How Portfolio Structuring Affects Lending Outcome with Allen Chan - ZENRG Finance
Unknown Speaker 0:00
Split your payment into four interest free installments with PayPal pay in for by now and pay later with no late fees with PayPal paying for where you see the PayPal button terms eligibility and exclusions applies. See paypal.com.au For more info
Allen Chan 0:23
one of the key things for me and I think without hands down try not afraid to, I mean, you got risks and losing. That's part of the game, right? You got to but the question is, after you losing, what did you learn from it? And what are you going to do differently
Unknown Speaker 0:42
this is property investing, where we talk to successful property investors to find out more about their stories, mindset and strategies. I'm trying Sham. And in this episode, we're continuing the conversation with Alan Chan from synergy finance to talk about his strategy of leveraging the tips he has for people looking to get into already in the market. His take on the current lending situation Australia's facing and so much more.
Unknown Speaker 1:19
With a portfolio of 10 properties, chan talks about the initial strategy he used when he first got started in investing.
Allen Chan 1:25
When I sold the St Kilda property was I was very blessed to meet my beautiful wife and and before we got married is utilizing some of the government incentives, which is first homebuyers to buy property. So again, we bought in the West, which was at that time, close to 400,000. You know, his house. But obviously, we've intention to add value to it, whether it's renovation to improve the capital of that property. And that was the start because, again, that's what we could afford after I sold the properties. And then once we did the renovation and revalue the property, then we can ask the bank to borrow more money to capitalize another investment property. So that's where you always started with one. And then you either use other people's money or you save up more deposit together next one, and subsequently you grow from there.
Unknown Speaker 2:25
Putting this into a timeframe perspective, changes that he purchased his first two properties between 2008 and 2010, before building his portfolio to include 10 investment properties,
Allen Chan 2:35
I think one of the key things also in the beginning phase, and I think investors don't understand when you're first one or second one, it takes a longer time, right could be three, four years to build up that equity, you're either paying it down on a principal and interest basis, right, you're saving a bit more, then it gets becomes quicker if you bought the right asset and the equity is going up. So I was fortunate enough that that property's gone up in value and, and able to build up the more gets, what I'm trying to say is that the gap gets smaller and smaller as you go to the next one, because it's like no ball effect.
Unknown Speaker 3:11
Having purchased his first investment out of state, chan explains what he looks for in a property to determine whether he should buy it or not. And when he looks for these investments,
Allen Chan 3:21
where we're living is definitely in Sydney, but in other investment properties is interstate. But for me another thing that through my investment journey is understanding the taxation whether it's a land tax, right, or what benefits in different structures, I got to know a bit more in my mortgage broker in Korea. So I think, you know, we're still always learning so So and again, I'm learning from other investors that are doing it so I don't like to use the word copy but I feel modeling ever since I was a young age in private banking was the basis that I got to where I did today right so I mean there's people investing interstate always ask them why you invest in interstate right. But then the you know, did you know this and stuff and took notes and and the main thing is about the implementation. So you know, started you know, investing, and also like residential and some people could talk about oh, commercial is good, then you know, until you buy it, then you won't know isn't it right?
Unknown Speaker 4:23
With so many properties in his portfolio now change shares with us the moment that he became comfortable to build and purchase properties at a fast rate of almost one every year.
Allen Chan 4:32
I'm just blessed. Because of my business and the injection of capital, no doubt it's allowed me to create more, but then as I accrued more then you become more choosy with your asset type. Like for example, we've mentioned about the return you know, is it residential is a commercial, you know, am I using my savings and I using equity? It's given me a lot more choice in a bit more pinpoint in terms of where the next investment is going to be? Right? So, I mean, no doubt Bill equity. And who knows even investing in yourself, or some of the things that you talk about as well, is pretty exciting in terms of the JV groups or the Property Groups. So yeah, I'm interested in learning, I think that's the key.
Unknown Speaker 5:19
leveraging other people's money, or utilizing his own capital to grow portfolio, chan shares more about how he utilized this strategy successfully, and some of the outcomes he's gotten. So I
Allen Chan 5:28
think the first thing is, doesn't matter if it's investor or private bank client, right? You go back to what I said, it's budgeting, right? So what's the expenses that's going out? Right? Even when I said understanding negatively geared neutrally geared or positively geared, you know, makes your investment decisions? So do I have excess money? Right? Where's that excess money going? At the same time? If you have one or two? My question would be is it structured correctly? Right? So is it interest only? Is that principal and interest? Right? If it's principal and interest, which is good, it's paying down the debt? That means you accrued equity, right? So you know, we can actually through our, you know, any online calculator by five years, you know, how much have you paid off? Right? Assuming your valuation is the same? What's the equity that you've built up? Right? So that could be classed as part of your saving if it's on principal and interest? So in answering your your question, I think the first thing anyone should be doing is no different to a business is understanding your profit and loss, right, in business terms? Or what's the income that's going in? What's the expenses? And what's the excess? Right? So that is a critical and the basis of how, you know, I have actually helped, you know, by the next one, because if you're spending a lot more than then you're earning, there's no way we can invest? Isn't it?
Unknown Speaker 6:47
Turn answers the questions most people ask, when it comes to loan repayments? Why should I be paying principal interest on investment property, when most people put interest only and put the extra money into an asset or something similar,
Allen Chan 6:59
you need to speak your account and interest to the bank best taxation structure, because the money could be in better use. That's number one. However, insane that you you know, if you're in a football game, there's always offensive and defensive, right. So I think one of the key things is like understanding the market, whether you know, at the moment if the property is going down, right, and you know, valuation values is not going to go up, obviously, you may consider principal and interest if you have extra cash, and then you can manufacture that equity, if that makes sense, right. But at that time, when I first bought the market was rising. So, you know, it may be interest only on the cash flow. And, and at that time, also, when I was beginning, I wasn't earning that much like, you know, cash flow was a challenge. And then I was just really riding the wave on the property increasing, and I sold it, or you can re leverage it, right. And that's how you get access to money. So I think every one situation is different. But what I do suggest is always reviewing which I've got my spreadsheet, or zero and some mechanism, I'm always, you know, monitoring, am I on the right track, and I think measurement is the key, isn't it?
Unknown Speaker 8:07
Talking more about his portfolio, he also shares where his property is currently located.
Allen Chan 8:12
I've got properties in New South Wales, commercial and residential. And then also in Queensland, and also commercial residential, I sold this some properties I did buy and sell in Victoria. That's, that's, that's my personal preference. And then I haven't looked in there since. For me also, I'm an investor that, you know, if I got extra money, and you know, let's say, 100,000, what's the next investment property that I can afford? Within my current situation now? So I'm always asking that question, right? Because we go through a different life stage, I'm just sharing now, you know, I'm very blessed. My, my wife's got a, you know, beautiful second daughter, like, you know, I'm not going to go proactively heavily, like buy another property, right? When there's on one income. So I think, you know, throughout understanding your life stage, and your financial journey is very important. So you know, that's why we deal with clients, or just in general, you need to know where you're at, isn't it? Right? What you're going to be facing, whether it's starting a family, am I going to get married, so that means it's another income, which is great, you can buy another property and so forth. reassess the situation. So that's my little tip, understand where you're at and where you're going and where you're gonna go.
Unknown Speaker 9:24
Yeah, and everybody's situation is going to be different at different stages in your life. So that's the reason why it's kind of good to actually come and speak to somebody like yourself to get into like a financial check in and giving them specific, I guess, recommendations on what they can do in their specific instance oil.
Allen Chan 9:40
Yeah. And sometimes I tell clients that no, absolutely. You know, we can't be doing that because you're spending more than than you earn, or we got to go a defensive strategy because you're buying a lot and you're over leveraging right which is one thing that we got to be careful about as well or going to lenders which is what we call the lenders of law. Last Resort, because they give you more borrowing capacity. But I anticipate the road ahead that I can see them coming to me. Oh, can you refinance? Ellen, can you help me? Can you refinance, the lenders put up the rates and, and I specifically said to them, Look, this is the lender of last resort, you need to do something with your portfolio. So that's why I love what I do, because every situation and client is different. And, and we all want to have the end game, which is having cash flow from our property. So yeah, hope that adds value.
Unknown Speaker 10:31
With this idea of working your way through lending tears, chan explains what this actually means.
Allen Chan 10:36
Firstly, lenders, basically your big four banks. Second, tears could be you know, your bank with ing, and then, you know, non conforming lenders like pepper liberty, so there's a different scale in terms of lending and the criterias are different. So what I mean is, Tyrone, you may be a hypothetically a PAYG, which is, you know, salary earner pay as you go, the way that he looks at it may be very different to how second tier looks at it, right? So hence why the assessment is different, they will never get the borrowing power to the exact dot. But of course, we need to add expense and all that stuff. So what I'm trying to share your situation is factual, everything's the same, there will be so many different outcomes. And that's what we've got access to all these lenders,
Unknown Speaker 11:24
churn ads, those here, we're using a mortgage broker actually comes in handy
Allen Chan 11:28
by him and convenience and your data. I think that's important. For us, we're very critical on privacy or privacy when it comes to your credit report. Right? So you're doing yourself, that's fine. You may not know the technology just like yourself, your property expert Tyrone, like, you know, they should consult you if it comes to property. But, you know, if you're an engineer, you don't do this every day, isn't it? Right. So I think it's going to the experts in getting the right advice rather than going to the banks directly, because they just focus on one product one policy, whereas for us, it's multiple policies, isn't it?
Unknown Speaker 12:08
Speaking about our current reelected, Liberal government champ, what's his take on how he thinks the policies released could potentially affect the lending requirements for investors in the next few years?
Allen Chan 12:18
Well, it's funny enough that straight after the re election of the coalition that APRA has come out with some of the buffering where rates, right, so for those listeners and viewers that may not understand what what that is, there is a stress test in every bank. So I think like going back when we're talking about first tier, second tier, like different banks, banks have different stress tests. And at the moment, just on an average basis, I know it's on the media, it's like 7% is probably the benchmark, right? So in saying that, if that's lowered, right to say, 6% 5%, guess what, to our borrowing power, is it going to increase or decrease? It's going to, absolutely, so therefore, this is the showstopper, I see at the moment with APRA or the regulatory, you know, company, imposing on the banks, which is kind of putting a brake on on the whole borrowing environment. And if that's removed, and with a coalition, that will be amazing, right? And that will be good news for our investors who's listening.
Unknown Speaker 13:26
Coming up after the break, we'll delve into mindset when it came to his property journey. I think
Allen Chan 13:30
what keeps me going is ability to teach that, you know, learning when, you know, just thinking back when I was like, you know, losing all the money or, or someone a mentor showing up to kind of show me the right path. I get juiced by that,
Unknown Speaker 13:45
um, why he believes seminars have helped him immensely during his journey.
Allen Chan 13:48
I like to study I guess, successful people, right? It could be, you know, anyone that walked the path? And because why do I believe in that is because if they'd done it, and I do exactly what they say, you know, I believe I get 10% of their current results, you know, I'm very happy. I'll be a very happy man,
Unknown Speaker 14:09
and much more next, I'm Tom sharp, and you're listening to property investors. Delving into the mindset side of things, chan shares that while his portfolio and business could sustain his retirement as yes, there are certain things that keep him within the property game.
Allen Chan 14:39
I think what keeps me going is ability to teach that, you know, learning when, you know, just thinking back when I was like, you know, losing all the money or, or someone a mentor showing up to kind of show me the right path. I get juiced by that. I'm sure that's, you know, probably one of your reasons with the podcast to share that valuable and expertise, knowledge Not so much from a book, or like you can read what depreciation is about, but actually hearing from people that have walked the ropes, and some of the challenges along the way or advice, you know, so that's why I want to continue to do. That's why I have a team of brokers not just working for myself, because I can easily do that, because I can share my knowledge in terms of lending to them and, and build their successful business, which no doubt resonates to their community helping charity because I'm a big fan of that or volunteering around the world. That's, that's my big passion.
Unknown Speaker 15:38
I want to give back to the community, chan talks a little bit more about some of the stuff that he's doing in terms of volunteering right now.
Allen Chan 15:44
I've been building houses for the poor in the Philippines. And funnily enough, this is my love story, how I met my beautiful wife. So you know, this has been a burning desire for me to be successful in business, not only in business, but in property investing to generate the passive income to do the things that you want, when you want, who you want, and how often you want to do it, and not what you're thinking, that is what you want to do in terms of like, you know, flying out and really a passion for things, right? If you want to be the best plumber, you got a time to do that the best father, the best volunteer, you know, you have a choice. I think that's the ultimate, why for me.
Unknown Speaker 16:27
So it's from lack of resources, chance shares, whether or not anything held him back from purchasing that first investment, and why he believes mindset was integral to his success.
Allen Chan 16:36
I think, like you said, what you touched on mindset is very important as well, right? You may know the things, but until you have the right mind frame to push you to take that uncomfortable step, or the fear of the unknown, then you will never action and take that leap of faith anyway. Right? So I always believe in business or even the property portfolio, you got to have a different mindset, or thinking to be a successful investor or be a successful businessman and so forth. Right? If you're doing the same thing that you're doing, right, like what I started said, is just pure insanity, isn't it? Right? So, so I've grabbed that. And that's why I love you know, you know, being on your show or podcast doing something new, right? I need to learn something and as you learn, then you can Oh, man, it's that concept that will work in my property portfolio, that concept will work in my business, right? So I'm always open to that.
Unknown Speaker 17:35
Expanding on that chance, shares that it's not only his mindset, but he's determination that has added to his success.
Allen Chan 17:41
One of the key things for me, and I think we've our hands down trying, not afraid to, I mean, you've got risks and losing that's part of the game, right? You got to but the question is, after you losing, what did you learn from it? And what are you going to do differently? Isn't it right? Because I often think people will go, oh, I have a you know, I lost a lot of money, you know, I can I can make a beat? Oh, it's the end of the world, you know, I'm just going to work for the rest of my life. I mean, I have to decide that mindset, what I'm going to do, isn't it right. So, and lucky, I chose that path of investing. So God bless for that. And, you know, I'm very grateful for the success that I have today.
Unknown Speaker 18:21
He shares whether or not he had any initial resources or mentors that helped him when he first entered the property world.
Allen Chan 18:27
One big thing Ethany Robins, right, what's the mindset piece, I studied him very early piece when I was young. In fact, my first year when I was working in the bank, and that gave me kind of like that hope and inspiration that, you know, if you put your mind to it, and, you know, constantly vision it, right, it will happen and, and all the things that I've envisioned, and when I was like 20, something, it's all happened, right? So I guess the key learning from that is Don't you know, stop or dare to dream. And then and even though like you may not have the how or the mechanics, but I think it really works. He talks about the other conscious mind, or you know, a lot of people call it subconscious mind is very powerful. And, and I feel you may not know how, at this moment, and he's famous quote is like people, you know, underestimate what we can do, they can do in a sorry, I would say that, again, they overestimate what they can do in a year, but underestimate what they can do in a decade. So you know, I'm a pure testament, you know, you just got to keep at it, keep learning and who I am
Unknown Speaker 19:36
right, turn and sales, more seminars rather than books that also assisted him along his journey.
Allen Chan 19:41
segement night, I was fortunate to attend some of these seminars, very properly, focus, been to mark Rolton some of these courses, understanding of property, not so much in implementing these strategies, right? Because it's a bit more advanced. But you know, I like To study I guess, successful people, right? It could be, you know, anyone that's walked the path? And because why do I believe in that is because if they done it, and I do exactly what they say, hopefully, if I get 10% of their current results, you know, I'm very happy, I'll be a very happy man.
Unknown Speaker 20:20
And one things he has learned from this, which had been helpful in determining his success,
Allen Chan 20:25
going back to Tony, because I was in one of these groups went to Whistler. And, and that was the distinction where, you know, when you're investing with your partner, right, and I just want to share that is that you really need to do this as a team effort and understand both your psychology, right? You mentioned about, like, your mindset is very important. But you know, if you're investing with the other half, like, if you don't know, their mindset, and we're not aligned to it, that's when often like, we think, as a man right for myself, increasing my portfolio, I was like, very aggressive, buying a lot of properties. But then I didn't realize how it impacted my wife, when she's very conservative, or the mindset is different to who, what I am, right. So Tony gave me a big lesson and and it's about reassessing my portfolio, and then I sold some properties and took the money off the table. And, and, you know, I'm very grateful for that. Because if I didn't have that learning, or the lesson I could have, like, over leveraged, which I mentioned in this podcast, anyway, will be very dangerous and detrimental to my investment journey.
Unknown Speaker 21:35
Speaking in terms of advice, chan shares, what he thinks is the best advice he's ever said,
Allen Chan 21:40
parodies power. One thing you leave, you know, with my wife is clarify and verify. That's been also very important things, right? I think we overuse, we need to communicate, and then bits and pieces. But if, if you know, you're thinking about read in another person's ear saying blue, I think we're not on the same page. But I've communicated it's red, but you know, the thinking completely different things. So questioning, right, the power of questions, to enter into the other conscious mind has been very important. So you know, I love it. When people ask me, what where do you see yourself in 12 months, three years, five years, 10 years is also, you know, a big, important part of my life and goal setting, or just envisioning and thinking bigger.
Unknown Speaker 22:28
And the personal habit that anyone can adopt, that's helped him maintain success in both the business and personal sector,
Allen Chan 22:34
I think, using better use of your time. So I am a bit more religious in terms of my calendar, what's happening in it. One thing that my wife told me is like money you can make back, but time you can never get back, like today, right? On the May May right talking to you. So I think that's a resource that's limited. So what you do in that time, right? How effective during that time? So what are some of the outcomes that you achieved in that time? So, again, I feel even in property investing is all about the planning, right? So why should it be any different in terms of your day or your week or your month? I feel that's important.
Unknown Speaker 23:20
With such an emphasis on time, Chad takes us back 10 years to tell us the best piece of advice he would have given himself,
Allen Chan 23:27
firstly is believe in what you're going to do. That's number one. Just keep trying and learn. But the key thing is implement right so and reflect I think we implement sometimes and we don't reflect in what we could have done differently.
Unknown Speaker 23:49
Looking forward to the future. Chan also shares why he's looking forward to gaining the power to make various investment decisions in the next five years, definitely
Allen Chan 23:57
have more power to select the right type of assets that I'm going to invest in. So whether it's residential or commercial, right, knowing you know how to access money, other people's money or other people's equity to do the next thing. I mean, I've been investor so is just a slow holding in buying and selling but, you know, we'd be interested in more development, you know, building granny flats or something. That's something I haven't explored, right. So that's on my horizon. And in the business just growing and helping other people do the same.
Unknown Speaker 24:36
On a final note, chan puts his spin on the question of whether his success has been determined by skill, intelligence or luck,
Allen Chan 24:43
I think. Probably 7030, skill and intelligence right, and planning and all that stuff. 30% is luck. Because how do you know when the property is gonna go up or down? Right, it's all about timing. So I've been very blessed with timing Guess. But you've got to have that intelligence to take the action as well, isn't it so whether they're selling or keeping, so that's what I would say the 30% luck comes from and doing charity stuff, right? If you're giving and doing other stuff, that's where the luck comes in. That's what I believe anyway.
Unknown Speaker 25:21
If you want to reach out to Ellen Chen to get a free financial health checkup and see how much money you could get access to simply visit property investors.com forward slash money to book in a time with Alan today to get your free financial health checkup.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.
