Allen Chan on Investing with Other Peoples Equity

Unknown Speaker 0:00

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Allen Chan 0:38

was young at that time, but I was in tears because not that I lost the money because I leveraged my parents home to borrow that money to invest in the wrong asset class and lost it all.

Unknown Speaker 0:54

This is property investors where we talk to successful property investors to find out more about their stories, mindset and strategies. I'm Taryn sharp, and in this episode, we're speaking with Alan Chan, directors energy finance to find out how he landed a job at the top for banks straight after university, the moment using his parents home as leverage, but investing turned into a disaster, how it turned it all around with his first investment, and so much more.

Unknown Speaker 1:34

Director of Energy Finance Ellen chan describes what his job consists of and how long he's been in his industry for way mortgage

Allen Chan 1:41

brokers got a good team of six mortgage brokers and a few supporting staff been doing that for six and a half years. And before that, I was working in one of the big four banks. And yeah, it's been a ever since I was a graduate from university, I've always been in home lending. Interesting enough. So I've been at that for over 10 years. So I may be still young. But you know, learn a lot of things along the way.

Unknown Speaker 2:11

With the knowledge that so many people need assistance when it comes to buying the first home, much of 10s day revolves around helping clients achieve just that

Allen Chan 2:19

we fulfilled the dream of homeownership for clients looking for their first home, raise a financial intelligence when it comes to property investing. So whether it's buying your first investment property or accrue a portfolio of properties, structuring as well, I guess, explaining to clients, what's the best mortgage structure to help them maximize the taxation? I don't do that myself. Of course, you got to speak to accountant. But, yeah, and also different structures. So we can, you know, lend money in a trust Family Trust specific, self managed super funds to buy residential commercial. That's probably a typical day it's energy or most of the guys. And it's some some of the brokers more specialize in certain areas. But we look at the lending, which, I guess caches what makes it go well go round, isn't it?

Unknown Speaker 3:18

Migrating to Australia back in 1991, Chang grew up in Sydney's West, initially studying something completely unrelated to the field of finance and property. I was

Allen Chan 3:26

born in Hong Kong, came to Australia when I was in 1991. We grew up in the suburb of Parramatta, which is in Sydney's West. And funnily enough, studied in a high school, which was New Town performing arts school. So audition it with the instrument of flutes. And then at the same time, study my six years Funny enough, instead of going into Conservatory in which usually most of the students end up as I did a degree in mathematics in finance at the University of Technology, Sydney. And then I was very blessed in getting a graduate program in one of the big four banks. And that's where my career started. In 2005, I guess,

Unknown Speaker 4:12

was such a drastic change. In his area of study, chan explains what compelled him to go into a different career path.

Allen Chan 4:17

I think, you know, one of the reasons says, you know, my family didn't grow up very rich, and that also leads to my, you know, property investment journey. So, obviously, we, when we're young, we had, you know, my parents would have challenges with money or usually argue about it. So, one of my things when I was growing up, like, Look, I need to learn how the rich do it, right. And what better way to do it than, you know, going to the bank. And I had aspirations working very specifically in private bank, which is looking after top 1% of banks clients. So which I was able to do that in my career fortunate enough, and I'm going to share some tips there as well and that will learn from Get Rich, and hopefully, listeners today can get some value out of it.

Unknown Speaker 5:06

Going back a little further, he adds to this by explaining what he believes were the key factors in his childhood that pushed him to pursue finance.

Allen Chan 5:14

One of the key things been growing up, you know, Asian background, like, you know, there's that stigma with music that, hey, it's not that stable. And then, you know, as a career, right, I was thinking, like, obviously, you know, what is something that, you know, I can provide for the family as well, right? So, it's obviously leading to more the academic, you can always get a job and do your music. But, uh, you know, if you were to do music and be the best of the best, is it going to be that financially sustainable? That's the question that always had in my mind, but lucky enough made that choice. And look, I'm still doing music, right, as a hobby or casually, but you know, having the finances and, and the income to back it up. So, you know, overall, since the beginning age, I guess that was a wise decision, right? You know, in going into a more career path and investing I guess,

Unknown Speaker 6:09

he also explains the circumstances that led to his choice to study a degree in mathematics, rather than one in commerce, or more narrowly finance,

Allen Chan 6:17

well, funnily enough, that's the mark that because then I could get HSC mark, at that time, even I spy to, you know, do accounting at that time. However, having said that, I think the mathematics part gave me a bit more, you know, the philosophy around solving problems. That's one. And secondly, by the end of the day in finance, you've got to know your numbers on business, which was, you know, if I look back to some of those successes, now, it's probably knowing your numbers from a very early, early stage, which is important in business, right,

Unknown Speaker 6:52

attempting to gain as much experience as it could, while at university, chan shared that while he was getting educated, he was also working various jobs at the same time,

Allen Chan 7:02

pets, doing different jobs, I was unloading containers, right. So as a store, man, I was in America, American Express on the call center. So visually picked up anything that I can get experience on at the same time, you know, fulfilling my studies or the bachelor degree. So I think that's what's the basis in getting into a graduate program, but also our philosophy, my investing as well to give things a try and get as much experience as I can.

Unknown Speaker 7:37

It was after he graduated from the university, that he was actually able to land a position at one of the top tier banks graduate programs, again, experienced that he starts taught quite a lot when it came to banking.

Allen Chan 7:49

It was a few interviews before ended up in the graduate program. And starting in the first year, it was in the retail bank. So going into different divisions, you know, from the banks, call centers, all the way to document prep preparation, all the way to the front end, which is the sales side. In To be honest, like one year was pretty long. And we because we're not getting into the job itself, we found a bit boring, so but I always aspired at that time, like I said, you know, wanting to look for jobs and get into the private banking sector. After that one year, which I eventually got. So that was the experience in the talk months, but learn a bit, but you know, until you do things, it's very different to you know, watching someone do it, if that makes sense. But

Unknown Speaker 8:37

when did he actually move into a full time career, and furthermore, into the era he wanted,

Allen Chan 8:42

it was taught my program, and during that time, there was no promise of getting a job. So it's always going into the bank's intranet, or the jobs to her search to see what's the next job that comes around. But I was very specific. And I knew in my head what I wanted. And again, like I said, in the private banking sector, which is the top 1%. So yeah, did an interview, you know, and then got the role. So I was very fortunate. But that was the ground bases, where I learned the bank systems and everything in the, in the three months, where that's why I thought the graduate program taught loans. I didn't, we learn a bit, but I think we learned the bank system when I was thrown in the deep end and actually doing things, which is the same thing in property, isn't it until you do it? That's where you really go, Oh, I understand this, isn't it?

Unknown Speaker 9:33

So true, so true. So is it with the same bank or did you have to change banks to go into that same particular day?

Allen Chan 9:40

It was the same bank. So I've been in the same bank for that. I mean, obviously graduate program private banking for the whole, six and a half, seven years until I ventured my into my own business, which is the mortgage mortgage brokering business now.

Unknown Speaker 9:57

Talking more about what inspired him to kickstart his mortgage broking business, Chad talks about when he knew it was time to move out a full time career.

Allen Chan 10:05

I guess one of the key things, I've been into other departments like, you know, the brokering side of the bank and as a team leader. And at that time, it didn't hit me until I was a mobile banker for the bank and realize, Wow, the banks do make a bit of money on their mortgages, right, which was last a year and a half of my career as a mobile lender, which gave me the confidence to step out. And at that time, I guess it's good timing. That's when the property prices, there's a demand on property. Probably, what, six and a half years ago, which is probably your early 2013, fourteens. So that that was I guess, right timing to get out of the bank and then start my own ventures?

Unknown Speaker 10:49

Yeah. And because you're in mobile banking for that period, you kind of have a lot more flexibility. Is that correct? To say to?

Allen Chan 10:56

Yeah, definitely, I built it from scratch, there are no clients at all, and then to, you know, a lot of clients with interviews, appointments, and obviously build that relationship and always believed that, you know, they bank with the person, which is myself rather than the bank itself, which is one product. So I'm very glad in terms of transitioning to mortgage brokering as well, because it offers offers the clients a lot more choice and not, you know, tea to one particular product.

Unknown Speaker 11:28

Coming up after the break, we'll delve into Alan Chan's journey, and where and how he bought his first investment.

Allen Chan 11:34

That's why I invested in St. Kilda, which was, you know, a unit,

Unknown Speaker 11:38

the interesting asset class he decided to go into at first then interesting

Allen Chan 11:41

story was I didn't invest in property. So I use that equity to actually buy options, which was a risky product,

Unknown Speaker 11:52

the important lesson he learned from his worst investing moment,

Allen Chan 11:55

once you lose money, then you learn not to go into that s asset class, because there's no get rich scheme, and you got to build it.

Unknown Speaker 12:03

And that's next, I'm Tom sharp, and you're listening to property investors. Delving into his property investing journey, change shares that was by building on what he learnt during this time in the bank, that he was able to gain the courage to make that first purchase,

Allen Chan 12:31

grew up not not being rich, and, you know, finally got into private basis, so excited to see, you know, how the rich people do it, right, you know, are they buying properties and, and one key thing that I learned is that it's, it's not how much money you make, it's how you manage your money. And that was a key lesson that I took from private banking, because I had a section of private bank, which was solicitors, by on their assets or liabilities, they may not show much, they're willing to get into private bank because of, you know, family relations and so forth. But, you know, every week, I noticed that I had to extend the, you know, overdraft facility or the line of credits at that time. So then I realized, Oh, how come these guys are not doing so? Well, compared to the other section of the private bank? The solicitors that bought property? Or actually, you know, structure that correctly, then I see how do they actually buy one, you know, every year. So, again, it's not how much you make is how you manage your money. So that was a key thing. And that's in 2007, where I, you know, got courage to actually start my investment journey. So And funnily enough, I did convince my parents to access their equity. So I didn't build up a bit of savings. Because the home that we were living in had a bit of equity that we've my banking knowledge, I could leverage, and that's where I first started accessing OPM or other people's money. Or another tip I put in there, Ope other people's equity,

Unknown Speaker 14:01

talking about some of the clients who had chan explains how they're able to manage their money and purchase multiple properties every year. But I

Allen Chan 14:08

think one of the lessons that I got from them is that these people are savvy with their money, which ties into you know, my mathematics degree, you know, knowing the numbers, right. So in today's terms, probably budgeting, right, these people had access, you know, cash on a monthly basis, whether they're saved. Well, firstly, you got to get into your first property, and subsequently, you're paying it down, you build a thing called equity, which I'm sure you in your podcast would have explained to the viewers or listeners. But then at the same time, as the equity builds up, then they can with the salary or, or borrowing power, they can go again and leverage to get into another one. So which fascinated me, so I kind of like studied them and, and then, in fact, one of the private clients which I still talk to is like one of my mentors,

Unknown Speaker 14:59

having learned so much from others changes how many properties he currently has in his portfolio.

Allen Chan 15:04

I had 10 properties currently.

Unknown Speaker 15:08

And why he considers his initial decision to invest in options to be his worst investing moment?

Allen Chan 15:14

Well, let's start off with the beginning. Because I mentioned I leveraged my parents property. But an interesting story was I didn't invest in property. So I use that equity to actually buy options, which was a risky product, you know, six figures worth as well. And I was trading, what they call these naked options in the US market. Funny enough, so. And I remember the date that I was investing in a company that started the GFC, writing naked puts, and it's sort of it's a really amazing story, which I still know that day on the 16th of February, because that's when the options market in the US close the share price needed to, you know, close at a certain type certain price. And unfortunately, it closed, you know, be below and what that meant is that, you know, because I was highly leveraged, you know, six figures of us money at that time was disappeared in one overnight. And in I know, I lost that money, how was young at that time, but I was in tears, because not that I lost the money because I leveraged my parents home, to to borrow that money to invest in the wrong asset class and lost it all. What do I say to my parents,

Unknown Speaker 16:34

explaining what it is and why the high risk attracted him to invest into it, churn elaborate on what an option actually is?

Allen Chan 16:41

I didn't understand that much. Number one, but secondly, I think the ironic thing is that we all attracted into high returns without knowing the risk. I think that's what you eluded me, it's like, oh, you know, I'm accessing my parents money, I gotta do it as quickly as I can. Then there was a vehicle that was returning high returns, like it was like, anywhere, double digits per month. So it's 10% by, you know, writing these options or renting it out, right. So it's a derivatives. And what that means is just say, not buying the share, or the property itself is just basically betting, right, that the price will go. So that's probably a brief overview of, you know, options market, because I don't have enough. I studied it in uni. But it takes a long time to explain, I guess.

Unknown Speaker 17:34

Going back to his initial regret, after losing the money he'd borrowed from his parents to invest in options, chan explains why he was thankful he made a decision to invest in a high risk asset class early on in his journey.

Allen Chan 17:45

Once you lose money, then you learn not to go into that asset class, because there's no get rich scheme. And you got to build it, you know, and that's why I had to learn the hard lesson right early in the piece, which I'm very grateful for

Unknown Speaker 17:58

having experienced such a great loss. And furthermore, one that wasn't his channel explains how was able to get himself out of that messy situation.

Allen Chan 18:06

We're still working so hard to pay that off. I mean, 100k, or, in US dollars is a lot of money back then. A lot of money now. Yeah, still is. And I guess that's where the turning point where I go, Hey, I've learned so much in private banking, I've got all these mentors. Why don't I still use this to access equity in starting my first investment property.

Unknown Speaker 18:32

Despite the negative outcome that occurred from this early decision, chan highlights that was actually this rookie decision that led to his first investment purchase,

Allen Chan 18:40

I bought a property in St. Kilda, which is in a unit and even working the banks. And funny enough, you do a lot of transaction for clients. Sometimes I don't know, if you had that moment that, you know, if you're doing it for yourself, you get so nervous, because it's your first transaction. But it's your career, you've been doing that with clients all the time. So that's when I was signing the contract, is there is this right? You know, all the motions go in your head, you know, am I going to do? Well, you know, at that time, these all played out in my thoughts. And interestingly enough, of course, took the courage and, and, you know, to go ahead, and here's where I am today,

Unknown Speaker 19:17

he also shows how long it took him to recoup the money that he lost, and how I was able to get into property at the same time.

Allen Chan 19:23

So lucky enough, my parents have actually paid off their mortgage. So at that time working the bank access a tool called a line of credit. So it's like a big credit card, but on on a home. Right. So at that time, I couldn't remember the exact figures but it probably be around 300,000. So insane that I'd use 100 or lost that right a bit more, but I still had a little bit left into the buffer to continue to invest. So in answering your question, it was still leveraging through my parents equity to invest in this first investment property even though I lost

Unknown Speaker 19:59

money And how this buffer meant Chen was able to invest in the secured a property he mentioned earlier.

Allen Chan 20:04

That's why I invested in St. Kilda, which was, you know, a unit like I mentioned, in the beginning, it was understanding Buying Your First one's about, you know, testing bought the borders, is this right? So, understanding, you know, new things introduced to me, of course, like, you know, doing your accounting, right, what is negative gearing, what is this appreciation, so, really understanding those concepts or the jargon. And in fact, it was, you know, negatively geared in the in the beginning. But in the end, when I actually sold it, before I got married, I made some good capital gains. So, which is one of the things that allowed me to reallocate my capital into other investment properties.

Unknown Speaker 20:53

Having made enough profit to purchase his second investment, he talks a little bit about the skills he has learned along the way,

Allen Chan 20:59

I had to sell that, you know, Victorian property in St. Kilda, then that allowed me to have deposit and capital to venture into other investments, properties. And that's important skill that I had to learn as well, because I think sometimes in property investing, we think that we got to hold it. And you know, there are some people that on one side, like, you know, hold it till the end, right, you know, never sell right. But then, you know, at the same time, if you don't, there's certainly another way to access the equity, which is through borrowing. And if you can pass capacities tight, then you know, the third option is probably to sell it and incur the taxes. But because there's so much gain, then I can still use that capital for other uses.

Unknown Speaker 21:44

Looking on the flip side of things, chan talks about the moment in his journey that cemented how much property could do for him,

Allen Chan 21:50

I have to think one of the aha moments, I think, is really knowing my numbers with a bookkeeper of mine, right. So, you know, there's there's things when in my consulting with clients is, do you know whether your investment properties, for example, will negatively geared neutrally geared or positively geared? And when that aha moment was understanding the optics, I was like, well, maybe I need to do that with my own properties, because we could possibly get are negatively geared, but they say it, but, you know, they don't have the numbers to prove it, if that makes sense, right? Or I just give it to my accountant, and he does it. And yeah, I'm making some money. So we dwelling enough in terms of the numbers and the optics to to make an informed decision with our investment property portfolio. So for example, let's say it's negatively did which my St Kilda property was, then do I continue to lose money? Or do I sell it? So with those optics, then I can make a more informed decision in my investment process.

Unknown Speaker 23:01

So inspired by Allen Chan's amazing story so far, we'll keep the conversation going in a future episode a property invest story, where we'll discuss his strategy,

Allen Chan 23:10

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 23:26

the personal habits which have been contributing to his success,

Allen Chan 23:29

I am a bit more religious in terms of my calendar, what's happening in it.

Unknown Speaker 23:34

And that's next time in a future episode of properly invest story. to jumpstart your week, he's Mindset Monday, where our real success in property isn't knowledge and skill. It's 70%, psychology and mindset. Here's this week's mindset tip from wealth coach Jill McIntyre. You're a strong advocate for building and maintaining a strong team around you and property. Jill, do you feel that many of your clients when starting off with you don't do this?

Unknown Speaker 24:05

Absolutely not. And when I first started working many years ago now about 11 years ago with Matt Jones, that I think many of you will know from Vision property networking group and property resource shop. And Matt is one of those people, I'm sure he won't mind me using this example of a person that's a good all rounder, and that can do everything got a renovation. The electrical worker will leave to the party, but I think he'd probably have a devil there too. And then you go home and work on the website and work on starting up each networking group and all of the things that he was doing, and spreading himself too thinly. We're only good at 5% of what we do. The other 95% We need to leave it to other people that are better suited doing whatever tasks we're doing. What we are stopping think, let could do all of those jobs, for example, but some of them were taking far longer. And I know for myself, I love that could be in envelope fees. But sitting down and doing a full feasibility absolutely bores me just knows. So my my property joint venture partner, he is excellent at the back end stuff like that, yes, I can read them, I can understand what goes into them. But my time is better spent at the things that I'm really in my 5% phone with. Stop and think what you're good at, because we need to be monetizing and maximizing that 5% So that you can then that's your specialty area. If it's negotiating, if it's fine and do work on that one, get someone else on your team that can do things that you don't like. It could be something that you should put at the bottom of the pile at the end of the week, because you don't want to do it on Monday and you do it on Friday. And if that's hampering you and slowing you down, do something that surprised the faint and get someone to help you with it. So until next time, enjoy that one plus

Unknown Speaker 26:31

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