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How to Calculate Your Mortgage Payment to Pay Off Debt Quickly

Updated 04/02/2018

When mortgage broker Eric Wu’s wish to attain financial freedom for his family coincided with his love of property investing as a vehicle, he set out to build his $5 million portfolios.

Having undertaken many jobs from scientist to salesperson, we’ll find out how the jack-of-all-trades plans to continue building his diversified portfolio, about the a-ha moment where everything fell into place for him and follow along on his property journey to reach his ultimate goal of travelling to Europe and Japan with his family!

'Property investing itself is a tool to use to get to what you want to achieve.'

Eric Wu

My name’s Eric and I'm a mortgage broker for a company called RealWay Finance, we started this company one and a half years ago. I have had some quite interesting careers before. I came to Australia when I was 29, almost 40 years ago, so I did quite a few jobs and didn't like it. I think in terms of my goals, I wanted to achieve something bigger and financing really inspired me. Property investing started back in 2010, when I bought my first investment property.

So what does he do in any given day?

My day sometimes can be really packed. Most of the time I meet with clients to have a bit of a discussion session to find out what they want to achieve and what do they actually need and we discuss some property investing ideas as well. The rest of the day will be doing long applications with the banks. I find I spend quite a lot of time with investors, the majority of them are starting out or have a portfolio that they want to expand more. I enjoy doing it.

Wu grew up in China where he undertook most of his education, before moving to Australia.

I grew up in China, so I came to Australia when I was 29 years old. I came here for my master's degree and that was in late 2002, so it’s been more than 14 years. I grew up in the inner city in the middle of China. It has some interesting history, I went to boarding school for high school, so I left home because we had no room in my home and I went to high school. So that boarding school went up to university as well, so I stayed there for four years, I finished my Bachelor degree as a pharmacist.

After that, I went to Beijing to work for close to 8-10 years. I did quite a few roles and research as a scientist and then for a pharmaceutical company, in sales. I didn’t mind being a scientist and to work with numbers and facts, but I think there was more interesting work there, so that’s part of the reason why I chose sales. There are two sides to the story - the first one was soft driven, there's no limit to what you can do, that’s the one thing that attracts me and the other side was more to work with people to improve my people skills. It's more fascinating working with people, you meet with different people every single day, every day is different. 

After working in Beijing for about 10 years in sales, the choice to move to Australia was based on the desire for change.

I guess it had quite a lot to do with my own extremism and kind of personality. It is very hard for me to stay in one place for more than five to eight years, once I settled into my job I was seeking more challenges. Before I came here I was already on quite a high income, it was quite a good income actually, but I could see that my career was close to peaking. I was thinking, ‘Well I want something different, I want to see a different environment and try something different.’ So that’s part of the reason why I came here. The challenge was huge, coming from China where I couldn't speak English at all - we learned English in school for a number of years but primarily reading and not much listening and speaking at all. So when I came here everything was different. So I had to learn pretty much everything from scratch. So that was a very interesting time.

When he arrived in Australia, Wu completed his Masters in Health and Management.

Actually I was always a full-time student doing my Master's degree in the University of NSW. So I did quite a few labour-hire works, I worked in a newsagency and I also worked in a factory as a packing assistant as well, while I was doing my full time studying.

calculate mortgage payment

However being an overseas student he found it increasingly hard to find work in that industry, so he looked for employment elsewhere.

I tried quite a lot, there were no jobs available so I thought, ‘Well, I have to survive. I need to find something that can guarantee employment.’ So that's why I went to do nursing - I did my Bachelor of Nursing in two years at UTS. After I graduated from that, I worked in a hospital for two years as well, in a public hospital. Then I moved to corporate to work for a few years and at the same time, I started my investing journey. I bought my first home in 2007 and just kept going until now. It's been a really interesting journey.

So did Wu have any influences from his parents to invest into property?

I wish I had. But I did learn some valuable things from my parents, they taught me to have a really good work ethic and also to work hard and try my best. 

The first property Wu bought wasn’t intended as an investment property, yet it was a catalyst for the beginning of his property journey.

It was really a superb unit apartment in Hornsby and the price back then was really attractive at $387,000 and for a superb apartment now I think it’s around $850,000. So when I initially bought that property it was purely for use as a home. But three years later, the price went up quite a lot.

Then in 2010, something clicked for him that shed a whole new light on his first property.

So before that time, we didn't really think too much about property investing, because we had our home valued just by chance and the property value went up by about 30%. I was thinking, ‘Well, we just bought this property and didn't do much to it, we just sat on it for three years and the price has gone up by 30% - we can repeat it.’ And that was the kind of spark that showed me there were other ways to make money and make a profit. At the same time were actually looking for something to invest in to create a different income stream. So in 2010, these two things came together and that's why we started researching properties and investing in property.

From there Wu continued to build his portfolio, diversifying between various states in Australia.

So with the first one, we were not sure what we were doing so it was a really long process - it took us three to six months to find another property. Really basic, older ex-commission houses in a good location close to public transport, close to the shops that we bought for $395,000. Now it’s well above $700,000.

The year after we bought another one, and then we repeated pretty much one a year. And in 2015 it was a big year for us, during the Sydney boom we took out lots and lots of equity and I bought four properties in Brisbane.

Purchasing between New South Wales and Southern Queensland, Wu has accumulated nine properties worth a considerable asset base.

I think it's very close to $5 million, overall.  The pure rental compared with a pure interest repayment, it's positive, but if you consider all the ongoing costs like the maintenance and management fees, it’s positive neutral. It's kind of come to the stage where I can walk away from the whole portfolio and it can just look after itself.

The purpose of building his portfolio, as with many property investors, is to attain wealth through generating passive income for his family.

The primary goal for us is to create wealth. It’s not only for me, it’s actually for my family as well. My plan is just to hold onto it for as long as I can and also expand the portfolio. And once it comes to a certain size, I can sell part of it and reduce the debt.

Wu’s worst investing moment came at a time when not only time was short, but expenses would have been tight for him as well.

With one of the properties I bought in Brisbane, the property itself wasn't in good condition, it needed lots of work. At that time when I bought it in roughly June 2015, my son was born and I couldn't really do the renovation by myself so the property manager took over the renovation. But unfortunately seeing the expenses coming together, it was just a bit of an ongoing headache. Then the builder who did the renovation turned out to be a really dodgy builder, there was a lot of substandard, bad quality work. I'm still fixing up his work at this point in time, two years later. So it’s still a headache!

calculate mortgage payment

He was a pretty much-doing renovation for the whole house, the biggest problem was the bathroom. The sink wasn’t done properly, the tiles weren’t done properly, the waterproofing is not done properly. There’s a lot of minor stuff, it’s just an ongoing fixing it up. This year I decided to just remove the whole bathroom and redo it - it cost quite a bit of money and also stress and a headache. I think that’s just part of the property investing journey. It’s not predictable.

But the property itself has good foundations and a good rental yield.

The property itself is actually quite a good quality property because when I bought it it was $370,000. So at the same when I bought it another property in the same area, selling vacant land the same size, was around about $320,000. So I wouldn’t say it’s a bad buy, it was just the after work that was a bit of an issue. I don't think it is a bad property, it’s still a good one, it just needed a bit of time to smooth out all the troubles and give it time for it to grow itself.  The rental yield is at 5%, so it’s still good. It's not too bad. 

One of Wu’s mentors shaped the way he now considers property investing, which was an important a-ha moment for him.

The a-ha moment is actually the moment when I spoke to my mortgage broker. He's just an amazing person. He actually helped me to see the big picture in the finance behind property investing. So now when I look back, property investing is less interesting than finance.  Property investing itself is a tool to use to get to what you want to achieve, regardless of financial freedom, regardless of your passive income, regardless of whether you use it to create wealth, it's just a cool tool to use. Some people choose shares, some people choose property. 

Probably there are three reasons why property is good to choose. First of all the property cycle, the second one is leveraging, the third one is the compounding. So all that, when you see a property you can really see those three factors from face value. Once you look from the finance side, you will clearly see there are those three factors there. I had a lot of sources of knowledge about property investing, but I didn't know there was an even deeper meaning, which is the financial side of stuff. It helped me to better see the big picture. 

So what is the all-important ‘why’ behind Wu’s property journey?

I haven't set a real figure of how much income I want. What I want is to have the freedom where I don't need to depend on a job, on work, to create income. I can pretty much do what I want to do and at the same time, the assets can generate income for me. I would say that it’s kind of financial freedom, but I didn't put any figures or how much income I need to define what financial freedom. 

Yeah, you. That's good. That's good I think. You've got a big picture in mind. And you know what you want in terms of financial freedom. I mean what will you do when you have free time to do whatever you want to have interesting hobbies you'll be pursuing or do you have something that you want to do with the family. What would you like to do? 

Working towards this financial freedom...

I’d like to travel, I haven’t travelled much so that's the first thing on the list.

My idea is that I don’t just want to travel as a tourist, I want to live somewhere for like six to eight months just to see how the locals live. Maybe Europe or Japan.

The Bigger Picture: How to Calculate and Pay Off Your Mortgage and Beyond with Eric Wu

The initial setback for Wu in starting his property journey was fear and that his goals weren’t big enough.

First of all, I’ll give you an example, when I invested in a Blacktown property and someone told me, ‘What are you doing? You’re buying a dump in a bad area, you’re just wasting money.’ So it made me think, ‘Did I do the right thing, or am I really just wasting my time and money?’ Luckily, I didn’t quit, I held onto it.

So when I look back, it was a fear and a lack of knowledge that has created uncertainty and self-doubt. The fear is that I don't really know what I'm doing, because as I started as a young investor I don’t know if this product will grow or not, whether it is a good investment or not. At that point in time, other people who bought somewhere else were doing really well, but it made me unsure.

Also, my goals weren’t big enough because I couldn't see the big picture. I thought, ‘I’ll just buy one or two and that’s big enough,’ because I knew we could create some money. But I didn’t go hard enough.

So what is his ‘bigger picture’ for the future now?

Even at that time, I was just thinking that if I buy a property in a few years’ time I could sell it and make a payment to my mortgage. That would be fantastic.

OK.

I didn't know anything about it. So once you make a payment to your mortgage , what do you do next?  

I also did not think about if they created a passive income and that there are big things we can do if we reach financial freedom. We just thought, ‘Well, if we pay off the mortgage and have a stable job, that’s it. That’s a beautiful life.’ But actually it's not, there’s a lot of things we can do besides that.

Purchasing between New South Wales and Southern Queensland, Wu has accumulated nine properties worth a considerable asset base.

I think it's very close to $5 million, overall.  The pure rental compared with a pure interest repayment, it's positive, but if you consider all the ongoing costs like the maintenance and management fees, it’s positive neutral. It's kind of come to the stage where I can walk away from the whole portfolio and it can just look after itself.

calculate mortgage payment

The purpose of building his portfolio, as with many property investors, is to attain wealth through generating passive income for his family.

The primary goal for us is to create wealth. It’s not only for me, it’s actually for my family as well. My plan is just to hold onto it for as long as I can and also expand the portfolio. And once it comes to a certain size, I can sell part of it and reduce the debt.

Since the beginning of his journey, Wu’s mindset has changed dramatically. 

I think it started from reading the books, online forms and talking to family investors and my mentor as well. Previously my mortgage broker, not my mentor. It was lots to do with seeing the big picture, setting a big goal and seeing what others can do and what they have achieved. And I was thinking, ‘Well, if you can keep more, why to settle for less?’ Just give yourself a chance and never give up.

His mentor and mortgage broker Rolf Latham - director of ASAP Financial Services - helped condition his mindset as well.

I think the truth is that first of all he helped me with getting started in property investing, but the thing that I think was more important as part of self-development. He helped not only me but lots of other people. He helped us to see what we could potentially achieve [in property investing] and also, showed us what other things we could achieve.

In terms of resources, Wu sought out personal development books by authors like Jeff Olsen, Charles Duhigg and David Schwartz.

I think that books are very important. I will put them into three different categories of books, podcasts and some magazines as well. With books, I listen to a lot of audiobooks.

My favourite ones would be The Slight Edge, The Power of Habits and The Magic of Thinking Big.

This is an interesting thing. When we started in property, mostly I just focused on the technical side, and that's quite important. Like where do you research, how do you do cash flow analysis, how do you find a property? The ones that focused on that were three or four or more, but then you come to the point where you need to open yourself up. You need to see a big goal using self-development and you need to change your mindset before you go a bit further.

When considering the right team to have around him on his journey, he enlisted the help of a property manager and several other professionals. However, he regrets not hiring a buyer’s agent.

When I was looking at the Brisbane purchase, at that time we were under a lot of stress as my son was born and I just didn't have much time to do research. So I think I rushed it a little bit to buy - I didn't make any mistakes but if I had used a buyer’s agent, It would have given me much more choice, options to look at different areas.

The best advice Wu has ever received is to continue to think bigger and grow bigger, but be cautious of potential risks.

With growing bigger, it’s not just irrationally buy, buy, buy. There are lots of things behind it, to be able to actually hold and make sure you buy the right property - which is a risk, how you choose an area. And also how do you manage your cash flow? How do you foresee the risks, how are you managing risks? That’s quite important as well. In order to grow bigger, you have to have all the risk management strategies in place and not just keep buying.

With nine properties currently in his portfolio diversified throughout NSW, Wu shares the strategy he has used to achieve this.

"If you can keep more, why settle for less? Just give yourself a chance and never give up."
-Eric Wu

I wouldn't consider myself a very conservative investor. I buy, renovate and hold instead of just buy and hold. I choose an area with very good fundamentals like public transport, schools, hospitals, shops. This kind of property, you tend to have less risk of it being vacant for a long period of time and it tends to be an area people want to live in. So that creates kind of a certain level of competition.

By focusing on investing in mid-range areas where people are more likely to live, he found a property in western Sydney.

The researching principles are very simple. When you look at it, you have all the essential services in place. Let me give you an example of the Marayong property, when I looked at it there was a train station there and a very big shopping centre there as well - also the hospitals [are nearby]. I think it was a 15-minute walk from there to the big shopping centre, with the train station right next to it. With this kind of property, the population will keep growing, I don't think this kind of property’s value would drop.

Finding a bread and butter property to renovate was Wu’s goal, which he did and then applied to his other properties in Blacktown, Hornsby and a townhouse in Marsfield, where he obtained the same principles.

Marsfield has got about 60% [capital growth], I think in four years time. It’s is closer to the jobs, close to the train station, close to the university, close to the shops and not far from a hospital. So when I look at what I bought in Sydney, all of these have those fundamentals. Also, I wanted to change suburbs, just to reduce the risk.

So what is the vision for his portfolio now?

With my current portfolio, I think I just want to hold onto it, long term. I think when you look at it long term, the actual real wealth is created by holding long term as it goes through a few cycles - that's where you can generate real wealth and money. It’s not enough just to buy and then sell, otherwise, you will have a quick profit it’s not real wealth.

So what I want to do next is grow my business to a certain level and I’m looking at doing some small development. I am interested in investing in commercial property as well. 

I'm thinking about a shop front, some small coffee shops, maybe newsagencies - small street shops.. 

Residential property is really good too, the initial asset base is very good, but it comes to a point where with the maintenance and stuff, you need to buy into a different asset class. Same property but in a different category. With commercials, there’s pretty much less of a headache and the rental yield is quite high and we can get more cash flow in from that. So you have the more positive cash flow to sustain your existing portfolio and make it grow bigger. So it’s a combination.

In Wu’s experience, he has developed some valuable personal habits which have contributed to his success.

I think the one thing that is very important is just to keep an open mind, just explore new ideas, listen to what people say, do your own research and also set higher goals for yourself.

Now Wu is most excited about helping others reach their own goals by applying specific strategies for them. 

One of the exciting things is I can help my clients to repeat what I have done and let them see and appreciate what I did a few years ago. It's more exciting. Helping people achieve what they want to do is very nice and helping them to see the big picture and realise it’s something that they can do, even if they have not seen it yet.

If you wish to connect with Wu, learn more about his strategy or find out about his mortgage services, you can reach out to him via his website.

I have a website, it's called www.realwayfinance.com.au. Or even if you use Google you can search Eric Wu - I'm quite easy to find.

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