Former casino worker stacks property investment odds in his favour
Some harsh lessons early in life have helped to inspire and drive the property investment strategy of Western Sydney product, Kev Tran.
At just 32 years of age, Kev Tran has seen both the dark and bright side of the real estate market.
The son of Vietnamese parents who had their lives turned upside down by war before migrating to Australia the early 1980s, Mr Tran grew up in social housing in Western Sydney’s Liverpool, eventually moving into their own house in Hinchinbrook by the time he was eight.
“My dad worked, and still works, in factories, while my mother was in furniture sales and had second jobs cleaning offices in the evening, where I would go with her and do my homework,” Mr Tran said.
“My parents have always been hard workers and from them I absorbed a strong work ethic.
“They came from the (Vietnam) war so they very much had a scarcity mindset, so we were very frugal and saved well, but they did not know much about investing or wealth creation, so they just worked, saved, and spent their after-tax money on depreciating assets.”
His parents’ eventual purchase of an investment property could’ve been a positive turning point for the family but differing strategies between his parents eventually contributed to the demise of their marriage.
They had bought an investment property in their neighbouring suburb of Miller but it caused an irreparable schism between his parents soon after.
“In Sydney’s early 2000s property boom, my parents sold their investment property after just a year of significant growth due to a fear that prices couldn’t go up anymore – again, due to the scarcity mindset and lack of education and financial literacy.
“They didn’t know about equity or leveraging.
“My father really pushed for this sale to cash in the profits and go on a holiday and purchase a car, but my mother didn’t want to sell,” Mr Tran recalled.
After they sold that property, they continued to see prices skyrocket for years to follow.
“I was only 11 or 12 but I could definitely see how this affected their relationship and infused a resentment towards each other.
“As their relationship worsened and other poor financial choices were made, they were constantly fighting and splitting up and there were often long periods where I didn’t see my father.
“My parents eventually divorced and sold our family home as well, and I went on to live with my mother in an apartment she later purchased in Liverpool.”
As this unfolded during his final turbulent years of high school, Mr Tran had unwittingly sown the seeds of the strategy that would become the solid footing for his own financial security.
“When I look I look back at my childhood and early teenage years, what stuck with me is that saving and being frugal is important but can only get you so far in life.”
Playing the odds
After his mother sold the apartment, she moved to Melbourne with her new partner, but Mr Tran stayed in Sydney where he was comfortable with his network of friends.
After periods living with his father and then auntie, he studied hospitality management and secured a job at 21 years-of-age at the Star Casino tending to VIP guests.
“The job introduced me to a whole new world of wealth I had only previously imagined; high rollers spending $10,000, $20,000, sometimes $100,000 in a day as if it was nothing.
“I quickly learned that no matter what industry, job or business these wealthy people made their income from, the majority built their long-term wealth through property and I decided this is what I’ll do once I have enough cash saved up.”
Kev's rentvestment portfolio
|Location||Purchase date||Building type||Price paid||Current value|
(refinanced in July 2022 at $571,000)
|Ballarat North||2018||Freestanding house||$385,000||$650,000
(refinanced Feb 2021 at this figure)
With his newfound income and independence, Mr Tran made his first venture into property investment.
By ensuring his expenses were less than 30 per cent of his nett income and by living a balanced lifestyle with some discretionary spending and overseas holidays, he was able to save $65,000 over five years for the all-important first investment property.
With Sydney deemed unaffordable in 2016, he looked interstate and bought an off-the-plan three-bedroom townhouse for $450,000 and an estimated completion within two years.
“It was a nervous step but I had already mentally prepared to enter the property market for many years, and was prepared to take a risk, as opposed to just saving my money and being afraid like my parents.”
Studying the market through as many mediums as he could, Mr Tran committed to rentvesting and continuing to rent in inner city and inner west Sydney, where his rented residences were out of reach to buy in the $1-2 million range.
“I choose to rentvest for a few reasons, namely the debt and interest paid on your residence is non tax-deductible as opposed to investment debt that helps my taxable income; the type of property I like to live in has high strata fees and less capital growth potential; and, the properties I buy have strong capital growth and strong rental yield that helps me build my passive income over the long term,” he explained.
Kev’s key strategies for success
“I first work my way from the macro research, then work my way to micro research, then on-the-ground research.”
Some of the macro factors I look at are:
- economy diversification, employment through various industries (not dependent on mining for example)
- overseas and net migration
- population growth
- current unemployment rate as well as unemployment trends versus job ad trends
- mortgage affordability of local owner-occupiers by assessing the Census data for household income versus median house prices, as affordable areas with strong fundamentals are resilient against interest rate rises
- strong infrastructure pipeline confirmed for the next 1-10 years.
From there he assesses particular clusters of suburbs, and highlights areas that have particular indicators, such as:
- increasing sales volume, indicating there is demand
- slowing or historically stable days on market, indicating properties are selling quicker or selling quickly consistently over time
- price segmentation (which particular price bracket is most in demand)
- stock on market trends (are more or less properties becoming available over time?)
- council building approvals (how much new stock will come onto the market to absorb demand?)
- public housing (“I want to ensure the minimal amount of public housing near my investment. Although I came from public housing, statistically speaking this will affect growth”).
Long term plans and shorter-term property goals
Having now taken another evolutionary step on his property journey, Mr Tran is now a buyers agent for Investorkit.
To secure his own property future, his ultimate goal is to retire with the equivalent of $150,000 in passive income.
“I’ve set a conservative 20-year plan that includes three more property purchases, maybe including commercial, over the next five years, which is again based on conservative assumptions of an average 7 per cent capital growth per annum and 4.5 per cent rental increase per annum.”
Asked if negative sentiment swirling around the immediate trajectory of property prices was a concern, Mr Tran said such short-term speculation had no effect on his property decision-making.
“I am investing for the long term, and have a six-month buffer in place for my portfolio that gives me the peace of mind I can hold onto them, even in the case of unexpected issues such as repairs, vacancies or rising repayments.”