Timestamps:
00:39 | Stop Right There
02:46 | Ready, Set, Bid
06:36 | All in One
10:38 | A Wise Investment
13:29 | Playing With Fire
16:36 | Paving a Prominent Path
22:20 | Learning on the Go
28:42 | Looking Backwards and Forwards

Resources and Links:

[00:05:20] And so we ended up paying a high rate, you could argue we were kind of paying top dollar for that property. I saw potential in it, because I saw that the shop, if it was successful with the person that was running this shop was successful, then I believe the amount of returns we could get from the property would be high. 

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 Chi Lam, passionate property investor, director and founder of his own company. He picks up where we left off in the late 2010s, when his journey became a little topsy-turvy. While the road ahead had its bumps in forms of authorities and an unusual bidding war, he always returns to his ‘why’ to guide him home.

Tyrone Shum:   

Lam was on a roll in 2017. In the five years before that he’d purchased four investment properties, and had found that getting finance for his property dreams was an easy and straightforward process. However, something rolled along and put a stone in his spokes.

Chi Lam:   

[00:00:39] APRA stepped in and just made it a lot harder.

  

[00:00:46] We got to a point where we kind of had to stop in 2017 because we couldn't get any more financing. Partially due to APRA, partially, probably due to the fact that we had that many loans. It's a case of if I'd been more picky in some of the properties, it would have taken longer, first of all. It would have taken more time to find these properties. I would have maybe gone further, you know what I mean? 

  

[00:01:18] But I wasn't super picky in that as soon as we had the funds and as soon as we found a property and had a spreadsheet to calculate whether or not it was worth buying— and at what price, that was the important thing, I had to calculate what price it was going to be neutrally geared or slightly positively geared after the granny flat was built and after the renos. There's a lot of error involved, because I'm predicting how much rent I'll be getting and everything. But it was all in that spreadsheet. And then [that] allowed me to go to the auctions with a level of confidence as to how much I wanted to bid. So that helped. 

Tyrone Shum:   

The strategy he implemented was relatively simple, making it an easy process for him. When the tides began to turn in 2017, suddenly APRA wasn’t the only thing rocking the boat.

Chi Lam:   

[00:02:46] I was fairly well prepared in terms of I had kind of the set prices, so I was never going to overpay. Although that last property, I was very, very doubtful. The last one that we bought, we bought at the peak. We bought in 2017. And that was probably past the peak, I'd say. And that was on its way down even. We were umming and ahhing about whether to buy it. 

  

[00:03:10] But I figured we were at the end of our accumulation. Because I knew by that stage that this would probably be the last. I don't think we'd be able to get more finance. 

  

[00:03:19] The auction was a very strange one in that it was only me and this other person that was bidding. And I used a very kind of aggressive bidding strategy whereas I would just bid quickly and try not to give the other party much time to think about their next bid type thing. I put pressure on them in a way. 

  

[00:03:43] So we got up to a point it had stopped and I'd reached my limit and I'd said, 'Okay, well that's it, I'm done'. I told the agent I was done. But the agent managed to kind of convince me to go an extra $1,000, right? So I was like, 'Alright, I'll put an extra $1,000 in'. 

  

[00:03:59] And then the other party got super angry. They got really upset, they were like, 'What is this?! I had it and now you're...' Anyway, he stormed off and then that kind of got me suspicious. I'm thinking, 'Whoa, whoa, whoa, is this guy being paid by the agent? Am I being stitched up here?' It led to push this price to a point where the other party just stormed off! 

Tyrone Shum:
Somewhat stunned, Lam ended up taking the deal, but the drama was far from over.

Chi Lam:  

[00:04:35] And then after that there was even further issues we had with the financing, because the property that I bought had a corner shop attached to it and so the loan that we end up getting could not be a simple residential loan. It had to be commercial but commercial wasn't going to work either for some reason, I can't remember now. The broker had issues with it. 

  

[00:04:59] So I ended up having to go with like a second tier lender who was able to do the sort of riskier loans, I suppose. But the rates were higher. So I guess a lesson learnt there would be [to] maybe [do] a bit more research. 

  

[00:05:20] And so we ended up paying a high rate, you could argue we were kind of paying top dollar for that property. I saw potential in it, because I saw that the shop, if it was successful with the person that was running this shop was successful, then I believe the amount of returns we could get from the property would be high. So that that was pretty much the only saving grace. I wouldn't even pay anywhere near that sort of figure if it didn't have a shop attached to it. So it came with its issues. And that's probably a learning experience, to know about those things in advance.

Tyrone Shum:   

As the property was on a corner block, it fitted his template of being able to accommodate a granny flat. Last but certainly not least, the shop was the icing on the cake.

Chi Lam:   

[00:06:36] So what's happened with that property ever since is, now we've got a good tenant in there. And they are running a business out of that. The lease we have in it is an all in one lease, meaning the people that are living in the house [are] also running the business. So we just have a residential lease. So we don't have three incomes, so to speak. 

 

[00:06:53] But the rent is higher, [it] is a little bit higher. But it's not anywhere near like if you had a commercial lease. But look, we don't know what the future would hold with it. But I'm hoping the business, their business is successful, and we can share in that success, I suppose.

  

[00:07:20] Because the interest rate was so high, that property has always kind of been teetering on neutrally geared to negatively geared. Whereas the other ones were a bit easier to become positive. I think it just makes it easier to hold. 

Tyrone Shum:   

He’s since gone back to refinance the most recent purchase, and while today the interest rate remains high, it hasn’t deterred him from his dream one bit.

Chi Lam:   

[00:08:22] I guess it goes back quite a way to kind of when I started property investing. It was really a goal to not be working in a full time job for the rest of my career. 

  

[00:08:38] The initial plan was to use property as a way to generate wealth. And over time, with the capital growth, I'd then be able to step back from my work. 

  

[00:08:52] I started investing [in] 2012. But I kind of went part time [in] about 2017 or so. I quit my job at ResMed because I joined them again, in a second stint after coming back from London. I quit my job there because they weren't able to offer a part time role. 

  

[00:09:11] And I joined up with Cochlear, and they were able to give me a part time role there. So that was great. So then I was able to continue doing this. And at that time I also started the side hustle. 

  

[00:09:25] So I've always been kind of thinking I just wanted to do this more than I wanted to work the previous role. And I guess over time with the capital growth, definitely, that's helped. Although it's capital growth, but we haven't refinanced after the original refinance. So if we're just letting the loan to value ratio drop, and as the rent slowly rose over time, becoming a slightly more positively geared. 

  

[00:10:01] The properties provide a little bit of extra income a year. Not a huge amount, I think. Most of its value is in the locked in equity. But just then switching over to concentrating more on the side hustle, which eventually turned into a side business, eventually turning into a full time business, that kind of gave me the opportunity to completely quit. 

Tyrone Shum:
It got to a stage where he was happy with the income from it. That, along with his wife’s full time job, gave him the resolve to step away.

Chi Lam:  

[00:10:38] That is an awesome security blanket. So having at least one partner making that full time wage. And then I was able to do that, I suppose, able to quit completely. I think it was [in] 2019, so a couple years after [we purchased] the last property. 

  

[00:10:59] And also around 2017, we also invested in a company, Tesla. Who you might have heard of! It was all after reading a book on Elon Musk, actually, I read the biography by Ashley Vance. 

  

[00:11:23] Because I'd seen some articles online about this. Because I heard about this guy, probably even back in London days, about this guy doing an electric vehicle. My mind wasn't really much in the share market at the time or anything in investing anything at the time, so I didn't pursue it. 

  

[00:11:37] But by 2017, I was obviously on the lookout for [investments]. I had more time as well. That's the other thing, like, not working that extra day gives you so much time to explore opportunities that I'd missed. Because previously, I was too busy working five days a week, and I was knackered by the weekend. And I just want to enjoy my weekend.  

  

[00:11:59] It's the opportunity cost, I think is very important here. Working part time is just the best. So I was able to kind of explore that opportunity after reading the book and just kind of [thinking he] was really interesting, what he'd achieved by that time. 

 

[00:12:16] [In] 2017, I was comfortable enough to put a decent chunk of money in the company in the stock market. And that's our biggest investment at that point in terms of the stock market. We never really were too big into the stock market. And so that's done quite well. Obviously, over the years, as the company has grown, we've added to it, we've added to our position in that. 

  

[00:12:17] So I think that's also contributed to being able to have the freedom of time now. It's not like we can just drop everything now. We're not in a position where we can just drop everything and say we're retired and not have to work at all. We still have living expenses to pay for, and mortgages to pay. So I don't think we've hit FIRE yet.

Tyrone Shum:   

FIRE is an acronym for Financial Independence, Retire Early. Lam was new to it himself, and it stumbled across him more so than the other way around.

Chi Lam:   

[00:13:29] The host of the Aussie Firebug, Matt, I think, he must have seen the article. 

  

[00:13:37] It all goes back to the article that my friend wrote. I had a friend who's the editor at the ABC for a column on... I think it was parenting and work life balance and that sort of stuff. And so he wanted to share my story about how I went from a full time job to being kind of almost a stay at home dad in a way. Being a primary carer is probably more accurate, being the primary care of my kids. Which was fairly uncommon, mostly you see women doing that role. So he wanted to share that story on the ABC. So he wrote an article about that. 

  

[00:14:17] And Matt, I think, on his forums, some of his members would have seen that article and posted it up and had some comments and Matt invited me on to that podcast. So I did a podcast with them. And I believe that's how you found me.

Tyrone Shum:   

He’s well on his way to his goal of having enough cash flow to cover everything life throws his way, something he admires Aussie Firebug Matt for.

Chi Lam:   

[00:15:22] He posts on his blog his net worth and how his investments have been going since, like, forever, and how you don't actually need that much money to hit FIRE as long as your expenses are not extravagant. 

  

[00:15:37] So that's quite an interesting concept. And I wasn't really aware of that [when I was] younger, so I kind of went about my way of doing it. But it's a similar concept of about freeing up your time to use your time in ways that [are] more valuable to you. 

  

[00:15:55] Because working a full time job is great for some people, I think. They love it. And that's absolutely great for them. But I think for a lot of other people as well, it's not what they want to do, either. And trying to trying to reach financial independence is a good goal to have.

Coming up after the break, he explains what— or who— he’s doing it all for…

Chi Lam:   

[00:16:36] You've got to really step back and kind of look at: What are you doing all this for? 

How certain things have opened his eyes, yet he chose to walk the other way…

[00:23:49] But I think over the years, I've learnt it's a case of usually those properties, the potential for capital growth isn't as high.

He reveals the investment that made him do a 180 on his approach.

Chi Lam:   

[00:27:01] So that's been a bit of a learning experience for me.

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

Tyrone Shum:   

Recognising and reaching for your goal is one of Lam’s top pieces of advice. Knowing why that’s your goal is just as important, if not more so.

Chi Lam:   

[00:16:36] You've got to really step back and kind of look at: What are you doing all this for? And I think as you get older the question becomes louder and louder in your mind as to well, why why am I doing all this? It's got to be for a reason. And then you kind of assess what's important to you in life. And you've got to prioritise those things and try to do more the important stuff.

Tyrone Shum:   

Lam considers his granny flat revelation to be his biggest ‘aha’ moment, as he helped to pave the path that many others walk on today.

Chi Lam:   

[00:17:30] Back then when I was doing it, I don't think it was as prominent. I don't think as many people [were doing it]. There were people doing it. Okay, there were people building granny flats. But I was aiming specifically for corner blocks where I would do it up so that it's like a little house. I think that's a big advantage in terms of getting it rented out. 

  

[00:17:51] I know you can have private access on a normal block. And that's better than nothing. But I think a corner block just makes it so much nicer. So the aha moment was like, wow, putting in $100,000 to $150,000 and getting back an extra $400 [or] $500 in rent. Wow. And that allows me then to just keep going. I can just refinance it and just move on to the next one. That was all until APRA shut it down.

Tyrone Shum:   

[00:18:21] Even with $100,000 [to] $250k, you can even borrow that, couldn't you? You know, through the equity that you built up.

Chi Lam:   

[00:18:26] That probably would have been the smart way to do it. I didn't do it that way. I kind of use personal funds, personal savings to do the build and then kind of refinanced. 

  

[00:18:39] Obviously, yeah, there would have been things that I probably would have done again, if I did it again I'd probably change, I'll probably try and borrow the funds instead of using personal equity.

Tyrone Shum:   

Turning back to recognising your ‘why’, Lam reveals his own.

Chi Lam:   

[00:19:29] I think it's pretty much doing it so that we can spend more time with our kids.

  

[00:19:40] I've got a seven year old and a 10 year old at the moment. The reason why we're doing all this is just so that whilst they're still young and whilst they still want to be with their parents, to go out with their parents and all that, that's our aim. 

  

[00:19:59] Obviously I am used to trying get it so that my wife doesn't need to work her full time job. If she doesn't want to. I mean, she's very happy there at the moment. But it's nice to have that option. So that's what's kind of important. 

  

[00:20:16] And I think moving forward even further, like into the future, i's almost like, if you're happy once you've achieved your goal, then what's your next goal? What do you do then? And I think maybe philanthropy later, if that becomes an option, is probably super long term at the moment.

Tyrone Shum:   

His mum and uncle definitely gave him the first push to buy an investment property, and it could have ended there if he chose to. The investment bug had bitten him hard though, and he was keen to soak up as much information as he could.

Chi Lam:   

[00:22:20] I remember attending various property...

 

[00:22:23] I guess they'd be workshops, although it was always presented— there's always a money making thing behind it. There's always a course you could sign up [for]. And then I think that was just to learn about the whole adding value to a property once you've purchased it to increase the returns. 

  

[00:22:53] I found the online forums are really great place. I'm a member of Property Chat. It's a great place to kind of learn about property investment.

  

[00:23:22] And I remember— and this was a while ago, as well— when I was reading a book by I think it was Steve McKnight about cash flow positive properties or something like that. And that was quite interesting. I didn't realise at the time that you could buy a property and it would pay you back more than what the loan could, the interest would be charged on. 

  

[00:23:49] But I think over the years, I've learnt it's a case of usually those properties, the potential for capital growth isn't as high. And so I think it opened my eyes in that sort of respect. But I kind of went the other way, didn't I? I went and I bought a place, I bought properties in Sydney, which was not great for cash flow, but had much higher potential growth. 

  

[00:24:10] And I think that was probably the right decision. I think. I'm not sure. I mean, I say that, but then there are people out there with 100 properties or making a ton of money. So they probably made the right decision. It's very interesting how they do that. 

 

[00:24:28] I think you make your money when you buy it. Basically you find a good deal that works out fantastically. And it's time consuming to do, actually. And that's what I meant earlier, when I could have probably been a bit more picky in terms of choosing my properties where I really just jumped into it because time was of the essence, I guess.  

  

[00:24:49] I think those people who were able to accumulate large portfolios, they bought really well and they must have had a lot of good connections and a lot of time and whatnot to buy those properties which [gave them] fantastic returns and just keep rolling. And even with APRA and everything, they were not stopped in that they were able to continue servicing their loans. That's great. I think that's, like, elite level property investing.

Tyrone Shum:    

He understands that even the people with the largest property portfolios hit a ceiling at one point or another, and has wisely diversified his assets as a result.

Chi Lam:   

[00:26:12] At one stage all our eggs were in one basket, so to speak, in that all our assets were in Sydney properties. And then we diversified into the stock market with Tesla. So now all our eggs are in two baskets.  

  

[00:26:31] I don't know what the future holds in terms of property investment for us. I don't know if we will accumulate more. I'm not sure. That's certainly a possibility. Or do we then invest in other companies? Because I've learnt a fair bit in the last few years about... not property investment, but a lot more on the investing in companies that have good growth potential, solid growth prospects that are not super risky, I suppose. 

  

[00:27:01] So that's been a bit of a learning experience for me, because when I was younger, I was always told that the stock market was a gambling house. And I don't believe that anymore. I think there are things you can do on the stock market that are kind of gambling, like short term trading is a little bit risky, because of the price fluctuations, it's hard to predict. 

  

[00:27:21] Whereas I think it's easier to predict long term trends and where companies are well positioned, and if you're willing to wait. It's kind of like property investment, it's a long term investment, if you see the potential and you see a path there, and it's a bit easier to predict. I mean, everything comes with risk, but I think it's less risky.

  

[00:28:01] Sydney property has done fantastic over the last 10 years, because Sydney is a great place to live. There's a lot of demand, we have population growth. But if all those things change, it could go the other way. It's unlikely for that to happen. And that's why we were happy at the time to put all our eggs in one basket, because of all that all those things. Population growth, fantastic place to live in, infrastructure was growing.

Tyrone Shum:   

[00:28:42] If you met yourself, say 10 years ago, what would you have said to him?

Chi Lam:   

[00:28:50] Start earlier in investing, I think would be the [first thing]. But I'm sure me 10 years ago would not listen to that advice. I was like, 'Nah, not important'. But yeah, it's always a case of if I bought earlier, then geez, I would have picked up a lot of cheaper properties. 

  

[00:29:10] But there's a time and a place I think. I always kind of step back and think yeah, it just wasn't ready at the time. And that's the case with a lot of people. And when you're young, you're not ready to think about that stuff.

Tyrone Shum:   

[00:29:20] Hindsight, it's always a good thing. Well, I guess in the future, you kind of already touched on it as well, too. You're interested in I guess looking at diversifying at the moment, but what are you most excited [about] in your journey over the next, say, five years?

Chi Lam:   

[00:29:38] I'm hoping we reach our goal of reaching complete financial independence.

 

[00:29:47] That would look like, say, for example, if my wife would choose to do so, probably not working a full time job maybe and she would probably spend a bit more time with our girls. And that's something that could possibly change in next five years. 

  

[00:30:06] I think I'd still run my business. So my business has a philanthropic component to it where every sale we make, we donate a portion of our profits to a charity of the customer's choice. I've always liked to tie, find our business success with kind of social responsibility and kind of give back to the community. I think that's important. 

  

[00:30:31] And I think— this is this is probably really like pie in the sky vision— where if one day, maybe the business can just be giving all profits to charity, that'll be fantastic. If I don't need that money for personal use, then why not? Then it comes down to how much time I want to spend on the business. Or if I want to let someone else run the business, perhaps. 

  

[00:31:03] If we can get there in five years time, that'd be fantastic. If our investments have reached a point where we can just have the business donate more to charity, that'd be great. Or even be more picky on maybe choosing some of the charities or supporting more local causes? Yeah, that'd be awesome. I think it's quite a lofty goal. 

Tyrone Shum:   

[00:31:35] Chi, you've achieved quite a lot, your property journey has been so inspiring. I've learnt so much as well, just from hearing your story. How much of it do you think has been in your success due to skill, intelligence, hard work? And how much of it do you think has been due to luck?

Chi Lam:   

[00:31:51] I think it's a bit of both. I think perseverance, being driven in kind of what you want your future to be is part of it. So putting in the hard yards is important in having the right strategy. But also believe we kind of got lucky in a way, in that we started buying properties around the time where properties were going up. We started in 2012, that's when it kind of started to lift off in Sydney. And during that period. So I guess that that part of it was luck. 

  

[00:32:26] You have to put yourself in the game, though. You can't just step back and not make decisions. And I think that's important and that you need to have actions with your goals. Just little things, even if it's doing a little thing a little bit a day, if your workday's busy just do a little bit each day to reach that goal. And that's important. 

  

[00:32:47] And we kind of got lucky too, with that Tesla investment, too, with how the company has done fantastically since 2017. But once again, you've got to be in the game. 

  

[00:33:00] So to answer that question, it's a bit of both. I think it's hard work thinking of the right strategies, being focused and doing it and following that strategy. And then luck Is luck. If you ever get it, that's great. It's one of those things.

Thank you to Chi Lam, our guest on this episode of Property Investory.