Plus, hear about the story of when he gave a property seller a bold ultimatum that led him to his biggest development project so far!

Timestamps:
01:19 | The Door to New Beginnings
04:59 | Hitting the Books and Showing Up
09:07 | Why Stop Now?
14:10 | In the Face of Fear
16:44 | From $515,000 to $2 Million
21:03 | Personal and Profound
23:52 | The Moment It Clicked
26:40 | A Driving Force to Be Reckoned With

Resources and Links:

[00:27:49] And being [from a] background of analytics and a bit of programming as well, that's how we created this tool or property research tool, [with the] name 'SuburbsFinder'. So that's how it all started. And now, we launched it around 2020. So now it's being used by mostly buyer's agents.

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 Gilbert Melgar, founder of SuburbsFinder. He delves into the story of an encounter that first piqued his interest in investing, the driving force behind his determination to succeed in property development, and how a $515,000 purchase he made became a property valued at $2 million.

Tyrone Shum: 

Remembering the early days of his first time living in Australia, Melgar shares a bit on the differences he's found between the Land Down Under and his homeland—starting with what time shops usually close in the Philippines.

Gilbert Melgar:   

[00:00:13] Every day, any day, weekday, it's like 10pm or 11pm. Every day until midnight.

Tyrone Shum:    

[00:00:28] I think it's a very hard working culture in Asia, because I know it happens not just in the Philippines. But in say, for example, China and Hong Kong, they all close very late. And that's the lifestyle. Everyone seems to be out and about after work and school. Yeah, whereas here in Australia, as soon as shops close, everyone is all home and just wants to be at home. Maybe it's the cold weather at the moment? I don't know. [laughs]

[00:00:57] So you arrived here in 2011; your wife got a job as an accountant, which is fantastic. And then yourself, at what stage were you able to get full-time work so you could also support the family?

Gilbert Melgar:   

[00:01:10] After a month. Or two, right away. Yeah.

[00:01:20] I continued to work in the same industry. I had to step back for a bit. But I started again, as an role for SEO. Again, because I don't mind, as long as I [got] a job during that time. But I [was] still lucky because I [got] to do the same thing that I've been doing, [which is] SEO. 

  

[00:01:45] And then during that time, I was working for one of the major agencies or digital agencies here in Sydney. And then they realised… and I showed them that I [knew] more, other than SEO, and they gave me an opportunity. 'You can do this. You can do that. Try doing this.'

Tyrone Shum: 

Considering the high standard of living in Australia, Melgar and his wife opted to stay with their relatives when they first arrived. Little did they know, that would open the door to the beginnings of their property journey.

Gilbert Melgar:   

[00:02:22] We just stayed with my wife's distant relative — third cousins; we just stayed there for, like, a month. So they helped us stay here for a bit while you're looking for a place that you can live, where you guys will work.

[00:02:52] That's why, yeah, we're used to paying rent [once] a month here.

[00:03:25] So we went to one of my wife's distant cousin's birthday; we went to that event, and they were talking about property. And then we heard one of her cousins talking about investments and all, and we were just having conversations and listening to them. And they were below their 30s during that time, so that was 2015. And they already had 10 properties combined.

  

[00:04:02] I was like, 'How are they able to do that? And they're under their 30s?' That's the time that I became curious about it.

  

[00:04:12] 'What are we doing wrong?'

  

[00:04:21] Me being a 'data guy', doing the research, I started doing research about it, reading online. And [I] started asking them questions, how to… 'simple equity extract',  'equity… you reimburse that.' I was like, 'Well, hang on a sec. I don't even know those terms'. 

  

Tyrone Shum: 

Leaning in on his growing interest in this newfound pursuit, Melgar recognised the need to thoroughly educate himself if he wanted to succeed.

Gilbert Melgar:  

[00:04:44] I started putting time on it, learning by myself. And there are things that I can't really answer by just learning by myself, so what I did is, I enrolled myself to different property education courses. I would say, 'This is too much. I need to pay $5,000, but it's still, you know, education is education'. If I'm able to buy one property, and it will save me one, and I can repeat the process, then I guess $5,000 is worth it.

[00:05:44] Coming from a third world country, we don't really want our hard earnt money just to go to waste.

Tyrone Shum:  

[00:06:09] How long before you actually first came and went, you know, I'm going to buy a property? Because obviously, for immigrants to come across, you know, and get your permanent residence—I don't know if there's any specific rules around purchasing property and saving up the deposit and all that kind of stuff—what kind of timeframe did it take you to actually look at getting your first property?

Gilbert Melgar:   

[00:06:28] During that time, we already got our Australian citizenship. So we got it [in] 2015. And after starting really serious[ly] learning about property, 2016 was the first property that we purchased. Even if we only ha[d] a 10% deposit rate at that time, I was like 'Let's give it a crack, even at 10%. Let's just pay...' For us, my wife being an accountant, and me, we're both numbers people, [we] just see it as an opportunity cost.

[00:07:29] We bought [it] for $595,000. So we just saved, we were able to save 10% of that. And then of course, stamp duty and all. We even borrowed money [from] my mother-in- law, $20,000, to help us with the stamp duty and all. But we paid her back.

Tyrone Shum: 

Many people would have second-guessed themselves when buying their first property, but not Melgar.

Gilbert Melgar:   

[00:08:27] We bought the property in Elderslie, somewhere in [Sydney's] south west near [the] Oran Park [and] Narellan area. So we bought a four-bedroom, one-bath and two-garage on a 630 square metre lot. 

  

[00:08:48] And we [were] comparing that with another property there that was being sold for $550,000 during that time, but only a three-bedroom, one-bath, and two-garage on a 700 square [metre] block. So smaller house, but bigger block. 

 

[00:09:14] I was like, 'Let's just go for a four-bedder. We don't have to do anything there; four bedroom[s], we can rent it more'. And the reason why we bought in that area, at least [if the] worse comes to worst, we can live in there.

Tyrone Shum: 

[00:09:40] In actual fact, this first was your investment property. You didn't buy it to live in but; you bought it to rent it out?

Gilbert Melgar:   

[00:09:47] Yep, with the intention of whatever happens, [if] worse comes to worst, we really can't afford it, we can just move in there and live in it.

Tyrone Shum:  

[00:10:00] Okay, and I'm assuming that it was no problem to go to the bank and get a loan and set this all up?

Gilbert Melgar:   

[00:10:05] That's the first thing that we did. We made sure that before we made an offer, we got pre-approval first.

Tyrone Shum: 

Melgar didn't stop with the success of his first property purchase. He looked at the data in the area around New South Wales and Canberra—and soon, his sights were set on Queanbeyan.

Gilbert Melgar:   

[00:10:32] After that, it took us a good year to buy another one. But the good thing was that [in] 2016—I don't know if we're just lucky during that time, [or] it's because it's on the tail end of the property boom—, but the property ha[d] increased. And we were able to extract small equity from that.  

  

[00:11:04] Because we are in 90% LVR, and we were able to put in into 80% LVR. And we [were] able to buy an apartment unit—a two-bedroom apartment unit in regional area in Queanbeyan; it's in the border of New South Wales and Canberra. So we bought that for $195,000. And there's already a tenant paying $250.

  

[00:11:40] Positive cash flow. And it's really ugly. Part of the beauty. So the reason why is we had an intention to renovate it. By the time the tenant moved out, we renovated, me and my friend went there. So the friend that I was talking about, he's the guy who has 10 properties. So he helped me out. We stripped the whole place. 

[00:12:13] What I did is I bought a kitchen being sold [on] Gumtree. So those houses that are about to be demolished, so they're selling the kitchen, so we took it out, put it in the Thrifty truck, bring it all the way there. Had some chippie adjust it, break it in—new kitchen.

[00:13:06] When I was doing my research, looking at the numbers, during that time, Canberra already ha[d] a high rental or median rent, so people [were] going outside the Canberra area. So when I looked at it, 'Okay. The nearest would be Queanbeyan'. 

[00:13:35] And we wanted to buy in [the] ACT. But the problem [was] we want[ed] to buy a property that we can own it. Right. So we decided in New South Wales not ACT; I think [with] ACT, we can't really own it. It's still federal. So yeah, so [that's the] reason why. So I said, 'Let's just start with Queanbeyan'.

Tyrone Shum:  

[00:14:05] How many properties have you purchased over a period of time?

Gilbert Melgar:   

[00:14:09] Now we [were] able to buy five. But we sold that one, that apartment unit, because we already renovated it and then [made a] profit. And then we bought another one in Queanbeyan, the next one, a couple blocks away.

 

[00:14:27] It's a house on a 900 square [metre] block. That's the reason why we bought it; we'll develop it. And then [we] bought another property in the border of New South Wales and Victoria. So [we] bought two there. So now, we're left with four.

Coming up after the break, he tells the story of when he gave a property seller a bold ultimatum…

Gilbert Melgar:   

[00:19:32] And I said, 'Okay, don't sell to anyone. Instead of $500,000, I'm going to add $15,000 more, but you have to tell the vendor they have to make the decision by the end of the day'.

The personal reason that further electrified his passion for property development…

Gilbert Melgar:   

[00:25:48] As an investor and as being a migrant moving here, when you move, you look right away for a safe and affordable accommodation. 

He delves into how doing his due diligence and research has been key to his success.

Gilbert Melgar:   

[00:28:43] The thing is, I realised when I was doing those property courses, I paid $5,000. But they're gonna teach you what you need to do. 

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

Tyrone Shum: 

With firm determination and a solid plan to develop the properties in his portfolio, Melgar faced his fears head-on.

Gilbert Melgar:   

[00:15:11] I guess the only fear that I had was when I was doing those reno things. If you're doing the project management yourself, sometimes you don't have any control with the tradies. 

[00:15:32] Because for me, buying a property, at the end of the day, if you buy a property, I think the worst thing that can happen is nothing. At the end of the day, five or 10 years from now, if worse comes to worst, it will not double the value, but at least it would have increased by 10% or 20%.

[00:16:23] [The] issue with tradies I guess that's it, but we'd finance… probably every investor who gets into their fourth one is going to have a hard time with their fifth one, especially with the tier-one vendors.

  

[00:16:48] But for now, we definitely have to step back. Because now we're in the process of developing two of our properties, because we bought them for the purpose of having multiple strategies, not just buy and hold. At least we can put in a granny flat, or at least we can subdivide, or at least we can develop them. So we learn all of those things as we go along the journey.

 

[00:17:56] [In] our situation that we have three dependents. That's the one that hold us back. Because we can, but with the property, with the asset type, or with the type of property that we want to buy, it will just end up buying the one that will not fit or the requirements. And we don't want to force it. We'd rather just wait than buy something that doesn't fit our requirements.

Tyrone Shum: 

Multiple strategies can work for different properties. The key lies in knowing which ones are worth holding on to and developing, and Melgar made sure he used the right strategy with his properties.

Gilbert Melgar:   

[00:18:52] Actually, all four of them are developable. But the two ones, we've already the one in Queanbeyan, so we bought that, that's a three-bedroom house on a 900 square [metre] block. 

  

[00:19:08] The reason why we bought that [is] because it's an R4 zone. So it's a high-density zone with a 15-metre height limit. So I was thinking, 'Okay, it was being sold for $500,000 during that time'. [I] spoke to the agent. [I] said I did my due diligence. And so, what can I do there? 

[00:19:32] And I said, 'Okay, don't sell to anyone. Instead of $500,000, I'm going to add $15,000 more, but you have to tell the vendor they have to make the decision by the end of the day'.

 

[00:19:44] The agent called me, 'They're happy to accept $15,000 more'. And so I continued doing my due diligence, and [in] 2019, we applied for a development application for a 24- room new generation boarding house. So it's 24 rooms. It's like studio apartments with ensuites. 

 

[00:20:19] So it's three level, not three. But because the ground floor is an in-ground porting for 14 car space, and the manager room is on that level, so 12 rooms on the second floor, and then another 12 rooms on the third floor.

Tyrone Shum:  

[00:20:38] Oh, wow. And how many parking spaces did you say it has? 

Gilbert Melgar:   

[00:20:40] 14.

Tyrone Shum:  

[00:20:42] Oh, how come only fourteen? Wouldn't they usually have a parking space for each?

Gilbert Melgar:   

[00:20:46] Because during that time, it's still under affordable housing policy. For every room, the requirement is 0.5 parking.

  

[00:21:04] It's an affordable housing policy.

 

[00:21:13] Prior to that it used to be 0.2.

[00:21:20] And then they increased. So I said, 'Okay, this is what we can do'. Yeah. And then it took us 20 months to get [it approved].

[00:21:35] A lot of back-and-forth, back-and-forth.

  

[00:21:40] Council was pretty supportive. Because for them, it's going to be the first in that area. And it willl also support the rental affordability crisis within that area.

Tyrone Shum:  

[00:22:02] So Gilbert, just curious, have you gone back and did a valuation on how much that property is now worth? Because if you've purchased it at that $515,000, how much do you think it would be worth now with the DA?

Gilbert Melgar:   

[00:22:12] Without the DA first, it just got revalued for $850,000. With a DA, because it's going to fall under commercial, so it's based on the revenue and then the cap rate. So it's valued at around $2 million.

Tyrone Shum:  

[00:22:37] Yeah. Excellent. Have you figured out the costs involved in actually building this? 

Gilbert Melgar:   

[00:22:43] Yeah, the costs involved—the build costs will be around $3 million or $3.5 million.

Tyrone Shum:  

[00:22:48] Wow. Three [million dollars] to build it? And how much would you say you could potentially rent it out for then for something like this?

Gilbert Melgar:   

[00:22:55] Each room will be rented around $320,000 to $350,000.

 

[00:23:11] So around $400,000 plus per annum.

Tyrone Shum:  

[00:23:18] Wow. Wow, that's fantastic. That's a very good return. I mean, especially [with] what you're going to have to do. But do you plan to keep it? Or are you planning to sell it?

Gilbert Melgar:   

[00:23:28] Well, we're still see[ing] if we can resolve the finance. But [the] exit strategy would be [to] sell it with the DA.

Tyrone Shum: 

With such a phenomenal achievement, Melgar is keen on the lessons he's learnt along the way, applying them on his next property project.

Gilbert Melgar:   

[00:23:45] What I've learnt is, if you really know what you're doing, and you need to have a good team behind you, an architect, a town planner. And because we had the shadow issue complained by the neighbours, and we were able to get around with it a bit to design to comply.

[00:24:32] The second one is in regional Victoria. So that's our rooming house. So Victoria has a rooming house. So our application got approved in two days. It's pretty quick. Because Victoria has a pretty straightforward policy when it comes to that.

  

[00:24:55] As long as you comply, they've seen your requirements, they've seen your plan and all, they'll just stamp it and say, 'Okay, you can proceed to building permit now'. So that's where we are now, building permits. So now we're putting in seven micro apartments, so it's like a boarding house, but with ensuite, so it's like 35 square metres per room with their own ensuite and kitchenette. But they still have their shared facility like the dining [and] kitchen.

[00:25:46] That's what I realised. As an investor and as being a migrant moving here. When you move, you look right away for a safe and affordable accommodation. It just so happened that me and my wife moved here together. But I see most of the migrants, they move by themselves first. [They] leave the family there, either the wife or the husbands move here. And then they rent somewhere or even they do a share house, rent the room. 

  

[00:26:25] And once they get a job, saving up, that's when they get the family. So I guess, being on this space, or that's where we're focusing now, is I guess we're not just investing, in a way we're helping provide a safe and affordable accommodation.

Tyrone Shum: 

Now, looking back through the years, he highlights a huge a-ha moment that started it all and the personal motivation that continues to fuel his passion for property.

Gilbert Melgar:   

[00:27:09] I'm into data, so I was able to identify those locations using the research and all. So I'm on it is during the COVID times that... Okay. That's when I [said], 'Why don't I create something out of those spreadsheets that I've been using?' 

  

[00:27:34] Because before that we were able to help a couple of friends of ours. And it worked well for them. And they're also the ones who push[ed] us. 'Hey, guys, why don't you create something out of it?' 

[00:27:49] And being [from a] background of analytics and a bit of programming as well, that's how we created this tool or property research tool, [with the] name 'SuburbsFinder'. So that's how it all started. And now, we launched it around 2020. So now it's being used by mostly buyer's agents.

Tyrone Shum:  

[00:28:17] [chuckles] Because it saves a lot of time. 

[00:28:21] And I think that's a great thing that you've achieved, especially if you've already shown it to work in your own situation, and you've been able to apply it. And then [with] other people, you know, I think you've got a fantastic headstart to be able to assist with that. Because the biggest, I think, challenge is the time to spend [on] research. Yeah, because you need to do it. It's important. If you don't do it, it's not going to be…

Gilbert Melgar:   

[00:28:43] The thing is, I realised when I was doing those property courses, I paid $5,000. But they're gonna teach you what you need to do. 

 

[00:28:57] But there's one question, if you ask them, they're just gonna say, 'Do your own research'. If you ask them, 'So where's the perfect place to buy?' 'Do your own research'.

[00:29:23] There's no one-size-fits-all strategy. It all depends, I guess, on your personal circumstances, and [it's] based on your financial situation.

Tyrone Shum:  

[00:29:36] That's right. Yeah. And hence the reason why, you know, everyone has to do their own due diligence and research differently, because you're looking for a different criteria. And hence, you know, because we're all of us are time poor. We all use buyer's agents to be able to assist us to find it because we want to be able to move quickly on to the next deal.

Gilbert Melgar:   

[00:29:55] But not only buyer's agents, regular Mum and Dad investors are using it as well. But majority are the buyer's agents, because they're using it every day of their life.

Tyrone Shum:  

[00:30:06] Excellent. Well, congrats on that. That's really great to be able to hear that this came out of a need that everyone needs as well. And I think that's a great thing that you've done. 

Gilbert Melgar:   

[00:30:27] The driving force is coming from a middle class family from a third world country. And then being here, working your ass off, and then seeing, 'What's our life going to be like when we stop working?' Because you can only work until a certain age, we don't want to be dependent on the pension. And at the same time, we want to do something. Most importantly, I'd say we want to leave something for the kids as well. 

Tyrone Shum:   

[00:31:12] If you were to look back and see yourself 10 years ago, what do you think you would have said to him?

Gilbert Melgar:   

[00:31:34] You should have started investing more. [chuckles]

  

[00:31:46] I should have [got] myself financially literate right away. Because that's the thing, right? I mean, at an early age, I guess. The generation now they get paid more right away. But even if they get paid more, they spend more.

Tyrone Shum:   

[00:32:52] Looking forward to the future. What are you most excited about in your property journey? I know you're talking about those two developments. Is that sort of what you're going to be excited about?

Gilbert Melgar:   

[00:33:04] We'll just continue doing the process.

Tyrone Shum:   

[00:33:25] So how much of this success that you've achieved so far has been due to your skill, intelligence and hard work? And how much of it do you think has been attributed towards luck?

Gilbert Melgar:   

[00:33:42] It's a combination of everything, I'd say. It's hard to put in a percentage or breakdown, and all those, because everything is connected. I guess it all goes down to: What's your goal? If you really want to achieve something in life, you['ve] really got to work hard for it. Even if it's not property investing, whatever that is, whatever your passion is, if you really want to achieve something, or out of it, you've really got to work hard.

Thank you to Gilbert Melgar, our guest on this episode of Property Investory.