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5 minutes with Lucia Xiao (Ambler)

Monday, April 04, 2016

Back in 2014 we received a call from Lucia Xiao (Ambler) enquiring about memberships.  It started typically enough, how much is subscription, what are the benefits, where are the meetings held?  Very quickly the conversation took a turn and the questions became very specific - what are the purposes of these meetings, who speaks at these events, what does APIA actually do?  We didn't know Lucia back then but we knew we were speaking to a motivated and purposeful lady.  Fast forward two years later, Lucia is a permanent fixture at APIA events even at presentations that are surely too entry-level for her.  Since 2012 she has been an active property investor and recently left her corporate career to start her own business.  We caught up with Lucia for a quick chat about her experience, where the Auckland market is heading and all about debt: 

APIA: You started investing in properties in 2012.  What prompted that move? 

LX: In 2011, I was working in the banking industry and had the opportunity to move from being a Mobile Insurance Manager to a Business Manager.  I had a client who was new to New Zealand and was buying up houses in Epsom around Christmas 2011.  At one point he was talking numbers at me, 134, 156 and so on.  At first I thought he was talking house numbers but he was actually talking about purchase prices!  He was maybe buying around 10 properties at that time.  I then noticed other investor clients were moving fast as well so that really clued me in as to where the market was heading.  Clearly back then there was a lot of potential in the housing market.  Unfortunately for various reasons I didn't take any action until October 2012.  I was sitting on one family home with very good equity and achieving a stable good income before I took my first steps. 

APIA: I want to talk a bit about debt, because you spoke previously about your changing attitude over the years towards your mortgage(s).  There are debts that are good and debts that are bad.  As a financial advisor, what can you tell the new investors who are wary of debt?

LX: This is a very good question, a good debt is an asset.  You are borrowing on an item that appreciates in value through time which in turn provides you with an income stream, like a good investment property.  A bad debt is an absolute liability.  It is a debt incurred for a depreciating asset like a vehicle.

We bought our first home in September 2011 with a deposit borrowed from  my mother and an 80% loan from the bank.  The repayment was initially $500 fnt which we actually increased to $1,000 on a combined income of $52K pa.  We were living a basic lifestyle and paying down the mortgage aggressively because I was truly fearful of debt, any debt.  Now I look back to those times and laugh at myself.  I wish we had used the additional money to support more properties.  A good property investment loan is a good debt and what we should've done was to focus on growing that debt to our advantage.  Our next move was to sell that house in order to purchase an empty section to build our own home.  The construction ended up doubling our initial budget, luckily a few things lined up in our favour - my income increased dramatically and the building industry at the time (the GFC) was keen for work.  If we were wise back then, we should have kept the first house, built up a portfolio then built our own home after accumulating enough performing properties.  I always think we should take stock, stop to smell the roses and enjoy the life you are creating for yourself. 

At the end of the day, currency in general is constantly being devalued as countries continue to print more paper money.  Inflation is the norm of our time.  I still come across a lot of people who are uncomfortable with debt.  My suggestion is to talk to someone who is investing successfully and talk about what scare these investors and how they overcome their fears.  It takes guts to be a property investor and not everyone can do it.  Auckland is a popular city to live in, the quality of life it offers is incredibly attractive to immigrants.  Putting aside overcrowding and traffic issues, so long as Auckland continues to generate jobs and business opportunities, there is always going to be an influx of population pushing up housing demand.  I am a big believer that you only invest in Auckland, where the population is, where the people want to live.  However, if you are buying an owner occupied, the advice may be different.


APIA: How has your investment strategy evolved in the last four years?

LX: I don't think I ever had any strategy when I first started out.  I was lucky to be on the top of the wave when I started.  If I invested now, I would look at the location first, close to CBD or other Auckland town centres and ideally walking distance to all amenities, then do the numbers.  If you are new to investment, it is worthwhile to reach out to successful and active investors.  A lot of them, like me, are more than happy to share our knowledge and experience with you.

APIA: Now that you are a seasoned investor, what would you say is the biggest lesson you have learnt over the years?

LX: Tenant selection.  Never ever skimp on tenant selection.  I was incredibly lucky to have a very nice couple as my very first tenants and incredibly unlucky when these tenants connected me with their friends to rent my property to.  I didn't bother to do proper background checks on them and ended up suffering through various issues with these new tenants.  I know now that had I gone through the tenant selection process properly I would have saved myself a lot of hassle.  

When a tenant leaves, it gives the landlord a good opportunity to start on a fresh page, select a quality tenant and increase the rent.  I always say a vacancy is actually an opportunity.

APIA: I have to say, you are the envy of many APIA members having successfully plotted your exit from the corporate world to start your own property related business.  How did you plan for this career move?  What part has your portfolio played?

LX: I recently left the bank after 15 years of service to start my own business - FINAX because I see myself as being in position to offer a unique service to investors.  Starting my own business is a big step which I do not take lightly.  FINAX took several months of careful consideration, consulting and planning.  If not for a few things aligning, I would not be able to do what I am doing right now.  Firstly, there is my investment portfolio which gives me the financial security to fall back on.  Secondly, in terms of budgeting, my income is not needed for the family.  My overall financial plan in terms of how my business fits into it is to have nothing owning on the owner occupied home and achieve an income/buffer that my family and I are comfortable with.  In terms of actual practical tips: 1. You must always have a purpose and a plan if you want to transition from 9-5 employment to owning a business that is complimentary to your investment portfolio; 2. A revolving credit is immeasurably valuable for new business ventures.  

APIA: What do you see as the biggest challenge facing Auckland property investors at this point of the market?

LX: Not so much a challenge per se but more a shift in mind-set.  I often hear people say "You can't buy in Auckland." the reality is that yes, you can.  You just need to keep looking.  There are still good buys around but you need to give your time and effort to find them.

APIA: Finally, for the new APIA members reading this interview - what is your top tip to getting the most value out of an APIA membership?

LX: Time allowing, attend as many meetings as you can.  I always pick up good nuggets of information even at presentations I had heard before.  Talk to other investors sitting next to you.  Don't be shy, there are a lot of investors who are willing to share their investment stories!

What about you?  Our community is all about celebrating the stories of our members.  What is your Auckland property investment experience?  Comment reply below!


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