This transcript was generated automatically and may contain small errors.
Saving, hustling, working early in life. The first thing that came to mind was get a new car. My dad saw the savings that I had. What's the responsible thing to do now? Forced me to meet a lender, look at what my borrowing capacity was.
Dad made that decision well before we all connected. A father's there to give their children the best shot. Most of my money was going into my parents' offset account. I'm applying that for my kids. Get to work at 16, invest the money.
That could have been the best advice you ever got. The second property, why am I doing this? I don't want to do another one. There's more red and more debt there. These debts are hurting me.
Why am I not prioritizing cash flow? That money's going to a mortgage and you're exposed to capital growth. You don't have to save a deposit anymore. Instead of something going two, four, six, it goes two, four, eight. Nerd alert!
Property Nerds, the home for data-driven property investors, where we uncover Australia's hot and cold markets, latest headlines and trends. Vignesh, thanks for joining us on the show, mate. Arjun, thanks for having me. You're officially a property nerd now, joining me and Jack. That's it.
I'm glad to be here. Mate, I wanted to talk to you about the journey starting. Obviously, in the intro, I shared more about what you've achieved and the success you've had. But tell us right back to the start. Take us right back.
You're 23 years old is when you first got your first investment at 2021, working together, which is, by the way, is such a special achievement to get in that young. But let's go even earlier than that. There's this journey, which is career, saving, getting ready for that first property. What was that first job? When did you hit the workforce?
And what was that financial sort of habits like early on? So I started uni 2016. I did construction management at UNSW. And I realized quickly in construction, a lot of the people around me were getting into the industry pretty early. And it was almost like a case of not wanting to be left behind, where I had to try and force my way into the industry.
Got a cadetship at a construction company for a builder, building residential towers. And then from there, I haven't stopped. So while I was at uni, working full time, studying full time, that kind of thing for five years, up until 2021, which is when I finished my cadetship and my degree, got the pay rise, the promotion, that kind of stuff. And naturally, when that happens, you start looking at, all right, what do I do with this money? So I'll be honest, the first thing that came to mind was get a new car.
My dad called me, he's like, look, you've got a car, don't be an idiot. We'll start looking at investments. And then since I was already in construction, I had come across paths with a few people. I knew that property investing was a thing. I didn't know anything about it, but I knew that's probably the way I wanted to go rather than stocks and shares and that kind of stuff.
I was a complete noob in all of that. Now, when it comes to your dad, Raj actually is also a client of ours. We've worked with him multiple times. And what's special is that not only did he introduce you early on to that journey, what was funny is like, I'll take you back to the meeting, Jack, me, Raj and Vignesh on the call. I'm thinking of meeting up with Vignesh, but I'm meeting up with Raj and Vignesh.
They're both on the call together. And I'm like, okay, this is interesting. I'm like, cool. Dad's helping out his son. Son's getting a leg up and have an opportunity, have a crack.
But then I'm like, nah, Vignesh is doing this on his own. Raj is here to guide Vignesh and be there to support him as a guide, but not to, here's 100,000, here's $200,000. Like, man, that's special. So I want to understand, obviously, you've had this financial independence, saving, hustling, working early in life. What role did Raj play in terms of encourage you early?
Like, what did he say or suggest to you that says, take action? I don't think, well, even before we got to the point where he asked me to take action, I think he was waiting for me to get to a point where that would actually be a reasonable thing to ask from me. Even before then, I picked up, like, they were first generation here, moved from India in the 90s, my mom and my dad. So it's a classic thing where you come here, they're pretty much building their life again from ground up. So I learned from a young age how to manage money correctly, not overspend, not ask for things that you don't need, that kind of thing.
And then when I started working and earning my own money, those kinds of habits and that understanding just carried through. And it got to a point where I think my dad saw the savings that I had and he said, look, what's the responsible thing to do now? And he'd also been on that journey before, buying properties, living places, renting, having investment properties as well. And I think he thought that was the most logical way. So he was, him and my mom were crucial for me to get started on that journey.
Yeah, that's special. Sydney's not cheap. Sydney's expensive. So a lot of young people who are today, like in their teens and early 20s, they're looking at Sydney and they're just like, it's not possible. Like, what made you believe it was possible for you?
Because it wasn't cheap back then even in 2021, Sydney was too expensive. So like, you're sitting in Sydney, your parents live in Sydney, they own a property in Sydney, you work in Sydney, you just must think like, the hell are we doing on this phone call with InvestorKit? Like, you know what I mean? Or what made it possible for you to go, like, what do we do from here kind of thing? I didn't actually, like you said, like, it's almost a case of you don't know what you don't know at that kind of age.
And for me, I grew up my whole life in Southwest Sydney, like grew up in Campbelltown, then moved over closer to Liverpool. Those are the only places I really knew. And I thought, when I first started looking at properties, the only concept of anything I had was the new airport that was being built there. I thought, oh, maybe I should get something around here because of that airport. And like you said, everything was way too expensive and it wasn't feasible at all at the time.
Pretty early on, my dad forced me into getting into a meeting at Commonwealth Bank to meet a lender, look at what my borrowing capacity was and things like that. I actually got pretty lucky with the guy that I had. He's the one that introduced me to you. There you go. And said, speak to Arjun at InvestorKit.
CBA, gone but never forgotten. Gone but never forgotten. Thank you, folks at CBA. We appreciate that. He gave me the idea to stay away from units, think of houses.
So that's when I started looking at areas like Penrith and Campbelltown, those kinds of areas. Was that Kevin, by the way? It was Kevin. Kevin, there you go. 2021 memory, five years in.
That's it. So yeah, honestly, I'm pretty fortunate the way it kind of like snowballed and I didn't get caught into that trap. Even though I do have mates that ended up making the same mistake, getting apartments in Blacktown and random areas like that. And yeah, like you said, the value doesn't go up, the rent barely stays the same. And you sit there five years later and you're regretting decisions that maybe you didn't value enough at the time.
Got it. Jack, you see this all too often, like people who live in Sydney, they're getting finance out, they get these approvals, but then they make that decision that he talked about. Why do you think that is? Why do you think so many Sydneysiders make those decisions where it's like those wrong decisions that hold them back many years? Yeah, buying your own backyard.
That's the common mistake that everyone makes. And I think in 2021, the property that you've bought would have had a higher growth percentage than any property that you could have bought. And I mean, your budget, it wouldn't have gone as far. If you bought interstate, you could have got a high quality house. Whereas if you bought in your own backyard, you might have only been looking at units or smaller two or three bedroom little townhouses or something in the burbs.
But yeah. Now that you mention that actually jogs my memory a bit. So we did start looking, like I said, because of the airport, we started looking at areas like that, Campbelltown, Austral, those kinds of areas. And yeah, exactly. The land was small or the house was tiny or it was in poor condition.
You're at the lowest end of the market. So there was nothing to look for there. And you know, so many people go into that thinking that's all they got. And that's the difference between you. It's like you didn't live to that world of going, oh, that's all that's possible.
That's all I've got. Kevin, dad, me, you, we all connected back in 2021. And it was like, what else can You know, comfort zones here. Like I'm taking you from Sydney side of going to Adelaide, now Sydney side of goes to Bundaberg. That property we purchased for $437,500 in 2023.
So what this has shown to everyone here is you wind the clock forward from 21, 22, 23, we're still finding properties in the fours and fives, which means that it's not the affordability is an issue in Australia, it's where you're looking. And you now go to Bundaberg, you then realize you're able to use equity. This is the first time you're using equity. What point did you realize you could use equity and what was that mindset shift for you from property number one going into property number two? I always, whenever you talk about property investment, it's the cliche where it's you get one, build equity, get another, build equity.
And it almost sounds too good to be true. And I didn't really have a real concept of it until we got to this point where it was the second property and you were explaining to me how equity works, what's accessible equity, what that can be used to. So I think from memory, it was around 140K or something in equity. And that was essentially covered the full deposit and expenses for the next purchase, which blew my mind at the time. You don't need to save a deposit anymore.
Yeah, I couldn't believe it. How different is that? What you mentioned there, Jack, saving a deposit versus signing a piece of paper for one. Yeah. Crazy.
It's unreal. So yeah, when that time came around, that's when I kind of, my mindset shifted a bit. And I think I got a better understanding of, okay, I'm not just buying one property, I'm using that property and we're actually building something here. I think that's when I started to understand the strategy and everything you try and communicate to your clients when it starts actually happening in front of me. So that's the start of this equity part of your journey now.
But also it is the start of your debt increasing faster than ever, right? Because it's someone who's been conditioned to save, be stringent with their money in a good way for good causes, good reasons. And then now you're moving to, I'm just seeing a lot of red balance increase. Obviously, Jack's favorite thing to do is give out a lot of red balances. But with this red balance increasing, what goes through your mind at this time?
Because it's the most debt you've ever had. Obviously, we see it as good debt. But I just want to go through your mindset of going, sure, equity created another deposit. Was there anything on your shoulder or something telling at you or whispering in your head going, why am I doing this? I don't do another one.
There's more red and more debt there. 100%. You probably still get it today. Especially the second property. Yeah, all the repayments.
There was definitely a certain point in time where I thought, why am I not prioritizing cash flow? These debts are hurting me. It's almost one of those things where you just have to let it sit for a bit. And then you kind of reap the rewards of it later down the line. At the time, for work, I'll give you a bit of background.
So in construction, my role is a contracts administrator. So what that does is for my project, I essentially manage the cash flow in and out of my project, manage the margin, expenses, revenue, that kind of stuff. And then my learnings in the industry helped me with managing this increased amount of debt. So I created my own little boring cash flow spreadsheet and track that every month and that kind of thing, which even though it didn't make the debt or expenses go down necessarily, it helped me get an understanding of the bigger picture and understand, okay, this is my expenses. I think the biggest shift comes from like on that first property, you actually have a cash deposit.
So the debt level is 90 or 80%. When you're buying a second property and funding it with equity, there's no cash deposit. So you've got more debt for that property and the cash flow is worse. But I think as well for someone young who's saving 75% of their income, then you start to eat into that savings like, oh no, I'm no longer saving money. It's like, well, what am I doing here?
But really, that money is going to a mortgage and you're exposed to capital growth. So you don't have to save a deposit anymore. It's kind of like the property is growing is a new way to save. Yeah. It's also for savings now.
Yeah. Because it's like your negative cash flow per loan or per property, instead of it saving in a bank account that goes up or Raj's offset account, it's now going to your actual property that grows in equity. And as you can see, that equity growth is way faster than your own savings. And what's Bundaberg worth now? Bundaberg's now worth, let me bring that up here.
So Bundaberg's now worth $675,000 from a purchase price of $437,500. So Adelaide's equity at $330,000 and then Bundaberg's equity at $237,500. So you're age 27 and we're not even up to your third property we bought, but you're already crossing $567,500K in equity just in those two properties. Wild, right? It's such a special start so early on.
Funnily enough, I also remember your plan, Vignesh, on the portfolio planning tool. It actually only allows to go up to 30 years. And by 30 years, he's not even 60. And 60 is that retirement age. So it's like by default, you're retiring early no matter what.
Sorry. But then happy days. So second thing is those, like by 60, it's just a whole, like the curve line really goes. And this is a big lesson for everyone out there. There's this concept in real estate called the three decades.
And the first third, the second third, and the third third. What happens with compounding wells is that the first decade of holding assets, if we grab a 500K property, a 500K property can grow to a million dollars. That's two times. On the second decade, and this is just assuming things doubling in 10 years, it's not perfect, but a million dollar property can go to two million, which is four times. But then the third decade, that two million dollar property going to four million is eight times.
So instead of something going two, four, six, it goes two, four, eight. And so you being so young and anyone in their 20s getting started, it's such a game changer because that 60 typical retirement age that people are looking at. And look, by the way, my dad's 67 and the dude's still fit as. So I'm just like the amount of people that think, oh, 60 is a bit old and I'm not going to be doing stuff. My dad's a workhorse at 67.
We were playing paddle with his dad in Thailand. He can move, right? So I'm just in my head, I'm just thinking the three decade advantage you have, you're going to be one of the few people as an investor who even get to the fourth decade because technically now you're holding power and your time ahead of you is wild. Inflation can come at you, wages could stagnate, but asset values could grow and different things could happen. The amount of time you've got on your side is just next level.
Like even the loan terms are 30 years. You outpace your loan terms because you started so early by the time you get to retirement age. But now, Jack, we came together in property number three. I'd love to hand over to you on that. We purchased that one in Wodonga.
Yeah. So I guess the borrowing power was running out with the major banks and that's how we got introduced. And I think we spent a lot of time talking about, there was a bit of resistance there from you going into non-major banks and things like that. You really wanted to stick with the major banks and credit to you, it didn't take much once I really broke it down for you and showed you the difference, what you could potentially be giving up. Like, okay, go to a major bank for 500K purchase versus going to a non-major bank for six or 650.
The difference in market that you have access to and the difference in rate that it's going to cost, like in the grand scheme of things, it's better off just to go to that higher purchase price. But during this time, it's very common that people get to this, go for their third property and they need to kind of branch out to speak to brokers. And then during that time, we can clean up like the equity release that you got for using that other property. If that property is growing in value, we can shift that over into the property just to clean it up a bit. But yeah, credit to you, man.
It wasn't too difficult. I think it's the generation. Like, logically, you look at it and go, well, yeah, that makes sense. And yeah, it was great. I wish all my clients were like this.
I mean, when it came to that Victorian purchase, that one's already, you purchased it for like 540,000 last year. It's worth 590,000. Again, we're like five years on and we're still in the fours and fives of purchase prices. It just shows you what's possible when you look at the right markets. But that's gone up 10% and it hasn't even been a year yet.
It's been like three months. Yeah, I think four or five months. Yeah, four or five months.
