Tyrone Shum of Property Investory Delves Into My Journey as a Wife, Businesswoman and Property Investor – Part 2
If you haven’t already had a listen, make sure to check out part one of the interview with Tyrone.
What I love about this interview is Tyrone’s ability to ask questions that unpack ideas that lean towards being subtle; and shine the torch on where alternative investing fits into portfolio building in the world today.
00:00:00 – Intro
00:01:21 – Salena’s journey towards the alternative space
00:04:56 – Salena’s 3 step process and dive into the alternative marketRead More
00:10:43 – Residential vs Commercial vs Alternative properties and their returns
00:14:15 – Salena’s 5 Buckets of Alternative Strategies
00:15:37 – Regulations outside of Australia and Salena’s network
00:18:04 – Types of Returns from the Alternative market
00:22:18 – Salena’s life over the past 15 years
00:25:48 – Salena’s Mentors
00:27:55 – Book recommendations
00:29:34 – Hindsight for past 10 years
00:30:38 – Future plans
00:33:19 – Skill vs Luck
00:34:31 – Outro
Q: You’ve shared the challenges you’ve faced, but we also want to hear about an amazing moment you’ve experienced.
- There are probably many moments where things went really well.
- We got involved in a development in Melbourne that basically got us a half a million dollar profit in a very short space of time.
- On the surface, that was a great win. But it was actually a really painful experience.
- The builder went bankrupt just before completion, and I was flying down to Melbourne every week to try and push it along.
- Overall, it was a great outcome, but it also taught me a lot about defining success as an investor.
- I made the decision from that moment onwards that I wasn’t going to expose myself to that level of risk again.
- So, I have done various small scale developments since, but with significantly lower risk.
- There is such a spectrum of investments that require virtually no effort through to those where you’re super active.
- In 2009, we had a really good portfolio at that point with a mix of commercial and residential property. And I started to use my accounting skills to figure out at what point we were going to be financially free.
- We had a high net worth (we’d been investing for nearly a decade at that point) and when I did the numbers, I realised that in order for us to replace our living expenses and have that freedom to step off, it was going to be another 25 years.
- Around that same time, we had just bought a commercial property in Canberra and the banks had said they weren’t going to give us any more money right now.
- At that point, I had a choice: we could sit on what we’ve got and wait that 25 years or ask the question, “what else?”
- I think one of the skills that really good investors have is that capacity to be tenacious and determined to ask the question, “what else?”.
- So my amazing moment was recognising that driving up my net worth wasn’t going to get me closer to my dreams around financial freedom, so I started to explore other opportunities and other ways of doing things.
- That’s how I stumbled into the alternate space.
Q: Was it that your portfolio was not generating our cashflow to be able to replace your daily living expenses? Or was it something else?
- It’s all good and well to say that you’ve got a multi-million dollar net worth – but you have to work.
- I’ve worked with so many people who have a staggering net worth but are in so much financial pain and have to keep hustling and working to support their lifestyle.
- You have to do the hard yards and you have to use the traditional investments to build up your capital base – and the property is the best vehicle to do that.
- But, the thing that I’ve embraced is that you don’t actually need as much of a net worth as you think.
- Part one of the game is building your capital base. Part two of the game is figuring out how to take that capital and start to dial.
- Putting a tiny percentage of your portfolio into the alternate space would mean that you could ramp up the cash flow in 3 to 5 years instead of waiting 20 to 30 years to replace that income.
- Once you’ve done that, then part three of the game, as far as I am concerned, is working out how to turn all of that income into annuities and a family bank.
Q: How do you go about turning to alternate sources to be able to generate more cash flow? What kind of sources are we talking about?
- Back in 2009 when I started to look at what else was out there. I think the thing that probably had the exponential impact in my world was looking for people who had results that I wanted.
- I didn’t restrict myself to Australia and New Zealand – I searched the globe.
- I wanted to know what people were doing in other parts of the world.
- I found mentors and people in other markets, and I got a chance to look over their shoulder and see what they were doing and what they were tapping into.
- Following the models that somebody else has already created is better than trying to do it yourself.
- I started to hear about opportunities off the market and out of the reach of most people who are trolling the internet looking for opportunities.
- I looked at the European and the US markets, but particularly like the US market at that time because it’s very similar to what we have in Australia from a mechanics point of view.
- The problem that we have with the Australian market and why I started to get more interested in the US space, is that the market here is terrible for cash flow.
- It’s fantastic for building up capital – there are not many markets in the world that match it.
- But from a cash flow perspective, properties held without any debt show a cash flow return of about 1% or 2% – which personally I don’t see as a great return at all.
- So, by putting small amounts of money into some of these alternate strategies, where I could get between 8% and 15% net returns, I was able to see that I didn’t need to put a whole lot of money into it in order to increase my cash flow by five times the amount.
- And that’s why that market was so exciting to me at that point.
- Our market is all about capital because it’s become very efficient – people have to fight to get deals here.
- In the State’s, however, it’s a very different matter. There’s this space of real estate investing in the market that is incredibly inefficient. And because of that, it means that there are all these unconventional opportunities, which are just not available to the masses.
- It’s really the playground of the ultra wealthy.
- Buying property is only one of the eight strategies that I’ve started to focus on. What I have learned now, out of all the alternative space strategies, is that owning direct property is actually my least favourite out of all of them.
- You can truly diversify for a liquidity point of view because there’s so many different layers to it.
- In Australia diversification means buying a house in New South Wales and then buying a house in Victoria.
- In the alternative space, because the dollars per deal are so small, it’s about diversification across strategy.
- The idea of owning houses is great, but it’s at the bottom of my pile now in terms of the strategies.
- I want to control the deals, I don’t necessarily want to own and be responsible for the tenants and maintenance.
Q: Would you mind sharing these eight strategies with us?
- So, obviously there’s the traditional one which is just buying property. You go to a bank, you get leverage and purchase. Or you just purchase in cash.
- With the other strategies, there’s probably five buckets and within each bucket, there’s variations.
- The five buckets are direct ownership, lending deals where you become the bank, joint venture deals, and syndications where you and small private funds have a group.
- Syndications is a bunch of people investing in one specific project and private funds is also a bunch of people, but the fund manager can get involved in multiple projects at the same time.
Q: How do the different rules and regulations work overseas?
- Well, I’m not setting up the funds, it’s not me that runs the funds and I don’t get paid based on anything anyone invests in.
- One of the attributes that I really think is important that you develop as an investor is being very agnostic – meaning that you’re unbiased by everybody else’s opinion, what the market is saying, and understanding and look at deals on their own merit.
- The funds over there are extremely well-regulated, but a lot of these small private funds operate in a space that is too small for the big hedge fund and the rates and way too big for your average mum-and-dad investor.
- So, they’re very nimble – they can take on big or small deals – and each fund has their own flavour of what they do.
- But, the calibre of people that run these funds won’t just work with you if you’re just some unknown off the street – they’re a very insular private network. So, it all comes back to your network.
- The interesting thing though, is because we’re foreign, they generally don’t care whether we are sophisticated investors or whether we have a net worth of a specific amount.
Q: What kind of returns would you be expecting from these kinds of strategies?
- Look, I’m slightly more aggressive than the average Joe and with the people I work with, my job is to figure out what’s the fit for them and what their appetite is.
- But typically on the more traditional stuff, you can get 8% to 15% net returns and on some of the joint ventures and other lending opportunities, you can get returns of 18% to 24% because of that market inefficiency.
- I know it sounds like they must appear super risky, but in all seriousness, when you unpack the deals, and you understand how the strategies work, you’ll understand that these deals don’t need a rising market and don’t care whether there’s economic turbulence or not.
- If you contrast that to our market’s uncertainty, the risk is relatively lower than what we experienced in the Australian market.
Q: Have you experienced any difficulty changing a mindset and working with people who don’t actually believe you can expect more than a 3% return?
- I’m all for healthy scepticism.
- My training has made me a very conservative person, yet people are so suspicious and sceptical about these opportunities.
- I’ve had people troll me and say, “this has to be a scam.”
- But I have zero involvement in the investments that the people around me make. My role is to support and give them access, but I don’t get paid and I don’t have any involvement.
- I love the Australian property market and it’s great for building capital, but I got tired of relying on a rising market to make money. And I got tired of trying to find good deals in our market – it’s hard work.
- So, my plan A is building cash flow through these alternate strategies, which by the way also exist here in Australia, they’re just not plentiful.
- My view is that the world is full of undervalued opportunities and all I’m doing is tapping into those.
- They exist – they’re just not mainstream.
Q: Can we talk a bit more about what you’re currently doing? Is your main focus helping your investor clients? Are you no longer working in management or accounting?
- I don’t think I’m employable to be frank – that’s how long it has been since I last had a job.
- I have been out of the corporate world for 15 years now.
- Being a mum has been a big part of the last 15 years – that sucked up a lot of time, space and energy.
- But I have also done lots of other things, for example I was an avid share trader at one point.
- But the property stuf just started to give the best returns, so I just let go of everything else and focused on that.
- It was never the case that I set out to start a business in this – people just asked if I could help them achieve the same and it just sort of evolved from there.
- For the last six or seven years prior to starting the Freedom Warrior program, I helped people find things in Australia and point them in the right direction.
- It’s only in the last two years that I decided that I didn’t actually want to work that hard and I want to work with people who get it.
- You don’t have to wait until you’re 65 to retire, you can get there in the next 18 months to 2 years if you embrace some of this alternate stuff.
- So my attitude is that I am driving this bus, and it’s going in this direction. And if you want to join me on that journey, you can jump on the bus.
- And that’s where I’m at.
- I help with two ends of the spectrum. I help business owners who are wanting to build that exit ramp from their business. And then at the other end, I love working with teenagers.
- I’ve done a lot of work in the teenage market, just helping them understand the basics of stewardship, investing and looking after money, and understanding that you can be the driver of your own financial success.
Q: Let’s talk a bit more about the mindset side of things in terms of mentors and resources. What kind of resources have you tapped into or who are the mentors that you’ve been using to help you accelerate your journey?
- I spent a small fortune on every property course and book that was out there back in the day and they were very helpful. They gave me a baseline understanding of different strategies and how they worked.
- But I still say the single best driver of my success was the mentors and masterminds that I became part of.
- There’s probably been a number of people along the way that happen to have a great capacity to create wealth and it’s effortless for them.
- I found that many of the people I took on as mentors were also relatively frugal – the purpose of money for them was not the fancy homes and big houses and all of that but rather the capacity to influence that mattered the most.
Q: Any particular books that you’ve recently read or that you still go back to from time to time that you could recommend to our listeners?
- Yeah, there’s a couple that come to mind.
- One that I’ve read a few times is called the Millionaire Next Door.
- It’s around 25 years old, but I think the principles in that book still stand true today. There’s some great things in there and there’s a formula that I kind of put my own tweak on that I pulled out of that book.
- The formula is if you take your average household age and multiply it by your average gross household income and divide by 10, that should give you your expected net worth.
- Because of the way that the property market and affordability has changed, I actually have changed the formula a little bit
- I say your average household age multiplied by your gross income divided by 5 and that should give you your expected net worth. If you’re above or below that, it gives you a barometer of how effectively you are creating wealth.
- So, I love that book. I just think it’s got many great concepts.
- Just a reminder though – there’s no magic formula. It’s just: spend less than you earn and invest.
Q: If you had a chance to go back and meet yourself, say 10 years ago, what do you think you would have said to her?
- The biggest part of the journey for me has been the head game and getting my head in the right space to be clear about what matters.
- I think I have wasted a lot of time going down many rabbit holes because I wasn’t sure and I didn’t back myself.
- It’s a little bit like the experience of seeing things on Facebook and Instagram. It just looks like everybody else has the perfect world and the perfect life.
- It’s probably, as I’ve got crankier and older, that I’ve learnt to just back myself more.
- I also think feeling an experience of the imposter syndrome from time to time has plagued me.
- I am a bit more comfortable in my own shoes now, so I think the message I would give myself is “back yourself a bit more.”
Q: If you go forward in say the next five years, what do you think would be some of the exciting plans that you’ve got?
- One thing that’s on the radar for the next 10 years is maybe a move to somewhere coastal. My husband and I both love places like Newcastle and he’s a real beach goer.
- That’s definitely one thing I am excited about.
- If we’re talking about wealth and property, I love the idea that I’ve got a plan A, B and C. I’m just continuing to build cash flow through these alternate strategies and not overexposing myself at all.
- I’ve still got a great portfolio of assets here in Australia which is my plan B. And then my plan C is obviously all the traditional things that I don’t really believe in, but like superannuations and all that stuff.
- When you know that there’s going to be money coming in, whether you get out of bed or not, it’s just such a freeing place to be. And I just wish that for everyone.
- I spoke to a guy earlier this week who is 70 and such a sweet guy. He has been running a business all his life and is barely making ends meet and is now at the point where he knows he can’t step off. I have a real empathy for people who feel they’ve got a higher purpose but just can’t work out how to access that.
Q: Out of all your successes, how much of that is due to intelligence, skill and hard work; and how much of that is due to luck?
- I genuinely believe that I’m a very lucky person and I have massive gratitude for the journey that I’ve been on and the people that I’ve met.
- But where opportunity meets preparation, the intersection of those two things is the dictator of the results you get.
- So it’s luck, but also being prepared and in the right mind space when you start looking for opportunity.
- So, I would say it’s probably where those two circles meet.
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