly it’s all just fluff because ultimately you break it down just to resources. As simple as that. One is how much money you have, one is how much you can borrow and then just focus on the one that’s limiting you.

Xia says that setting goals is something that keeps him centred and in turn contributes toward his success.

I think one of the things that really helps me is setting goals. I touched on the first podcast that we had, how important a goal is. So I’m a big advocate of that. I feel that if you don’t know where you’re going then how can you even aim or get there because you don’t know the direction that you’re heading in. So one of the things that I do religiously every day is the first thing that I do when I open up my computer when I get to my office and I open up my diary is actually, to rewrite my goals.

So at the moment I put in my four goals there. Another thing that I do is something that I picked up from the Anthony Robins seminar that I went to last year: I write three things that I’m grateful for. Because I think that a lot of the time people forget that. It’s like there’s so many things to be grateful for. After I put down my goals I put three things that I’m grateful for.

After I’ve written them, it always gives me a lift. It feels like you’re thinking of things that you always take for granted. After that I put maybe the top three or five things that I need to get done on that day. And I’ll do that every day religiously and it helps me keep focus.

So almost I feel when I don’t do that on the one page diary that I have, I feel a little bit flustered. But once I’ve done that it’s almost like a ritual now. It really helps me feel more centered.

I highly recommend putting what your great four are. That’s something I started doing last year when I went to the Anthony Robins seminar and I think that’s actually something that has helped me, because some days it’s like you’ve just woken up on the wrong side of bed.

And that is important so I highly encourage that.

Xia recommends his go-to book for financial enlightenment, which can also provide information relating to health and relationships.

If there’s one book that I’ll say is a must read, it’s actually Slight Edge by Jeff Olson. So I won’t go into the book too much. But what I find is that book gives you tools to then read other personal development – or whatever book that you’re into – and also digest that.

So I think it’s a really good book to start off with and it’s all-encompassing. It’s not just going to help you financially, but it will help you in your relationships or help you in your health.

It’s basically looking at how people have been successful over time versus people that haven’t been successful in the things that lead to that. So I’ll leave it there, but highly encourage everyone out there to read Slight Edge by Jeff Olson.

If you wish to contact Michael Xia and find out more, here’s the best way of getting in touch with him.

So the best way is through email. They can email me at michael@mortgagechannel.com.au.

This episode was produced by Alex Cooper with narrations and interviews conducted by Tyrone Shum.

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