Ironfish CEO and multi-million-dollar property investor Joseph Chou shares his journey from first-home-buyer to apartment downsizer – and there are plenty of great tips in there for property investors, first-home-buyers and downsizers alike.
Buying my first home
I purchased my first home back in 1992. We were quite focused about what we were looking for which really helped to narrow down the options.
If you are clear about what you’re looking for you, you don’t necessarily need to go out and see hundreds of houses every Saturday.
For us, we knew we wanted to be close to my wife’s work and that we wanted a home that was ready to move in, without requiring renovation. So, to be honest, we only looked at a few houses and a few apartments and ended up buying a 3-bedroom home in Ermington for $175,000. We saw this house as just a stepping stone.
Joseph’s first home in the Sydney suburb of Ermington. Purchased for $175,000 in 1992.
Remember your 10%
In 1995, only 3 years later, my wife and I started casually looking at property – my wife’s parents were planning to migrate from China and so we had that in mind. In amongst our search, a great 5-bedroom house with a pool in the Sydney suburb of Epping came up.
We quickly dismissed it, assuming it was out of our price range – which was about $250,000 at that point, a modest increase from our previous house. We assumed the Epping house would be close to double that. But the agent gave us a call ahead of the auction telling us that due to a divorce the house would definitely be sold so it would be worth coming down for the auction.
So we did, and ended up placing the winning bid of $252,000, because we felt it was a real bargain.
We were completely unprepared and inexperienced with auctions – in fact we didn’t even realise we were required to put down a 10% deposit on the spot! But we put it together and then went on to sell our Ermington home in order to be able to secure the loan.
At that point, I didn’t know anything about property investment. Had I known how to restructure my finance and release the equity from Ermington – I’d managed to pay down most of the mortgage by this stage – it might have been possible to hold onto it.
But as it was, I had to sell it (and didn’t make any money in the process), got bridging finance and went on to live in our Epping home for 5 years.
Chatswood’s record house price
I’d always had it as a personal goal, when I moved to Australia, that I’d be able to buy a million-dollar house one day. In 2000, my wife and I were in a position to be able to make that a reality. So, my wife started looking around and making shortlists for me to view. She found a beautiful home in Chatswood West, on the golf course – a 1000sqm block, 400sqm internal space. We bought it from a downsizing couple who were reluctant to part with their cherished home for less than $1 million – which would set a new record sale price for the suburb.
We ended up buying it for $995,000, and again sold our Epping home (which was now worth about $500,000) in order to make the purchase. I still wasn’t thinking about property investment and still in the mindset of not wanting to have debt.
Joseph’s next home was in Chatswood West, purchased in 2000 for $995,000.
The family home
The decision to move to St Ives after only 3 years of living in Chatswood was really because the commute was becoming difficult between my son’s school and our respective workplaces. My wife found a home in St Ives: a brand new, architecturally designed home overlooking Ku-rin-gai Chase national park. It turned out the developer had over-spent and was having difficulty getting $2.2 million for it, which was the bank valuation. So, we were very pleased to buy this home at auction for $1.72 million.
Finally, we were now investment-savvy and didn’t sell our Chatswood house when we bought this one. We kept our Chatswood house and rented it out for about 13 years before we ultimately decided to sell it.
We spent 10 years at St Ives, the longest time in any home since we moved to Australia and it’s where the kids grew up. We always said it had good “feng shui;” they were great years when business started booming in earnest and our family enjoyed good times together there.
Joseph’s first purchase of a newly-built house was in St Ives in 2003.
The benefits of downsizing
In 2013, my wife and I read an article in the media discussing what’s really important in life. It was framed around the idea that there is a lot of stuff we have that we never end up using or enjoying the benefits of. For example, you might have a grand house but find that you’re not actually using 70% of the space in your house, or 70% of the power in your car or even spending 70% of your wealth.
In discussing these ideas, it started to change our thinking around how our traditional aims or desires had changed over time. For example, I always thought that it would feel like a real achievement to be able to own a house on Sydney’s famously exclusive Wolseley Road in Point Piper. But as my son had started attending Sydney Grammar, and we were thinking more about the kind of lifestyle we wanted, it became clear that downsizing to an apartment closer to the city would offer us what we were actually looking for. We wanted to focus on the 30% that really counts.
And I think, at the end of the day, lifestyle is something that everyone wants – and it’s more important than living on a huge block that you don’t actually make the most of.
We decided to buy a 4-bedroom apartment with harbour views in the lower north shore. It’s so much easier to access the ferry or buses, and my kids – who are teenagers now – can be a lot more independent in travelling to their various activities.
If we don’t feel like cooking, we can easily go out and enjoy the local restaurants. I think the other major thing is that the maintenance is so much easier. Our neighbour, like many people who live in higher-end apartment buildings, travels a lot for business. When you travel so often, you really need a house-sitter or someone to manage a big property. With an apartment, you don’t have to worry about security and maintenance in the same way – you can literally just lock your door and leave.
Apartment living is becoming more and more appealing to Australians – including families. Families such as mine and even young families are seeing the lifestyle benefits of an apartment. In my case, my kids were already teenagers and weren’t using a big backyard. And for younger families the compromise in outdoor space is often balanced by living next to a great park or near the beach.
We bought most of our homes at auction, including our apartment. My wife bid on our final two homes – using our auction strategy.
Whether you’re buying a 3-million-dollar home or starting at lower entry point, if you’re at auction it’s important to have a bidding strategy.
For example, say you’ve got an upper limit of $2 million for purchasing a property. I think it’s not worth going up in smaller, regular increments. Once you get to $1.2 million in the bidding and the auctioneer is asking for an extra $50,000. You might be thinking, well if I just offer an extra $50,000 it will be enough to win. But chances are other buyers are thinking the same thing – and are happy to keep matching your $50,000 bids. Instead, if you bid $1.5 million – suddenly you’re changing the game. People are not sure if they’ll be able to go as high as you and may pull back.
What I’d do differently if I had my time again
I think the only thing I’d change if I were to go back and do it all again is that I wouldn’t have bought my first houses to live in – at least not the first 2 houses. Instead I would buy investment property and rent where I wanted to or needed to live at the time.
“Renting can be much cheaper and more flexible; where you buy your first home is unlikely to be where you want to end up in 10 years’ time – your job, kid’s schools and overall situation will change. I know many people over the years who have chosen to do this – and ‘rent-vesting’ is becoming a more common term today. Because whilst you may not be able to buy a house in your suburb of choice, you may well be able to afford to rent there.”
And if you invest in property while you’re renting, you’ll still be in the market so when the time comes and you’re more settled – perhaps starting a family – you could sell 1 or 2 properties and put that equity towards buying your first home to live in at that point. Even further down the track, many families may even rent out their own houses and then rent a house closer to premium school catchment areas – I think this can make a lot of sense.
Joseph Chou presents regularly on the topics of property investment, strategies and entrepreneurship. For information on his next speaking engagement please see our seminars page.