Our CEO & Founder – and a prolific and highly successful property investor in his own right – Joseph Chou, reveals which cities he’s personally investing in this financial year, some important property investment tips and how to start planning for your future, now.
Getting ahead: invest for your future
Most people don’t plan to succeed. They feel retirement is too far away, or they feel that being able to invest in property is an impossible goal so they don’t try. Others play the waiting game, waiting for the perfect time.
In my experience, people start acting in the third year of a cycle – in the first year they don’t do anything, but they start becoming aware and becoming uneasy. In the second year, when they read a report about another year of strong growth, then they might attend property investment seminars or see what their friends are doing. But they don’t start acting till the third year, when the market has moved a lot – and might be close to the peak. At this point they start queueing up, but without any strategy, without any long-term plans. And the minute the market changes – which it inevitably does, as it always moves in cycles – they sell, thinking it hasn’t been a good investment, which is of course, simply not the case.
When I invest in property, I’m not just investing for the next 12 months, I’m planning for the next 50 years.
Where can you buy to get the most gain?
As a property investor, if you’re not just investing for the short-term gain, if you want to retire on these properties, and maybe live on the rent and equity for decades, if not generations – where can you buy to get the most gain or the best value?
For me, I invest with common sense: it’s about following the money or following people with money. I ask the simple question: in the future, will this property attract someone who is prepared to pay double the price I’m paying now, or pay a premium rent? And then I consider what people with money want in a property: convenience, security, good views, exclusivity, facilities, prestige and quality.
Why I’m investing in Perth in 2018
This year I’m settling about 12 properties, in Brisbane, Melbourne, Adelaide and Perth. For the last two years almost all my investments have been in Brisbane and Melbourne; I’ve bought a few in Adelaide, and the most recent one was in Perth. To me, it makes sense to think outside Sydney and buy into the most prestigious, most affluent suburbs in other cities, which are often half the cost of Sydney.
I decided to get into the Perth market these last few years, simply because the people who make the most money are those who get into the market early before the next wave. Of course, this takes courage, insight and foresight as well. Most people don’t feel comfortable doing something when nobody else is doing it. I bought an off-the-plan property from Mirvac a couple of years ago, which hasn’t settled yet, for under $800,000 in a Mosman equivalent suburb. The same property in a peak market would be a $1.5 – $2 million property. To me, that’s a no-brainer. I just put in my 10% and bide my time.
Joseph’s 12 month property plan
At the beginning of my investment journey – my plan was to buy $20 million net value worth of property as quickly as possible, and then wait for it double in value. This was because I wanted to earn $1 million in income from the properties. I had a mentor who helped me with this as my initial thoughts were that I couldn’t afford it. But I quickly learned that you can make a start, and work on your income at the same time as waiting to increase the equity in your property.
Nowadays, I no longer have an investment plan for residential properties, because I’ve already achieved my goals in that space. But if I’m blown away by a property then I will be opportunistic and invest. I’ve bought everything that ARIA has ever built because I’m such a big fan. Their developments are exclusive and with such great attention to quality. I go for fundamentals. I want to buy and hold quality assets – this is the foundation of wealth building.
I sold some property in the early days and I regret every single one. I missed out on about $10 – $15 million worth of capital gain. So, I’m not planning to sell anything in the next 12 months – I do annual valuations and use my portfolio to refinance. Investors need to do regular valuations, so as soon as there is an increase in perceived value by banks then you can release your equity.
Setting your own property investment plan
I’m now working on my commercial and retail property portfolio, but for an early investor, residential property is the foundation of your investment plan. Residential property tends to be more stable, you can borrow more, it is backed by the banks and vacancy is lower.
The typical foundation for a property investor is $2 – $5 million in value, at which point you can look to diversify and take a bit of risk. In the same way that you work and exercise and so on, plan to invest for your future. And invest more not less; always think about how you can invest more even if you’re not currently in the position to be able to do so. Any money you put into an investment is not spending it – it’s being put to work and is coming back to you manyfold. Be kind to yourself. People often give money to others but don’t give back to themselves in the same way.
Property is a ‘forgiving’ investment in Australia
I learned from day one that property is a forgiving form of investment. Even if you bought in the worst building at the wrong price, you will still see growth over the longer term. And the risk of waiting is still higher than the so-called opportunity cost.
Property has performed in a particular fashion for the last 100 years. Banks know this pattern and that’s why they’ll lend 80 percent. Even mortgage insurance is only required for the first 12 months if the borrowing is more than 80 percent because the banks know that after 12 months, the money they have lent would be safe in the event of a mortgage default – unlike lending to a business that could go bust. That’s why I feel so comfortable with property, it’s safe.
If you are considering where to invest in property in the Australian capital cities in 2018, download our quarterly market report, or register to access our premium selected properties list.
Joseph Chou travels regularly across the country speaking and presenting at a number of events, workshops and seminars. Find his next speaking engagement in your city.
This article was first published in July 2017, but has been updated for freshness, accuracy and comprehensiveness.