podcast

How to build a sophisticated multi-property portfolio

By Vivienne Kelly
Hank Hong on The Smart Property Investment Show
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Hank Hong buys property in all different ways – by himself, with family members and with financial backers to create small developments – and he has lots of lessons to offer other investors.

On this week’s episode of The Smart Property Investment Show podcast, Hank tells hosts Phil Tarrant and Vivienne Kelly why he invests in all kinds of different structures and how this benefits his ultimate wealth creation goals.

Hank also puts his mortgage broking hat on and gives investors some hot tips on interest rates, fixed loans, co-investing and how to build wealth through borrowing money.

All this and much much more on this episode of The Smart Property Investment Show.

Tune in now!

If you have any questions you want answered by the team, or if you would like to appear on the show, please get in touch: [email protected]

Make sure you never miss an episode by subscribing to us now on iTunes.

 

 

Listen to other instalments of The Smart Property Investment Show:
Episode 71: How this investor complements each property and balances his portfolio
Episode 70: Special episode: buyer’s agent answers more listener questions
Episode 69: Are you a ‘lazy’ investor? Consider the benefits to working with a financial team
Episode 68: Special episode: audience discussion live from the Property Buyer Expo
Episode 67: Don’t get ‘caught up in the now’: an expert reveals his tips for success
Episode 66: Wealth distribution: how should you manage your money?
Episode 65: Real estate agents: what separates the good from the bad?
Episode 64: How this investor learned from a property blunder
Episode 63: Q&A session: the SPI team answers your questions
Episode 62: Property procrastination: the importance of finding help

Transcript:

Introduction: Welcome to The Smart Property Investment Show, with your host, Phil Tarrant.

Phil Tarrant: Good day, everyone. Welcome to The Smart Property Investment Show, Phil Tarrant here. I'm the editor of Smart Property Investment. Thanks for tuning in, it's always good to have you with us. I'm joined by my regular co-host Vivienne Kelly. Viv, how are you going?

Vivienne Kelly: I'm good, thanks Phil, considering it's first thing in the morning.

Phil Tarrant: I know, it's good. I'm not really a morning person, but I can be.

Vivienne Kelly: I am not a morning person, it's well known.

Phil Tarrant: Couple of coffees and I get going, I'm pretty good. Looking forward to today's podcast. We've got Hank Hong in. Now Hank is ... We know Hank well. Hank is a mortgage broker, but we haven't brought him in here to talk about mortgages.

Hank Hong: No, no. It's about time, it's a long overdue date.

Phil Tarrant: Hank runs ... He's part of the mortgage brokerage The Home Loan Experts. It's a really good outfit, arranging loans for both home buyers and investors, but what was interesting about Hank was our discussions with him and just the diversity of the way he invests within his portfolio, and also coming from a knowledge base of being a broker and seeing how other people invest, it's always good to get you sort of guys on here to talk about property investment. Welcome, mate!

Hank Hong: Thank you, mate. I appreciate being here.

Phil Tarrant: So Hank, so very quickly off air, we sort of spoke about ... I said, 'Hank, how many properties you got?' It was sort of a way to help frame this conversation, and you sort of went, 'I don't really talk about how many properties I've got,' because it's sort of in a lot of different structures’ and ways you do it. Can you just run me through, can you give me sort a bit of a picture of your property investment portfolio?

Hank Hong: Definitely. Look, just to give you an idea why I don't really stress too much about my properties is that I've always believed that investment should be something that's not a headache. It should be a set and forget.

So therefore if you buy something, leave it there, let it sort itself out, and it's not too much of a headache on your personal life.

Now on the investment side of things in my personal name, I've probably got about three investment properties. After that, the issues with finance, of course, looking to put them in trusts and stuff, and so there was investment properties in family names, sisters and partnerships. Also, there's investment properties in companies, that I’ve built with other financial backers, and we've got some more developments in other investment properties in that. I'd say a handful, maybe eight to 10, when we talk about developments, it's really two houses but that have the potential being 10 town houses. The numbers, there's really no set number, depending on what we’re doing.

Phil Tarrant: So it's very fluid and for more sophisticated investors – which I'd probably call you – that’s not uncommon, to have a portfolio that might look like that. You've got a number of different things happening at the same time.

Hank Hong: Correct.

Phil Tarrant: At different stages of maturity. Some have a lot of upsides and some are just set and forget stuff.

Hank Hong: Correct. The big thing for me was that when I started investing, I did it alone for the first two or three. Then finance, home loan stuff you get maxed out that side of things, so you bring family on board.

I've done a step-by-step process, it's very hard to do it on your own, and there are people out there that do aim for 10 before they're 35, or all that kind of stuff. But to do a loan I’ve seen that it is hard, so when I did the first two or three, I couldn't get the finance, I was having trouble, I brought my sister on board. Then, my wife came along so I brought her on board.

Then when we looked at bigger projects, you need other financial people with similar mindsets, and then you build a trust to get a company, and then you can build small developments. So it is possible to do it on your own, but it will get to a point to where it will max out, and you will need to get other help as well.

Phil Tarrant: So you're talking from a serviceability perspective there?

Hank Hong: Yeah, well, always a mortgage broker.

Phil Tarrant: Which is good, let's have a quick chat about that. What you're saying, is that if you go by yourself –

Hank Hong: Yes.

Phil Tarrant: – you're going to get to a point to where your serviceability is going to restrict your borrowing capacity.

Hank Hong: Hundred percent.

Phil Tarrant: So you can look at how can you increase your borrowing capacity and that is by getting greater serviceability. How do you get greater serviceability? You get more people involved. That's good.

Hank Hong: There's that, and what I really want to say as well, is that there is no wrong way of investing, there's so many different tools, there's so many different ways. So my way was to bring family in, because I'm a very family-orientated person. Other people might look at investment ways of getting positively geared properties. Buying smaller properties.

The serviceability is probably I'd say the most important thing out of increasing your portfolio.

Phil Tarrant: Serviceability aside, do you actually enjoy investing with other people? That human interaction element?

Hank Hong: Yes.

Phil Tarrant: As in, we're in this together, and let's try and create something not by myself, but let's have a bit of fun with this.

Hank Hong: Everyone gets together, everyone makes a bit of money, you help your family, you help your friends, you leverage other people to help as well, and everyone together can make more money and look forward to retirement or increasing their asset portfolio.

Phil Tarrant: We chat, Viv, a lot about taking the emotion out of property investment.

Vivienne Kelly: Yeah.

Hank Hong: Oh, it's massive.

Phil Tarrant: Property investment is about the numbers, right? It's about making sure that you buy property that's going to go up in value and hopefully over time –

Hank Hong: Correct.

Phil Tarrant: – generates a yield so you can cover the cost of it. But putting that human element into it, it's actually quite a good thing to do something with other people, because it keeps yourself accountable, it keeps you –

Hank Hong: Yes.

Phil Tarrant: – It keeps the energy levels there sometimes, when you're maybe questioning decisions or you're not too sure, it's a really good sounding board...

Vivienne Kelly: Yeah, and I think if you are surrounding yourself with similarly minded people, we have so many investors coming here and e-mail us and talk to the show in general, about how people in their life become negative about property investment, and whether it's a jealousy thing, or whether it's ‘You shouldn't invest there’, or ‘Don't do that’, or ‘You're making sacrifices’ – when you're surrounding yourself with people who don't support what you're doing, it becomes a massive roadblock to people, and they start questioning their decisions. I think if you're in it with people, if it's the right people, that can be a really good way to keep you on the right mental path.

Hank Hong: Yeah. I agree with that one hundred per cent, Phil.

If everyone's like-minded, then everyone will see the same negatives and same positives and then you can move forward. But if they're on different financial backgrounds or different ethnicities or any kind of differences, you will have a clash.

So you've got to find the right people that everyone just goes, 'We want to make money, and we want to make double that money, and this is how we're going to do it.' Absolute, no emotion out of it. It's just got to be logic and numbers. Let's say the numbers don't return a 20 per cent figure, everyone just goes, 'Oh, that's off the table. Bring something else.’

Phil Tarrant: So you need commonality in the way you see the world, number one, but also commonality of goals, commonality of principles towards money, and we have spoken recently a little bit about this Millennial/ Generation Y type thing ...

Vivienne Kelly: Yeah.

Phil Tarrant: And what we're seeing is some of the younger generation struggling to get onto the property ladder are joining forces, so mates might be joining forces.

This is what we're talking about – it's slightly different because it's friends rather than family, but it still is the same principle, who go out and invest together. Sometimes it's very productive, but we also hear absolute nightmares about people who want to go down the path of investing together, and they end up in court…

Vivienne Kelly: Yeah, well, if you are going to go into a joint venture or co-invest, I think it's very easy to think, 'Oh, it's my mum, or it's my brother, we'll be fine,' but I think it is really important to have not only really clear goals but just really clear parameters and have an exit strategy. You might not even think you're ever going to need or want to exit, but that's why you end up in court. If something goes wrong, it can all fall apart. You know, family is family, but also, money is money and it can be quite a distracting force. I think you really really need to be clear and just plan for everything, because then, look, if nothing goes wrong, great. But if it does, you're ready to go and you'll know how to tackle it.

Hank Hong: That's the big thing, people believe that family will always be there for you, but people's lives change. As it changes, it's going to affect your investment situation. What I've got, I've got exit ramps every single year. ‘If you want to get out, we'll do this, we'll pay you out for this’. ‘If we haven't got to this situation, then we'll pay you out for this side of things’. Luckily I have a great family, a great mum, great sister, they love me, and they just go, 'Take the money. Do what you want to do’. But with the professional side of things, we've got exit ramps every single year. If we're aiming to build the 10 town houses by this period of time, if it doesn't go between this time and you want to jump, sure. We'll pay you back this, and you get this, and you get out.

Phil Tarrant: Yeah. I think the important point with this is if you don't have a relationship with a lawyer, your accountant, or even your broker should be able to advise on someone, but to actually put some documentation around these type of things, as in the agreement in terms of if you're co-investing with someone, make sure – even if you’re best mates, or your sister or your brother ... And often it can be sometimes quite a painful thing to actually sit there and say, 'If and when this all goes wrong, this is what happens.' So I would recommend that you document this in many ways and actually get a letter, some sort of deed or some sort of agreement in place that says, 'Here's the situation, if x happens, this is what we do.' I think the important point here, Hank, and this is with your mortgage broker had on, if you co-invest into a property –

Hank Hong: Yes.

Phil Tarrant: – essentially, both people, irrespective to whether or not they pay their share of the mortgage, are liable or responsible for the total mortgage.

Hank Hong: Hundred per cent. Correct. There's a Mr A and Mr B and they have a loan together, Mr B decides not to pay the loan, Mr A still has to pay the loan, either way. He's going to be liable and both you guys are going to get hurt. So yes. Agree with that one hundred per cent.

Phil Tarrant: Do you see, have you seen any circumstances where this has happened, where people end up in arrears or default on their mortgage?

Hank Hong: It actually happens quite a lot in marriages.

Phil Tarrant: Okay.

Hank Hong: Divorces happen, and what happens is the Mr and the Mrs, they're on separation, no one wants to pay the loan, and at that point they're shooting daggers at each other, so they just don't pay the loan, and arrears accrue up.

Phil Tarrant: And then the bank forecloses and they sell the property, and that's when a good property investor gets in, because –

Hank Hong: Oh, a property investor jumps straight in. He hears a divorce case, that's where he is at the moment.

Yeah, and if the bank does sell your property, they're not selling for the best price in the market.

Vivienne Kelly: They just need to get their money back.

Hank Hong: Correct. The auctioneer would just go, bang bang bang, smash it off, and no one wins. Like I said, investment or anything has to be really rational and logical, but marriages are emotional.

Phil Tarrant: Yeah. As a property investor, many of the the properties that I've purchased, and this is the stuff that we look for, is stuff that never hits the market, stuff that never hits the market, by the time it’s on realestate.com.au and the open market –

Hank Hong: It's too late.

Phil Tarrant: It's too late. What typically makes properties under market value? There's a whole bunch of different things, it could be how it's presented, what it looks like –

Hank Hong: Deceased estate

Phil Tarrant: But then you've got all the Ds. Death, divorce, and debt, essentially.

Hank Hong: Yes.

Phil Tarrant: Deceased estate, as you just said.

Hank Hong: Correct.

Phil Tarrant: There's a divorce happening, or there's been a death in the family. Often, a property investor will capitalise on someone else's misfortune, and it sounds absolutely horrible ...

Hank Hong: It does.

Phil Tarrant: But this is the nature of the game, taking the emotion out of property investment. What makes a good investment? Buying something under market value, in an area that's going to go up over time.

Hank Hong: Yes. Also, to add to that, I believe a good investment area is also somewhere that's got a stereotype. A stigmata, or something that everyone looks down upon. So we're looking at the Sydney market, back in the day, Cabramatta. It’s my hood, Vietnamese area, and back in the day, that was a very drug riddled, criminal kind of area. Now it's one of the most expensive western suburbs out there at the moment. We've got houses at one million dollars, we’ve got units sitting at $600,000, and the units are over 20, 30 years old.

If you look at areas where they have maybe a strong cultural influence, a strong ethnic influence, they're great investments, or areas that have in the past have a lower economic household, they're good investments as well, because remember, what we said before, an investment is a rational, logical decision. It shouldn't be emotional. End of the day, you're never going to live in that investment property. It's numbers. I helped a mate, back in the day a few years ago buy a property in Minto. Two-bedroom town house, it cost him $230,000. Three years ago, now he's sitting on $450,000. Great buy. So in three years he made $200,000. He’s bought two Harleys ever since.

Phil Tarrant: Good man.

Hank Hong: Yeah!

Phil Tarrant: Maybe he should be reinvesting.

Do you have a Vietnamese background?

Hank Hong: Yes.

Phil Tarrant: Do you mind if we have a quick chat about your perception toward money, or your –

Hank Hong: Oh, yeah! Of course. Of course. Hundred per cent.

Phil Tarrant:Cabramatta is where you grew up, was it?

Hank Hong: I'm a Bankstown boy.

Phil Tarrant: A Bankstown boy.

Hank Hong: But Bankstown, Marrickville, Cabramatta, it's Vietnamese hoods.

Phil Tarrant: So the Vietnamese community really originated in Sydney around the eighties?

Hank Hong: Yes. Parents came about 1982.

Phil Tarrant: How ... Your family's perception towards money... Is the Vietnamese culture about saving? Is it a saving culture, or is it an investing and borrowing culture? How would you explain it?

Hank Hong: Well, the early ones that came up, which would be my parents, around the eighties, they're big on saving. When they came over, they were blown away by Australia, they loved Australians, so the Australian dream was buy the home, pay off the loan. So even today, my parents, they have just the one house. They're happy with it, and it's worth $1 million, because they bought it over 30 years ago. Yeah, they save, and they save.

The next generation came through, I'd say, probably in the last 10 to 20 years. They've come over and they've started to invest a lot more. It wasn't as easy to buy the home anymore. It's what we're seeing right now with the current generation of Australians.

Phil Tarrant: Okay. Coming with the cultural background that you've explained from your parents' generation, versus your generation, as a second-generation Australian migrant, you're obviously an investor, so you're okay with debt, you work in mortgages, so you understand –

Hank Hong: Yes. I have no issues with debt.

Phil Tarrant: What do you think framed your mindset? You've got both worlds, pretty much.

Hank Hong: My parents were, when I was growing up, were big on no debt. Pay your car out of cash and I bought my first two cars with cash, and all that kind of stuff. Then, being in mortgages, allowed me to understand that there's good debt and bad debt. The good debt allows you to leverage to get more assets to build a better future for yourself. There's good debt, and there's bad debt. Getting a car loan for $20,000 when you're 18, probably not the best idea. Playing in shares, building up a deposit so you can get an investment property, good win. It's a big mindset that's been switched over from the older generation to the newer generation.

Vivienne Kelly: The good debt/ bad debt thing is really interesting though, because I know a lot of people that got into huge debt around 18/19/20 for a car loan, and obviously the repayments on car loans are –

Phil Tarrant: I did it.

Vivienne Kelly: – huge. That burned them, because then five years later, they end up with a pretty crappy car that's gone down in value and they've so overpaid for it by the end, that then they are just really put off debt and they think, I know these people now, they're financially fine now, that they're moving towards 30, but they still feel burned by that experience, and they still hate debt, and they still can't get their head around good debt/ bad debt because they did have that bad debt experience.

Phil Tarrant: I did the same thing, I bought a $20,000 car when I was in my early twenties, late teens/ early 20s, I can't remember. Yeah, I paid it off, which is good, but I completely get what you're saying.

A flip side to that, and maybe this is a question for you, Hank, is, when you look to get a mortgage from a bank, it's quite good to have a history of being able to show your ability to service debt. Let's say you have a $20,000 car loan at 20, and then you pay that thing off, every single month, right on time. By the time you're 25, you've got a very good history of showing you are responsible in terms of understanding debt and making your repayments towards that debt, and banks will look more favourably if you have that history, is that correct?

Hank Hong: That is correct. I would completely agree with that. It would show that you've got a better track record, but if you're coming from – putting my mortgage hat back on – average incomes at the moment sitting at, what, sixty, seventy, eighty thousand dollars. If you've got a $20,000 car debt, your borrowing power now shoots down to maybe just under $300,000, which pretty much locks you out of every property in Sydney, and probably quite all over the other place.

So you're 18, do not get a car debt. Get a $2,000 Corolla and drive around in that. Save your money. That's probably the best way, because these days, like I said, 25, the average age of someone, a first home owner who'd want to buy a property and invest into a property is now getting younger and younger. Because they're looking at the market and they're going, 'I'm locked out.' I've got lots of clients that are 20, 21, and they've just finished uni, and they're only earning $60,000 - $70,000, and they're going to leverage buying an investment property because they can see clearly now that the market's going through the roof.

I don't know how it was 20 years ago, when people coming out 18 and 19, looking at the market, but these days, kids are looking at it and it's like, $600,000 for a decent unit. They're getting smarter now. They're getting smarter. I get lots of clients call up while they're in university, or the parents are going, 'Go talk to Hank, because Hank will show you this and that.' I'll sit there, and I'll go, 'Don't buy the car. Don't get into credit card debt. Here's your funding position, save up this money and come back to me in 12 months.

Phil Tarrant: Yeah. For our listeners, it's good to be able to show that you can service debt, but don't hold too much debt so if you've got a $20,000 credit card, you don't really need that. You should have a $2,000 credit card.

Hank Hong: Correct. Close it down, bring it down to $2,000. If you've got $2,000 – $3,000 left on your car loan, just knock it off. Then go get a home loan. You can still show it to the bank, 'Look, I've paid off my debt exactly on time,' but the bank would rather see I've saved $20,000 in the last three or four months. That shows a person that doesn't need to leverage debt and again, good debt, bad debt, as we were saying before Vivienne.

Phil Tarrant: Let's have a quick chat about the properties in your portfolio if you don't mind.

Hank Hong: Yes sir!

Phil Tarrant: What was the first property?

Hank Hong: First property was about 26, so about six years ago.

Phil Tarrant: Okay. So you first bought at 26.

Hank Hong: Yeah, I was actually quite a late bloomer.

Phil Tarrant: You're saying that's late? I was going to say you started young!

Hank Hong: To give you an idea, I've been in the mortgage industry for 14 years now.

Phil Tarrant: Okay.

Hank Hong: I started when I was 18. So for someone that's been into mortgages for six years and waited six years to buy a property, I think –

Vivienne Kelly: It felt like a long time, but I think to most people, that's probably quite young.

Phil Tarrant: The challenge of saving a deposit, was that the issue?

Hank Hong: Yeah, well at that point I was still living at home with mum and dad. So life was great. Earning $50,000 - $60,000 working the bank, I really didn't think about property. Then, the first homeowners grant came through, and that was back in the day when they were giving a bit of money, they were waiving stamp duty and you could still buy an old property.

My first property was, thank God with the help of mum and dad, I still had $20,000 - $30,000 myself. I bought a Strathfield town house for about $450,000. I used mum and dad as a guarantee, got the stamp duty waived, got $7,000 in first homeowners grant. So practically, that first home, technically, did not cost me a cent to buy.

Phil Tarrant: You obviously lived in that for a period of time?

Hank Hong: I lived there for about a year.

Phil Tarrant: Yep.

Hank Hong: Then, after that, I moved back home.

Phil Tarrant: So, $400,000 back then, I reckon that probably today is worth ...

Hank Hong: It's not bad. 

Phil Tarrant: Strathfield has done very well.

Hank Hong: Strathfield has always been the pinnacle around that area. It's the spot to be. Right in the middle.

Phil Tarrant: You still got it?

Hank Hong: Yes, yes.

Phil Tarrant: Excellent.

Hank Hong: It's my baby.

Phil Tarrant: Okay, so after Strathfield, where did you go?

Hank Hong: After Strathfield was, again, what I was talking about, was Cabramatta.

Phil Tarrant: Okay.

Hank Hong: Cabramatta would have been about a year after that. Back then, they were still going for $150,000 - $200,000.

Phil Tarrant: Those sort of red brick, two-bedroom units.

Hank Hong: Which is the perfect investment. It's my baby. I bought that back then for probably, $200,000? $250,000. It's probably sitting I'd say about maybe $460,000 to about $500,000 at the moment.

Now going back before, what you said before, red brick, and maybe up to three or four levels, great investments, because there's no strata on those properties. They're usually, those units are quite large, 100 – 120 square metres. They're built old school, so they don't fall off, they don't have defects.

Phil Tarrant: There's no lifts, there's no pools, there's none of this sort of stuff.

Hank Hong: Correct! So there's no actual cost. There are investments out there which have a 100 level – well, maybe 30 levels or so, three or four pools, four or five elevators, and the strata's maybe $2,000 a quarter. Even if you own that property outright, you're still paying rent on strata.

Going back to the Cabramatta one, the great thing about the Cabramatta or these areas that have stigmatas, or not great ... I'll say, they don't look that great.

These are where the great investments, I believe are, because other people go, 'Oh, I don't want to invest in Lakemba, I don't want to invest in Cabramatta because I've heard stories about it.' When the local person moves there to rent, he'll rent in that area, so rent figures are low. When he has enough money to buy a property, where's he going to buy? In the local area where he's working, where he knows his people. Where he's comfortable. So you've got this organic organism that just feeds on itself. When they do well, they invest back into the area. It just keeps going and just keeps building up.

Phil Tarrant: You're just talking about probably fundamentals, is all it is. The logic that you're explaining in terms of the demand for properties because people want to be within their cultural / ethnic sphere of influence – that's one driver, but that dynamic, what does that cause? It's positive pressure on rents because there is demand.

Hank Hong: Correct.

Phil Tarrant: Which means there are low vacancy rates.

Hank Hong: Yes.

Phil Tarrant: Which is good for an investor. It means that you've got generational cycles so people coming in as renters, they like the area, therefore they want to upgrade into owning a property in that area, so there's positive pressure on price. Prices should continue to go up.

There areas you’re explaining, they're all in west/ southwest Sydney, but this is the same dynamics irrespective of whether it's in Melbourne, or Brisbane, or Perth.

Hank Hong: I'm not saying it's the perfect investment ideal, there's plenty out there, but it's the strongest one that I've seen.

Phil Tarrant: It's the drivers. I think the important thing for our listeners is about the drivers. What will make a property go up in value, and what's going to make your rent – how are you going to be able to rent your property and make sure your rent is sustainable?

Hank Hong: It's sustainable on something that's organic rather than – and I don't like trash-talking other stuff – but an area which is dependent on, let's say, mines. Or dependent on tourism or dependent something. It's organic, it builds itself.

Phil Tarrant: Well, there's jobs. There's jobs, people want to live there, there's infrastructure, there's everything you need to actually stay within that particular area. It makes a lot of sense.

The message for our listeners is to understand what the drivers are, for why property goes up in value, and you've just explained some of them. There's a lot on smartpropertyinvestment.com.au, we write about it all the time, don't we Viv?

Vivienne Kelly: We do.

Phil Tarrant: The fundamental stuff. I think we're running out of time, have we?

Vivienne Kelly: We have! We always do. It's sort of, time gets away from us, there's so much that we can talk about.

Phil Tarrant: Hank, you're going to have to come back in and chat a bit more.

Hank Hong: Oh, I would love to. I'd love to.

Phil Tarrant: We really enjoyed it. It was sort of a mish-mash of a podcast between you being a mortgage broker and some of your experience in that regard, but you also as a property investor.

Vivienne Kelly: Yeah.

Hank Hong: It's a good combination of both. I think your mortgage broker is someone that should see, because they know how much you can borrow, so therefore they can give you an idea. They're unbiased, they're not selling you a property in certain areas, and the mortgage broker is someone that's like myself, I've dealt all around Australia, so that means I've seen so many different investment tools that other people do. I know the areas that my clients have invested in and they usually tell me ‘It's good because of this and good because of that’. Rather than just going to a real estate agent that's just, 'I only sell in Abbotsford.' The mortgage broker's important because he knows how much you can borrow, how far you can go, he's seen a lot. He's done a lot of applications. He's seen different types of investment granny flats, duplexes, developments, mining towns, positive geared investment portfolios. So speak to your mortgage broker.

Phil Tarrant: Would you recommend that your mortgage broker should be an investor themselves?

Hank Hong: Yes. Yes. I've sat down with many clients and they've gone, 'What's your portfolio like?' And I'll sit there and explain to them, and one of my portfolio strategies might hit exactly what they're thinking in their mind. That's important, knowing what your client wants, and your client understands that you know what they want. That keeps them at ease, and they'll tell you everything, and then you can open up and run through their situation for you. You're not there for advice, I'm never here for advice, I'm just here for, ‘Look, I've seen my client do this, this. Do your own research and see how you feel about it’.

And if you've got an investment rate right now that's more than 12 months old, your rate's too high. Your rate is definitely too high, go speak to a mortgage broker.

Vivienne Kelly: That's some good advice.

Phil Tarrant: That's good, yeah. I'll close with this, I've got three mortgages with a particular bank and ...

Hank Hong: Your interest rate just went up 12 months ago.

Phil Tarrant: I can't remember, I was doing something, I can't remember ... I looked at the interest rates ... I can't remember what I was doing, but I checked, I looked at it and I just went, 'Hang on a second, what's going on here?' They were so far over what market should be.

Hank Hong: Yep. Definitely.

Phil Tarrant: So I called my mortgage broker and said, it probably had some expletives in there, 'What the ... What's going on here? This ain't cool.' So he got straight onto them and got the rates down.

Hank Hong: Yep. He'll either get the rates down, or he can move you. Right now, a lot of the banks are stepping back into the investment market, there are amazing fixed rates under four per cent, and there's variable rates a couple of the major, actually the non-majors, they're under four per cent at the moment. Have your mortgage broker run a quick scenario for you and make sure that you're still competitive.

Phil Tarrant: Fixed or variable?

Hank Hong: That's a question that everyone asks all the time. All right, so what I say is, I've always thought the rates were going to stay the same for the last 12 to 24 months, but they keep going down, so I’ve been wrong, every single time. I fix my rates because, like I said at the start, I like the ease. It's fixed, I know the repayments are exactly that much, and I know the rent's going to be that much, it's a set and forget, and it disappears. At the moment, all the fixed rates are sitting at under 4.2 per cent, four per cent. It's great, because rental yields are sitting at five, six, seven per cent.

I can't ... I don't tell people to fix rates, but it's up to you. If you fix three to five years, under four per cent, I can't see you losing, even if it goes down once, I can see in a couple years’ time, even 12, 24, the rates are going to be higher than four per cent.

To fix in is not a bad way, and it locks your investment down. No headache, the rent pays it, and you move on.

Phil Tarrant: Speak to your mortgage broker.

Hank Hong: Yeah. Speak to your mortgage broker.

Phil Tarrant: Anything to finish up with, Viv?

Vivienne Kelly: No, I think that's it, I think it was really interesting to have Hank wearing all of his different hats.

Phil Tarrant: Yeah.

Vivienne Kelly: I think we'll probably need to get him back in to sort of delve more deeply into the way that he's structured his portfolio and…

Hank Hong: I would love to. If anyone's hearing, if you make comments, tell us exactly what you want to hear, and I'll come back next time and go more into deep into that side of things.

Phil Tarrant: Cool. That was fun. Thanks, Hank.

Hank Hong: You’re welcome.

Phil Tarrant: Appreciate you coming in. Viv, thank you.

Vivienne Kelly: Thanks, Phil.

Hank Hong: Thank you guys, for having me.

Phil Tarrant: Thanks for tuning in, everyone. Remember to check us out, smartpropertyinvestment.com.au, you can e-mail us if you've got any questions, and we get plenty of them, [email protected], Viv will get back to you as quickly as she can, if you've got any particular questions around the Smart Property Investment portfolio, or Hank in particular, or anything we've spoken about, just drop us a note and we'll get onto it. You can follow us on all the social networks, Twitter, Facebook, you can find me on Twitter @PhillipTarrant, and that's pretty much everything I think.

Vivienne Kelly: Yep! That's it!

Phil Tarrant: Cool, all right. We'll see you next week, thank you, bye bye.

 

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