Join us as we discuss the next stage of Loo’s investment career. We learn the benefits of buying lifestyle property in the right locations, as well as the challenges associated with Airbnb, and how to overcome them. With a portfolio sitting currently at 18 properties and a net passive income of between $200,000 and $250,000, Loo has some incredible insights to share with listeners in this exciting episode.

Timestamps:
1:06 | LOO HAS SPENT YEARS BUYING PROPERTIES BASED ON LOGIC.
2:12 | AFTER ALMOST A DECADE HE CAN AFFORD TO INVEST ‘EMOTIONALLY’.
4:24 | IT’S WAY TOO RISKY FOR FIRST TIME INVESTORS.
7:31 | LOO BOUGHT THE PROPERTY BASED ON MORE THAN PROFIT POTENTIAL.
11:56 | DURING THE SUMMER MONTHS THE PRIORITY IS MAKING SURE IT’S BOOKED UP.
15:16 | THE DEMAND FOR AIRBNB’S IN DRIVING DISTANCE FROM CAPITAL CITIES HAS SKYROCKETED SINCE THE PANDEMIC STARTED.
17:56 | LOO QUICKLY REALIZED HE WAS DEALING WITH A MOTIVATED SELLER.
20:47 | IN THE CURRENT MARKET YOU NEED TO BE PREPARED TO MOVE QUICKLY.
23:27 | IT BECOMES TONNES EASIER IF YOU’RE PASSIONATE ABOUT IT.
24:35 | LOCATION IS KEY, PART OF THE APPEAL IS GETTING AWAY FROM WHAT YOU’RE USED TO.
 
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(3:56) And the short of it is, the income is not secure. And the income is not secure, not only because it's based on whoever books throughout the year, but it's also dependent on what's happening externally.

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 of “Invest Like A Pro” we’re joined by influential Buyer’s Agent and investor Simon Loo, who has surpassed his long standing goal of accumulating over $100,000 of passive net income. We learn the benefits of buying lifestyle property in the right locations, as well as the challenges associated with Airbnb and how to overcome them. 

 

Loo has spent almost a decade of his life accumulating investment properties to add to his portfolio, and his portfolio is secure enough now to move on to riskier ventures. 

(00:42) My property journey started when I was 26 years old. And I've been buying properties, based on what I've been talking about pretty much all of last year, you know, properties that are below market value, and good cash flow, and all that kind of stuff, very business focused decisions with every property that I bought. 

(1:06) So it was never emotional, it was just all about the numbers and how it could help me build my passive income. So around about seven years later, from 26 years old, I reached $100,000 of passive income, which was my initial goal. And at that point, I had 12 properties under my belt, just by buying below market value, and all that kind of stuff. And since then, obviously started this business that I'm running now as a buyer's agent, helping others achieve that same outcome. 

(1:39) And I've been running that for about five years now. So you know, it's been going pretty well. And my current portfolio sits at 18 properties. And my loan to value ratio is under 50%. So slightly under 50%. Which means my overall passive income across the year, in terms of net cash flow, is somewhere around about the $200,000 to $250,000 mark. 

(2:12) So, you know, after sort of building this portfolio over the past, you know, nine or so years, it's enabled me to recently get into more interesting or more what I would consider risky investments, which, I'm happy to share that I've been buying a couple of lifestyle properties on the North coast of New South Wales.

Loo explains what he means by risky investments according to his standards. 

(3:18) The biggest risk is the fact that the cash flow is not secure. You know, with most of the properties that I've been buying, as part of our portfolio to generate that initial secure passive, income has always been, 'Okay, you know, 6% rental yields. If I buy it I can rent it out immediately, and get that immediate cash flow'. With these lifestyle properties that I'm looking into now, for personal reasons, it's because my goal is to Airbnb them out. My goal is to short term let these properties. 

(3:56) And the short of it is, the income is not secure. And the income is not secure, not only because it's based on whoever books throughout the year, but it's also dependent on what's happening externally. So, you know, obviously we've had quite an interesting eight months where there was a series of lockdowns, and people can't travel to certain areas, or within states or even interstate. 

(4:24) So, you know, whenever there's those kinds of factors that influence how people can travel, then obviously that will affect your income on these properties as well. So, I guess from my perspective, just by way of background on my personal circumstances and where I've come since I started investing, you know, I would have never dreamed of buying these kinds of lifestyle Airbnb type properties in the initial part of my investment journey, because it would have been just way too risky. 

(4:56) So it was very important—and I tell this to my clients as well, or anyone who I talk to about property investing—it's super important just to develop that initial portfolio of properties, that's doing its cash flow thing, it's giving you that passive income stream, it's got a bunch of equity in it. So that if you do want to pursue maybe like a dream property, or a scenario where you can overextend yourself from a risk perspective, but potentially get bigger rewards, then you can kind of afford to. Once you've got that established portfolio.

(5:36) And that makes sense, I think that's the key thing, that it's the foundations. I think everybody needs to fully understand that before you actually jump into something like maybe development, or Airbnb, or any of those types of things, you've got to have those foundational properties, because you're dealing with a different strategy altogether. 

Simon Loo:  

(6:33) To be upfront with you, you know, all the properties I bought up until these Airbnb projects that I've been getting into, have been purely unemotional, you know, it's just purely business decisions. But these ones in particular have definitely had a little bit of a personal or an emotional decision involved as well. 

(6:55) Because after so many years, you get to a point where you just want to smell the roses a bit and want to enjoy what you're doing. So, you know, like, personally, I've got a young family now, so having these sort of lifestyle properties that I Airbnb out, I can also potentially use when it's vacant, for like a short family holiday or just as a means to spend more time together as a family and to enjoy it as well. So there's definitely that sort of personal element to it as well. 

(7:31) It's always been a long term goal of mine to own these types of properties ever since I started investing. So just to expand a little bit on the properties as well, they're on the water. So they're waterfront type houses, with like a jetty, and all this kind of stuff. You know, my family is really into fishing and things like that. So we kind of bought it with that premise. 

 

(8:16) The other thing I've noticed with the whole sort of short term letting slash Airbnb market is that you definitely need to buy properties that have that X Factor, you know, if you just have a property that's just like a standard house, you know, in some suburb, it's never going to perform as well or consistently as a property that might be on the water, or might be near a beach, or it might have like, internally lots of lots of activities and things like pools and children's equipment and all this kind of stuff as well. 

(8:54) And those are the ones that you know, develop a bit of a following, I guess. And you just get that consistent income and consistent booking. Now the catch is...To purchase and to build up these types of properties to have that x factor is generally, you know, quite expensive.

(9:27) You know, at the end of the day, to purchase a car to get from point A to B, there's nothing flashy about it, it just works. But if you want to actually have something with a bit of a status, like a brand symbol to it, then you got to pay for a premium and it's no different really in property too. But the demand is there, as you can see.

(9:45) Definitely and look, I mean, for anyone out there who's looking to get into Airbnb, that will be my suggestion. Get into something that has that sort of appeal. That emotional appeal. Because most people when they go on holidays with their family, it might be once every three months, max, when it's going interstate. 

(10:05) So they don't really mind spending a little bit more on a nightly basis if they're doing two or three or four nights, or a week, whatever it is. There's just more wow factor. There's more enjoyment. You know. So, from that perspective, I've been able to charge a little bit more for the place that I've got, obviously, since I paid a little bit more for it. But more importantly, I mean, we launched the first one that we bought in January, and we're pretty much booked out for the month already. 

(10:41) So, you know, the cash flow, it appears from now to be a pretty good business, just by itself. But I will say there was definitely a cost to do it, to get it to this point.

So how does Loo cover himself when the property is vacant? 

(11:37) Having these properties for me is also, you know, somewhat for personal enjoyment as well. So I can use it personally. And I can only use it if it's vacant, right? I'm actually kind of half hoping that, you know, there are going to be some periods where it stays empty, so I can actually use it myself. 

(11:56) I mean, it's great that it's booked and producing income, but at the same time, I guess I can probably use that income and just book my own Airbnb. But it's nice to be able to enjoy, you know, the fruits of your labour as well.

(12:23) You know, definitely peak times, the priority is to ensure that it's booked up as much as possible. But during quiet times, yeah, we'll be looking to spend a bit of family time there. 

What was it about Airbnb that attracted Loo over something like a subdivision or development?

(13:41) Owning a waterfront house has always been a dream of mine, ever since I bought that initial property. It wasn't just for the, 'look at me' factor, 'I have a waterfront property', but it's the fact that I actually really enjoy kayaking and fishing and being on a boat and, you know, just the views of having waterfront you know, it's been always been a goal in the back of my mind. And it's something that I've always worked towards. 

(14:09) Now, what happened last year when the whole COVID thing started, are a couple of things for me personally. The first thing is that it kind of reinforced the fact that anything can happen in life, that's with or without your control. You know, so there is an element where you know, you need to enjoy what you're doing, you know, you need to experience life or just, you know, reach your goals and it's not just all about you know, the bottom line and making money and investing and all that kind of stuff. 

(14:43) So at some point you really have to enjoy the process, but also enjoy the outcome as well. So that kind of told me, 'Okay, cool, you know, this year, based on all that's happening, I've already established my portfolio, I've done pretty well so far. I think this is the way I'm going to transition to start enjoying what I'm doing the most'. I'm enjoying it on a personal level, I've enjoyed it all up until this point, but you know, this is more kind of like, sit back and relax type type thing as well. 

(15:16) And I guess the second thing that kind of prompted me to get into Airbnb in particular, was obviously the shift between how people were travelling, based on last year. So you know, you couldn't go overseas anymore. I've noticed, you know, even I stayed in a few Airbnb's myself early last year. And I've noticed that the demand for these kinds of X Factor properties within driving distance from a capital city, was significantly high, you know, and that's reflected on the nightly prices for a lot of these places. 

(15:54) And it's also reflected just when you go to book a particular Airbnb, you can see how many dates are booked out, you know, in advance. Some of these properties could be months and months in advance. 

(16:09) So that kind of told me, you know, combining the fact that I've always wanted to buy waterfront property, the fact that there's certain things that had happened last year, that kind of was a bit of a wake up call, to not only me, but I'm sure every person, you know, is thinking that your life or the world can change in an instant, you know, time is a limiting factor, you kind of just have to go out and do things. 

(16:34) And also the fact that from a business decision perspective, you know, there was that demand for these types of products. And that got me searching, you know, started doing some numbers and started looking at what was viable, and there was a certain price point versus how much I can potentially rent these properties out for on a nightly basis that would make it, you know, make sense, I guess, from a conservative perspective. 

Coming up in the second half, we learn about the process Loo followed to secure his investment. 

(17:35) I remember it came up on a Thursday, and I just called the agent, immediately drove up, had a look at it, and I immediately signed contracts. 

He shares his negotiation tactics.

(18:29) So, you know, I kind of played that to my advantage. You know, I knew that this guy wanted a certain figure, and I knew that figure was below what the property was worth.

We discuss the importance of interior design when marketing Airbnb properties.

(28:24) First and foremost, I have to thank my wife, for basically doing it all. If it was left to me it would probably still be empty at this point. There might be a TV in the corner somewhere.

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

Loo talks us through how he found his dream lifestyle property..

(17:01) I just started looking for it like I normally do when I look for properties. And, you know, there are a few opportunities that came up, which fell over, which is normal. But then I ended up with this particular property that we bought, which is in Lake Macquarie, New South Wales. 

(17:21) And, you know, it was on the water and everything, and it was a property that was listed for less than a day, you know, I remember it came up on a Thursday, and I just called the agent, immediately drove up, had a look at it, and I immediately signed contracts, because I knew the price that they wanted for the property was not conducive to what it was worth. Pretty much there was a massive gap. And there was a reason for that. The seller was a pilot, a Qantas pilot, unfortunately, who had lost his job.

(17:56) And he spent a lot of money renovating this property, his goal was to live there, to enjoy the property. And, you know, when I was there in the living room of the property and negotiating with the agent and the seller, you know, it became apparent that his goal was not to get the highest price, his goal was just to ensure that whoever buys his property is not going to mess around with finance issues, or, you know, having a contract crash and all this kind of stuff. 

(18:29) So, you know, I kind of played that to my advantage. You know, I knew that this guy wanted a certain figure, and I knew that figure was below what the property was worth. So I basically just gave him what he wanted. And I signed what we call the 66W, which is an unconditional contract. And I don't recommend anyone do it, for radio listeners out there.

(18:52) Well, that's pretty much when you go to auction, you will have to sign an unconditional 66W. 

(18:59) But for me like I've bought, you know, so many properties for myself and for clients as well, like, I know what to look for, I was comfortable enough from a finance perspective in terms of being able to get out and get a loan for it. I had known what to look for from a building and pest, I knew what to look for, you know, pretty much from what would be considered risky or what could be an issue from a building perspective.

(19:28) When you see and hear, and especially when you were there as well, that it was a renovated property, I'm pretty sure he said he was going to do it for himself... He wouldn't do it, you know, cutting the corners and stuff like that. He probably put a lot of time and effort, especially being a pilot, you know, to look after?

(19:44) I mean, look, it's important that we don't make those assumptions because there are some shoddy renovators out there. So when I'm negotiating on the spot, I try and take that factor out of it, that sort of emotional assumption. I try and just look at it as what it is, and just walk around the house looking into the house, looking, you know, on the outside and like I could tell that he put a lot of care and effort into it. And, look, I mean, there is always a risk. 

(20:13) As I said, I'm not a building inspector, but that risk was mitigated by the fact that I bought this property for way cheaper than what it could potentially sell for. Though, you know, I went up on a Thursday, I signed the contract. It was listed for literally a few hours, you know, come Saturday, the selling agent was smashed with inquiries, people wanting to look at the property to buy the property. And yeah, I mean, there were even higher offers than what I paid at that point in time. 

(20:47) But obviously, I already had signed an unconditional contract, which meant that, you know, not only could I not get out of it, but the seller couldn't get out of it either. So, you know, especially in this market, I guess one of the lessons is to move quickly, you know, don't make uninformed, risky decisions. But get prepared, you know, get your finances sorted. When you see something that you like, just go for it, but just don't sign anything unless you know what you're looking for. 

(21:22) But there are certain certain times where if the price is right, that sometimes it might be worth taking a bit of a risk, you know, because you kind of have to think, 'Okay, if there is something wrong with a certain part of the house, but you're getting it for $100,000, or $200,000, or $300,000 below what it's worth, then, you know, it wouldn't be at the end of the world to fix it'. If that makes sense? So you kind of have to just work out that risk versus reward.

(21:52) Totally. And it sounds about right, because when you say that you've got it under market value, you probably will go back to the bank and get it revalued down the track anyway, and be able to draw a bit more of that equity out eventually.

(22:04) Yeah, exactly.

How much time did Loo spend doing his research before signing the contract, given that it was such a fast transaction? 

(22:32) I mean I'm a buyer's agent, so I, you know, it's my job to look at properties day in day out. So it's kind of natural for me. And, you know, after a while, I just keep a very whole eye on the market. You know, I obviously liaise with all the agents in the areas that I'm looking at. And I was very in tune with what was selling after a while and how much there was selling for and what certain properties are worth, good sides, bad sides. 

(22:58) And this comes down to interest, you know, which I brushed on this a little bit earlier on, you know, we talked about investing in property investing and things to help us make money. But I have a thing called the Saturday night tests, you know, if you can't spend your Saturday nights, you know, researching something or doing something that's just purely something that you're interested in, like most people are, you know, clocked off, they might be, you know, out partying or whatever. 

(23:27) So for me, like it was definitely a bit of a passion project, I probably got to a point where I was somewhat obsessed, which makes things easier, you know, from a research perspective, like all the evidence is there, you know, you just have to look at Airbnb, and what's listed even in the areas that you're looking at, you know, what they're renting for, what their block-out periods are for example, how much they're charging, all that kind of stuff. 

(23:56) And you kind of have to work backwards from there. So if they're renting for x amount, per week, per month, per year, you know, how much would I have to spend on a particular property, or what would be the max purchase price on the property that I would have to spend to ensure that the cash flow works so that I'm not out of pocket? 

(24:16) You know, if you bought a $10 million waterfront house in Palm Beach, the amount of consistent Airbnb income is very similar to if you bought a $2 million house at the coast that's also maybe on the waterfront, if that makes sense?

(24:34) So you know, you kind of have to just weigh out the reward as well, and treat it like a little bit of a business decision but also think to yourself, 'Okay, there's no compromise on the quality, the enjoyment on a personal level, and all those factors as well'. And interestingly the 'get out of Sydney', or 'get out of Brisbane', or 'get out of any Capital City' factor, is also something that was in the back of my mind as well.

(24:35) You know, because when people want to take holidays, they generally want to get out from where they are, they don't want, even if there's like a super nice property down the road on the Northern Beaches, if you're in Sydney, that's not as appealing as going off the coast, you know, somewhere a few hours drive away, like part of the appeal is actually getting out of the city. So it kind of works like that as well, it's a little bit more of an interesting thing. Very emotionally charged. So it's not necessarily just like, you know, what the yield is, and all this kind of stuff. 

(26:14) It's a mental thing. Like, you've gotten away from it all, you know. And the other thing when I chose particular locations that I bought these properties in, is they're surrounded by a whole bunch of lifestyle things as well. So, you know, you got the Hunter Valley wineries, you've got beaches, you've got, you know, a lot of stuff in that area that's just a short drive away. 

(26:36) And they can sort of return back to base for that time or for whatever. So it's definitely something that I've been thinking of for quite a while. But it does require a certain level of passion and dedication to do it properly. And I will say, the furnishing bit is also a bit of a challenge. When you buy these properties, you have to furnish it properly. You know, people only assess the property based on pictures. 

(27:09) So you know, you gotta make sure you take proper pictures, you got to make sure that there's a theme to the property. You know, you can't just buy like, you know, secondhand furniture and hope that it all comes together. And at the end of the day it's just marketing, you know, you start an Instagram page, you start building it from that perspective. And that's where it gets a lot of traction. So, look, I mean, it's still early days. But so far, it's been going okay, so you know, we'll see how it plays out.

Since he bought the property empty, Loo had to fit out the place to make it as appealing as possible for potential holiday makers. 

(28:24) First and foremost, I have to thank my wife, for basically doing it all. If it was left to me it would probably still be empty at this point. There might be a TV in the corner somewhere. So look, I mean, we made a conscious decision to do it properly. You know, and in doing it properly, we actually got an interior designer in to do some sketches and to make sure the colours were right and they even picked up the specific pieces of furniture for us to buy.

(28:57) Obviously, there was a cost to it, but at the end of the day, you know, the feedback that we're getting so far is that it looks great, it all kind of works together. So that kind of made it a little bit easy. What probably was the most difficult thing was actually just coordinating, you know, all the purchasing and all the deliveries and, you know, obviously putting the furniture together and all that kind of stuff, which probably took a couple of weeks, you know. Plus enjoyment as well. It wasn't all work when you're up there.

(29:31) And you've got a beautiful waterfront property to enjoy. It kind of makes putting a couch together a little bit more enjoyable.

(29:40) Not so labour intensive as well. It's like, 'Yeah, I'll put it together when I'm finished having a bit of fun on the water with my family'.

(29:47) Look, I mean, interestingly, it's also a little bit therapeutic. It was definitely good and it was actually so enjoyable because the whole family went up to help. So we spent a lot of quality time together. It was so enjoyable that I bought another one within a month, so we've got another one now that's not yet settled. But once it settles, we're obviously going to be doing it all over again. 

**OUTRO**

Thank you to Simon Loo, on this episode of Invest Like A Pro.