When Jyh Kao first got into real estate investing, he wasn't sure about many things – but he knew for sure that his portfolio offered him a great opportunity. to create wealth.
"I started investing in real estate at the age of 24 and two years after starting my professional career in marketing," he says.
“I didn't have a clear reason to invest at the time and didn't know much about what I was doing. I just knew that financially I would be better off in the long run. "
Kao traces his first real estate investing experience back to his teenage years when his family moved from the northern beaches to Lindfield, both in New South Wales.
"[My parents] wanted to buy a new house in the catchment area of ??the school and sell the existing house, but our mortgage broker, who was a friend of the family, explained to my parents how they could keep their existing home as rental property and get the money to buy a second home, ”he says.
Heeding their friend's advice, his parents kept their home in the Northern Beaches and bought a $ 440,000 property in Lindfield in 2000. The house they bought was old and long. from a busy main road. Over the years, Kao and his family have done various renovations, including updating the kitchen and two bathrooms, adding a patio, and converting the garage from one to another. access to the main street in a grandmother's apartment.
In 2015, her parents sold the house for $ 1.6 million, more than three times the price they paid.
"At that point, I realized how powerful the investment was," Kao says. “I thought to myself that if I could scale this by purchasing multiple properties, I could accumulate tremendous wealth over the next few decades. From there I wanted to invest and continue to develop a portfolio. "
First Real Estate Investment Purchase
Kao actually started his investment journey in 2013, two years before his parents sold their house in Lindfield. But it was his parents' profitable sale of the property that sparked his desire to expand his portfolio.
His first purchase was a 52m² one bedroom apartment in North Sydney valued at $ 428,000. He was drawn to the property because it was in a good location, which has 'a strong foundation for income and population growth' and 'high demand for rentals'.
Kao withdrew $ 80,000 from his personal savings as a deposit and spent around $ 10,000 on cosmetic renovations, which included covering the old cap with popcorn, updating the bathroom, applying a new coat of paint and installing pendant lights, roller shutters, wood laminate flooring, desks and wall shelves.
The updates allowed her to increase the rent by $ 50 per week. He then used the equity to acquire a second property in 2016.
JYH KAO
Years of investment: 7
Current number of properties: 5
Portfolio value: $ 2.5 million
Investment Strategy
Kao's investment strategy is simple: “Build up assets in high demand locations and add value through cosmetic renovations to increase both equity and rental yield.”
This strategy allowed him to grow his portfolio to a total of five properties with a combined value of $ 2.5 million in just seven years. He now owns a portfolio of apartments and houses in New South Wales and Queensland, all but one currently generating rental income. The tenant of his property in North Sydney recently moved, but the apartment is ready for occupancy.
When asked which cosmetic renovations are most effective in increasing the value of a property, Kao says it is beneficial to "focus on the areas where people have the most most emotional connection with the kitchen, the bathroom, the garden and the front facade. ”
He adds that it's also important to stay on a budget and not overcapitalize in areas that don't increase value.
"I've learned, as a rule of thumb, to spend around 10% of the property's value on total renovations," he says.
Main lessons
Kao admits his investment journey was far from smooth, but says he learned some important lessons along the way.
"Real estate investing has helped me develop a strong sense of financial confidence and better financial habits knowing that I can live a life of abundance in the decades to come", he said. “My goal is to… build a large, self-sustaining asset base and generate long-term passive income. I haven't given any numbers, but as long as I can continue to build and hold the portfolio, I will continue to do so. "
Kao adds that the key to being successful as a real estate investor is having the right mindset and the right attitude.
"Personally, I think the biggest challenge in investing is your state of mind and your relationship with money," he says. "A lot of people I talk to are afraid of going into debt, but I've learned that if productive debt is structured and operated properly, it can help increase your wealth much more than if you didn't do anything." . "
Kao says the belief that investing in property requires one to have a "very high income" is far from the truth.
"I think anyone can create and build a portfolio," he says. "This is the amount of money you can set aside as excess fund to invest."
"I realized the world is full of opportunity once you change your mindset from scarcity to abundance, and it can transform your perspective in life. », He adds.
Kao, who owns a gym and also spends time as a personal trainer, says investing in property and maintaining health and fitness have many similarities.
"The success of the two does not happen overnight," he said. “It takes discipline and building good, consistent long-term habits. Good nutrition and training is like cash flow and capital growth in real estate investing. "
Kao’s Top Five Buying and Investing Tips
1. Learn good financial habits.
"I started working at age 15 and in my early years I didn't have good financial habits, often spending money on credit cards, car loans and living off a paycheck. However, it was through this experience that I was able to grasp the concept of productive or non-productive debt. "
2. Understanding the power of compound growth over time.
“Many investors try to time the market and make short-term gains. I think it's risky and I think the best time to invest is when you can. I think time in the market is more important than trying to speculate and find the best time to buy. "
3. Learn how to take advantage of debt and build confidence through debt.
"A lot of people I talk to are afraid of getting into debt, but I've learned that if productive debt is structured and operated properly, it can help increase your wealth much more than if you did nothing. "
4. Talk to as many investors and real estate agents to understand the market and submarkets.
"Talk to as many investors as possible to understand what worked and what didn't for them." Do more field research, visit more open houses, and understand what drives higher prices. "
5. Create your own financial feasibility spreadsheet. It helps to remove the emotion of buying.
Kao's portfolio
Suburbs
State
Type of property
Year of purchase
Purchase price
Present value
Gross rental yield
Estimated expenditure per week
Rent per week
North Sydney
NSW
Unit
2013
$ 428,000
$ 650,000
$ 26,780
$ 374
$ 515
Wynnum
QLD
House
2016
$ 515,000
$ 630,000
$ 24,440
$ 486
$ 470
Brighton-Le-Sands
NSW
Unit
2019
$ 615,000
$ 630,000
$ 25,480
$ 460
$ 490
Crestmead
QLD
House
2020
$ 330,000
$ 330,000
$ 19,760
$ 280
$ 380
Crestmead
QLD
House
2020
$ 315,000
$ 315,000
$ 18,200
$ 314
$ 350
Location: North Sydney, NSW
One bedroom apartment purchased in 2013 for $ 428,000. Spend less than $ 10,000 on renovations and increase the rent by $ 50 per week
Location: Wynnum, QLD
Four bedroom house purchased in 2016 for $ 515,000. Renovations planned for the future.
Location: Brighton-Le-Sands, New South Wales
Two bedroom apartment purchased in 2019 for $ 615,000. Spent $ 6,000 on renovations and increased rent by $ 40 per week.
Location: Crestmead, QLD
Four bedroom house purchased in 2020 for $ 330,000. Renovations planned for the future.
Location: Crestmead, QLD
Four bedroom house purchased in 2020 for $ 315,000. Renovations planned for the future.
