Timestamps:
33:55 | Don’t Rush It
36:48 | Harry Potter, Is That You?
38:50 | Pay Your Dues— It Pays Off
44:03 | The Emotional Rollercoaster
51:14 | 39 Properties? No Way
53:00 | Steven’s Dream
55:22 | I Can See Clearly Now
58:50 | Hard Work vs. Luck

Resources and Links:

[00:46:28] I've got one client up in Brisbane that just develops within the five to 10 kilometre radius of Brisbane. And sometimes developing can be very hard, people don't make money from it. But he's got it down to a science, and he does it phenomenally well. So there's many ways to skin a cat in property investing. 

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 Michael Xia, owner of Mortgage Channel. From impulsive decisions and cupboard offices to the unexpected cities he’s putting his mark on, he shares the details that have secured him over a 7% rental yield. He also explains the one area of investing that he always finds difficult, and what’s next on his list of dreams.

Xia is keeping his eyes on the market, looking out for an amazing deal that will help him find his dream principal place of residence. While he’s not likely to turn down any good investments that come his way, his main driver at the moment is the home he can move his family into. Luckily, he’s not feeling that sense of urgency, which has gotten him into trouble before.

Michael Xia:   

[00:33:55] One of my worst deals I bought, funnily enough, was my 10th property. And why it was the worst [was] because I just so wanted to hit this double digit. It was like this magical number for me. So I literally just bought any property off the street. 

  

[00:34:12] This was going back [to] 2014 [or] 2015. It was in Woodridge, I paid $373,000 for this fully renovated, high set, and the amount of issues that I have had with this property... like, even the bathtub wasn't plumbed in. You would turn on the tap, and the water would just go out from the bath. And we didn't even know. I've spent close to $50,000 [or] $70,000 just into that property. 

  

[00:34:38] The main reason why I was mad was because I rushed it. I just really wanted to hit the goal. Whereas now, we're not desperately needing to buy a property. But if it's a really good deal, then yeah, we'll make it happen. So that's also made that our deals are a lot better now as opposed to kind of rush for it.

Tyrone Shum:   

It’s important to remember that if somebody’s trying to pressure you into making a deal, no matter how desperate you may feel, that deal might not be the best one for you.

Michael Xia:   

[00:35:32] It's so hard when you first start because you see the market getting away. Particularly even, say, for instance, in Logan. Prices are literally going up $10,000 a week. And it's just you feel that if you don't buy this one, there will never be another one. 

  

[00:35:46] I certainly felt that when I was building my property portfolio. What helped me overcome that was actually through the mortgage broking business. Every single week, I see deals across my desk. And every single week, there are properties that I think are fricking amazing, and that I would buy myself. 

  

[00:36:04] So that's kind of sated that desperation to then be needing to buy last week, because if there [were] no good deals, then we probably won't be in business anyway. So that's made me realise that a deal of a lifetime comes around once a week.

Tyrone Shum:   

Over the last couple of years, finding their PPOR has been a hot topic in the Xia household. It’s such a big discussion that it’s bigger than Xia’s office, but then again, that isn’t hard!

Michael Xia:   

[00:36:48] There were times when the property price wasn't going up, then there's a lot more pressure from the spouse to stop doing what I was doing. In saying that, even to this day, we are quite frugal in terms of where we are. We are living in a two bedroom townhouse. It's nothing flash by any means. The office that I work from, the joke between the brokers is actually I work in a cupboard. Like, literally, a cupboard. It's a walk-in wardrobe that we knocked out. And it's about 1.5 by 1.5 metres, and I work from home. 

  

[00:37:23] My wife, she'll just slide the lunch underneath the curtains every day. And I just stay in this cubicle writing loans. So by that, it's nothing flash, and we've paid our dues. But when we do buy that PPOR, I'll come back to you where we've got a good answer on that. 

  

[00:37:43] I think when the market is right. I mean, people say Sydney goes up forever. But there [have] been times over the last five [to] seven years where Sydney has dipped, and it hasn't been crazy. Like, I'm not waiting for the market to crash to buy. But at least it's not silly. You're going to an auction for a property priced at a million and it goes for $1.5 million. Like, I just can't bring myself to buy in that market. So I think [I’ll] just wait and see.

  

[00:38:10] I think people will know when it's the right time for them. And it depends on your circumstances. It's lucky that my wife is understanding. But there will be other times when, like now, our second is coming in April, so very shortly, so there is definitely more pressure now. So, yeah, I'll let you know. 

Tyrone Shum:
As a big believer in the ‘happy wife, happy life’ philosophy, he sees buying your PPOR as a lifestyle decision more than a timing decision.

Michael Xia:  

[00:38:50] If it's purely financial, and you're looking to make money from that transaction, then I guess you just need to do your own research and decide whether buy[ing] in Sydney in 2022 is the right call or not. Or maybe you look elsewhere and think that maybe those areas give you better numbers.

[00:39:25] I am a believer of delayed gratification. You pay your dues. I believe that everyone has to sacrifice at one point in their life, whether you sacrifice when you're a little bit younger, and your later years [are] a little bit easier. Or in some instances you sacrifice much later in life and then there's not that many options. So that's kind of what I'm hearing, too, is pay your dues now and then later in life, you're going to then have a lot more options and choices.

Tyrone Shum:   

The properties he owns are scattered up and down the New South Wales coast, but his latest ventures couldn’t be further from home.

Michael Xia:   

[00:40:17] We've got 10 properties in New South Wales, and that's spread between Sydney and Newcastle and then also Coffs Harbour. And our recent purchases have actually been in Perth. So I guess that kind of follows on. The main question that I get, when I speak to clients, is 'Where should I buy?' So if it was me in 2022, looking at where the numbers are, I would look towards Perth. 

  

[00:40:46] There's a whole bunch of reasons for that. Brisbane has had an amazing run in the last 12 months. It's hard to buy properties, in terms of what we were buying them for, to what they are now. But in saying that, if I had no holdings in Brisbane, I would not hesitate to buy in Brisbane. In the grand scheme of things, for $500,000 [or] $600,000 you can still buy within 30 kilometres of the CBD. 

  

[00:41:10] And if you hold that until 2032 until the Olympics, I'm sure you'll do very well out of them. But in terms of every purchase that we're buying in Brisbane, now we're getting reamed by land tax, so it doesn't make sense there. So looking at where the other numbers make sense if we looked at Australia holistically, Sydney and Melbourne have had great runs over the last couple of years. [It's] hard to buy into those markets. 

 

[00:41:33] Brisbane and Adelaide have followed each other in that sense. Adelaide's done very, very well too. Hobart has been an amazing performer for the last couple of years. So that's out of the picture. And Perth is starting to recover. Perth at the moment now feels like what Brisbane was like about 12 months ago. It's starting to bubble along. 

  

[00:41:55] To put it into context, for about five years, the most loans that we did for property investors was by far and away Brisbane. But in the last three months that started to change, and we're doing a lot more purchases in Perth. On Friday, the Friday that just passed, on that one day, we had five properties settled in Perth. So a lot of investors [are] now moving towards it. 

  

[00:42:21] You want to look at where it is on the property cycle, in the grand scheme of things prices haven't moved for about 13 [or] 14 years. Before, Perth vacancy rates [were] always an issue. Whereas now vacancy rates across Perth is, like, less than 1%. It's amazing. 

 

[00:42:39] Rental yield, my first purchase in Perth, we picked up for $311,000 and it rents for $450 per week. So that's more than 7%. So a lot of those things are pointing towards Perth. But even just looking at yesterday and speaking to other investors on the ground, it is definitely starting to pick up. The amount of competition, everything that's going on in Perth is starting to get busier by the week. And I think when the borders open up in Perth, it's just going to even be a little bit harder to buy there.

Tyrone Shum:   

He finds the technical knowledge of property investing to be pretty straightforward, such as working out rental yields and the overall buying process. However, there’s one aspect that’s anything but cut and dry.

Michael Xia:   

[00:44:03] It's the emotional side of things that's a lot harder. I've had clients where you're so set on buying a property, you think you buy that property, and it's going to be your ticket to financial freedom. And for one reason or another, maybe someone else offered a little bit more or when you do the building and pest it turned out to be really bad— it's those emotional rollercoaster letdowns that are so hard to get over. 

  

[00:44:29] And what helps you get through that are those property books. So when people ask me, when they want to get into property investing, the books that they want to read are the property investment books. And yes, they do help you with the technical knowledge. And that's very important for when you start out, but the books that actually help you the most are the mindset books.

 

[00:44:53] And these are the books that actually Rolf geared me a little bit towards. So to answer your question in terms of books, I think that technical knowledge in terms of property investing in Australia, there's one book by Jane Somers. I think it's called More Wealth From Residential Property Investing in Australia. 

  

[00:45:13] That book is phenomenal. That book was written 20 [to] 30 years ago. It talks about Sydney being unaffordable at $300,000. And it talks through the mechanics of buy and hold property investing in Australia and the theories behind it. So I read that book again last year. And even though the price brackets are different, it's as true today as what it was back then. 

He admits that some of the advice in the book is a bit dated, but its overall premise holds up very well.

[00:45:37] She does, in the books, advise [you] to pay off your PPOR, which I think is a little bit different now. I mean, it's a lot harder to pay off a $2 million PPOR before you start investing. But if you skip past that, the overall theory of buy and hold, she breaks it down very, very well. So I'm a big fan [of] that book. 

  

[00:45:56] In terms of technical knowledge, I think other good resources for that is Property Chat, and obviously, Property Investory podcast. That's always my go-to recommended podcast. And mainly just because you hear so many different stories. I believe there's many ways to skin a cat in property investing. Yes, I do buy and hold, I do some renovation. But I've come across so many clients that use other strategies, they specialise in that one strategy, and they just do it phenomenally well.

 

[00:46:28] I've got one client up in Brisbane that just develops within the five to 10 kilometre radius of Brisbane. And sometimes developing can be very hard, people don't make money from it. But he's got it down to a science, and he does it phenomenally well. So there's many ways to skin a cat in property investing. 

 

[00:46:47] I think listening to other people's journeys, through your podcast, you take key bits from each story. And then you distill that, and then compare it to your own journey. Because everyone's experiences, knowledge, risk profiles are different. So I think when you take from everyone's stories, then you can then formulate that for yourself.

 

[00:47:17] The technical side of things I'll just quickly touch on in terms of the emotional and the self development books. There's one book that I highly recommend, and that's called Slight Edge. I don't know, have you come across it?

Tyrone Shum:   

[00:47:32] I've read it! Jeff Olson, I love it. And I've listened to it multiple times. And that was actually through your recommendation when we've chatted multiple times ago. And every time I listened to it... I probably should let you say it!

Michael Xia:  

[00:47:48] The background on the book for the listeners, Jeff Olson goes and studies a whole bunch of people and sees what are the differences between people that are very, very successful to the people that aren't very successful. And what are their habits? What are the things that they do that shaped them?

[00:48:09] He kind of boils it down to the two words of slight edge. And I won't spill too much about the book. But essentially, what it is, is it's your everyday, small actions that you do that shape in terms of your success. 

 

[00:48:26] So in terms of success, it's not one thing that you instantly do, that you become ultra successful. And to reflect back in terms of the gym: It's not one session that you do, and you come back with a six pack. But if you do something consistently, do it every day, do it well for the next six to 12 months, over time, those small incremental sessions will then give you that result at the end. And the book just breaks it down in many, many examples. And it's very easy to understand. 

  

[00:49:00] And similar to yourself, I remember when I was driving on the Gold Coast, going between Rolf's office and also my Airbnb, I just had that CD on repeat for, like, a year. I think it just ingrains you in terms of what you need to do to then be successful. So that book I highly recommend. 

  

[00:49:18] And then there's some other ones, like, there's one other book called Personality Plus, and it just talks about people's personalities. You may think it's not related to property investing, but in terms of me working with people, dealing with agents, knowing people's personalities— that book has helped me immensely. 

  

[00:49:37] So if you're negotiating with an agent, if you know what their personality is and what kind of triggers their emotions or their decision making process, then your negotiation game will be a lot better. So Personality Plus would be another one. 

  

[00:49:52] And then yeah, there's just a whole bunch of classic[s], like Seven Habits of Successful People, Think and Grow Rich, there's a lot of these self help books. And I recommend everyone to just go kind of into that category when you're looking at books and just kind of picking through them. But if I had to give two books, I would definitely say Slight Edge, and then also Personality Plus.

 

Coming up after the break, he reveals what he would tell his much younger self if he could…

 

[00:52:1] If I said to myself when I first started and said, 'Hey, Michael, in nine to 10 years' time, you would be at 39 properties', I'll tell you, 'Frickin' go away, just get out. There's no chance'. 

He recognises the advantages he’s had that have helped him along the way…

 

[00:58:55] I was lucky enough to catch the back end of the Sydney wave. I was lucky enough to experience that in Newcastle, be around APRA when the lending was a little bit easier. 

 

He explains the mistakes he sees people make that he wishes he didn’t see.

[01:01:58] Maybe they had a bad experience with an agent. Or maybe they spoke to a friend that dished property investing. And then after that, they don't really look into it. 

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

 

Tyrone Shum:   

Xia is a man with no regrets, and if he had the chance to go back 10 years, there’s nothing he would do differently. However, that isn’t the case for further back in his past.

Michael Xia:   

[00:51:14] If I go back to the 10 years prior to that, it's almost like, 'How much more time do we have?' But I won't go into that. But to answer your question, I would say one would be to dream bigger. Some of the listeners may say, 'Oh, sitting on 39 properties, that's great'. But I can tell you too, as I was growing that property portfolio, looking to build my mortgage broking business, it just felt that it couldn't happen fast enough. 

  

[00:51:46] And then also that in terms of getting a little bit impatient, trying to hit certain goals, and overall, in terms of where I am, and you can think of what the possibilities are— overall, I think that I haven't dreamt big enough, in terms of actually what's possible.

  

[00:52:11] Because if I said to myself when I first started and said, 'Hey, Michael, in nine to 10 years' time, you would be at 39 properties', I'll tell you, 'Frickin' go away, just get out. There's no chance'. When I was at my second property, I would have been happy with five or six properties. So to be where I am now, I would have told that Michael, when I was sitting on those two properties, to dream a little bit bigger. 

  

[00:52:39] Now over time, yes, that dream has grown. But it is something that I'm continually still exercising myself in terms of okay, maybe there is more. And then there's bigger things out there. In the times that I do get a buzz is when I speak to other people that are going down this same journey. And they have even bigger goals. 

Michael Xia: 

[00:53:00] And to give you an example of that… we touched on Steven Ryan earlier, actually, where Steven Ryan, me and him started mortgage broking together, he quit broking after two years, went to travel the world and now runs a very successful YouTube channel. And his goals are wild. It's like literally [meeting] Elon Musk. 

 

[00:53:23] So he's devised this whole thing where he's going to now uproot [and] move to the US, he's going to get enough capital coverage through his YouTube channel, to then go and then interview and then meet Elon Musk. His channel is basically on Tesla. So kind of big world dreams like that. 

  

[00:53:40] And I think that we're only on this earth once. And if I see other people, it's most people's dreams and goals are not that big. Or because of everything that's happened in their life, they've made their dreams and goals match that. And it's so easy to do. 

  

[00:54:03] I'm guilty of that too, particularly early on. Rolf used to say, 'Hey, Michael, you need to increase your income'. And I used to get very defensive, and I'd be like, 'Well work only gives me 2%, how can I increase it beyond $80,000?' And almost argue back at him. 

  

[00:54:24] I have the same conversation with some of my clients now. I'm like, 'Look, you need to increase your income', and they say the same things. And I can completely understand where they're coming from. But it is hard. But once you get into that thinking and that mindset, it's almost there's just so many opportunities out there.

Tyrone Shum:   

His main property-related goal for the future is to find his dream principal place of residence, which aligns perfectly with his personal goals.

Michael Xia:   

[00:55:22] I would say the big burning goal at the moment is a nice PPOR. And every year that passes, that PPOR, the vision of it gets a little bit nicer. And ultimately, it is to spend more time with the family. I share a common goal with a lot of people out there. Our second is due in April, and our first girl, Zoe, is already 18 months, and I've just watched her grow so quickly in front of my eyes. And if you look back on the 18 months, it's almost like, 'Frick, where has our baby gone?' 

Tyrone Shum:   

[00:56:06] I can tell you from experience, my kids are seven and five, ‘What has happened to my seven to eight years?’

Michael Xia:   

[00:56:14] I want to set up things in a way through the business, through property investing, that I can be there with my children, and to see them grow up. I'm lucky in the sense that I can work from home. So that helps things. But also, I do want to be able to take them on holidays— when we can, when COVID finishes— to travel the world [and] experience things together. 

  

[00:56:39] So that's kind of the next phase of life, what I'm aiming towards. Nice PPOR, to then we spend all of our time at home so I think that's very important. To be there with the kids, to grow the family, to spend time with them. I'll be brutally honest, is the 40th property going to give me that much more joy than the 39th?

  

[00:57:09] When I signed that contract, and you know you bought a good deal, and you made, you know, 10% on the way in, it does give you a bit of a buzz on that day, but it fades out very quickly. But being able to be the only dad at my daughter's swimming class, and to be able to take her there, I think for the next journey of our life, that will be the most important thing.

[00:58:07] I'm lucky in the sense that Jo gets to stay at home a bit more and then spend time with the kids, but because I'm so busy too, with property investing/mortgage broking, sometimes it's like I might not spend quality time with Zoe for a week. And already she's doing different things to last week. So I definitely want to be able to experience all of that. 

Tyrone Shum:   

[00:58:34] Well, you've shared an amazing, amazing story, Michael, and thank you so much for doing that. I guess the last question I usually ask the guest is how much of your success has been due to skill, intelligence and hard work? And how much of it has [been] because of luck?

Michael Xia:   

[00:58:50] Don't get me wrong, I think luck is definitely an element. I was lucky enough to catch the back end of the Sydney wave. I was lucky enough to experience that in Newcastle, be around APRA when the lending was a little bit easier now to catch Brisbane. So don't get me wrong, luck has been an absolute key factor in it. 

  

[00:59:17] But I've seen so many other people start their journey after me or start their journey during the same time as me. And whether they get lucky or not, it hasn't really affected the result as much. I think the key in all of that, that you said, I would have to say is hard work. 

  

[00:59:37] We can go on for a lot longer in terms of the specifics that I think that affects someone's journey. But I think a lot of it is hard work because a lot of the time it won't be glamorous. Property investing won't be easy. But if you're willing to push through that, to continually show up, then over the long run, kind of the Slight Edge concepts, you will do well.

 

[01:00:07] I'll give you a story around this. In terms of clients, I've met many, many clients. And I can tell you that in terms of what they earnt, to their resources, to their levels of success in property investing— and I'm only talking about property investing here, because there's other definitions of success— it's not really dependent in terms of what they make or what they have. But it's about how long consistently, they can keep being interested in property investing. 

  

[01:00:41] It's the same for my gym. I might get motivated to get more fit than I am. And a couple of weeks later then I've stopped. Funny story on that too is three weeks ago, I bought this program in terms of stretching online. Being desperate about getting healthy, you do silly things. But this program said that in a month, I could do my full splits. 

Tyrone Shum:   

[01:01:08] I've never heard that before!

Michael Xia:   

[01:01:13] It was $17 plus an extra $8 for the added program. But it promised me that I could do my splits in a month. I can tell you four weeks later, I still can't do my splits. So why I kind of add this is part of the program is you have to do this thing every single night. For the first three days I did. After that, no. And now it's probably [that] I'm lucky to do it once per week. And that's similar to a lot of property investors.

  

[01:01:41] Unfortunate as it is, when they hear this podcast or when they read a book or they speak to a friend, they're super excited. And they're just all about property investing. And they might be about it for a month or two. And then after that, probably just on the backburner. 

  

[01:01:58] Maybe they had a bad experience with an agent. Or maybe they spoke to a friend that dished property investing. And then after that, they don't really look into it. And maybe the next time they look into it was like a year and a half, but maybe then the market has gone and they're like, 'Oh, frick, I should have looked more into it'. 

 

[01:02:16] That's actually— unfortunate as it is— the most common experience that I have with property investors. I have worked with a few that [are] not like that. Every single day for a continual period of time, for a number of years, they've looked at deals every day. They've spoken to agents, they've messaged me and [said], 'Is there anything that we can do to help me get into the property portfolio?'

 

[01:02:40] And those clients I have stuck at it every single day, explored all the opportunities, worked on becoming a better investor every single day for a number of years. Those are the people that have had very, very good results. When you break it down like that, it doesn't seem like rocket science. But to do it every single day is not an easy thing. 

Thank you to Michael Xia, our guest on this episode of Property Investory.