Timestamps:
00:46 | Diving in Head First
03:19 | What’s a Subdivision?
05:33 | Long Term Benefits
08:57 | Capitalise on the Pull Back
11:39 | Focus, Then Replicate
13:36 | The Simple Formula
16:38 | Learning Curves
21:33 | Case Study
26:03 | Financial Security Was in Sight
31:53 | Lifting the Bar

Resources and Links:

[00:07:52] I actually bought a lot of properties. And then sort of just left them for a while and just kept doing the same thing, adding more properties to my portfolio. Until the point where I said, 'Okay, look, I think I have enough at the moment. So what am I going to do with them?'

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 Siva Raj, property advisor at Mantra Wealth. With his hobby of property investment now his profession, he shares the steps he took to develop a formula and stick with it, launching him into a career of subdivision stardom. Plus, hear the bad habit that nearly stopped it all from happening...

Tyrone Shum:   

Raj recounts one of his earliest projects, where he performed the classic ‘look before you leap’ manoeuvre every investor is sure to be familiar with.

Siva Raj:   

[00:00:46] I bought this, I was so excited, kinda jumped in, secured the property, not looking at what are the things that I need to do at the time to actually make this whole thing work. 

[00:01:02] There was challenges in that way. Obviously, challenges comes in when you start working on it. So, I got to a point where I had almost given up saying, 'Look, I can't make this work.' Because I couldn't get the services or couldn't get the connection to the new lot. But mainly due to the slope on the property. 

[00:01:35] When I looked at the property for the first time, I was like, 'Oh, it's quite flat.' But when you go through the technical, they say, 'Sorry mate, it's sloping back,' or sloping to the rear. Anyway, so that was the biggest issue that I had, not knowing what to do and then trying to find a solution by yourself, that was a tough challenge. And it took me a while to find a solution for it. 

[00:02:06] And, thankfully, I was able to find a solution with the help of a number of professionals, and complete that project. So, it was quite a challenging at the time. You're learning, every day you're learning. So, that was one of my challenges. I don't know if it's the worst of the worst or not, but for me, it was quite a challenging time.

Tyrone Shum:   

He bought it as an investment property with the goal of increasing his capital growth by keeping the property, and build a new one on the side.

Siva Raj:  

[00:03:19] It actually came about [by] one of the agents that I dealt with previously, and he just called me casually and said, 'Look, I have a property that is not on the market, do you want to have a look at it? It's something that you may like, or you may want to get into.' When he said 'subdivision,' I was like, 'What is this subdivision?' So he actually explained to me what I could do. And then I was very excited. I just didn't think too much, I pretty much jumped into it.

Tyrone Shum:   

[00:03:56] And where was this property?

Siva Raj:   

[00:03:57] This one is actually in Queensland. So I was actually still in Sydney at the time. So the distance made it a bit more challenging, but I actually learnt a lot more how you actually mitigate these risks.

[00:04:17] So it's a simple one, just a splitter. So it was a simple one. But look, even a simple one for the person who was starting off is quite a challenge.

Tyrone Shum:   

After he finished university, he leveraged his computer science degree to land an IT role. From there, he moved into one of the apartments he had purchased.

Siva Raj:  

[00:05:33] And then I only thought, 'Okay, not going to buy a house to live in, because it's going to hinder my capacity. So whatever the minimum that I'm going to spend on living, then everything else, I'm trying to put it to purchasing an investment property.' So for probably about five years into it, five to six years into it. 

[00:05:58] Oh, actually, I've started investing quite heavily on land. When I say land means that house and the land, or house with significant amount of land where you can do something in the future. So I didn't think that I'm going to do something now, I was already thought about the long term benefits. That's why I stopped actually buying units. The house is a way for me to go because it add much more value in 10 years. At that time, that's what my thoughts were. Add value, by the market condition, not by you doing anything, just the market. 

[00:06:43] And so I just bought and held. And what I was able to do is when there's a capital increase or equity increase, I was able to recycle those to a new property. So I didn't actually have to have too much cash or savings, but I was able to recirculate that equity to buy the next property. That time that I was really starting to do this was just before the financial crisis that happened. And you can really negotiate, like, even in Sydney. At that time, you can really negotiate. It was buyer's market. 

[00:07:32] I remember going to an auction, and there was only two people, and then the person just stopped. When I wasn't even reached to my mind that I wanted to pay, they just stopped, like, maybe $50,000 lower than what I was going to pay. So it was a good time. So I actually bought a lot of properties. And then sort of just left them for a while and just kept doing the same thing, adding more properties to my portfolio. Until the point where I said, 'Okay, look, I think I have enough at the moment. So what am I going to do with them?'

[00:08:13] By that time it became a passion for me. This became real, it's like, 'Oh, yeah, I can do this.' And like I said, I was always watching seminars, or going to seminars, and a lot of other people have done it, in the '90s. Even early a lot of people have a lot of good ideas. And all I did was just implemented some of those ideas from that point onward.

Tyrone Shum:   

With his ability to leapfrog to each property using their appreciated values, he reveals the key that opened all the doors for him.

Siva Raj:   

[00:08:57] The key was buying under market. Because if you overpay, by the time you wait for the equity increase, you're waiting for too long, natural market gains. So I think the key was I was actually in the right time, and I was in the right mindset. When GFC hits, a lot of people tend to pull back and say, 'Okay, what's going to happen?' So I think that's probably the time that you can capitalise a bit more.

Tyrone Shum:   

[00:09:36] When you purchase these blocks, did they also have houses on them for you to be able to service them? 

Siva Raj:   

[00:09:42] I actually bought only properties with houses on them. So I didn't buy vacant land or I didn't buy off the plan blocks. Look, I was comfortable with it. It's probably not for everyone. A lot of different people do different strategies. But this is something that worked for me and I was comfortable with that part.

Tyrone Shum:   

[00:10:09] And where you just investing mostly in Queensland [and] New South Wales, so did you go out to other states as well?

Siva Raj:   

[00:10:14] When I initially started, I invested heavily in Sydney. That actually made more sense for me heavily doing it in Sydney because the market was actually by 2013, or 2014, the market actually started accelerating. So I was able to then use the small equity from Sydney properties and purchase more. Or somewhere else where the market is still steady, hasn't moved much. So, the key to finding opportunities is not to worry about the hypes, what you see in the media and things like that. You've got to do what's right for you. What are your gut feeling? 

Tyrone Shum:   

There have been many aha moments that have popped up along his journey, but one in particular stands out.

Siva Raj:   

[00:11:39] I was actually doing a small development and realised that all this hard work that you're putting in, you're getting involved a lot of the professionals to help you. And I realised that there is a formula to this, this is not just something that you are trialing and erroring. There is a formula to it. If you stick to this formula, you can actually scale this up. 

[00:12:11] I think in any field, people, if they understand that there is a formula that you can replicate, you can scale. So that was aha moments. So that's when it actually hit me like, 'Okay, so I'm going to only focus on one very niche area. And want to replicate what I've done and be successful at it, just replicate at a bigger scale.' So that was an eye opener for me at that time. I was looking back and say, 'Oh, this is if I can do one, what does it stop me from doing two or five or 10? Or 15?' So having that formula in place really helped me. Stick to the formula, stick to what you know.

Coming up after the break, Raj shares the one tip he would give to any aspiring investor...

[00:14:00] You can't go past that. Not doing it properly, it actually hurts you later. 

How no one strategy is easier than another, they just may have different challenges...

[00:19:17] We bought the property and then we thought 'Okay, we will just invest it, we won't do anything, I'll just invest.' 

He reveals the driving force behind why he does what he does, and what turned his hobby into a career.

[00:26:26] So in order for me to excel, this was something that I can do it much faster, in a faster pace. And the something that I actually was passionate about. 

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

Tyrone Shum:   

Raj divulges his strategy and his formula, with the aim to help others in their ventures. If you expected it to be too difficult to comprehend, here’s some good news for you!

Siva Raj:   

[00:13:36] The formula is quite simple. It's to find the right property in terms of the cost of the property, the location, and so finding the right property is the key. 

[00:13:54] And then doing your due diligence after that. You can't go past that. Not doing it properly, it actually hurts you later. So finding the right property, doing your due diligence, and having a goal of what you're gonna do with it. And then making sure that it's financially feasible. You don't want to be doing stuff just for fun and losing money out of it. You want to make sure that it's financially feasible. Make sure that you cover all your exit strategies, cover all your cost that's involved with whatever you're doing. And then lastly, to be able to replicate this, have a team of professionals. All different fields, that if they can help you complete this.

Tyrone Shum:  

With the right strategy, formula, and property being different from one investor to the next, he reveals the ingredients he uses.

Siva Raj:   

[00:15:35] For me, I set myself, like I said, this is what I want to do. And this is the right strategy for me to find a bigger block of land, and then capitalise on that.

[00:16:06] Most of my developments have been subdivisions. So the reason I didn't go into too many other ventures is because I wanted to get into just subdivision. But in terms of subdivision, there are other way to subdivide, not just a land. So I actually ended up buying a block of units. And then I actually went through a subdivision process. 

[00:16:38] I actually bought the block of units as an investment initially. But then I saw the opportunity that this is a great opportunity to startup how to live. So I went through the process. Every project I've done, there's some learning. So there's some challenges. I didn't want to go outside that, I just wanted to do mainly strata subdivision or land subdivision. So that's been a really good project for myself. 

[00:17:15] If I think back, a lot of people will not take that challenge, because this is so many unknowns. But I was eager, actually eager to try some different type of things I wanted to try out. So it was a great challenge. But if these things are hard to come by nowadays, so haven't pursued that part.

Tyrone Shum:   

The block contained eight units, which he sought out once he had all his ducks in a row.

Siva Raj:   

[00:18:16] I was always looking into growing the capital more toward capital growth. So if I were to buy a unit, one unit out of that plot, at the time my opinion was, 'It will take too long.' So I was actually thinking out loud and seeing a couple of other people do it. And then I started looking for a block of unit because I had a bit of equities saved up and also I had finance lined up. So if some opportunity came in I said, 'Okay, fine, let's try it.' 

[00:19:17] We bought the property and then we thought 'Okay, we will just invest it, we won't do anything, I'll just invest.' But as I learn more and more about strata subdivision, I thought it was pretty good. And it's much easier than other subdivisions that I've done. But let me correct myself. It's not easier, it has different challenges. So I decided, 'Okay, let's give it a go.' And that was a really good project that I can't forget. There's a lot of challenges, but I can't.

Tyrone Shum:   

[00:20:23] I guess what I'm curious about is: what kind of challenges did you face?

Siva Raj:  

[00:20:27] The many challenges because when they're already on one block, which means that they probably don't have all the services not split up. That was the biggest challenge, trying to split all the services, metered separately, to each of the units. And also, making sure that unit it's in good order to sell. And then working with councils and other professionals to satisfy all the necessary requirements. You would think that there's not many, but there are a lot of requirements to satisfy. So it was a good project, because a lot of it was getting the right people in to do the work.

Tyrone Shum:   

[00:21:33] So let's sort of form a little case study around this. How much did you buy this block of units for?

Siva Raj:   

[00:21:47] I've got to recall, but it's around that $550,000 mark, I think. Each block is something around that $450,000 mark, I think.

Tyrone Shum:   

[00:22:00] So you bought the block of units for $450,000, how much would you say you had to put in to actually subdivide it?

Siva Raj:  

[00:22:07] Look, not much. I think we would have spent about less than $100,000. Because of how the units were positioned and how the units were given accessibility to doing this service without doing any major changes.

Tyrone Shum:   

[00:22:34] And so that $100,000, was that actually the physical work, or was it some of that goes towards the council?

Siva Raj:   

[00:22:451] Generally, it's not that much, because they have already paid their contribution, whoever built it, they've already paid their contribution. So it's not toward the council, it's more toward getting the certifications, and more toward getting the services in place. So it's been separating the services.

Tyrone Shum:   

[00:23:06] Yeah, that's the challenge, too. And I guess at the end of it, how much do you think that the property's been valued? Have you kept the property? Or have you sold?

Siva Raj:   

[00:23:14] Unfortunately I had to sell the properties, because I had another project lined up straight after that. One of those sometimes you regret things that you sell. I actually didn't realise initially that I want to have different title, you're paying rates suddenly, actually becomes much harder to hold, because it would have been positively geared property. Then suddenly it can be neutral or something like that. And so that made me realise, 'Oh, no, I shouldn't have done this.' It's a good learning curve for me. Unless you want to sell, you should have messed up on one title.

Tyrone Shum:   

At the end of the day, he sold it with a 20% increase, which was well worth the time and effort he put into it. However, it took longer than he expected.

Siva Raj:   

[00:24:32] I wasn't expecting to strata title and sell up. I was expecting to actually strata title it and revalue the property and get more capital equity out of it. So it took me roughly around about a year and a bit to do.

Tyrone Shum:   

[00:24:55] That's still pretty good. I mean, like for you to have a 20% increase for a year, most people don't usually achieve that result for any year that they usually buy and hold.

Siva Raj:   

[00:25:04] Yeah, it's true. But look, there's a lot of work went behind it. It wasn't just buying. It wasn't a passive investment. In the hindsight, I should have just kept it and not default.

Tyrone Shum:   

The reason why Raj started on his property investment journey stems from his past experiences, and wanting to achieve what he had previously considered impossible.

Siva Raj:   

[00:26:03] Property was one of those things that when we bought the first property there was this slight bit of financial security. Obviously the bank owned the unit, but even then, just mentally it felt like you have some kind of financial security. 

[00:26:26] So in order for me to excel, this was something that I can do it much faster, in a faster pace. And the something that I actually was passionate about. It was hobby, and I was passionate about it. So, if you ask me why, it is to have a financial security. And something that when you buy and you invest, you are actually increasing the value over time, without doing doing much. 

[00:27:12] So, that's the reason. Financials security would be that main reason. Knowing the background, you knowing the background where I come from. So at the time, this was the best decision for me, so I thought I should pursue this part, to see where it takes me. And also, look, a lot of the people in Australia who have gone through this process, and they quite successful.

Tyrone Shum:   

[00:28:06] Along the journey, have you had any particular resources or mentors that you could share with us that's been really impactful for you?

Siva Raj:   

[00:28:18] In terms of property, I can name a lot of guys who share their knowledge with a lot of people were starting up. But generally speaking, for me, it's self improvement books that really, really helped me through the whole mindset and want to get into this. And I met a lot of buyer's agents who actually initially outgrew boredom, bought a lot of my properties through buyer's agents. They have built up knowledge, but I just don't want to name anyone because I don't miss anyone. They helped me through, they played a part. And I'm grateful for some of the guys who share their knowledge. Obviously, you'll be paying a fee, but it's the knowledge that they carry, the knowledge that they can give you is more important.

Tyrone Shum:   

In pondering what he would tell the Siva Raj of 10 years ago, he realises he could be telling a different story than he is now.

Siva Raj:   

[00:30:11] I would have said, 'Stop wasting time. Stop procrastinating.' Because I did a lot of procrastinating before. That's why from my first one to the second one was a long period, it's almost six years. From the first one to the second one. So procrastinating was one of those things that if I could go back and tell myself, please don't do that. Either you let go or just don't procrastinate, just get on with it. Get yourself in the right place. 

[00:30:54] And maybe also having the confidence to seize that opportunity when it presents itself. Because a lot of the time— I'll give you just the context— a lot of time I look at poker and say, 'Oh, this is the right one. Am I making a mistake?' So you just have to be confident with yourself. Look, you're making the right decision with the information that you have at that time, seize that opportunity. And also open for the opportunity to come. 

Tyrone Shum:   

[00:31:53] So looking ahead then, what are you most excited about in your journey, say, in the next five years?

Siva Raj:   

[00:32:05] Because I have gone through a few different paths. So looking at what I've done, and looking at what I can do. I've always been challenging myself to lift that bar higher. Because when you are in this uncomfortable position, that's when you can actually make change to the current situation. 

[00:32:38] So I'm always trying to find a way how I can lift this bar, so that I can jump higher or at least try to jump higher. So I've always been setting my goals higher and higher since the time I started. Keeping with this pace, I have already started a new path, what I want to do for the next five years, is to go toward more commercial kind of investments and development. Mainly because it's more challenging, more rewarding. There's a lot more components to it, that you had to bring it together, but a lot more things that you need to pull together to make it work. And it is challenging, exciting, and rewarding. So that's the path that I have already started taking. So in next five years, I think I'll be focusing more on that path.

Tyrone Shum:   

[00:34:03] Last question for you, really, is to ask you is how much of your success is due to your skill, intelligence and hard work? And how much of it do you think is because of luck?

Siva Raj:   

[00:34:15] More than the skills and intelligence, it's the mindset. You've got to have the right mindset. I know a lot of books out there. If you can set your mindset and you have a particular mindset to achieve success, you will get to it. And also having your partner or your wife or whoever it is have the similar mindset. You can do it much faster, much easier. If I were to go back, looking back at it, I would say the luck wasn't a big deal. It didn't play a big role in my situation. Mostly, it's been hard work.

Thank you to Siva Raj, our guest on this episode of Property Investory.