Timestamps:
00:14 | Hot Deals Can’t Be Left to Cool
03:47 | Waterfront Markets Aren’t Wishy-Washy
06:12 | The Demographics Make the Difference
09:46 | A $30,000 Saving
17:35 | Simplify Your Research
21:43 | What? How? Why?
25:05 | Cutting the Noise
26:35 | There Are No Property Doctors

Resources and Links:

[00:09:13] So again, I'm pretty much around the same position. I still hold two houses. But on those two blocks, where someone bought an older house and now they need to demolish and redevelop, I still can continue for another 10 to 15 years by just doing minor modifications or renovations.

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 Ashish Malhotra, IT guru turned property enthusiast by passion and profession. He steers us through the locations he prefers to buy in, which are slightly different to the hustle and bustle of India! He also shares a tip to help you save up to $30,000 on your next purchase.

If there’s a deal to be done, you can be sure Malhotra is hot on its heels.

Ashish Malhotra:   

[00:00:14] I was doing property as a side gig since 2017. And why? Because I was seeing so many deals, and I couldn't grab every deal. And I didn't want the deals to go away. Or just be left alone. I started telling my friends and family, 'Look here, you can buy something for $360,000, make $30,000 [or] $40,000 from day one.' The rentals were around $330 [or] $340. So they were getting their 5% yields too. The areas were growing, and people started buying one after the other. 

[00:00:48] And in 2019 and 2020, I started seeing a lot of distressed sales. So I'm talking mainly Victoria at the moment. That's where I started my journey from and that's while I was staying in NSW, which was a bit costly. I've done few purchases in NSW but I was doing it as a side gig, and my major focus was Victoria. So I found an opportunity for a client cum friend of mine. He was contracting, single earner, no family. I thought it would have been the best. I found a lot distressed at that time. 

[00:01:24] Someone booked this property back in 2018, March 2018. That's when I started targeting that Bellarine Peninsula as an area. Now, in 2020, February, someone wanted to sell the land at the same price. So in Victoria, you can sell it before the titles and just not pay stamp duty as well, because you've not made anything on it. So this lady, she wanted to sell the land, and I offered it to client of mine. It was a 322 square metre block for $470,000. The market value was around $220,000. 

 

[00:02:03] I was amazed to see this deal. And I told her, 'Look, it's 400 metres to the jetty. I think you're making $50,000. 30% on the land alone.' And there was further money to be made after the building, just by adding the right product to it. Just when she had to sign, she got cold feet and she backed out. And I was talking to my wife and I said, 'I don't think we should let this deal go.' So this was my number five. 

 

[00:02:33] So, aha moment, now I'll tell you the aha moment which is on the market. So I bought the land for $170,000. I got the evaluation from NAB for $210,000. And I borrowed 90% of it. So the bank also paid me for the stamp duty on the land. On top, no money down. I did construction. I think my end costing I bumped up the specs in the construction because it's a coastal area. I finished everything for $420,000 including interest and all of the costs, maybe $450,000. So hardly $450,000. It's on the market for $650,000 to $670,000. Now, that's my aha moment.

Tyrone Shum:   

[00:03:16] That is phenomenal. So literally no money down, when you think about it. And you made that much. And are you holding that property now for long term and you've got a tenant in there?

Ashish Malhotra:   

[00:03:25] It's brand new. I'm just getting the landscaping done, just bumping up the specs and landscaping. The agent thinks I should be able to get around $650,000 to $670,000 on it. I think I'll sell it and just take some money out now, I think, and put it somewhere.

Tyrone Shum:   

[00:03:44] Yeah, because of the market being so hot as it is now.

Ashish Malhotra:   

[00:03:47] But then again, Tyrone, I think what we need to see is— even now if I have to rent it, it will rent out for $440 a week. So it still is five and a half percent deal if I want to hold. And this is an awesome buy and hold. You don't get to buy near water. It's crazy.

Tyrone Shum:   

[00:04:06] It is. For that kind of price. Whereabouts is this in Victoria? 

Ashish Malhotra:   

[00:04:12] There are two peninsulas, the Bellarine Peninsula and Mornington Peninsula. Just across Mornington is Bellerine. And I've gotten so many clients and friends in there who've made more than $200,000. About five or five six of them that made $200,000 between 2018 and now. 

 

[00:04:47] These suburbs are Curlewis, Drysdale... Ocean Grove was one of the premium suburbs in that market, and you could have just made $250,000 [or] $300,000 by buying in those premium areas. The same has happened to Central Coast here, right? So you can be in those lakeside suburbs, go a bit further out in Central Coast. Markets have been, I think, very generous in last five [or] six years to every investor that have been there.

Tyrone Shum:  

Although the country is quickly embracing the work from home life, Malhotra isn’t as keen to head for the hills.

Ashish Malhotra:   

[00:05:44] And that's where I'm sometimes hesitant. So people are going three, four or five hours outside the main capital cities and buying there. Of course, everything's growing at this moment, it looks like we are in the middle of a national boom, which happened around 15 [or] 20 years back last. But once these areas will grow by 15 [or] 20%, and I'm thinking: then what?

Tyrone Shum:   

[00:06:08] Usually when things go up, things have to come back down.

Ashish Malhotra:   

[00:06:12] Exactly. So what goes up comes down. So yeah, I think that's why as an investor, and even as advisors, I like to stick in the surrounds of capital cities. And that's why I pretty much take the entire chunk of state and I start to research where the rentals are more. How the demographics are different. Because the demographics make a lot of difference between the rental that you get, and within the value that you get in a suburb.

Tyrone Shum:  

He delves into how he ended up on the path that leads to development, rather than the fully-paved streets of established properties.

Ashish Malhotra:   

[00:07:11] I have a bit of a different thought here. And I strongly believe, again, no right or wrong, different strategies work in different ways for people. And I've found getting a small lot and getting a decent house on it might work wonders. Because when people buy bigger lots for subdivisions, they're not doing subdivisions immediately, right? As a developer, if you have to do everything in a year or year and a half, take your money, run away. That's what development is. 

  

[00:07:48] But what, as individual investors, people do is everyone thinks the land will grow in value. Yes, definitely. But between buying a 400 square metre lot and 600 square metre lot in some markets there's a difference of $30,000 to $50,000. So if we assume that at 6% growth rate or 7% growth rate, market will double in 10 to 12 years time, that additional $50,000 might be just $100,000. Because you're still getting double in value. 

  

[00:08:19] Rather than spending that $50,000 in additional land, you hold on to it. You save your borrowing, you don't pay additional, you don't pay holding costs, you pay less land taxes, and you have capitalised between the asset that you're putting on that lot. And by not overcapitalising on that lot. 

  

[00:08:39] And we have seen, being Sydneysiders, the smaller the lot, the costlier per square metre it is. So in holding, then, when you subdivide or you develop at the end of 10 years, you pay for demolition, you pay for subdivisions, you pay for clearing the lands. If there's major slope you pay in site costs, and then you build two houses. If that would have been this scenario, I would rather buy one house now and another in three to four years time with the money that I've saved. 

  

[00:09:13] So again, I'm pretty much around the same position. I still hold two houses. But on those two blocks, where someone bought an older house and now they need to demolish and redevelop, I still can continue for another 10 to 15 years by just doing minor modifications or renovations.

Tyrone Shum:  

His philosophy is: why spend on a house with a shorter lifespan when you could build a fresh one?

Ashish Malhotra:   

[00:09:46] A lot of people confuse it with house and land packages. I do not advertise that, neither I sell that nor I recommend that. I'm simply saying you buy a piece of land. You put the best asset on it in the most reasonable way possible. Just by doing that, you can save $25,000 to $30,000 at any day in any market. Now, when you're looking at $350,000 to $400,000 houses, this turns out to be 5% [or] 6% savings. Can you otherwise buy from the market under value 5% [or] 6%? It's really difficult in tighter markets. 

  

[00:10:30] And I can give examples with numbers with a current deal in the same street that I'm looking at for two different types of investors. So, one investor in SM, who wants to buy an SMSF. I know they cannot redevelop. I know they cannot do renovations because the SMSF doesn't support that. Again, I'm not a licensed advisor, they have to go to an SMSF, a licensed advisor. But I know based on my experience. So a 350 square metre lot, a brand new home, is available for $420,000. Renting out for $400 a week. 

  

[00:11:10] Continue as long as possible for next 30 [to] 35 years. Now I'm talking about growth, market style, and so on. When I say growth markets, everything takes supply side, demand side, and affordability side. Alternatively, in the same street, it's a 650 square metre block, a 1970s built house, still well managed and maintained, and you are buying the same similar property for $332,000. With a house on it. Subdividable blocks. The same street also has a subdivision. 

Tyrone Shum:
To Malhotra, both products are equal.

 

[00:11:45] You need to work out if you assume, or as an investor I assume, both the lands will double in value in 10 years time. In one asset, I've paid more on the quality of the house that is built, and I can sustain it longer. 

  

[00:12:08] Alternatively, in the other one, I have paid more on the land, because eventually I want to develop. But even that is not costing you to hold because this $330,000 property will rent out for $340 a week. But if you bought under SMSF, what will you do then? You have to sell it. And then you have to cover the costs and all of those because you can't do developments under that. 

 

[00:12:28] So maybe to an individual investor that might make sense. But then you need to have a risk appetite of buying an older house, because often there could be some expenses that might be levied on you. So can you invest that time? Even if you have six properties, you're not working, everything's paid out, you're still spending three [or] four hours a week. That's how the four hour workweek came into being, right? So, with work, how much time can you spend? What type of investor are you? Young family? Maybe spending time with tenants and with properties might not suit you. Are you a high net worth investor? If you're getting $300,000 [or] $400,000, why would you buy cheap assets? You buy quality homes. So I think it's just there's no right or wrong. 

Tyrone Shum:  

We all know time is money— so how does time factor into his strategy?

Ashish Malhotra:   

[00:13:45] I just was approached by an investor friend of mine. He was really struggling looking at Marsden Park, Edmondson Park, buying those small 270 [or] 280 square metre lots, even 240, getting sold for $750,000 to $780,000. 

Tyrone Shum:   

[00:13:59] Yep, very expensive right now. It's crazy. 

Ashish Malhotra:   

[00:14:02] He came to me. He said, 'I just want growth in next five, six years. And I just want to move out.' So this is 2019, early 2019. And I had to ask him, like, 'Are you planning to stay in the home? Then definitely, you should have a decent home.' He said 'No, I would still like to stay somewhere around Parramatta.' And I just gave him an option, Tyrone. And, see, we bought land. We paid 10% on it. We waited six months for the land to title. At that time, it was 240 and he paid $24,000 and just waited. 

  

[00:14:45] And again, this is one example which I was doing from my side gig. At this point I'm majorly targeting established. But established also you have a balance. By doing this we put a home on it for $240,000. And I've been building with the same builder. So it's pretty much like giving them the same builder. And if I'm charging a client, I don't keep anything anywhere anyway. So whatever costs $240,000, fully complete, 22 square [metre] home, $480,000 all done. 

[00:15:17] The cost that you have to factor in is, one, the stamp duty on the land, the second holding costs. And you can't delay things. You'll be out of pocket by nearly $5,000 [or] $10,000 [or] $15,000 by the time you realise you've lost nearly six weeks or four months. That's a rental loss as well. 

Coming up after the break, Malhotra shares his simplification technique...

[00:17:03] I'm really learning of these numbers. And that's why I love a KISS— don't get me wrong, it's 'Keep It Simple, Silly.' 

The chance encounter he had at an IT convention that led him to where he is today...

[00:22:09] And after the training, I just happened to talk to him. And I said, 'Would you care for a drink? I see you were on real estate all day. What are you doing?' And he said, 'Oh, I'm an investor, I hold XYZ properties.' 

He explains how he got into the mindset of a buyer’s agent.

[00:23:17] I've worked with my investor as well, and he also does pretty similar stuff. But I think then I had to just part ways because I wanted to act purely on behalf of the buyer. 

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

Tyrone Shum:
What drew him to this market was the low cost point, which covered the expenses.

Ashish Malhotra:   

[00:15:50] Whatever you're paying on a brand new home is covered. If someone has built it, you are paying not $480,000 but $550,000 for it. But he's recently sold that property. And I just got a thank you gift. So he sold it for $675,000. 

Tyrone Shum:   

[00:16:09] He must be happy with that! 

Ashish Malhotra:   

[00:16:11] Yes, yes. And now same property, Five Dock, I can still get the land for $300,000. I have to wait for a year for the land to title. And I'll spend another $270,000 to $280,000 in this market for new build. But new build is a struggle if you go into it. It's not anyone's appetite at this moment, looking at the way things are going. 

  

[00:16:34] But having said that, you can still build that property for $580,000. Would you do that for $90,000 from day one? Which covers your first time costs? That's the question. So not just that, this brand new property, which you're building for $570,000 [or] $580,000, it'll rent out for $500 a week. So four and a half percent yield on a brand new property with 10 [or] 12% equity. 

[00:17:03] I'm really learning of these numbers. And that's why I love a KISS— don't get me wrong, it's 'Keep It Simple, Silly.' So even if you are looking at two assets, you work out the way what the market will cost you in subdividing. So if it is costing you $450,000 [or] $460,000 now and you can buy next door house brand new and half the size lot for $420,000, I think that there is a bit of savings there. 

[00:17:35] And when you see the growth, it has to be differential. You pay for the quality of the house, you pay for the age of the house and the footprint of the house. And you pay for the type of land and the location that you hold. And that's where the valuation techniques comes in. Because that's where a successful valuabler— when I'm doing valuations, I do not look at CoreLogic, I do not look at any other website, I just look at sold properties, and what's currently on the market. What's asking and what's being sold.

[00:18:31] Even in growing markets, between when the property actually gets sold, and it's listed as sold there's a gap of three to five weeks. The markets may run here and there between that time also.

Tyrone Shum:  

Initially he started so he could generate a decent income, but that income has now supported him to follow his passion.

Ashish Malhotra:   

[00:19:31] This passion will fuel my financial freedom and passive income strategy. That's what I'm teaching and that's where the mindset comes in. I read a lot of books. I've read more books in Australia in last seven years than what I've read my entire life in India. So I now have memberships to Audible and all of that. Every five [to] 15 days, I'm completing a book. 

 

[00:20:02] So all in all, I think I am a big fan of Mr. Robert Kiyosaki. And my first book was Building Wealth Through Investment Properties by Jan Somers. And that's where I'm building finances, I'm building income streams, pretty much everything on investment principles, I've diligently followed everything. 

 

[00:20:26] My 'Why' is I'm able to give when I want to give, to whoever I want to give. So when I say giving, when I'm talking to people who are asking for donations of funds, and I have to support someone, I don't have to think twice about it. So I'm always available. I have to give a bit of a base or a cushion to my boys who are growing up, so then they can follow their passions from day one. And they don't have to get a midlife crisis, where they're changing jobs thinking, 'Oh, my passion as changed.' Which may, but I went into job because I wanted to earn, not because I was passionate about. So I want my boys to find a passion and follow the passion.

Tyrone Shum: 

He has a wealth of stories to share— this one involves a chance encounter with a stranger who ended up becoming his mentor.

Ashish Malhotra:   

[00:21:43] I was in an IT training, right? It's called it Information Technology, infrastructure library. And there was an investor besides me. I'm saying investor but someone not doing the training, searching on real estate. And out of my curiosity, I said, 'What is this guy doing?' And I was just thinking, what's the words he's searching and all that. 

[00:22:09] And after the training, I just happened to talk to him. And I said, 'Would you care for a drink? I see you were on real estate all day. What are you doing?' And he said, 'Oh, I'm an investor, I hold XYZ properties.' And I was amazed. Suddenly coming here, listening to someone who has a little over, I don't know, one and a half dozen properties. 

[00:22:33] And I said, 'What? How? Why?' And that's what my start was. So a bit of a direction is all that I needed. I was already pumped up. And that's how I started reading magazines. I follow blogs, forums. Sommerset is one if you've heard, I think that's thermocouples. And now it's improvised. It's bought by someone and now it runs by the name propertychat.com.au. I'm a very active poster. I'm a very active reader. And I've pretty much put my entire property journey there. 

  

[00:23:11] I'm a big believer of educating as well. What I know, and if people can get benefited, because that's how I've learnt. I've worked with my investor as well, and he also does pretty similar stuff. But I think then I had to just part ways because I wanted to act purely on behalf of the buyer. And if I'm taking money from someone else in this entire journey, I don't think I can tell them that I am purely thinking in your best interests. And that's when I felt— and this was again, coming from a mentor— he said, 'Ashish, if you want to act on behalf of a buyer, become a buyer's agent. There's no other way of doing it.' And that's how I got into the mind of becoming a buyer's agent. 

  

[00:24:00] But just to cut long story short, I'm very thankful, rather, grateful to him. For all the learnings that I've got, for the indications, for the small tips and tricks. And same concepts, all investment concepts are similar, read books, educate yourself. But yeah, I've taken three [or] four years to actually get into the right mindset.

Tyrone Shum:   

Rich Dad, Poor Dad has earnt itself the unofficial title of the investor’s Bible, but Malhotra has another Kiyosaki book to recommend.

Ashish Malhotra:   

[00:25:05] I definitely recommend some books there. And the blogs are always there. But you have to just cut the noise from the actual knowledge. So I think that's where books are pretty handy. You have to have that patience. 

  

[00:25:20] One is Barefoot Investor by Scott Pape. I really liked that book. And a book on finances, I would say, The Richest Man in Babylon. That's what sorts your finances, where you actually start to understand that investing is not important. Having what I already have, and saving it is also equally important. 

 

[00:25:47] And then Rich Dad, Poor Dad, again, a very common book, but I'd recommend the second book of the series, which is The Cashflow Quadrant, which is important for any business owner and investor. And then one book, again, which I read for properties, starting with the basics, or starting on average incomes, which is Building Wealth Through Investment Properties by Jan Somers.

Tyrone Shum:   

The best advice he’s received so far may sound a bit out of left field, but stick around— it all leads to property!

Ashish Malhotra:   

[00:26:35] I can relate it with when we were having our younger one. The gynecologist we were dealing with, she said, 'Don't listen to anyone else, because everyone who has a kid, or everyone who has a child thinks they're a doctor.' The same thing comes when it comes to property. Look, in last six [or] seven years, anyone who's bought one or two properties, of course they've done well. By all means. It's always a journey and a comfort. But then you end up taking advice from people who have that limited knowledge of not even fund strategy as a whole. I think you're not doing justice to your finances, or your risk appetite or your abilities. 

[00:27:21] So when it comes to advice, you minimise the noise and choose to listen to people who achieved what you want to achieve. And that is the only advice that I follow. Because the advice is free of cost, but it will come at a cost to someone who's taking it. So that's what I have diligently followed. And that's what I would definitely tell people. 

Tyrone Shum:   

[00:27:52] If you met yourself, say 10 years ago, what do you think you would have said to him?

Ashish Malhotra:   

[00:27:58] Get educated. Start early, start small, but be consistent, and persistent. So I might have been inconsistent sometimes, but I'm very persistent. I wake up early mornings— I sometimes wake up late, but I try to get up early! Because, again, coming from a book, I think it's an amazing time when you're early in the morning, you're doing a little bit of exercise. You have to give time to health as well, equally. I go for weekly runs. Two or three days, at least I get to do some exercise also. 

 

[00:28:33] But I think one is just being persistent in what you'd like. So again, it's something that I like really, right? So the consistency and persistency, they have to go hand in hand. So one defines your way of doing things and the other defines your attitude. And I think if I have to pick one, attitude, or persistence is more important. 

Tyrone Shum:   

[00:28:34] I agree. That's fantastic. Let's look forward to the future. What are you most excited about in your property journey in the next, say, five years? 

Ashish Malhotra:   

[00:29:12] I started keeping things simple. I think I'd love to explore some of the developments considering I'm now looking at development sites, feasibilities. I talk a lot of numbers. I'd like to do some sort of practical, hands-on as well. So I'm working on a deal whereby, which is a big deal. I took it with a couple of investors but I think it's still a bit off the plan sort of thing, but now in commercial warehousing. So I would look into moving into development. 

 

[00:29:47] On personal front and business front, I'd like to keep a consistent pace advising the investors on what the best strategy is suited based on their circumstances. If they should be buying commercials or residential, if they should be buying a home versus investment. A lot of people ask that. And I think I just like to keep myself abreast of all the changes that are happening, keep learning as an investor, and keep moving ahead.

Tyrone Shum:   

[00:30:15] I think that's wonderful, excellent. Ashish, you've achieved a lot in a short period of time. And you've built up and established a lot of great networks and connections. And you've got a fantastic mentor. How much of this success that you've achieved is due to your intelligence, hard work and skill? And how much of it do you think is because of luck?

Ashish Malhotra:   

[00:30:37] It's good you asked that. During my first three [or] four years, I kept telling everyone who I dealt with, 'I might have been lucky, I might have been lucky.' Then I was reading in a book, 'If it happens once it's luck. If you're consistently doing it, it's not luck.' And that's where it made me realise, definitely, I think I have that eye of spotting the deals, or differentiating one bit from the other. So I'd say about 80% to skill and hard work, maybe 20% luck. I cannot just ignore luck.

Thank you to Ashish Malhotra, our guest on this episode of Property Investory.