A former social housing resident and high school failure has defied the odds to build a property portfolio worth $1.8m.
Kev Tran, 32, grew up in western Sydney’s Liverpool area after his Vietnamese parents immigrated to Australia in the 1980s.
Mr Tran said he worked minimum wage jobs after leaving school, but is now a father and a buyer’s agent at Sydney firm InvestorKit. He owns three properties across Australia.
He said he struggled for many years, but things turned around when he got a job at a casino, which made him view investing and saving in a different way.
He became interested in property and began educating himself on the topic. He snapped up his first property at aged 26, buying a townhouse in Melbourne. He was earning about $85,000 at the time.
Mr Tran followed this up with a purchase in regional Victoria a few years later. His third purchase was in Toowoomba in Queensland.
Mr Tran said he saw many new investors making the same mistakes:
PURCHASING THE WRONG ASSET TYPE.
“The first and most common mistake I see people make – I notice it because I made a similar mistake when I bought a townhouse at the start of my investment journey too – is buying the wrong asset type,” he said.
“Because many people can’t afford to buy a house as a family home these days, they may opt for an apartment in their local area. But it’s a trap in which families will get stuck with an underperforming asset.”
Mr Tran said apartments were often in high-density locations. Many of these locations could be easily oversupplied with housing, making it harder to sell for a premium. Structural problems like concrete cancer were more common in big unit blocks and special levies were a frequent expense, Mr Tran said.
FORGETTING DUE DILIGENCE.
Mr Tran suggested checking what was in the surrounding areas. He said buyers should ask: are you next to any commercial sites; are you next to a water treatment facility; and are you in a flood zone or at risk of bushfire?
ONLY LOOKING IN THEIR BACKYARD.
Many prospective buyers may feel hesitant about investing in an unfamiliar area, but such a decision could result in substantial capital growth. Moreover, if the property is purchased as an investment, long-term rental returns can also be expected. Kev advises potential buyers conduct extensive research and due diligence during this critical period.
NOT RESEARCHING FINANCE.
“If you’re going to be an investor or a property owner, you need to understand the basics,” Mr Tran said.
“When I made that first poor purchase on the townhouse, I did it because I only had enough for a 10 per cent deposit and I thought that was the only option. But when I educated myself I realised I could have bought an established house and I could have capitalised the Lender’s Mortgage Insurance into the loan … It’s vital to get a grip on how money, leverage and investing works as a bare minimum.”
Investors can often concentrate exclusively on purchasing their next property, without considering unforeseen problems such as repairs, vacancies, or increasing repayments. To mitigate such issues, buyers should establish an emergency fund. A six-month buffer is the optimal amount, which can provide additional reassurance throughout the property purchasing process.
Mr Tran said he has learned the importance of good financial habits and mindset.
“After seeing my parents be frugal and saving being so ingrained in my family, I inherited that approach. Every time I got paid I would automatically save a major chunk of it, as much as I possibly could.
“But what I learnt when I started working at a casino in my early twenties – and seeing people blow insane amounts of money and saying they could just make more – was that saving can only get you so far.”
His top tips for buyers, include:
“Live at home as long as you can, or in a share house. With expenses rising anyone who wants to purchase property has to get a little creative, and be prepared to sacrifice certain luxuries. Saving up the deposit is the hard grind. If you do it well, you will be able to leverage equity for your second and third investment. Reducing living costs will also enable you to increase your borrowing power.”
BUY AN ESTABLISHED HOUSE
There are so many benefits to buying an established house over building and purchasing off-the-plan. You get compounding growth and rental income straight away as opposed to waiting two or more years because of potential building delays.
PAY YOURSELF FIRST
“When I got paid, I would just transfer a whole bunch of funds into another account and then never touch that money. By doing this approach I saved $65k over five years, which is $13k a year. I had to be disciplined, but over time it got easier.”
DITCH THE CREDIT CARD
If you are trying to secure a home loan and you have a credit card limit of $5k or $10k, the bank sees it as debt, even if you don’t use it.
REFINANCE YOUR EXISTING PROPERTIES
“I refinanced my properties, I’ve taken equity out and parked it in an offset. So, effectively, that’s my savings as well, which helps because now having the family and the business, it’s just nice to have some backup money. Now that I’m a father, it’s been important to change the structure of my money so that I can afford the costs of having a family.”
Sourced from realestate.com.au