Simon Loo is a successful investment property buyer’s agent and director of buyer’s agency, House Finder. He has an abundance of experience in the field of buying investment properties for his clients and he shares with us some of that knowledge on the strategies you should implement to help build a positive portfolio.
Join us as we delve into the topic of, “How an investment property buyer’s agent can help their clients buy the best properties for their portfolio,'' he shares stories about a specific client that has been able to build a portfolio worth approximately $2.8 million, the criteria that he adheres by when buying property, and the advantages you receive when you have a buyer’s agent and much more on this special episode of Invest in Property Like A Pro brought to you by House Finder!
We delve right into the topic as Loo talks to us about a certain client that he helped build their portfolio. We learn about how this client found Loo and how they got started.
This particular client was, when I met him, a 24-year-old guy that just freshly came out of university. He'd been working for a couple of years already. And he saved up his initial deposit, which was actually quite good for a 24-year-old. I think from memory it was around about the 70-$80k mark, he was a very good saver. He was very [inaudible] and he's still extremely ambitious. So instead of like all these mates that maybe were out partying every night as you do around that age, I think he was just more focused on saving as much money as possible to buy that first property or just invest and find ways of making money to improve his future.
So when he reached out to me and we started talking about his goals, the initial goal that he had was like a lot of my clients, to ultimately quit their job at 24 years old.
I think it's one of those things that is becoming more and more relatable even for younger people. I guess it's a mixture of getting rich quick and there is a lot of stigma around the younger generation wanting things immediately. But I think people are becoming naturally more ambitious and people are hearing and seeing things on social media and their peers are achieving things that are above and beyond just the regular 9 to 5 kind of life.
So this guy was definitely quite ambitious and wanted to have a chat with me about achieving his goals through property. So initially he was extremely green, didn't know very much if anything at all about property investing. He spoke to family and friends and they gave their 2 cents, but none of them were successful property investors themselves. So he wasn't really sure if they were giving him the right kind of advice and feedback and all that type of stuff. We worked out again on 10-year plans because in the property you can make a lot of money. You can reach your goals, but it usually is a long term play.
When you are getting started in property a buyer’s agent can provide you with priceless information that you might not be aware of.
It's not really something that you can make a quick buck on within six months unless you get lucky. Obviously everyone's a little bit different. If you bought property right at the bottom of the Sydney boom, you wouldn't have had to wait for very long before your property would have doubled in value. One of those booms can come around literally once in a lifetime. And that's the thing, that's not skill, that's just basically luck and timing. And look, I mean, whilst we all want to get lucky, I think it's super important to buy properties based on the fundamentals of property. Investing in the fundamentals is to not get emotional about property, to make sure the numbers work.
Because when you're investing in property, you're basically running a business. It's completely separate from buying a property for yourself to live in. Because when you're buying a property to live in, you're thinking of things like north-facing, in nice areas that you want to live in, close to cafes and things like that which may not make business sense. Looking at market cycles, looking at demographics, looking at cash flow and the benefits of positive cash flow versus negative cash flow.
So all those things we had lengthy, lengthy conversations about. I was more than happy to engage and teach this person because quite frankly, he was actually motivating me with his ambition. It was kind of a two-way street, to be honest. But look, anyway, one of the first things that I did too was I recommended to him to actually speak to a mortgage broker. A mortgage broker that was quite successful in their own right, in terms of building their own portfolio, that's kind of been there and done that. And for a person that saved up $80K at the age of 24, you kind of want to make sure that you maximise what you can do with that $80k and to make sure that if you are engaging professionals to make sure that you're not just buying something that may not be in your best interest.
Having a buyer’s agent with you in a meeting with a mortgage broker makes it easier to understand your financial situation when it comes to purchasing your next property.
We got chatting to this mortgage broker. And because really if you think about property investing, it's really about how much you can borrow. It's how much you can leverage. That's probably, aside from having the right team around you, one of the most important things that you can figure out very early on. The mortgage broker, instead of just working out, “Ok, you've got $80k, this is how much you can borrow, go off and buy a property.” He sat him down, talked about his goals and worked out a plan for the next five properties. The first property we should go with this particular bank. And then the second property we should go with that bank again. And then the third property we need to move to this other bank and then the fourth property and feed the property and so on.
And the reason why I prefer to work with mortgage brokers that do this is that they really maximize the serviceability of each individual client so it's either a mixture of that they can borrow more and also that they can extract more equity with each purchase. Because the broker and I would be talking about the types of properties that we're buying to get this particular client to reach their goals. So there's more kind of synergy I guess across your team and everyone's talking to each other to make sure they're on the same page before they're moving forward.
We find out about the current state of this client’s property portfolio and how Loo helped build it.
It's amazing what this client has done because within an 18 month period he actually managed to purchase five properties in total. Just again, ensuring that he bought well enough so that he could extract the equity to help him by his next one and extract the equity again and to buy his next one. Also ensuring that the cash flow was actually working for him as well to ensure that he wasn't in a position where it was super risky.
And it was also helped by the fact that some of the properties that he bought within the five achieved a lot of organic growth based on the market. So there was a combination of things, but it was really down to the types of properties that we ended up finding for him that had that distressed element in it so he could extract that equity. And also ensuring that they were in the right areas with the right fundamentals in place. They were properties that he could add value to which he did on two occasions by adding extra rooms to achieve more rent.
A buyer’s agent can also provide you with some confidence to be able to go and look for properties on your own and are still there if you need any advice.
I really focus on houses when I'm looking to invest in property for my clients. It actually got him to a point that he was so confident and so in tune with what he needed to do to reach his goal and what type of properties he needed to buy. He actually ended up buying his sixth, seventh, and eighth property by himself which I was actually very proud of. It was just really great to see someone that started off with a lot of ambition and a lot of motivation and to see it put into practice.
And me having an active role in getting him to where he is at the moment and where he potentially could go. I think it's important as well because obviously in the process of buying five properties for someone in such a short timeframe you do end up getting to know them quite well on a personal level. Even his sixth and seventh property, which I played a very little role in, played no role in from a business perspective. I was still there to give him a lot of advice and he'd flick me properties and I'd give him a bit of a rundown on whether it's a good property or a bad property. In many ways, we've become good friends as a result of it as well. And I was more than happy to keep helping him throughout his journey.
We learn about the position where his client started his property journey and the approximate income that he was on.
He was actually on a fairly decent wage at 24. You know, he was above $100,000 a year, but he worked other jobs as well. Outside of his normal sort of nine to five-ish job, on the weekends and after hours. I believe he was a musician, so I think he taught some students during his downtime which brought in additional income. He was really focused on making money at such a young age. At that point, he was very green in property investing. He really didn't have any idea on what to do, but he just made a lot of money.
He's continued to make a lot of money with his jobs and just saved as much as he could. Looking back, I would consider that a bit of an anomaly. Most people, especially at his young age, have a really good balance of going out and traveling and all this type of stuff and he did do that stuff as well. But his main focus was really just getting ahead.
Have you been looking for months and getting frustrated that each property you’ve seen seems to be a lemon?
Or are you after distressed, off market, high cashflow properties in high growth, capital city locations? If you answered yes to either of these questions, you are not alone.
For being a loyal listener of the podcast, Simon Loo is offering a free 1-hour strategy session normally valued at $500 to help you put together actionable property plan.
To get your free strategy session, simply visit housefinder.com.au and fill out the contact form, or call Simon directly on 0415 626 342 and quote “Property Investory”.
Loo shares with us how much the 8 properties in his client’s portfolio is worth and the risk and reward factor that comes along with having numerous properties in your portfolio.
The value of the properties would be around about maybe 2.8-$3 million in total. And in terms of passive income, when he bought his initial five, he did dip into quite a lot of equity that we extracted just by buying well. So his cash flow at the moment when I last spoke to him would have still been positive before depreciation. But I believe now his focus on his ninth and tenth properties are properties that are bringing in much higher cash flow just to make sure that he's not in a risky position. Because like I said previously, when you have more properties, you're more exposed to things that go wrong.
When you've got one or two properties, you get a phone call from your property manager, maybe once a month about a leaking tap or a broken hot water tank or a tenant that's not paying rent. But when you've got 8 or 9 or 10 or 15 or 20 properties, that phone call becomes much, much more frequent. Almost on a weekly basis. So like I said before, treating the property like a business is not just every single property, but a portfolio as a whole. You need to make sure that, like any business, you've got income, you've got expenses and you've got the asset. So it's always important to make sure your head is above water quite comfortably. So look, I mean a $2.8 million portfolio, that he's achieved within around a three-year timeframe, I think it's quite an achievement.
And because of a little bit of organic growth and by buying well, his loan to value ratio isn't that bad either. I think when people take a look at this strategy, they assume that they're just leveraging, leveraging, leveraging and getting themselves really heavy in debt. But that's not really the case because by buying well, like truly buying well based on comparables, you're kind of starting off with a lower LVR already because the value’s there with the property that you buy. I think that's a really great achievement on his behalf.
We delve into how he helped his client buy the first 5 properties and as a buyer’s agent, what type of properties was he looking for to get them started.
These properties were, when we first started looking, all in Brisbane. There was a mixture of northside and southside of Brisbane or within 30 kilometers. All of them we managed to buy below $300,000, except for one, which was slightly above $300,000. They were all houses. They were all on around about 600 square meters. They were all single story. So just low set, really standard brick 3-4 bedroom type properties. They were all just easily rented out and easy to maintain. So the areas, I wouldn't go into specifics in terms of what kind of suburbs or anything like that, but they were in the Moreton Bay Shire Council and also the Logan Shire Council, so it was a good mix of north and south.
We ensured that the fundamentals were definitely there with the cash flow first and foremost. And also obviously coming again to the value of the properties as well. Making sure that they were below market value. But I think one of the things that we really looked for was properties that had owner-occupier appeal. Because we want to make sure whatever property we're buying that you could sell it and you can sell it for a profit. When you're selling a property, the people that generally pay the most are people that buy properties to want to live in. So they fall in love with the property emotionally or they see potential in it. So we really had a focus on that as well.
The exit strategy for any property's important. Like I said to this particular client, we always want to aim to sell the property after it’s achieved a certain amount of growth so we can take the profits. But I think the reality is sometimes you might find yourself in a position where you are forced to sell a property whether it's a position where it's in your control or not. Things happen in life, the property is a long term game. If you're looking at a 10 or 15 or 20 year period, that may be a time where you have to consolidate your debt a bit, then put yourself in a less risky position. So those kinds of properties that we bought we made sure they were in nice, quiet, family friendly areas, that was close to transport and shops and schools and parks and close to the CBD obviously. And properties that you had to liquidate, you could do that straight away.
When you hire a buyer’s agent to help you buy properties, you not only get them but they provide a team around you to help you succeed.
I think that's helped a lot by, and this is gonna maybe come across as a little bit biased, but by having everything or most of the things done for him, in terms of the negotiating and organising inspections and introducing the full suite that makes up your team. Like your broker, your property manager, your solicitors, your tradies, your building, and pest guys. That just kind of helps accelerate that confidence. You don't really spend a lot of time thinking about the last property to settle before you can move onto the next one. And look, don't get me wrong as well, during this entire period we were in constant communication.
So it was all about, where are you at? What do we need to do now? What's the next step? Whether it was finding a tenant or negotiating on the building and pest report or extracting equity and using the equity to move forward to buy your next property. So it was having the right team around him and having the right guidance as well that helped him accelerate quite significantly. All I can say is, I wish I had that kind of support when I first started buying property because when I bought my first property at 26, I certainly made a lot of mistakes and I continued to make mistakes. It's not about not making mistakes because you will make mistakes regardless, even if you engage in the most successful property investors out there. But it's about minimising those mistakes as much as possible. If you're making a mistake in the world of property, it's mostly a lot of the time, very costly.
He shares with us how a buyer’s agent and their team allow you to research property interstate without having to be on site.
He’s actually based in Sydney and he did everything remotely which initially was quite daunting for him. He ended up flying up to check out his properties at some point. When we first started, every property I sent him, he wanted to fly up and inspect. I was like, look, I've got a team that does that. They're very unbiased so they come back to you with a lot of feedback on the properties. It's not just like here's the property and the living room and the bathroom. It's like, this property has a crack here, there's a safety hazard there, it's missing three fence palings. The feedback is thorough enough so that you can make a business decision from Sydney, from interstate, and there are enough photos and maybe even a video to show you every single defect of the house.
And not only that, obviously we do all the due diligence such as building and pest inspections and all that type of stuff to make sure that there's nothing majorly wrong with the house.
I think buying interstate, like for me with my own portfolio, when I first started buying, I'm a very risk-averse person. And I did fly up to see a lot of these properties and what actually became apparent to me was that I was missing out on a lot of deals by actually seeing them physically. I think I got caught up in the emotions of it a bit too much. When you fly up and you see these properties and you start critiquing them from an emotional level and you kind of miss out on properties that could have been excellent deals from a numbers perspective. But you didn't buy them because maybe they were facing the wrong direction.
Maybe they were on a slightly sloping block or something like that. Everyone wants the perfect property, but a lot of people don't realise that there's no such thing as a perfect property and everything has a value. If there is a perfect property where it's a flat level block, north-facing, five-minute walk to the train station or six-minute walk to Westfield, whatever it is, you do get to a point where you have to think, it's a great property, but how much is it? How much can I pay for it? Whereas the property next door may not have those or maybe the next street may not have a lot of those emotions, that emotional appeal, but if you're buying that particular property at a low enough price, you are still going to make money out of it.
People will still want to live in it at some point in time. Drawing a line between being emotional and making an investment decision. And I think what we'll do it in another episode we're gonna break down how that process works, how you choose the property. How does your selling agent help you as well to find those ones? Because to find those type of properties, they don't necessarily always come out as easily and you'd have to be able to understand what things to look out for because they don't just always come like that. It sounds like it's easy. I've been doing it for not a very long time but I've bought a lot of properties. A lot of it is second nature to me, but for someone starting out, it's definitely a daunting thing.
This episode was produced by Andrew Faleafaga with narrations and interviews conducted by Tyrone Shum.