In this week's episode we continue our discussion with Pan, whose incredible research and analytical skills have enabled her to build an impressive portfolio holding over 26 properties. In this episode she reveals the secrets of her own investment strategies, what her greatest motivations were as a young investor, as well as sharing valuable insights into the current property market and much more!

Timestamps:
2:33 | DATA SKILLS HAVE PLAYED A VITAL ROLE IN HER SUCCESS.
8:10 | LIANNA SAID GOODBYE TO HER DAD FOR SEVEN YEARS.
9:27 | HER PARENTS’ SACRIFICE FUELLED LIANNA’S MOTIVATION TO ACHIEVE FINANCIAL FREEDOM.
14:27 | LIANNA STUDIED HARD TO ACHIEVE TOP GRADES.
16:37 | STUDYING FULL TIME AND WORKING THREE JOBS, HOW DID SHE MANAGE IT ALL?
18:25 | PAN GRABBED EVERY OPPORTUNITY SHE COULD TO BETTER HER FINANCIAL POSITION.
23:48 | SHE SOON REALIZED SHE NEEDED TO THINK OUTSIDE OF THE BOX
26:14 | PAN USED HER DATA SKILLS TO DETERMINE IF AN INVESTMENT WOULD BE SUCCESSFUL.
27:45 | LIANNA HAD TO OVERCOME A LOT OF FEAR BEFORE SHE WAS ABLE TO COMMIT TO AN INVESTMENT.
31:06 | FROM $400,000 TO A MILLION.
33:12 | PAN’S RENOVATION STRATEGY DIDN’T WORK OUT AS PLANNED.
34:28 | SHE WENT THROUGH MANY SLEEPLESS NIGHTS DURING THIS TIME.


Resources and Links:
Tony Robbins - Motivational Speaker and Life Coach
Lianna’s business and community of investors
Lianna Pan on Facebook and LinkedIn.


Transcript

(14:55) So back in 2008, the government spent about $10 billion and so far, this government has spent about $500 billion. It literally dwarfs what was happening in 2008. So can you imagine the magnitude of this boom? 

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 continuing our discussion with Property Investor, and retired Actuary Lianna Pan, with an impressive portfolio of over 26 properties. She reveals the secrets of her own investment strategies, what her greatest motivations were as a young investor, as well as sharing valuable insights into the current property market and much more! 

Pan and I discuss the struggles she faced when trying out renovation strategies, and why certain strategies work better for her. 

(34:53 audio part 1) I must have grown so much. Like so many sleepless nights. At the end of the day, the biggest lesson I learned each time is when I make money, it was always because I got the property at the right time, right? The right location, the right time. And when I lost money, it was not doing that research properly. You know, I've done all these strategies and in some cases, I've made money. 

(35:22) In some cases, I haven't made money. So those were probably, I would say, the interesting years, but I always look back on those years and say, ‘Well, I'm glad that I've done this’. I know what it's like to do all these different strategies. So I can see what strategy works for me, like someone who's a busy professional, who's got a lot going on in their life, and doesn't really have the time to actually spend doing active strata property strategy, so to speak.

(35:58) So what would it be like for people in that situation, to build a portfolio of properties that can give them the passive income, the financial freedom they want? So the strategy I come back to is to do research upfront and just find the property that is the right location, right time, to make sure that you maximise your chance of getting properties that will beat the average growth all the time, and build a portfolio from there. 

(36:26) And there's a lot of numbers and science behind it as well, you can basically build a portfolio and actually pay off all of your debt. So say you buy two properties, you can pay off if those two properties grow at above average rate, and then after 10 years or so, you can actually sell one property and use that to pay off the debt against the other property completely. 

(36:49) So the strategy is simply, you know, buy twice as many properties as you need, roughly, and then sell half of them off at the point where you were ready to consolidate and have the other half completely paid off and paying you a passive income.

(37:05) Yeah, yeah. And that's a great strategy. And it's a simple strategy. I mean, anyone can follow it. It's just a matter of time. It's really interesting. I'm also curious about the renovation, the property development type of things. What kind of renovations did you do? And did you actually manage the trades? Or did you actually go into the renovations to manage trades? 

(37:30) So with a renovation strategy it's about, you know, buying a property location. I chose locations where you can get a big gap between unrenovated and renovated properties. But as I said, even if you tick all your boxes, do everything right, if you think that the margin on renovations is typically 5-10%. Yeah, it's slim. And what if the property market slides by 5% over a 6-12 month period where you're doing this project? Well, then you lost all of your profit.

(0:01) It's been very interesting to hear that. And I think, you know, renovations, development, is not for everyone. And, you know, you’ve got to start off with the foundations which is just, as you said, you know, buy a property that's under market value in the right location, do your research, and if you buy it right, you can pretty much hold on to those properties. And you don't have to really do anything.

We move on to discuss Lianna’s most memorable ‘aha’ moments where everything seemed to click into place for her. 

(0:47) There's a lot of ‘aha’ moments in my journey. I think one of the biggest aha moments that leads on from what I talked about before is that research is hugely important. Understanding the data. The property market is predictable, to a large extent.

(1:09) And understanding that is so incredibly important. So there are certain rules, certain rules that I've figured out over the years, for example, you know, you've got the long term growth rate for Australian property which is incredibly stable.

(1:25) It's about 6.8-7% all the time, whether you're 25 years [or] 30 years, I've even gone back 100 years, the hundred year average growth rate of Australian property is about 7%. Incredibly stable, and also, the property cycles, they are not in a straight line, otherwise it would be so predictable. 

(1:48) But actually, within the property cycle, the growth rate will be either above the trend line or below the trend line. And the idea is finding points below the trend line, but it's about to accelerate its growth rate to get above the trend line. 

(2:14) So you could call it a 70/30 rule, for example, property cycles spend 70% of their time in stagnation, sort of from going above the trend line to below the trend is a period of stagnation, and about 30% of their time in acceleration. So you want to actually get to that point in time to take advantage of the uplift of that 30%. I mean, the market is one part of it. 

(2:47) And then there are lots of cycles within Australia. So it's not one property cycle, there's so many property cycles, every city has its own property cycle. And so you can always find properties that are in the right point in cycle to take advantage of the growth. So like, research is a big ‘aha’ moment, just how important it is doesn't matter what strategy I implement.

(3:15) So that's a huge one. And the other one is just the strategy that we talked about. So how do you get properties to pay themselves off. And that is a huge ‘aha’ moment for me, as well. And you actually don't need to put in more of your savings. You don't actually have to live on baked beans for 10 years of your financial freedom, it doesn't really need to affect your lifestyle.

(3:40) Yeah, well, this is really good that you pointed out those because it really leads into more talking about the strategies that you've done. And I really like it that you've hit on the point that you don't need to leave on baked beans to build a portfolio. 

(3:54) Maybe in your situation, what were you able to do, because as you said, 2008 was a great time to buy property. Did you buy lots of property around that time? Or did you actually just wait a bit to do that? Because, you know, it'd be interesting to know, how did you actually accelerate growth over the last 10 years?

(4:13) Between 2008 and 2009, as I predicted there was going to be a property boom, and a property boom did come. So my first property that I bought for $400,000 grew by $100,000 in 12 months. 

(4:27) So that gave me $100,000 of capital growth or equity. So the strategy is, you don't want to put all your savings continuously over the time period that you need to accumulate your portfolio, you're using the equity in your property to actually get your next properties. After about 12 months, because that's all the savings I got, I had about $50,000 which got me my first property but I didn't have any more after that.

(4:58) So that capital growth, a big chunk of capital growth from that first property allowed me to get into two or more properties the following year. And those properties again, same scenario, right location, right time, ticks all the boxes in terms of above average capital growth potential, and they were all positive cash flow as well. 

(5:19) This is, again, a very, very, very important thing. From day one, I bought properties that were cash flow positive. So they all were brand new properties, which meant that they will maximise your depreciation benefits and your tax return, tax refunds. Yeah, very important for someone like myself, for example. 

(5:39) And also they have very good rental yields to start with, so they will have positive cash flow, often before tax refunds, the tax refunds just add to that. So that's very important, because it's  good for borrowing capacity later on as well. So the banks can continue to lend you money if your property's doing really well, in terms of paying you to own it. Even if you’re paying 90% or 100% interest, you know, so that was one of the key rules that I stuck to. 

(6:13) And using those additional funds, like the additional cash flow on that property, not using that to fund your lifestyle, or putting that back into the property to help pay down that property or putting it towards another deposit for another property.

(6:28) And so you're able to pretty much leapfrog from one property to another without having to inject your own cash, you know, that way you can keep that cash to, I guess, live and you know, have a lifestyle that you want until your portfolio generates additional passive income as well.

Lianna Pan: 

(6:43) You don't need to inject more of your cash after maybe the first two or three properties, you should be able to pull out the equity from the properties themselves to keep going. I did both anyway, being Asian. Just wanted all the money into properties! So I did both.

Tyrone Shum:  

Thriving on accelerated growth, at what point did Pan decide to quit her 9-5 job and invest all of her time into property? 

Lianna Pan: 

(7:19) About five to six years into my investment journey. So 2013, I realised that I was actually getting more passive income for my property portfolio than I was for my day job. And at that point, I just realised, you know, what I could do, I could spend my time better, I could just do this full time. 

(7:41) Because you know, I can look at so many more opportunities. My big dream, like, as a data scientist, your big dream is always being able to do a lot of data analytics. And, by that point, I had truly really got the property bug, and really wanted to know everything, like the depths of property, and how you can make this so predictable. 

(8:06) And my very accurate predictions are always always about that. So my big dream was to one day be able to be able to fund the purchase of a lot of data, and build a research team around me to do this full time. I'm glad to say that we were able to bring that to fruition. So, you know, that model just keeps getting refined and refined. But it's quite expensive to actually purchase and maintain a lot of data and to be able to do analytics on it.

(8:41) Yeah, and that's the thing, data is so key. It's like gold, you know, in our day and age at the moment, I mean, when we look at Google, Facebook, the amount of data that it may sell for advertisers is worth a lot of money, it's the same thing as property, you're able to get that data on it, and then you know, find the best value out of it.

(8:57) So I guess the question that pops into my head is, why do we not use technology to, you know, use your models, apply your models, and then spit out, I guess properties or answers to what we're doing rather than human interaction? Is it getting to that point that we would do that in future? Or is it going to be still human interaction?

(9:19) So if you think about a lot of pricing algorithms these days in an insurance context or in a data analytics context does include AI (Artificial Intelligence) already. So just a simple example would be a feedback loop or automatic feedback loop. So we're getting the algorithms to pick up patterns in the data, live data, and feed it back and still refine the model in real time. 

(9:45) So that's been happening since about six or seven years ago now. So a lot of insurance companies already have that. So, what I will say is that even in an insurance context, that's why I actually do still exist today, you can never leave data, just to do its own thing like a black box, you put stuff into the black box, it comes out, you have no idea what it means.

(10:12) And so you always have to apply a judgement layer to do that. So simple examples like data can help you identify it. So we have like 94 point checklist checkpoints that we go through when we identify a suburb with the potential for above average capital growth, for example.

(10:36) But that process, once that suburb comes out, we'll give them a score. In the suburbs with high scores, we actually look into. You always need to have on the ground knowledge, you need to know what you like and see and feel, as that’s a part of it. That part you can't remove, you can't completely rely on data. 

(10:58) So if you look at some of the companies out there who only produce data like results, predictions based on only looking at the data, you can often see that they leave a lot out, for example, if an area is going through a massive change by massive population growth, one of the things you'll see is that new developments or estates will come through. 

(11:29) And you might be forgiven for thinking what the median price point might look like when it's come out a lot, but what is happening is, a lot of the new sales are actually new properties, whereas sales which happened a few years ago are the older properties. So it's not comparing apples to apples.

(11:51) Yeah. And that also skews the property prices too, in that particular seller.

Lianna Pan:  

(11:55) Yeah. You’re thinking, ‘Wow, that that area has gone through massive growth’. But if you look into it, you might flag that area, and if you look into it, you realise, ‘Well, actually the mix of properties that gets sold all the time is actually different’. So just to give you a simple example. So there’s a lot of data cleaning, you can do. But with this type of data like this, it's very hard to clean up that.

Coming up after the break, Pan shares her exciting predictions for the property market.

(13:17) I'll go so far as saying that the boom is happening, like it's starting now. 

We discuss the positive impact of setting goals.

(29:15) The goal was a number that we set, and we thought that it's like a big, big, big goal. And at the time we set it we kind of thought, ‘Oh, my God, that's such a huge number’.

Pan lets us in on the advice she should have followed in hindsight.

(27:26) And I talk to investors all the time. And I've never met an investor that told me I wish I started later in life.

And that’s right after the break! I’m Tyrone Shum and you’re listening to Property Investory.

Being equipped with so much knowledge around data is incredibly progressive for Pan. I ask her what the data is suggesting about the market around this time, with the current pandemic still in play. 

(13:17) I'll go so far as saying that the boom is happening, like it's starting now. So one part of our prediction methodology, which we call the Four Pillars of Prediction, one of the pillars is in fact studying external events that have profound impact on the market. So things like economic shocks or pandemics, a perfect example of that, and studying how that affects the market. So certain factors that have happened in the past, if it's happening again, the same thing will happen again, and that is exactly what's happening. 

(13:59) So, during the GFC, what happened after the GFC is the government injected a lot of stimulus into the economy, and there was a lot of direct stimulus for the housing industry. So for example, they doubled the first homebuyers grant, an increase in grants to encourage people to buy brand new properties, therefore, stimulating the construction industry. 

(14:20) They fast tracked a lot of infrastructure projects. Doesn't that sound familiar to you? It's happening now. You know, they're listening. They're lending in the last few months, right? And we just got the budget two days ago, which is very, very exciting, because they've introduced more text cards. They've introduced an initiative to create more jobs. And they fast forward a whole bunch of infrastructure projects, as well. 

(14:48) And what is different this time is the scale of the stimulus. So back in 2008, the government spent about $10 billion and so far, this government has spent about $500 billion. It literally dwarfs what was happening in 2008. So can you imagine the magnitude of this boom? Yeah, anything I think the same thing is going to happen is just the scale for this time around is going to be bigger than the last time.

(15:20) And it sounds like they're trying to move it quickly, because there's still a lot of fear around the coronavirus pandemic that's still happening around people still staying at home. So I guess there's more and more people wanting to get their own property, you know, living somewhere that's stable.

(15:36) Yeah, absolutely. There's always a fear for times like these. People often lose faith in assets that are liquid, just because it can change so much like from the beginning of this year to the onset of the pandemic, for example, property market loss 30-40%, in a period of two or three weeks. And the same thing happened during the GFC. 

(16:00) During the GFC, the fair share market fell by 55%. And yet, around the same time, the property market fell across Australia only by 5%. So it's so much more stable and resilient against any economic shocks. So whenever economic shock happens, people lose facing the share market and take their money out, they want to invest it in safer assets. 

(16:24) And so, you know, if you are looking at superannuation, for example, it's quite an interesting area, people always transition phone shares to brick and mortar at times of crisis like this. And, you know, you can't blame them for doing that. Because imagine you're trying to retire in 2008. And suddenly, half of your retirement fund was gone.

(16:48) That’s the scary thing. Yeah, so that's why the people flocked to or moved into secure assets, such as physical assets like property, which is very, very common.

(16:57) Yeah, they also got an interest rate down to the lowest it's ever been historically. So it's never been cheaper to borrow money. You also got like, government's just relaxing the lending policies again. And again, then as we just put out an announcement, on my birthday 24th of September, they announced that they're going to simplify a whole set of rules to make lending easier with the implications, the borrowing capacity for everybody will increase. 

(17:27) And the whole finance process will be a lot faster. And so that will just encourage even more people to do it, so they can afford to buy more now they can encourage more people into the property market. And they are the first ones to get the Home Builders Grant. 

(17:44) And you've also got so many other incentives for first time buyers coming in. So like, for the first home buyer right now, it's never been a better time, because they get so much. We did the math across all cities and states, just to see how much the level of incentives they can get from each of the federal government, state government, and so forth. And it adds up to about $80,000-$100,000 of incentives that they can get to buy their first property. 

(18:20) How hard is it to save that much money for a first time buyer? Way too hard. All of a sudden, like before, you might have so many people who can afford to buy their first property, now all of a sudden, the floodgates open. So that's already happening the past couple months.

(18:36) Actually, yeah, I've spoken to a lot of buyers' agents, and they've said exactly the same thing. A lot of people going to open homes and buying property are mostly first time buyers. So we're starting to see a huge uplift and drive for that. It's fascinating. 

Pan and I move on from discussing the market to discussing her current motivations. Having achieved financial freedom, and having seen her parents retire comfortably, she has done what she initially set out to do. So what now? What is her ‘why’ moving forward? 

(19:13) My why is a couple of reasons. One, I am a nerd. So I love data. And the data actually that I'm working with now, building a research team and just getting a deeper, deeper understanding of how to build you know, this perfect model that actually has real applications in life. 

(19:35) So that in itself is an extremely rewarding experience. There's nothing as satisfying as seeing your predictions coming true. Time and time again and really helping, not just me personally, but now members of the freedom community as well. 

(19:54) Now, I guess that brings us to the second part of it, which is that we want to help as many people as we can to achieve the same outcomes that we have been able to achieve for myself, my business partner, Scott Kuru, and all the members of the Freedom community. And also Alfred and the team, which is over 70 people strong today, all of these people are actually interested in building their own portfolio for following this same strategy. 

(20:23) So you kind of feel responsible and that's why you work extra hard, because you want to put your family and friends and then our team members savings into these properties, you want to make sure that you do the absolute best you can to make sure you pick the right properties. So that is driving us. And our mission with freedom is to help 10,000 families or individuals to achieve their own financial freedom in the next 5-10 years. 

(20:59) So that's been our big mission. I mean, after I quit my actual job, I did actually go travelling and go overseas and did the whole, you know, lifestyle thing, doing nothing, basically doing nothing. And it got boring pretty quickly.

(21:17) That’s what I hear a lot. So people when they say they've achieved financial freedom, it's more than life, you know, and they find something that's going to be purposeful. And that's what it sounds like you found your purpose now is to help others and achieve that. How far off are you from achieving the goal that you've set or the vision that you and your company set?

(21:36) We've got about 2000 members now in our community, which is growing, and it's growing really fast, even during the midst of Covid. And I think a lot of people are waking up, they understand that they have to take what the media is saying with a big grain of salt. And this is waking up to the fact that it is now a great opportunity window. 

(22:00) So that's why we're getting record numbers of members joining us which is, you know, amazing, because the bigger our community, the bigger and stronger our negotiation power is. So yeah, we're about 2000 members strong, and we'd be absolutely confident that we can grow this membership to about 10,000. 

(22:22) And helping them achieve. We'd like to be able to have that member going through the whole investment journey with us and to the point where they have achieved their financial freedom, you know, that whole journey will be incredibly gratifying for us.

(22:40) And, you know, especially when you join a community like yours, and implement action and get results, you know, it's a no brainer, you know, to be able to be part of something like that, especially if you surround yourself with the right mindset, because that's the hardest thing is finding the right community to be part of, and learning from them. And to have great mentors like yourself as well to be able to support and coach them through that process. 

(23:01) Yeah, I've definitely benefited from mentoring and coaching in my time. And also, I continue to have looked to mentors and coaches as well. And just that's incredibly important, because they help you. The biggest help they give is mindset. It’s actually just making sure that, for example, when you are in a state of fear, you can make good decisions. 

(23:29) And they can pull you out of that and they can point it out to you. So mindset is actually incredibly important. And that's actually what I spend, like I say every everybody should spend most of their time working on that mindset. And it's never ending. It's a never ending journey.

While on the subject, Pan shares her biggest motivators and inspirations who have helped her succeed in her personal journey. 

(23:59) One of my biggest mentors that I've been listening to and following for many, many years now, is Tony Robbins. And I probably first looked at his material back in 2007 [or] 2008, as it was just when I was starting this journey, and that whole personal development space, it's just been a journey that I've embarked on more and more. 

(24:22) So I've been through all of his programmes with all of his books. And it's been incredibly helpful, because he can put it in terms of making yourself incredibly aware of some of the things that you're doing to yourself that you may not be consciously aware of. You know, they're driven by fear. They're not driven by anything logical and also one of the habits that I got into doing is setting yourself a goal. 

(24:56) So at least once a year, you set like a vision board with goals for different aspects of your life, and visualise that as much as you possibly read on a regular basis. So that was something that I really stuck on doing, and wouldn't have picked it up if I didn't come across mentors like Tony. And it's amazing what you do. You focus on the universe and manage to bring it to you. 

(25:29) So you know, the more you focus on one thing, and this is a goal that I set for myself, it was completely non negotiable. The goal that I set for myself when I was 20, was that I wanted to retire from my career by the age of 30, having managed to find a way to build a passive income for myself and my family. And I achieved that, because I really focused on it and I was telling everybody about it. 

(25:57) And it was very funny because I was talking to someone, one of my old colleagues and he said, ‘Lianna, do you remember that you were telling us about it? Telling me about it?’ That point in time, I just imagine some people would just say, ‘Well, good luck to you’. But by speaking it out loud, it's like you're committing, you're holding yourself accountable.

Knowing everything that she does now, what would Pan say to her younger self if she could go back to 10 years ago? 

(27:03) If I met myself 10 years ago, I would have probably just said, you know, take action, take more action, you know, don't procrastinate. And, like, it's a very interesting thing. I talk to investors all the time. And I'll say the same thing to myself, start earlier, if I could sign this thing earlier, if I could... And I talk to investors all the time. And I've never met an investor that told me I wish I started later in life.

(27:34) Everyone says I wish I had started earlier. I wish I didn't sell that property. I wish I could hold on to whatever, whatever that may be, or I wish I had a mentor earlier in my life. You know. So if I went back 10 years ago, I would have said those things. Yeah, absolutely.

(27:50) It's hindsight, we always reflect back and go, you know, wish we could change that because you don't know what you don't know, until you reach the point and destination. I guess I'm looking forward to five years. What are you most excited about in your journey? And I think you've kind of covered it, but I thought I'd still ask that question as well, unless it's any different to what you've talked about.

Lianna Pan: 

(28:10) That mission, which is the freedom mission, my business partner and our entire freedom team’s mission is to help. You know, we have amazing, incredibly amazing property coaches and strategists in our team today that have achieved, you know, incredible results for themselves, but who are also huge on helping others do the same. 

(28:36) So our mission, our team mission is actually to be able to bring that to fruition. If we can help 10,000 people or more, you know, to be on that journey to achieve their financial freedom, and to see that happen, you know, that transformation, and just asking them to pay that forward, as well. Imagine what a difference it could make. So that's been our biggest, huge goal and we’ve been incredibly happy already being on this journey.

(29:08) It gives your life so much more purpose. How did you come up with the number 10,000 by the way?

(29:15) The goal was a number that we set, and we thought that it's like a big, big, big goal. And at the time we set it we kind of thought, ‘Oh, my God, that's such a huge number’. But you know, without having set those huge goals for yourself, things don't happen. And it's amazing when you do that, you know, a lot of things, a lot of opportunities you're not seeing before you're opening your eyes toward it.

Tyrone Shum: 

So how much of Pan’s success is due to skill, intelligence and hard work, and how much of it is based on luck?

(30:00) I think I really like this saying, actually. This comes from Tony Robbins, and it’s that the more you focus on something, the more you work at it, and the harder you work, the luckier you get. And that goes back to the same thing you know, the more you hone in on something, the more your eyes will be open to things that you just never knew, your mind would have just overlooked before.

(30:26) A perfect example is like, if you go out and buy a car, and from the very next day, you suddenly notice that a lot of people are driving the same car and notice every car that is your car, right? If you haven't, if you are not aware of it in the first place, then you wouldn't be looking for it.

Thank you to Lianna Pan, our guest on this episode of Property Investory. 

If you want to hear more about her journey and get a copy of the episode guide on the website, head over to PropertyInvestory.com/guide.

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Just head over to PropertyInvestory.com/guide and download it today.