In this episode, Kao will explain how he bounced back from being afraid and $1,000,000 in debt, to having an impressive portfolio of seven properties! As well as this, learn about the importance of understanding equity and the power that comes alongside it, and much more!

Timestamps:
0:55 | The Daily Grind
4:14 | Feeling Out Of Place
8:24 | Childhood Hobbies
10:37 | Beginning of a Business
14:55 | Climbing the Corporate Ladder
18:58 | Watch and Learn
23:03 | Hitting Roadblocks
27:30 | Understanding Equity

Resources and Links:

[6:38] One of the best aha moments was understanding equity and that power of it.

 

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 the founder and director of JD Capital, Jyh Kao. Kao will delve into feeling out of place while growing up, and how this led to a passion for property. As well as this, learn how Kao bounced back from being afraid of having $1,000,000 in debt, to having an impressive portfolio of seven properties!

 

 

Kao is an avid property investor and is passionate about anything related to property. To follow this passion, he founded his own mortgage brokering company.

 

[1:05] JD Capital is a mortgage brokerage company that's focused on investment lending, and I started this just over a year ago. I was quite inspired by a mentor of mine. So, some of you might have listened to a previous podcast with Michael sharp. So, he's been a really big inspiration for me and I kind of took that pathway down, deciding to leave corporate and get into property.

 

[1:29] And I just was kind of stuck at one point deciding what I wanted to do[with] my career. And I always thought, initially, I wanted to climb the corporate ladder and I remember I was very, very driven. And I always wanted to kind of focus on personal development, and I guess throughout the years of working in corporate, I kind of realized it's not really something that I wanted to do longer term — like just keep climbing ladder. Because you end up working more and more hours, but not necessarily on things that you're passionate about, and [you're] not necessarily able to control a lot of things working in such a large organization.

 

[2:04] So, I guess it was about two to three years ago, just before COVID, I kind of got to a point where I just felt really stuck in my career. But alongside, I've always been investing in property since 2013 and so, when I got to that point when I hit my 10 year mark at my old company, I decided to take a career break. Because our company actually had offered a career break and that one year really allowed me to focus on my passion, which was property.

 

[2:35] And I decided to go down the finance space, mainly because finance is the kind of enabler, and we know that in property [it] is usually a game of finance. So, getting close to finance and getting close to people's goals around enabling them, just basically allowed me to go down that path. So, yeah, I would say over the last year or two, I've just been really focusing on personally building up my property portfolio, investing and also help building up JD Capital and reaching as many clients as we can.

 

Kao is also very passionate about fitness and uses this to help achieve his property-related goals.

[4:06] So, for me, I love exercising. So, I like staying fit. So, I used to go to the gym quite a lot. For me now, it's more just around health and just being active. So, I have this mantra where you know, each day I just need to move. It doesn't have to be a very long gym session, but I just try to spend, you know, 30 minutes to even 45 minutes just doing some form of exercise. That might be going to the gym, [it] might be going for a walk, sometimes cycling or it might be going to just the local park, having a coffee and kind of walking back home.

 

[4:39] So, just some sort of daily movement. Just to keep the brain fresh, and just kind of keep me motivated for the day. So, that's kind of usually how I start or end the day. And then during the day is pretty hectic because being in the mortgage broking space but constantly on the phone with banks, with clients and just trying to get property settled and refinance etc. So, there's usually a lot of deadlines. So, during the day [is] pretty crazy. And then at night-time, I just try to wind down a little bit.

 

Originally from Taiwan, he moved to Australia with his family at only 12 months old.

 

[5:56] My parents, like a typical Asian migrant story, they came to Australia in 1989 and I was only 12 months old. So, just a little baby. I came here [and] didn't really have much memory of what was really happening to be honest. My dad always wanted to leave Taiwan [and] to get out into the western culture. So, he found work here and then my mum followed, and me and my mum came.

 

Kao and his family settled on the northern beaches of Sydney and although he enjoyed his childhood, Kao also felt out of place.

 

[6:23] I remember we first lived in Dee Why. At the time, there was like no Asians in that area. Even now, there's not as much Asians in the northern beaches. So, we kind of felt very foreign to the area and I remember going to school in the northern beaches — I was probably one of three or four Asian kids. So, I definitely felt a little bit out of place and then after primary school, my parents wanted me to get into a better school where there's a bit more Asian culture. So, they sent me to Killara High School. So, not too far from the Chatswood area.

 

[6:54] But to get into that school, you need to live in a local catchment and so they needed to find a way to get me there or move close to the area. But at the time, house prices were quite expensive in that North Shore area, even back then. So, we had a little townhouse in Dee Why [and] they ended up upgrading to a house in Freshwater. So, we lived there for about 15 years and to move into Killara, they ended up buying a house in Linfield.

 

[7:27] But they were originally going to sell that house in Freshwater in order to upgrade to Linfield. And at that time, I remember quite clearly, they had a really good family friend, and their family friend was a mortgage broker. And they actually gave them advice and said, 'Look, we can help you buy the property in Linfield if you rent out the Freshwater property'. So, they'd never had the intent of keeping Freshwater as an investment property. It was always just going to be sold and they would pay off their debt and go buy that new home for us to then go into the new school.

 

[7:59] So, I think it was from there that kind of sparked my interest in property because over the years, I saw how much house values were going up. So, that was kind of a backstory to my later property journey. But yeah, so that's basically the story. We ended up moving. So, we kept the Freshwater house and then we moved to Linfield, which was the worst house on a decent street. I remember at the time my mum just couldn't really afford to buy anything in the area. So, she just looked for the cheapest property. It was on a main highway. Very noisy house but it was the cheapest property that they could find at the time. I think it was around just under $400,000 for a three bedroom house in Linfield.

 

[8:37] So, yeah, that was an interesting move. So, we went there and then I think that completely changed my life because [it was a] completely different culture. A lot of new people. I saw a lot of Asians, like Killara High School in that year was basically 70% Asians. I was like going from a school of like no Asians to a school full of Asians, was just very interesting.

 

This move caused quite a large shock for him, but also left him with a sense of curiosity.

 

[10:08] I started to notice a lot of different walks of life. Like you see different family households, you see some really, really wealthy people around the area, and also a lot of wealthy, I guess, kids coming from wealthy backgrounds. But I also noticed, there were also children coming from families that were also extremely hard working, like immigrant kind of backgrounds, too.

 

[10:31] So, I saw a lot of different dynamics and I was very curious. And I think from there, I just was very open to just seeing a lot of the how different people would, I guess, come from a different background. And it was a very good experience to be able to connect with a lot of different people from all walks of life.

 

Growing up on the northern beaches also left Kao with some adoring memories and good habits.

 

[11:38] I think the good thing about living in the northern beaches is everyone's so sporty, and everyone's so active. So, one good habit that I developed as a kid was, I tried so many different sports. I did a lot of skateboarding, we did a lot of mountain biking, we had everyone always had scooters. So, we were always at the park on the weekend with the mates. I played soccer, I did taekwondo, and we even went to the scouts. So, yeah. So, [I] did a lot of different range of activities, which is really good because I didn't really do that much of that when I moved into the Linfield area.

In his later years of high school, Kao gained the motivation needed to get into university.

 

[12:55] I was not too studious to be honest. I remember my early high school years, I just wasn’t great at studying or maybe a lot of the subjects just didn't interest me. So, I remember I just started getting my act together around year 11 and year 12 because I knew I had to get into university. I need to get a degree in order to get a good job. I was always told by my parents, you need to just go into a big company, and then you'll be set for life.

 

[13:25] I went okay, I better study hard then. So, year 11 [and] year 12 [I] study really hard. And after high school, I went to UNSW. So, University of New South Wales, and [I] studied a Bachelor of Commerce degree. So, I've always wanted to do business because I thought I just really was curious around economics, finance, and money. And I remember even in my early uni years, I even started like an ebay shop to try and sell things online.

 

[13:53] So, I was always kind of business minded, just wondering how people are making money. So, I decided to get into commerce and that's kind of led [me] down that path. But I didn't really know what to major in. I tried accounting [and] failed. [I] tried a little bit of finance. It was okay, [but a] bit complicated. And then I wanted to do something fun. So, I end up doing marketing. I majored in marketing and did a minor in finance and that was yeah, basically my tertiary study after high school.

 

 

The ebay business that Kao developed was a clear sign of his entrepreneurial streak.

 

[14:48] I remember, I think it was around, I can't remember what year was — 2012 [or] 2013. That's when like, e commerce started to get really big. And I remember, I was just shopping on ebay a lot and that's when you started to see globalization. You could start buying things from Asia at cheap prices and I just always thought if I buy something at a cheaper price, and then sell it in Australia for a higher margin, that sounds pretty smart. Sounds pretty cool.

 

[15:16] And at the time, I was dating a girl and we decided to go in on buying some stock from Asia on dresses. And so, we tried to sell dresses online [but] didn't do too well. So, we end up losing money. But we didn't put too much capital and there was only like, $1,000 each, so it wasn't too much. But at the time, $1,000 for someone in their early 20s is definitely a lot of money. So, it was scary, but I think it was a really good learning experience. Yeah, so that was totally enjoyable.

 

Out of all of the products available to sell online, Kao and his partner decided to sell dresses for a very simple reason.

 

[16:01] At the time, my ex-girlfriend was really into dresses. And so, she just had this idea. She was like, 'Oh, what if we buy bulk stock?' And then so we just went to a wholesaler, and we just have a look at what options they had. And then they just had a range of different options. So, we thought, okay, well, let's just try a particular design or try a particular pattern, or style and then we just bought bulk.

 

[16:27] But one thing that we learned is that the sizing there is so different to here. So, we sold, we actually did make some good sales initially, but we had a lot of customer complaints because the sizing was completely off and it just didn't match what they were expecting. So that was a really quick learning, like, 'Oh, crap, we just ended up buying all this stock, which the sizing is just not correct or not advertised correctly'.

 

[16:49] And it's really hard to buy stuff overseas and be able to try it. So, that was one of the biggest learnings. But yeah, so we [were] just very naive, just decided to go into wholesale, because they said if you buy a minimum amount, we'll give it to you for a discounted rate. So, we thought okay, well, great. So, it's a good discount. Let's buy. Let's buy it and try it.

 

Although this was Kao’s first attempt at founding a business, he has held down jobs since he was 14.

 

[18:15] I've always had a job and started off in a typical kind of retail job. So, I remember my first job was actually McDonald's. In the kitchen. So, I again, learned so much off just being in the workforce. Flipping burgers, I remember I was flipping, I was making like 12 burgers every two minutes.

 

[18:41] So, it's just mind boggling at the time because I was like earning. I remember very clearly, my first pay was $6.13 for an hour. And I was just calculating in my mind, I'm making 12 burgers every two [to] three minutes, and they're selling for what $5 each?

 

[19:11] So, I think just understanding or trying to understand how the numbers work was actually really intriguing for me. And I was just always wondered how businesses work? How do they make money? How do people become wealthy? It was just something I was always curious about and naturally being in these jobs I was exposed to a lot of the mechanics behind it.

 

He moved from flipping burgers to scooping ice-cream.

 

[19:49] Then I worked for New Zealand Natural. So, scooping ice cream. So, a lot of retail there, food retail. And then I ended up going into another retailer selling appliances. So, I'm not sure if the listeners will remember Clive Peters, they actually went under. Clive Peters is like similar to Harvey Norman. But they were like more of a premium kind of retail at the time. So, that was where I learnt a lot of my sales experience and sales skill sets because we're just constantly trying to sell like larger goods, mostly white goods. So, I worked there for about two years while I was at uni. And actually, after that I then worked at Optus. So, the Optus retail store selling phone plants and phones.

 

Kao’s job at Optus helped him financially throughout his time at university, and it also kicked off his corporate career.

 

[21:02] Because I was working at Optus retail for two and a half years, whilst I was studying my marketing degree. I found out that Optus were doing a graduate program and so, [it was] kind of [a] natural progression. I remember my manager at the time, he was like, 'Oh, why don't you just go to apply for the grad program? You've already got the retail experience, you know the products, you know the brand very well'. So, I was like, yeah that's a good stepping stone because I always wanted to get into [a] grad program.

 

[21:28] But it was quite hard to get into the larger banks, just because there's so much competition with new grads coming out. So, I did apply for your standard big four banks trying to get into those as a stepping stone but didn't get in. So, I applied for Optus, and I ended up getting into the grad program. So, that led to my career for 10 years at Optus and I had numerous amounts of roles at Optus, kind of moving [between] different departments. But yeah, so [I] ended up in some of their sales departments and I ended up in their corporate marketing, and also some digital marketing roles.

 

From his time working for Optus, he had one major takeaway.

 

[22:38] I think the biggest learning for me was working with so many different people and different experiences, different skill sets and also different levels of the hierarchy. What I didn't realize was in such a large organization, I think we had 10,000 employees in the Sydney office alone. So, I was just suddenly exposed to so many people and what I realized was it's all about stakeholder management, because you're working with so many different groups and teams.

 

[23:07] And sometimes getting a task done can take forever, just because there's so much process and structure around things. And I was just always kind of baffled by how long it would take to get things done. Because you have to get approval from almost every level. So, it was very interesting to be honest. But yeah, lots of experiences around just how to work with people. I think that was the biggest learning.

 

Kao’s career at Optus came to an unplanned end.

 

[3:24] Initially [it] was [a] long service leave but I kind of pointed out that I wanted to take a bit of a break. So, yeah, [I] took a bit [of a] long service leave and took an extended break. Kind of knowing at that point that I wasn't going to go back.

 

 

Coming up after the break, we hear about Kao’s first property investment experience…

 

[24:28] My first experience was actually witnessing my parents sell their Linfield home.

 

He shares problems that he encountered when trying to invest…

 

[0:22] I would say the first one that I hit a roadblock was serviceability. So, income.

 

We’ll learn the importance of understanding equity…

 

[6:38] One of the best aha moments was understanding equity and that power of it.

 

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

 

Kao’s parents had an influence on his interest in property and watching a deal they made was his first experience of an investment.

 

[24:28] My first experience was actually witnessing my parents sell their Linfield home, because we, me and my brother lived in Linfield for another 10 to 15 years. So, we didn't move out at home to our late 20s. And I remember at the time, I said to my parents, 'look, I do want to move out because I just want to be a bit more independent'. And my parents’ kind of came to the conclusion that okay, well, if you and your brother [are] going to move out, it makes sense for them to sell that home.

 

[24:58] And then they were going to move back to Freshwater. And that's exactly what happened. So, when they sold that property in 2016, they sold it for three times the amount that they bought it for. And it's just incredible, right? Like, you can't save that much amount of money in 15 years. I think they bought it for $400,000 and they sold it for $1,600,000 in 2016. But in hindsight, I was like you guys kept it, you would have been double that amount.

 

[25:34] So, its hindsight is always an eye opener, isn't it? So, it was from that experience that I was like, just the power of leverage and wealth of property is incredible. Like, if we don't invest, then saving our way to wealth is going to take forever and we will most likely be working for the rest of our lives. So, that transaction got me thinking, 'Okay, well, how can I make my money work harder? I need to invest'.

 

From this realisation, Kao jumped into the world of property investment.

 

[26:48] That same year I think, no actually a little bit early, I did buy an apartment in north Sydney and that intent was always to be an investment property. So, I bought a one bedroom apartment in north Sydney. At the time, I was seeing the Sydney market starting to climb very quickly. So, I wanted to get in and I've always had the goal of buying my first property.

 

[27:09] So, after my parents sold the Linfield home, I ended up moving into north Sydney and I actually came across a lady called Cherie Barber. So, she runs a reno course which I went to. [It was] a seminar and I just kind of fell in love with the aspect of being able to decorate a property and using that concept of getting more equity, getting evaluation after to improve the value of the building.

 

[27:38] So, I kind of apply what I learned on the north Sydney property. So, I always loved decorating kind of decor, home decor, and styling as well. So, you played around with the north Sydney property. [I] kind of made a few small cosmetic improvements to it, and then got a valuation afterwards and I was quite surprised by the valuation increase just from small changes. And then that's kind of how I started growing the property portfolio.

Although this investment got Kao started in property, in hindsight he thinks it was not the best purchase.

 

[28:20] In everything I've learned, I always learned it is better to buy land, right? And not to buy in large apartment complexes. So, this one was exactly that. It was in a very large apartment complex. There are about 100 apartments in there and I can see right now [that] Strata is increasing. There's a lot of issues with the building. High turnover of renters as well, just because there's so many vacant buildings in that particular block.

 

[28:46] So, in hindsight, I look back I'm like, okay, that's what I've learnt is to try to go for higher land value. But at the time, I really didn't know much better. I just always thought you have to buy a blue chip. And I thought, okay, well, north Sydney is blue chip, there's always going to be [an] employment hub, there's always going to be demand close to the city. So, that's the main reason I bought, I didn't look anywhere else.

 

From this first investment, he has managed to build up an impressive property portfolio.

 

[30:04] At the moment I'm holding, I'm about to settle on my seventh investment property. So, I've got two apartments in Sydney and three houses in Queensland and two houses in Perth, WA.

 

Over his time investing, Kao has faced situations that he describes as ‘roadblocks’.

 

[0:22] I would say the first one that I hit a roadblock was serviceability. So, income. [Being] able to borrow more money. My first broker that I used, I felt [that] they were very good at what they were doing because they were just able to give me the best product [and] the best rate at the time. But there wasn't much of a strategy around how to grow a property portfolio.

 

[0:47] I remember, we used to go to these property seminars and people used to have, like people quite young in their early 30s, talking about their large property portfolios. Multi Million dollar property portfolio and I was just always baffled how they did it. I still didn't understand how that all worked. So, I didn't know much about different lenders [and] how to structure as well. So, I kind of hit a roadblock around after my second property, because after that my broker just said, 'sorry, you can't borrow any more money'. And I just [was] kind of stuck. I was like, 'okay, well he said no'. So, I just kind of sat on the sidelines for about two to three years.

 

[1:25] And so, if I look at my portfolio, the first three purchases are always two years after each other. Yeah, because I didn't have much of a plan. I was kind of just finding my feet [and] trying to figure out okay, well, maybe I'm going to save a bit more money, then get for the deposit, then go into the next one. [I] didn't really know too much about structuring. It was really until I met Michael, to be honest. So, he was able to show me a plan on how to structure [and] how to use different lenders in the right order to actually grow your serviceability. And also buying the right types of properties, especially if they're cash flow positive, they actually will help you increase your serviceability.

 

[2:07] So, it was really when I got to, I think it was about three years ago where I started to aggressively accumulate a portfolio. Because I knew how to do it. I knew how to build a plan and that's essentially how I started JD Capital. Because he inspired me to become that strategic broker or partner to be able to help you grow your portfolio and not many brokers that I knew, knew how to do that at the time.

 

To overcome these roadblocks, Kao had to shift his mindset.

 

[3:25] At first, when I got to property number two or three, I started realising I'm starting to take on quite a fair bit of debt. I've got a total debt of over one million. And then I think it's a mindset too. Like, you start to get afraid. You're like, oh, is this too much debt? What if I can't repay this? And so just getting comfortable and just thinking long term as well.

 

[3:46] Because when you start to understand how the economy works, how inflation and interest rates that ties into the whole macroeconomics, right? And so, understanding that, which is not something you just pick up straight away, you really need to experience and see what happens across the world to really experience that. So, I think when Covid came, that really was a big eye opener. You can just really start to see the amount of money being pumped into the market, from grants and from money being printed.

 

[4:19] You can start to see that the value of cash is getting smaller and smaller over time and so just connecting the dots of that with longer term goals, around how you can hold on to assets that appreciate in value, that really gave me some confidence around, okay, I am a long term investor, I am going to hold these properties for several decades. If that is the case, and the cash flow is strong enough to pay for these properties or hold the properties, then I'm not going to be concerned about the short term.

 

[4:49] So, the mindset was a huge thing for me. And also, one thing for me was just not being too worried about the short term interest rate because I remember at the time, we were comparing options around I can get more lending if we go with smaller lenders, but the interest rates were a bit higher. And at the time, I couldn't get my head around it. I was like, I don't really want to pay [a] high interest rate for that. But then when you tie back to your larger picture, if I can accumulate another two or three properties in the portfolio that are compounding at 5% to 6% per annum on that total asset base, that far outweighs the 0.5% increase in interest rates. So, I honestly think it's a mindset thing.

 

For him, another big ‘aha’ moment was understanding equity and the power that came with it.

 

[6:45] I always thought you have to save a 20% deposit; I didn't even know about LMI back then. So, I didn't even know that was an option. I just thought 20% deposit is how much you're got to save and as you know, 20% on any house these days or even back then that's a lot of money for someone just fresh out of uni. [It is] basically your entire life savings.

 

[7:04] So, [it] took me a long time just to save up that initial deposit only because I always thought it was 20%. Then [I] kind of got into the luck of the Sydney boom during that time. So, when I mentioned I did that cosmetic renovation on North Sydney, I was quite surprised after that I got a valuation done. I think it went up by over $100,000. And that was an eye opener for me because I then saw the power of just being able to build equity from a very small cosmetic change. And I then went back to the bank and got an equity release out of that. So, that was the biggest aha moment. I was just like, wow. Just all this cash just got released and that would have taken me years to save.

 

 

In a future episode of Property Investory, we will continue to explore Jyh Kao’s journey. We will look into his strategy…

 

[9:02] I definitely do intend on renovating properties that I hold elsewhere.

 

The challenges of buying interstate…

 

[17:26] Not many people I knew were buying interstate. Borderless investing wasn't really a big thing back then.

 

Why he decided to invest into a business as well as property…

 

[28:33] I was just like, you know what, I would be really interested in this opportunity.

 

And that’s next time on Property Investory.