Timestamps:
00:33 | Passing on Pay to Play
04:23 | The Runner
10:32 | Bet on Needing a Buffer
05:26 | Who, Me?
17:56 | Double It
20:50 | Property Chat
25:25 | Making the Most of Mindset
31:05 | Poker Face

Resources and Links:

[00:13:06] And if haven't paid back any of your debt— which is unlikely, you probably would have paid down some of it. But even if you don't, it's still at $1.6 million. You would have made $2.4 million equity. And that number actually means different things to different people. But it could mean getting more of your time back, opening up options to do something else with your time instead of working.

This is Property Investory where we talk to successful property investors to find out more about their stories, mindset and strategies.

I’m Tyrone Shum and in this episode we’re back with Justin Zhu, the founder of GG Loans. After having spent 10 years as a psychologist, he made the jump to property investment and has never looked back. He shares the importance of understanding inflation, the real difference between good debt and bad debt, and why finding a community can be the best thing you do for yourself.

Tyrone Shum: 

Zhu’s portfolio started with an investment property in Logan in Queensland. At the time he was also working and doing a psychology internship, so between the three, his schedule was jam-packed. However, he still had time for a monumental realisation.

Justin Zhu:   

[00:00:33] It was tough work. You had to hear about a lot of problems and a lot of things with depression, anxiety and trauma, homelessness, substance, all sorts of things. 

  

[00:00:46] And then we have to still do our research and stuff on the side. So it was intense. I gotta say. And then I was like, 'You know, what?' I'm like, 22 [or] 23, something like that. 24. And I was like, retirement age is what, 65 back then? I think it's like, 68.

  

[00:01:14] It keeps getting higher every year. Like, 40 to 50 more years of working like, that sort of existential moment hit me. Remember, first 18 years free to play. This pay to play part sucks. And so I was like, 40 [or] 50 years, I can't really do it. 

  

[00:01:43] And then I think the reality was talking to people. A lot of my colleagues, they're not that happy. And there's no real other sort of options to get ahead. And so, like I said, luckily I met Mez, who really taught me some of the basics. And then I started researching, and, you know, what's this thing called investing? 

Tyrone Shum:
He came across Rich Dad, Poor Dad, and took note of its main takeaway.

Justin Zhu:  

[00:02:14] Essentially, what it boils down to is we want to invest to control our time, at the end of the day, because it's the only resource that's truly, truly limited.

  

[00:02:26] And so I learnt about that sort of concept. And then I think the other concept I really learnt about was about how inflation works, and how [the] monetary system works. Basically, where the value of money decreased. Well, because of how the fiat money system works, essentially, the value of $1, it doesn't buy the same thing. And we're seeing that right now with the rates going up and all that sort of stuff. 

  

[00:02:56] So I remember my parents back then stressing out about, I think their mortgage was somewhere like $150,000 to $200,000. And they were stressing out about that. And this was, like, maybe 20 years ago, something like that.

 

[00:03:18] But I think the main thing, I was like, you see that inflation, you know, debt is also being inflated away. And these days, if I could buy a freaking place with only a $200,000 mortgage, you know, to me, I'd be laughing. Like, you can't even get a one bedroom studio with that sort of mortgage. It's just crazy. 

  

[00:03:41] So, I think that essentially what I learnt was property as a hedge against inflation. And so that's how I came to that sort of realisation. I was like, 'You know what? Let's get into this investing thing. Let's do something that's passive, then that helps'.

Tyrone Shum:  

Along his investment journey, he came to many more realisations.

Justin Zhu:   

[00:04:23] I think the most recent one, in terms of, like, a horror story you can say, was so we had this property, we have this property. It's in Waterford West, which is a suburb in Logan in Queensland. And this was our second investment property, sorry our third property that we bought, and basically we tapped the equity from the Zetland and Marston, which was our first investment property.

  

[00:04:55] 2015 to, I think 2021 [was] smooth, smooth sailing, in terms of, like, tenants [were] really, really good, paid their rent on time and stuff like that. 

  

[00:05:05] It was always one of the properties that had a lot of repairs, like [a] decent amount of repairs. So that's a potential downside, but I think most property investors should know that. And if you're looking to invest in properties, that's definitely something to keep in mind, maintenance requests. And the more properties you have, every week [a] property manager's like, 'This is broken, hot water system's gone'. Or, 'The aircon's not working'.

Tyrone Shum:
Then, a week before Christmas, one of his long-term tenants gave him an unexpected present that wasn’t on his list.

[00:05:49] I noticed the rent stopped coming in, which is odd, because they always paid their rent on time. 

  

[00:05:56] And then, like, a couple of days later, my property manager gives me a call. And, she was like, 'I'm gonna clock off for Christmas. So just wanting to wish you a merry Christmas and stuff like that'. And then [she] was like, 'I got a Christmas present for you'. I'm like, 'Oh, what is it?' And she was like, 'Well, you know Waterford West?' I'm like, 'Yeah'. And [my] spidey senses were tingling. She was like, 'Well, the tenant's kind of gone and done a runner'.

[00:06:34] I was like, 'What do you mean, they've done a runner? They've been paying rent all this time' and stuff like that. And she's like, 'Yeah, like, they've literally cleaned out the whole place, vacated the premises. And didn't tell anyone. Like, it was like, they just disappeared'. That would explain why the rent hasn't been coming in. And then she's like, 'Yeah'. So that was the first part of the horror story. 

  

[00:07:06] So the second part was like, there was a bit of damage. I don't think it was intentional. But maybe they were moving out in a hurry. I still don't know why they... like, if you're listening to this, tell me why you moved out in a hurry. I really want to know, what was so urgent that you literally disappeared? One of life's biggest unsolved mysteries. 

His next Christmas present to arrive was the bill, which was for $20,000 worth of damages.

Justin Zhu: 

[00:07:52] Because we've got to shop for our presents for our friends and family. Like, well, our budget just down by $20,000.

 

[00:08:03] And the icing on the cake. And I think any listener that's out there right now, make sure you have a good property insurance. I didn't at that time. I had insurance through a bank, through the lender that I was with, I'm not going to name them. But it was one of the big fours. And then so we got the insurance for that. And I thought I was good. Rental damage and loss of rent and stuff that was all covered in the policy, right? 

  

[00:08:34] But because we hadn't reviewed our rent, like, in the insurance policy, I didn't update the rent as it went up over time. So we were still bloody insured for, like, it was like the amount when we first signed up the tenant, which was, like $100 less or something. So there was that. 

  

[00:08:52] And then this insurance company was, like, just the worst, like literally the worst. Every time I'd get in touch with them, you get this auto email that they'll reply in, like, 10 business days. So every communication was 10 business days in between.

  

[00:09:13] So by the time I got the rent back, it took me six months, to cut a long story short, six months to get that rent back that was missing in that time. So we were out of pocket. No rent was coming in. We had a $20,000 expense, and yeah, it was a bit of a shocker. Bit of a shocker.

Tyrone Shum:   

There was a lot of back and forth with the insurance company over the $20,000 bill. In the end his insurance covered most of it, but Zhu paid for the renovations out of his own pocket.

Justin Zhu:  

[00:10:32] Because at one point I was like, 'Am I ever gonna get paid for this?' So yeah, I think the biggest lesson I learnt was make sure you have a buffer. And the more properties that you have, you've got to make sure that that's covered, and make sure you have a good insurance company. 

  

[00:10:49] And these days, I found a good one. And I did a claim last year, and it took me one month to get everything resolved. And it was super easy, super easy. So, definitely get an insurance company that specialises for property investors, that's my advice.

Tyrone Shum:   

His biggest aha moments were when he learnt about the differences between good and bad debt, and how leverage works.

Justin Zhu:   

[00:11:45] I think, if you understand these two sort of concepts as you're starting out, or you're thinking about investing, I think those two things are very golden.

  

[00:11:57] And what I mean by that is good debt is basically a debt leverage against an asset that's giving you some sort of return. And we're on a property podcast, so I'm going to talk about property here. But I'm going to when I met Ms. And this was the example that she gave me, and to this date, this is what I explain to our investor clients. 

 

[00:12:21] Let's say, as an example, you have $2 million worth of assets. And you have $1.6 million worth of loans secured against those assets. So about 80%. 

  

[00:12:36] Essentially, in property, what tends to happen is about every seven to 10 years, it's what we call a property cycle. And in that sort of timeframe, if you look back at the data over the last 50 years or so, property tends to double. 

  

[00:12:51] Sydney is a good example of that, Brisbane in the last couple of years has done that. And now I think Perth is like going through that sort of phase. But basically, yeah, $2 million assets, $1.6 million debt. After one cycle, that's about $4 million in assets. 

  

[00:13:06] And if haven't paid back any of your debt— which is unlikely, you probably would have paid down some of it. But even if you don't, it's still at $1.6 million. You would have made $2.4 million equity. And that number actually means different things to different people. But it could mean getting more of your time back, opening up options to do something else with your time instead of working. It's like, endless possibilities. And the math behind it is actually very, very straightforward.

Tyrone Shum:   

He eventually came to the same conclusion that many investors do. 

Justin Zhu:   

[00:14:27] It's mainly around leveraging debt to work for your goals. 

  

[00:14:32] And I remember when I was just starting out, I was, like, $65,000 or something like that. And I think my wife was slightly higher at that point. But our total income would have been, like, $140,000, maybe a bit less than that. So, it wasn't, like, a lot. It wasn't bad, but it wasn't a lot either. 

  

[00:14:51] But I remember setting a goal that I really want to have $100,000 in passive income. And then so all you have to do you is work backwards from that. If you get $2 million of assets, unencumbered, returning 5%, there's your $100,ooo. And once you work that out, then it's more about just how do you get there along the way. 

10 years after his initial aha moment, he found himself on the front page of news.com.au. However, Zhu remains as humble as ever. 

Justin Zhu:  

[00:05:26] Obviously, we're pleased with ourselves, but I don't think it was that big of a story.

  

[00:15:38] It's an okay story, but I think there's so many people out there doing really amazing things. And other investors, a couple I know, who have done even, like, much, much better than I. And I'm like, 'Wait, why are we on the front page?' 

 

[00:05:54] But I think that really cemented it, that it was very surreal. And it shows [the] main message I want to send [which] is if you set a goal, and you dream big, go for it. And you make the actions that's attached with that goal. That's how you ended up getting there.

   

[00:16:59] Just like how I saw my colleague with the six properties, I was like, 'This is possible'. Like, you don't have to earn a crazy amount. If you do, that helps. But I think the main thing comes down to that sort of mindset of believing himself and believing you can do it.

  

[00:16:59] If I had to tie it down into, like, a sort of saying or slogan, it's really about learning from your past. Living in the present. And investing for your future.

Coming up after the break, he delves into how and where he found his first community…

Justin Zhu:   

[00:20:02] I don't know about you, but when I was first starting to look into investing and building that portfolio, I looked around me and none of my friends were into property that I knew of.

Why it doesn’t always pay to read the comments…

Justin Zhu:   

[00:27:24] I think they really demonstrate that sort of mindset.

He shares the plans he has for the future, both personally and professionally.

Justin Zhu:   

[00:30:24] And, I mean, look, I could do that right now, just dump everything and sail off into the sunset.

And that’s next. I’m Tyrone Shum and you’re listening to Property Investory.

Tyrone Shum:   

With six properties in his portfolio, Zhu has blown past his initial goal.

Justin Zhu:   

[00:17:56] I think [our] initial goal was to get $2 million unencumbered. So the goal was always to get to that sort of $2 million sort of mark, hold it for a cycle, and then that becomes $4 million, sell down, blah, blah, blah. 

  

[00:18:10] The latest round of bank valuations we did put us at about $5.2 million. So we're ahead of that sort of curve. So I think in terms of, you know, do we want to keep buying? Yeah, I mean, if a really, really great deal comes up. And we've hit a bit of a income servicing wall ourselves. But once we get past that wall, I think we possibly could. 

  

[00:18:36] But I think our energy— my energy, especially— is very much focused on the mortgage broking side right now, growing that as a business and being able to help our clients get to their goals. 

  

[00:18:48] Just like as a psychologist, I was helping people get from here to there. It's the same sort of process. And I really take a lot of enjoyment, especially for those clients who are a bit more newer to it, or have one or two properties. I love doing that sort of work.

Tyrone Shum:   

When it comes to mentors, he doesn’t restrict himself to just one or two— well, maybe one or two hundred.

Justin Zhu:   

[00:19:52] There's different resources around property and around mindset and things like that. So I think with the property side, I think the biggest time for me was finding a community. 

  

[00:20:02] I don't know about you, but when I was first starting to look into investing and building that portfolio, I looked around me and none of my friends were into property that I knew of. So I ended up finding this community as I was doing my research called Summer Soft. Or back then was known as Summer Soft and today it's known as Property Chat. I'm sure it's been mentioned on some of the podcasts here as well. 

  

[00:20:31] But it's a great group of people around you. And I think why that works is it's a principle, you are the average of the five people that you spend the most amount of time with. And so if you're surrounded by a like minded community, you're going to be able to learn from them. 

Justin Zhu: 

[00:20:50] And I remember going to Property Chat meetups and things like that, driving out to... I think it was in western Sydney somewhere out there. It was amazing. And I remember going to those meetings, and they were like, 'Oh, how many properties do you have?' I'm like, 'Uh, one?' And then they're like, 'How many do you have?' And people are throwing out all these sort[s] of numbers. I'm like, 'Wow. Crazy'. 

 

[00:21:19] And then everyone was super nice and super friendly. And it's so crazy, like this community, like, people just love to help. Like, no one's trying to sell you anything. Like, everyone's just trying to help. And contrast that to now, I'm still going to some Property Chat meetups, like, [I] went to one recently in Chatswood and then one in the city. 

  

[00:21:41] And I think now I'm that person, like, talking to some of the newer ones. And they're like, 'How many properties do you have?' [And I say,] 'I have six properties' and stuff like that. [They're like,] 'Oh, wow'. I'm like, 'Yeah, yeah'. But when you're there, it's not that big of a deal.

Tyrone Shum:   

He can relate it to psychology terms such as ‘validated’, meaning that your feelings are recognised and normalised.

Justin Zhu:   

[00:22:43] 'Oh, how hard is this property [stuff]?' Talking to another investor, like, yeah, this is tough, but it's normal, right? Like you missed out on all these deals, there'll be other ones that come along. Hearing that, I think having [a] community that can help you with that [is] absolutely amazing. So definitely check Property Chat out for all the listeners out there. 

  

[00:22:36] I think the second probably biggest resource was my broker. He taught me the strategies. And at first when I went in, I was like, 'I could probably maybe borrow for one or two more properties', in my mind. Because you don't know what you don't know, essentially. 

 

[00:23:19] And then he was an investor himself, and he focused a lot on property investors. So that's how we actually ended up connecting. And I remember doing that first call with him, and he was able to map out our property journey to something like 10, maybe even more properties. So I was like, 'What?'

  

[00:23:47] Back then I wasn't a broker. So I didn't understand the strategies and lending strategies that you can use. And so I think, find yourself a broker, it doesn't have to be me, but find yourself a broker that truly has your best interests [at] heart and knows the deal. 

  

[00:24:06] If you were to get someone to teach your kids to play basketball, I think one of the big criterias is that they would have played basketball or are still playing basketball. You don't want someone doing lawn bowls coaching your kids how to play basketball. Nothing wrong with that, but it probably wouldn't make that much sense. So I think having a broker that invests, I think that that makes a huge, huge difference, someone who walked the talk.

Tyrone Shum:   

He believes it all boils down to mindset, what you believe, and what you think is possible and not possible.

Justin Zhu:   

[00:25:25] That's where I think a lot of people get stuck as well, like the finance side, certainly. But the other side is your mindset. I think as a psychologist as well, you see that all the time. Mindset can be a huge— and you're married to a psychologist, I'm sure you probably know about these principles— but, you know, how you see things and in your perspective on things, really determine your sort of reality. And it's incredibly powerful. 

Tyrone Shum:   

[00:26:05] If you were to meet yourself, say 10 years ago, what do you think you would have actually said to him now?

Justin Zhu:   

[00:26:21] I would say probably dream bigger. Think big, dream bigger, basically. Because I think when you're first starting out, you're kind of, like, tiptoeing your feet in the water. And I think it's hard to say that without hindsight. But I think the biggest thing is you've got to be flexible with your mindset. You've got to be able to, as Bruce Lee said, be like water. Because, oftentimes, if you have a very rigid sort of mindset, you're only going to see the world in a certain angle. And you're going to miss out on all these other sorts of potential perspectives. 

 

[00:27:02] And if you go to, like, any of those news articles, or Facebook articles about someone who's done well, you look in the comment section, and I guarantee you, like, a whole bunch of them would say, like, 'This is not possible', 'It's not doable', or, like, 'If they did it, they cheated', all that sort of commentary. 

  

[00:27:24] I think they really demonstrate that sort of mindset. And certainly, look, I don't blame them. I don't blame them for thinking in that way. Because it's much easier to stick with what you believe in. It's much more comfortable internally. 

  

[00:27:41] But for the people who are maybe sitting on the fence and things like that, I think the way to address that sort of mindset is just be curious around this. When you listen to podcasts, when you're talking to people and stuff like that, if the viewpoint is not the same as your own, be curious. Don't get defensive. Curious, you know, don't let your amygdala activate, be curious and just kind of really find out what the evidence is. 

 

[00:28:13] And that's how we all got into investing. You look at the data, you talk to people and you're like, 'Actually, this is possible'. It's not what I'm used to, taking all this debt,. We have, like, what, I think $3 million debt or something like that. It's crazy, right? So you can't jump into that. 

  

[00:28:31] But you've got to slowly turn your mind and learn and educate yourself. And I think mindset is huge. Like, I think the biggest quote I can say is the man who thinks he can and the man who thinks he can't are both, right. That's it.

Tyrone Shum:   

[00:29:15] What are you most excited about in your journey in, say, the next five years?

Justin Zhu:   

[00:29:18] I think, first of all, I mean, being able to use some of the options that property investing has helped me, I think that that's investing my time in the mortgage broking business and helping our clients and teaching them and educating them about how to use leverage, how to use your finance strategies, how to use the numbers and people, those sorts of things. I'm really excited every time because I'm still about a year into this, I still have that huge sort of spark when I talk to the clients. And teaching them about these things that kind of like, 'Oh, you didn't think that's possible'. So I think I'm really much looking forward to continuing doing that. 

  

[00:29:19] I think I'm also looking forward to, I think in the five year sort of period, having more time and building my team up so that I have more time to spend with my own family. That's a huge sort of motivation for me. 

 

[00:30:24] And, I mean, look, I could do that right now, just dump everything and sail off into the sunset. But I'm still quite young, I think, well, not young, but I'm in this awkward sort of, I'm 36 years old. So I'm sort of in this in between sort of age, you can say. So I think if I was to quit, I was like, 'What am I going to do?' All my friends are still working. 

  

[00:30:51] So I think lots of things to look forward to. And definitely, I think property investing and helping our clients is going to be one of those huge things. 

Tyrone Shum:   

[00:31:05] Well, Justin, thank you so much for sharing your wonderful story I want to ask you one final question [which] is: How much of your success that you've achieved is due to your intelligence skill, hard work? And guess how much of it do you think has been due to luck?

[00:31:19] I think it's a very good question, because there's a lot behind that question.  I think luck certainly plays a larger part than most people probably realise. There's a very good book called The Psychology of Money. The guy talks about what's the difference between skill, intelligence and luck. And I think a lot of it comes down to luck determines a lot of our timing, our connections and circumstances. So there's certainly an element of that. 

  

[00:32:31] But I think also, you can kind of make your luck as well. And like, [an] analogy would be like... do you play poker, or have you played poker?

Tyrone Shum:   

[00:32:41] Yeah, I have played poker, but not really.

Justin Zhu:   

[00:32:43] So you know how the game works, right? And often, people who first get into it, it's a game of luck. It's like gambling, right?

  

[00:32:51] In poker like we call a variance, that sort of luck component. But when we look at the all time money lists, and of tournament players and cash players, right? You see this very common pattern of names that keep popping up of poker players like Phil Ivey, Tom Dwan, Daniel Greiner, and so on.

  

[00:33:10] So the game is all luck based, right? Are these guys just luckier than everyone else all the time? Because if not, yeah, how [are] these guys getting such good results consistently in a game that's luck based? 

  

[00:33:23] And it's the same with property investing, I think. You've got to set your goals, don't rush in. But I think it's also important, you've got to do your numbers, right, and know the numbers really well. And know the areas really well. And I think that takes a lot of the luck out of it. Knowing your time in the market and time in the market, knowing those differences. Huge, right? So I think look at what's inside your control and set a goal and dream big, go for it.

Thank you to Justin Zhu, our guest on this episode of Property Investory.