As IT professional Koko Naing shares his journey from Burma to Australia and how he made the shift from renter to property investor, we will follow his story from a steep compensation amount of $900 to an a-ha moment on increasing rental yield!
Uncover the mobile developer’s views on good debt and bad debt, how he migrated to Australia with only $10,000 in hand and unable to buy a home, what led him to build his portfolio of six investment properties and why it’s essential to get to know the market you’re investing in.
Working in IT, Naing is involved in the development of mobile apps.
My name is Koko Naing, I'm actually a developer, so I develop mobile apps on IOS platforms and Android platforms. Basically I’m in the IT industry.
Great. How long have you been doing that for?
It’s been about 14 years already since I graduated.
I'm in the IT field as well and I love learning so much about the new developments and so forth. Are you developing mostly on iOS, or are you developing on the Android platform across the board?
I mainly focus on IOS, but from time to time I also help out with the Android development in my workplace as well.
In any given day he makes the commute to the CBD for work, then uses his evening hours at home to look at property.
It’s like a typical IT professional. So normally, I wake up you know, get ready for the commute a long way to the city. I live in Melbourne, so it's like a half an hour commute to the city throughout the day and then on the way, also on the way back is the same.
Basically like right after I arrive back at home, I normally look online for real estate sites, to look through the properties. Especially looking online at the property chats.
Growing up in Southeast Asia, Naing graduated from a computer science degree in Thailand in 2003 before deciding to move to Australia.
I was born in Burma and I spent my uni life in Thailand, I was married to a Thai girl there. So a big part of my life was spent in Thailand and at the end of 2009, we decided to move to Australia.
We have high school up to Grade 10, which is the end of high school and then from there the next stage of education is the university life. So I started learning computer science in Thailand. So the previous 14 years of my life was in Burma and the rest was in Thailand and then in 2009, we migrated to Australia.
Over the six years he remained in Thailand before migrating, he began work as a software developer.
I was a software developer back then. You know the thing is, it was web development back then when I first arrived here you know all the IOS and Androids were starting to be in trend at the time. The period of late 2010, there's a big hit for the iPhone and I jumped right into the mobile development.
During this time, Naing had very little interest in property investing due to a high awareness of debt.
If I had to go back and think about it, I was very, very careful about debt level - I didn't even take out a credit card with a high balance at all. So we did have a credit card, but we were very sensitive to debt so we didn't even try to look at any homes to buy and live in at all. So we had been renting all the time, just we thought that debt was not good, we were taught in those days that debt is physically a burden for your life.
The idea to move to Australia with his wife came from working in a company which was undertaking a lot of international projects.
Back then, in between 2003 to 2009, I was working for a company who had contact with overseas projects, overseas companies who needed people. So I was sent off to the US at one point for a three-month project and I didn't really enjoy living there, and then for the next project they sent me to Australia to Melbourne and I really enjoyed it. So I liked the way people work here, I like the way people react here. And then when I went back to Thailand, I talked to my wife and said, ‘Why don’t we think about moving to another country and start a new life?’
After saying to his wife, ‘OK honey, let’s move to Australia!’ Naing started to search for employment in the IT field, which turned out to be quite a challenge.
We migrated to Australia at the end of 2009, so in November. As you know, November is not the best time to find a new job, especially for those who have no local experience in Australia at all. I think that I picked up a job which was slightly different from my previous role as a technical writer; so I write software specifications for a software company.
Then I did a course for about 11 months and moved on. Before moving on, I learned about mobile development by myself, so I studied mobile development and after 11 months from the first employment in that company I moved onto another company and started to learn about the mobile development field.
Fortunate enough to find a stable job in IT development, Naing continued renting up to the point where he was inspired to start looking into property investments and buy his own home.
So basically we migrated to Australia with just $10,000 in cash with us and no other assets at all. And we were very sensitive about debt like I mentioned before, and we were not a fan of any debt at all whether it's a good debt or bad debt. Later we found out the difference between good debt and bad debt. But at the beginning, my wife kept on saying that we should buy a property to live in and one day it would be ours. After renting for about six months, I guess we thought we'd try to get into the property market - without knowing anything about mortgages or property at all!
I remember asking a mortgage broker how much we could borrow based on the income at that moment. And he basically asked how much we had as a deposit and we said, ‘We have $6,000 in our savings.’ He smiled and said, ‘Well, with $6,000 we can't really do anything about it,’ and told us to save more, to even buy a small house. So we kept on renting until the end of 2012; so after about two to three years, we had the trigger point where my wife accidentally placed a hot pan on our kitchen benchtop and then that left a very mild burn mark on the benchtop. We went through the back and forth with the property manager back then, talking about the compensation and quotes and all that kind of stuff; it was a big hurdle for both of us, mentally and physically.
And then the people, of course, we're negotiating a compensation amount of $900 - that was the main trigger point for me. Like I started to think about how to become a landlord and how we couldn’t really buy own house to live in. I think that in December 2012, we bought our own home in a suburb which was about 30 km away from Melbourne.
This event would be the sole influence for his shift in mindset and his ‘why’ which compelled him to invest in property.
It's more about a feeling how a single event can change your mindset about buying a house to live in. And it didn’t stop there, not long after that I self-studied a lot about property from property forums, books, everything, you name it. Back then there was a magazine that had a lot of investor case studies about how they can make money from the property and I read a lot and self learned a lot for about two years. And then we purchased our first investment property in Ballarat, which is a large regional city in Victoria; we bought it in 2015.
Purchasing the first property as his own home in 2012 and then investing in another house in Ballarat, Naing started to spread his risk.
Actually we bought a full blockhouse as our own home. So since we were young we have been living in a proper house and land so we have been, even though they come in places like 30 km farther away from the CBD, we thought it was good for our lifestyle.
It was 2015 when we first bought the first property investment. Not long after that, I think three months after, we'd we bought another one in the same city, Ballarat, and I think that was also in 2015. After that, we met an awesome broker and awesome mentor and we kept on accumulating up to six. We've got six investment properties at the moment.
Fantastic. And they're all in the same area or different areas of Melbourne?
Three of them are in Ballarat and another three are in Logan, Queensland.
So over the three years, Naing has been investing in property, what would be considered his worst investing moment?
The property in Crestmead where we initially miscalculated the rent to put on. So we thought it would get around $480 per week for that Crestmead property investment. It took about two months, a bit over two months, to get a tenant after gradually decreasing the rent.
So just tell me a little bit about the behind the stories behind that. How did you find that property. When did you buy the property and then why did you buy that property?
We bought our first two properties in Ballarat and it’s sort of like neutral to positive gear at that time. We had kept with our mortgage broker and he said it would be good to balance out our portfolio into a little bit more positive, to try to be more balanced within our portfolio. So we looked at the Logan area, which has very high yielding returns at the moment. So we jumped into the Logan area and tried to find places to buy. We picked up a place in Crestmead which has a pretty good ratio of owner-occupiers there. So we picked up in the Crestmead area in 2016. We bought that property just mainly for the high yielding return.
Where did it all go wrong? It was the impression that two families could occupy the house.
Our initial impression was that the property was good for dual living, so two families can live in the same property and share the rent. So we bumped up our rent higher; at the time there were other investors coming into the market as well, so a little bit higher than average they can see at that moment and we miscalculated the rent. It is very important that you've got to have a really good lease consultant to really know the market and get a reasonable rent level.
Naing has continued using a property manager’s services ever since, having learned that you need to follow the experts’ advice on rent levels and the importance of getting to know the rental market.
I have to admit that it's also from our old mistake that we wanted a little bit higher than what they recommended. So as a landlord, there should be a reasonable rent level we should expect as well.
More recently, he had an a-ha moment where he recognised a way to add value to his properties and increase the rental yield.
Last year in 2017, at the beginning of last year, we bought another property in Crestmead as well based on a theory. We learned so many things from the first property in Crestmead that we really need to have a good place for people to rent. So we bought another property, which had a very solid foundation for renovating from the downstairs area. We renovated that area for about $15,000, we bought the property for $315,000 back then and then we put in another $15,000 for the renovations and now it's getting rented at $480, so it is a pretty good investment for us so far.
Naing found this Crestmead property through researching the market and consulting with a property manager, who was able to recommend the property to him.
Now you'll see that we are trying to balance out our portfolio, so we were highly positive geared at that moment and then we bought another property in Ballarat, which has a little bit more negative gear but it is a huge land, 1,000 square metres in Ballarat. So now our portfolio is very balanced.
The key here in the property investment that many would agree is the land content, so land is king. It's really the case that the more land you have, the better position you will be in in the future.
What Is Buyers Remorse? Ko Ko Naing Shares His Experience
Apprehensive about taking on debt when initially considering entering into property investing, Naing was motivated to get started when there was a need that needed to be met with action.
It would be when my wife burnt the kitchen benchtop that we wanted to see how it would be like as a landlord. Basically the mindset of when you are stuck in a corner, you try to push it back as much as you can to get into a position you are comfortable with.
A combination of elements aided Naing to get to where he is now with his portfolio, such as spending time on property forums and having a mentor to guide him.
Self-education is one thing, there's another thing which is like having a good mentor behind me. When buying property, it's also about how you set your mind when you've got rejected, or when you've bought a property without that much thought and you later start to have buyer’s remorse when things aren’t faring well. So it is more about the mindset as well.
It was his mentor who also helped him overcome his case of buyer’s remorse, at a time when he was the only bidder for a property.
The best example for my case was that the last property that I bought in Ballarat in a big area, over 1,000 square metres, it was a quite interesting situation there. It was just two days before Christmas and there was an auction; no one turned up at the auction and I paid, I put in my bid for $280,000 for the property and the auction was passed in, which was what the vendor was expecting at that moment. We had a private negotiation afterwards and after that, we put down $320,000 for that particular property. Then after I signed the documents for the contract sale and then came back home I thought, ‘Did I pay too much for that?’ because there was no other bidders at all.
But on the other hand, I thought it was just because of the Christmas period that the market is also quiet. Then I had a chat with my mentor and he said, ‘It's the land content that really matters. This last property among or all six properties that you have, this particular property might be the best performing property in your journey.’ So that's the mindset I had to put in to really know that what I have done is not to be remorsed.
Since then he has come to learn that once you hold a property for one or two cycles, you can really see the effect of compound interest on your investment. And compared with similar properties on the market, he believes he has chosen well.
So not long after, about a week later, I browsed around the sold section of the realestate.com website and saw that for a 1,000 square metre property they were selling it for like $500,000 for a 1,000 square metre land, which was a very similar condition, like mine. So, I was pretty happy with that.
In addition to his mentor, he found a good mortgage broker on the Property Chat forum who guided him through some of the most vital aspects of property investing.
I learnt a lot about how loan structure is important and you know, mindset and attitude to the property market in the area that I am interested in. And also get to know the market really well, so that's something that a mentor can really help you out with.
In terms of books Naing would recommend to aspiring property investors who are looking to condition their mindset, he names those written by authors like Florence Littauer and David Schwartz.
And what has been the best advice he has ever received?
I would say he had one point that there are plenty of fish in the sea, so there will always be properties in the market that you can buy. So if you miss out on one and if you think it is not a good deal for you to pay, then there will still be many more in the market.
Naing’s initial strategy when locating a property is to research areas with good growth and educate himself as much as he can on those markets.
Before we looked at different suburbs around Melbourne to buy, we just looked at you know we just tried to see what places in our suburb were good in growth, or if it is good for family and stuff. So I researched a lot about individual suburbs as well and then, later on, it was more like self-educating on the property markets.
In terms of criteria that he considers when purchasing a property, he looks at the land size and the potential to add value.
Really what I mentioned previously, it's land that matters the most. So you see landlords getting stuff everyday like you know when you see the amount, the city grew outward because there’s not much land available in the inner city. So what I do and my strategy is looking for properties with a very good land size, so at least 600 square metres if possible.
For me personally, I also like renovating property. Based on the books that I read before, I really look at the potential to add value with renovation. So the potential to add value to the property is another criteria that I look at as well.
I really look at the cosmetic renovation structure - you need to put in a bit more effort to do the structural ones. So what I really do is just the cosmetic renovations at the moment, try to paint, try to change the carpet, upgrade the kitchen. So that way you can always bring up the rent a little bit higher as well.
Areas Naing targets are regional locations which provide him with a positive to neutral cash flow.
My target areas are those that have modest growth, also a neutral to positive cash flow one. So basically I don’t really want to pay out of my pocket, you know a better way is if the renter can cover it and I can still have money in my pocket, that's the best thing. That should also eliminate the aspect of the growth as well, so I look at those areas like Geelong, Ballarat or Bendigo, regional area you know. Logan is also modest in its growth.
Now with six properties working for him, his portfolio is generally quite positive geared.
The first one we bought in Ballarat, it cost $235,000, currently renting for $280, so that's obviously positive geared right now. And the second one, also in Ballarat was for $250,000 and is currently renting for $280; that's a bit neutral at the moment, so not too bad. And the third one in Woolwich in the Logan area was for $335,000 and are currently renting for $390, so that's also positive geared at the moment.
The next one, the fourth one, is in Crestmead and I bought it for $326,000 and is currently renting for $410 per week. The fifth one which I mentioned as the a-ha moment is the other Crestmead one for $315,000 and I put in another $15,000 for renovations and that’s currently renting for $480, which is a big cash flow property at the moment for me. And the last one we bought in Reedan, which is also in the Ballarat area, 1,000 square metre one that was bought for $320,000 currently renting for $300 per week. So basically very balanced and positive gearing.
And what's the total value of your portfolio worth now?
If I include my own home as well, it will be $2.8 million. The good thing is that I can easily think of the growth as a bonus, even though the growth will be something that can expand the portfolio in the future.
Naing’s ultimate goal for his portfolio is to provide for his retirement.
My primary goal is to retire properly, not just on the pension. So that's my goal. A lot of average Australians retire on pensions and they can barely meet their daily, or monthly expenses. So I don't want to be in that situation, so what I do basically try to put in a nest egg and then hopefully it will hatch into a very good chicken, or hen, in the end.
Having built a portfolio worth $2.8 million so far, he still has a long way to go before he reaches his ultimate goal.
My target is to reach 30 properties. I was talking with my mentor, we tried to work out the number of properties needed for me in terms of to live a comfortable retirement life. So there was a number - 30 investment properties, around $300,000 level of property each.
A personal habit which Naing attributes to his success in property is being certain of the criteria he is looking for.
I would say self-discipline, like trying to get things done properly and very effectively - when I try to look at the real estate portal, I need to know what my criteria is, otherwise you'll be browsing through hundreds of hundreds of properties and you’ll get lost. So I would say really know the criteria that you’re looking at.
If he were to meet himself from 10 years ago, what would he say?
I would say don’t neglect the aspect of good debt and if you are only thinking about debt without realising that there is good debt and bad debt at all, you won't go any further. So that would be my message to him. And I would say that you know, leveraging is another aspect that you need to learn - give the banks money to leverage your wealth further.
For the next five years, Naing is excited to put the knowledge he has gleaned so far throughout his property journey to good use.
For the next five years, I would say I learned a lot about property investing over the past three years and with proper tools and knowledge with me at the moment, spending time buying will be a lot more of an exciting process. And a way to overcome the buyer's remorse is another aspect.
He is also excited to be continuing on with his full-time job in software development while also setting up his own mortgage broking business.
I'm setting up my mortgage broking business at the moment as a part-time career, so I'm not totally getting rid of my full-time job. You know at the end, you want to do what you like most. So I'm currently working as a full-time job, not because I have to but I'm currently living off part of my monthly expenses with the rent as well, so I would say I'm currently working full time because I want to.
If you would like to connect with Naing and find out more about his strategy, you can do so via email. Alternatively, you can message him through Property Chat.
That would through email, that’s [email protected]. So you can shoot out any questions, or any tips and tricks that you would like to know, I’m happy to share.
This episode was produced by Andrew Faleafaga with narrations and interviews conducted by Tyrone Shum.