Property Investory
Ashish Malhotra - How to Use House Prices to Propel Your Portfolio to $3.5M
November 7, 2021
Ashish Malhotra is a buyer’s agent who arrived in Australia from India less than a decade ago. After landing here at the tail end of 2014, he bought his first Australian property sight unseen— and once his sights were set, he never looked back. With each investment performing better than the last, it’s safe to say Australia really is the lucky country.
In this episode Malhotra shares stories of growing up in his clean and green city near the Pakistan border, where his childhood was never boring. He delves into how he became an entrepreneur without even realising it— and how despite some embarrassments along the way, he learnt a lot of lessons on his metaphorical and physical journeys.

Timestamps:
02:29 | Just Popping Over to Pakistan
08:00 | The IT Crowd
10:08 | Ethical Earnings
12:36 | Seeking Stability
15:48 | Chasing the Work/Life Balance
19:57 | From $8,000 to $60,000
23:01 | I Never Forget a Number
29:45 | BYO Statistics

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

Resources and Links:

Transcript:

Ashish Malhotra:
[00:16:54] At times, we left early, we went late. And we were not even seeing our son. So that's where we took a call. Maybe if we move to a country elsewhere, we have that time to spend with the family. Maybe we get better working environment. So I started exploring, talking to my friends or the family who were in Australia. 
 
**INTRO MUSIC**
 
Tyrone Shum:
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 speaking with Ashish Malhotra, director of Auswide Buyers Agency. The world traveller and IT guru shares how he’s surpassed his earlier salary without sacrificing quality family time, and how he leapfrogs from property to property, increasing both his earnings and happiness in ways he never could have imagined.
 
**END INTRO MUSIC**
 
**START BACKGROUND MUSIC**

Tyrone Shum:  
Malhotra’s skill and passion for property allow him to spend his days doing what he loves: talking business, and spending time with his family.

Ashish Malhotra:   
[00:00:46] The days do get pretty long sometimes. But otherwise, just in normal day to day, I'm talking to people, advising on property, talking on deals, negotiating deals, looking at development sites. I'm researching on the next growth markets that I'd be targeting. Or I am pretty much all day on the phone with agents, building and pest inspectors, conveyancers. So I think I'm one of the lucky ones who can follow the passion. So for me property is everything and everything is property. And of course, after my family.
 
[00:01:31] I've got two boys, 10 and four, younger one's a bit cheeky! As I'm sure everyone's are. I love my family. I've been married for now almost 12 and a half years. 

Just Popping Over to Pakistan

Tyrone Shum:   
He grew up in a green and clean city in India, but there was definitely some excitement involved!

Ashish Malhotra:  
[00:02:29] I grew up in the city, which is in northern parts of India, just about three and a half hours' drive from the capital, Delhi. It's called Chandigarh. It's one of the most cleanest and greenest cities of India. But I've spent my entire life in Chandigarh. I was born in Punjab, a small town neighbouring the border, next to Pakistan border. And the town's name is Patti. Again, very small town, not everyone's aware. But that's where I was born. I remember we used to stay in army camps because my uncle was in army and we always went to the border to see how things are going. And he has to watch binoculars. I love my childhood.

Tyrone Shum:   
[00:03:22] Wow. That's really interesting. Fascinating. So when you're on site, army base, what kind of things would you say you were exposed to or saw?

Ashish Malhotra:   
[00:03:33] Some nights we could hear gunshots and we were asked not to go on the rooftops. Some nights, my uncle would take me to his base. And I think now, it's very formalised. You can go to the borders to view the ceremonies. So every evening they would open the gates and the soldiers would come from that side to this side. The soldiers would go from this side to that side and then perform a small ceremony of about an hour, hour and a half. So things have harmonised now, there's a lot of peace. But during those times, there were not such ceremonies. And we used to look into binoculars and we used to be very happy as kids. 'Oh, my God, look at people walking there on the other side!' Those are good memories.

[00:04:37] I did my schooling in Chandigarh, which is a very different city from the town I was born in. So Chandigarh, again, it's a very sophisticated city. It's a very small city as well. I think the whole population when I left was around 1 million of the city. From real estate perspective, it is also one of the costliest cities from traffic rules perspective. Again, it's one of the most strict cities across the northern parts. I did my entire schooling and college from the city. 
 
[00:05:18] The schooling was good. The schools, I used to go to a private school. So again, parents thought whatever they can give us [that is] the best. So I was in the school for around up to year seven or so, and then I left [and] moved on to other school. My year 11 and 12 I did in a college. And then finally I did my Bachelor's in another town adjoining, which was around one and a half hour drive from my place. But again, I've stayed my entire life in Chandigarh, and I still miss it.

Tyrone Shum:   
[00:05:52] That's amazing. And you mentioned a million people— that would not have been a small city! There's a lot of people!

Ashish Malhotra:  
[00:06:00] In India, it is considered as a small city.

Tyrone Shum:  
If you thought Sydney was crowded, try looking at it from Malhotra’s perspective. 

Ashish Malhotra:   
[00:06:38] That city, I loved it. It had that peaceful aspect, I could be from one end to the other, within half an hour. It wasn't that crowded. Now, things might be different. But I still liked it as compared to any other metropolitan city in India. We had to take a call whereby either we would have moved into metropolitan regions for the sake of being in better jobs or earning better wages. And I didn't want to do that. 

[00:07:14] Alternatively, we could have moved to some other country. And I chose the latter. For me moving outside the city, where I lived my entire life and moving outside the country sounded the same. But I think I've been a bit fortunate. I like Sydney from that aspect. Because Sydney is pretty similar. I don't feel it is crowded. I also don't like to go to crowded places, though. So I like my peaceful space.

The IT Crowd

Tyrone Shum:   
[00:08:00] So does that mean then you traveled from where you lived in the suburbs out to the city when you went to work and studies and all that? Or was it quite close to where you were?

Ashish Malhotra:   
[00:08:09] I was, again, very fortunate. I used to work in IT before moving into real estate. So the consultancy that I used to work with, they actually had a big office, and they were starting their first batch back in 2006. So it goes a bit far out. I've got about 15 [or] 16 years of corporate experience. So we were the first batch of students who were trained and recruited in the same campus. So it was a 30 acre campus. It wasn't small. 

[00:08:49] It had a shipbuilding. It was the first special economies zone, Economic Zone, where you get some special benefits in taxes and everything. But it was a building in the shape of a ship, two such buildings. And then you had a cafe, a food court. You had a dormitory of, like, nearly 300 rooms or something. And you had a swimming pool and tennis courts and whatnot. 

Tyrone Shum:   
[00:09:20] Wow. That's amazing. So this was actually a company that you actually went to work for as a consultant, an IT consultant? That's phenomenal. It's almost like living on a Google campus by the sounds of it.

Ashish Malhotra:   
[00:09:33] It's kind of, I'd say so! And I've gone to Mexico, I've gone to UK. And again, I came on a job here through the same company, so I'm fond of the company. When I left it was a heartbreak, pretty much, but you eventually have to move on.

Ethical Earnings

Tyrone Shum:  
He started bucking the trend from a young age, getting into the working world early. But that’s not to say it didn’t come with its embarrassing stories!

Ashish Malhotra:   
[00:10:08] In India, usually kids don't work until they actually get a job. So it's not the trend. I started working at a very early age. When I was in year nine or 10, or even year eight, for that matter, I started working in early, just to get a bit of pocket money. Again, you can just manage your own expenses at that age. And it's not a bad thing. 
 
[00:10:41] And once I had to stand with a banner in hand. And one of my neighbours saw me and I was really embarrassed. And I came home and I told my mother, I said, 'I'm really embarrassed because they saw me,' and my mum said, 'Why? Were you stealing something? Did they [catch] you stealing?' 'No, I was just standing like that.' She said, 'You're earning. You're earning by all ethical, and with all the hard work that you're putting in, you're doing nothing wrong.' 

[00:11:10] And that really boosted my morale when I was doing such jobs. And with that, this entrepreneurship was infused in a little bit because I started working these jobs. And then I started recruiting my friends into similar jobs. So by year 11 and 12, I think I had done a fair bit of jobs, I had got good contacts and networking. I'd built a good friends there. That's how I went up. And my parents have been a big inspiration to me, even my investment journey, which I'm sure we will cover in some time. But yes, my parents have been a big source of inspiration for me.

[00:12:18] Both my parents were working for the government. And, again, around that time, it was considered very good to be working for the government. You're in permanent jobs. You get pensions. So it was all about job security at that time.

Seeking Stability

Tyrone Shum:   
[00:12:36] And it still is, I mean, like, that's the thing. People want that. But with COVID and the way we work, now we can work from home, we still want that stability, working in some kind of job or business or whatever it is, which is really important.

Ashish Malhotra:   
[00:12:49] I think you do end up seeking stability. But eventually, if you go outside the comfort zone a bit, that's where sometimes the balance is. Between me and my wife we are very opposite. She's an IT developer. And similar experience [of] about 16 years [in] different technologies. She loves working what she does. And I'm sure what anyone else does in four [or] five hours she'll complete it within one and a half, two hours and just enjoy the rest of it. Every 4:30 she'll just come besides and she just lies down and says, 'I'm done for the day. What about you?' And I'm working my ass off!

Tyrone Shum:  
It was then that he realised he could pivot to a role he loved, rather than tolerated.

Ashish Malhotra:   
[00:13:48] And that's why when I started following property as a passion, again, it was a big decision, right? You're leaving a high paying IT corporate job. When I left I was in an IT management role. I was working for CBS and IT service manager. So work was okay. Again, sometimes you get along with people well, sometimes not. But I then thought, 'What am I doing here? I'm working two jobs almost the same time. If I can move into one definitely, I might get some time. But I think the work just follows me.' 
  
[00:14:24] So last six, seven months, I have replaced my income. I've surpassed my IT income. But I think now it's all about serving people the way they expect me to. And yeah, I think I am at a point where I'd be hiring now someone, and the job advertisement is on Seek so I'm also taking interviews on the side. But I think it's a good thing, if I'm able to generate that employment as well as I'm able to give time to my family and run the business, I think I'm very grateful for what I have got to now.

Chasing the Work/Life Balance

Tyrone Shum: 
Before coming to Australia, Malhotra did a three to four month stint in Mexico, and then landed in London in 2012.

Ashish Malhotra:   
[00:15:48] We were in London for about seven [or] eight months. Both me and my wife were working there. And we really liked it. Apart from the weather, everything else was good. My mum came and stayed with us. So pretty much we had our family there. 

[00:16:07] But after coming back, we thought the lifestyle is a bit different, right? You can focus on family, you have a better working environment, you have a better work life balance. So we were working late nights, we were working early mornings, we were dropping our son to daycare, running around here and there. In that busy life we saw there were opportunities where we could have devoted more time to family. 
  
[00:16:36] And say between 2012 and 2014 we started early mornings. One evening, one of us would go pick our son from school, drop to home— my mum was always home— came back, worked until eight or 9pm. And then we went back around 9:00 [or] 9:30. At times, we left early, we went late. And we were not even seeing our son. So that's where we took a call. Maybe if we move to a country elsewhere, we have that time to spend with the family. Maybe we get better working environment. 

[00:17:12] So I started exploring, talking to my friends or the family who were in Australia. Not family, but majorly friends— started exploring. I'm a bit of a DIY enthusiast. I do a bit of research before taking a decision just so we don't have to defend eventually. But I talked to my friends in Canada, I talked to my friends in Singapore and other locations and Australia. And finally we thought because of the weather and everything— and we had been in UK, I think Canada is pretty similar with respect to weather— we thought Australia is the country where we have to make a move. Provided we get the PR and everything. 

[00:17:48] Now I find the PR and I started telling my company that I'm getting a PR. If you have an opportunity, just send me there. And early 2014 is when they put me on to a different project, which was for Westpac. And when I came here, I was working for Westpac. And since then I've been working for the banks. 
 
[00:18:10] And then there's another story, right. So because I was working for the banks, I ended up doing my Certificate 4 in finance and mortgage broking, just to learn more on the finance sides, on the compliance sides, different regulatory bodies and industries. Which actually opened the doors for me to contract for other banks or move on to other banks also. So I think I just tried to... not try, but I actually hit the two targets with just maybe one sort of effort that I put in.

Tyrone Shum:   
[00:18:42] Wow, that's fantastic. So just to clarify, 2014, you got an opportunity to move into a different project which allowed you to be able to move to Australia, which was around about 2015. And you've settled in Australia since then?

Ashish Malhotra:   
[00:18:55] Yes. Second November 2014 is when I landed. 24th December is when my family landed. And 26 December I took them to a trip to Victoria.
 
[00:19:10] I remember everything.

Tyrone Shum:   
[00:19:13] That would have been the perfect Christmas present too, because it led up to Christmas right then, one month later?.

Ashish Malhotra:   
[00:19:17] They were actually tired. But I thought I'll plan a surprise trip without realising they would have some jetlag and all! But I think they eventually enjoyed it because they came into a new place. We suddenly went to Victoria. We're staying in hotels, again, a new thing, coming back to work in the same house. I think it was a bit of change, but it worked pretty well.

From $8,000 to $60,000

Tyrone Shum: 
After his years in the corporate space, he turned his thoughts and attention to property.

Ashish Malhotra:   
[00:19:57] My first investment was when I got my second job. So I was earning decent money, no expenses, we don't party that hard in India! So can't see to where I can spend the money. I did buy a bike for myself. But apart from that, I think my mum bought our first investment opportunity to us, which was, again from the understanding standpoint, right, we were priced out of the city we were staying in. We had to spend about $60,000 [or] $70,000 if we had to buy something there, and it was outside pretty much our capacity. I think I was earning, like, $16,000. Actually, I was earning around $8,000 a year. 
 
[00:20:48] So she got an opportunity, and I loved it. It was right at joining the city we were living in, but on to some other state. We could buy something for, like, $7,000. And I thought that's an amazing price. And then she brought up, 'I like this, and I like this and which one do you like?' And being an earner, I think I was given that opportunity to make a decision for which I'm really grateful to my family. And the same with my sister, I think she's been given equal opportunities. So I picked one and saying we should not buy that one. We should buy this one for $8,000, not that one for $7,000. She said, 'Why?' I said, 'That doesn't look nice.' 

[00:21:50] I just thought this was better placed, wider road. So that's what I thought. That was a more, like, a congested corner. But yes, now in this market, that is valued around $60,000. So that we bought in 2008 or 2009. So that's in India, you get decent growth. But when you see the rentals, that's 1%. Then I invested in other land or lot interstate after our marriage back in 2012. I must say, not necessarily turned well. I also bought a commercial in India, again, didn't turn well. But these were a lot of learnings. When I came here, I really thought I had to invest in educating myself. And so pretty much first investment in India was very different. And in Australia, my first investment I had bought sight unseen.

Tyrone Shum:   
[00:22:56] Oh, okay, I'm liking this story!

I Never Forget a Number

Ashish Malhotra:  
[00:23:01] But I met a really good mentor. And I've worked with him a while as well. So he gave me a few tips and tricks. For one year, or at least for first six months, I was reading every month, day, morning and night, waking up early mornings, to magazines, Australian Property Investor and Your Investment Property. So every single month, I was spending money, buying these magazines, reading these and finishing this month on, month off for six months. And I was learning and I was talking to people and I was networking with like minded investors. 

[00:23:43] And I bought my site unseen, but I could see the area, why it was trending. It was an extension of a suburb. And I was buying land for like $160,000 but this again, why I bought there— when I came [in] 2014 all my friends were buying properties in The Ponds. They were buying in Quakers Hill, Schofields and spending $550,000 to about $650,000.

[00:24:29] Actually, I'll tell you the product. 300 square metre corner block, 18 and a half square three bedroom double storey home on it. I don't forget the numbers! But again, I was not a high income earner at that point. I had migrated and I wasn't comfortable on a single income spending that much. So it was costly then, it's costlier now. I'll be honest. 

[00:24:56] So what I did was started I talking to my friends. That's what you do initially. But I've eventually learnt, my friends were actually advising me against what I actually did. And I think, again, it's good that I did, because I did based on knowledge and education. So I always tell my clients, 'You listen to your friends, but they are advising you based on what they are aware of.' 
 
[00:25:28] If someone is staying in Sydney, they can tell you you buy in Quakers Hill and you buy in maybe Penrith, or you buy in Greystanes or whatever suburbs you want to be based at. But they might put a high income earner hat on. They might think themselves in the shoes of people who are staying there, which is not right. So this investor mentor of mine, he always tells me, 'You put yourselves in the shoes of people who are actually living there. What they are earning, what they can afford. And then you see the type of demographics that you're looking at.' And I've been basing my decisions based on that. But just long story short, that first investment, $360,000 is what I spent there. It's today it's renting out for $510 a week and the market valuation's about $580,000. And it's just been, what, six years now. And every single investment of mine has done better than the previous one.

Tyrone Shum: 
[00:26:25] That's fantastic.

Ashish Malhotra:  
[00:26:27] Yes, learn a bit of learnings. But I think it's all good if you're making the decisions based on education. Or if at least you can have a mentor or a guide who can then tell you what to do, what not and why not.

Tyrone Shum:  
At this point, he had four properties fully built and rented out, and one property on the market.

Ashish Malhotra:   
[00:27:09] I'm planning to sell it to take some money out now. So I'm consolidating the debts of it. And I've got a sixth one which is currently being built. I've got a seventh lot that I've just bought, just four months back, and I'm looking at a commercial deal as well. And that's another reason of consolidation. I'm now looking to develop a commercial warehouse project. But again, it's still in discussions, it's been three months now. 

[00:27:35] But excluding the last, the commercial one and the seventh lot, the first six months, pretty much my portfolio would be around $3.5 million, with about $2 million debt on it. And I've hardly paid anything because I have been using valuations. And I've been able to settle some properties with just $30,000 or $40,000 in hand. So that's the thing. That's why the debts are a bit high, because I've hardly added any money. And I've been using my money again into different asset classes and all other places as well. But that's pretty much what my journey is. 

[00:28:16] Currently, with all the four rented out, I'm getting nearly $1,700 a week in rent. And I think even if I hold all six, I'd be in a position where I'd be getting $2,600 a week in rent. That's because I've been keeping yields into consideration, I've been ensuring that I add value in one form or the other. So there is a difference of at least 10 to 15% between my price and the market price. 

Tyrone Shum:   
[00:28:44] So you've been buying on the market value, using the valuations to be able to leapfrog to the next property, which is great.

Ashish Malhotra:   
[00:28:50] Exactly. And that's why many people ask me, 'How have you been able to borrow so much?' And before I left my job, and now my wife's also working right, so your situation improves with time. But then I have put a check mark on yields, on valuations. And that's why I think before I left, I could have borrowed $400,000 [or] $500,000 more.

BYO Statistics

Tyrone Shum:   
Malhotra’s darkest investing moment happened during his time in India, where market statistics are scarce.

Ashish Malhotra:  
[00:29:45] I always am thinking, 'What have I done wrong here?' So I think the only one learning I've got from one... again, maybe sort of not thinking in the right way is sometimes the demographics that are buying the property in an area are entirely different with the demographics that are renting in that area. But from India perspective, I've bought a commercial property where I have bought nearly $70,000, and the developer had gone bankrupt. Now, checks wise, I saw the area was growing. One thing that I wasn't aware of the supply side in India, you don't get statistics. Australian investors are really lucky to get so many insights on the markets to make that decision. In India— intuition. And your friends are the best source of information.
 
[00:30:54] Trust property developers, property dealers, but I ticked pretty much all the tech checkboxes. The developers was actually very good developer, this commercial property had some assured returns, which now I'll rethink if someone gives me! But I invested based on that. There was no commercial property in the surrounds. The markets were booming. And I don't know for what, it could have been a peak. I bought bought back in 2011 [or] 2012. And then it's just stagnant till then. So the money's still stuck. There's no way out because the developer has gone bankrupt. I think that's where one of the learning is off the plan. Got the learning of it early. 
 
[00:31:42] The other one, me and my wife, we did our first investment interstate about 12 hours from the city we were living in. And we bought in outskirts. Again, I thought because there was another special economic zone being developed there. Some companies had already moved, there were a lot of companies that were moving. What I didn't realise was I was comparing it with my city, Chandigarh, but the areas were quite vastly different. The population per square metre ratios were vastly different. And now while that property has grown— I think we bought it for about $22,000— If I want to sell now I can sell it for $50,000. It's not that big profit, considering I've had it since 2012. But it's still okay. But it's tough because it's on the market for last three [or] four months now. And I haven't got a buyer. So yeah, that's two of my learnings. Just be careful where you're investing.

Tyrone Shum:  
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.

Waterfront Markets Aren’t Wishy-Washy

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.

The Demographics Make the Difference

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.

A $30,000 Saving

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.
 
Ashish Malhotra:
[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. 

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. 

Simplify Your Research

[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.

What? How? Why?

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.

Cutting the Noise

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.

There Are No Property Doctors

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.

**OUTRO**

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