Things only rich people say (and my investment journey)

Posted by Gavin Chau

Well, we’re somehow at the last blog of the year again. Even though time is a never-ending continuum, our rituals around Christmas and New Year’s are a useful milestone and place marker during our lives. It’s a mystery why humans assign these place markers, but it happens in nature as well – we see sheep gathering around a lone tree in a paddock even if it’s not a hot day, and Mahi Mahi and various pelagic fish gather around floating debris as they travel the vast nothingness of the open ocean currents.

Regardless, the last four or five years have always left me feeling the same way—I always slow down and review the year, and I guess writing this blog forces me to think about where I went wrong, what I did right, and how I should course correct for next year. We’re likely past the halfway point for this property cycle, and in the next few years, we should see prices rise rapidly.

I’ve been wrong all year about interest rates. What I didn’t count on was the RBA holding and effectively forcing the government to do its job. This was a departure from recent history when the government relied heavily on the RBA to manage the economy rather than using fiscal policy to target the areas that need targeting. Regardless, we will see rate cuts eventually, and the longer it takes, the further asset prices can rise. I’ve never been more bullish.

I recently got sent this from a retired friend of mine; he’s 36 and has been retired since he was 33 through a range of business ventures and property. I had to laugh because it’s the kind of thing that only rich people say.

It’s difficult to have time, a quiet mind, slow mornings, and the ability to travel without having a decent amount of money. If you aren’t an heir to a fortune, money is really just a battery that stores the effort and energy you have put into your life. You can then use it to buy back the time you have left on this earth by doing more of the things you want to do and less of the things you don’t want to do.

He is absolutely right, of course. Earlier in the year, I spoke to a retired US naval clearance diver who got bitten on the leg by a bull shark while spearfishing. It severed his femoral artery, and he bled out for over 90 minutes, losing seven liters of blood despite the application of a makeshift tourniquet. He went into cardiac arrest and died on the way to the hospital before being revived. He said the whole time the only thing he was thinking about was his children and his wife and not at all about money, assets, or finances.

Steve Jobs (CEO of Apple) had similar regrets as he was dying of pancreatic cancer at the age of 56, saying, “I wanted my kids to know me. I wasn’t always here for them, and I wanted them to know why and to understand what I did”. The truth is we’re all billionaires – there would be things that we wouldn’t give up even if someone offered us a billion dollars.

I wasn’t going to add this part because this blog has already dragged on way too long, but I’ll tell you a little about my own investment journey.

For as long as I can remember, I haven’t wanted to have a job. My father often reminds me of when I was five or six, asking him, “If people didn’t have to eat, would that mean they wouldn’t have to work?” He answered yes at the time.

The irony, of course, is that you have to work really hard not to have a job. Since I didn’t want to have a job, I didn’t have a clear idea of what I wanted to study at university. I started off with an architecture degree at UNSW, and despite topping the year on a bunch of assignments, I quickly realized I didn’t want to be an architect.

So, I switched to a commerce degree at USYD because I’m Asian. I went through various analytical, economics, and data science-based roles. Along the way, I built an algorithm to accurately predict the number of magazine sales to each news agency in Australia and built the model to price the cost of BHP running a rail line from its WA mines to the port.

But I never lost my interest in property. I clearly remember how house prices in my suburb doubled from $500,000 to $1 million from 2000 to 2003. I attended a property seminar by the late Peter Spann to get a crash course. But like most people, I FOMO’d into the property market at its peak in 2003, buying a house in Katoomba, thinking it was now or never.

In 2006, I finally found my calling after landing a job working for Tony in a different organization as a research analyst in the property market. For the first time, I felt interested in work. I then added another two properties in Granville and Merrylands. This time, having a far better understanding of the market, I watched prices double over about two years.

I left and purchased a few milk runs, running them for 11 years while investing in a range of other assets and another house in Strathfield. I then returned to work for Tony at Blue Wealth, where I added another property to the portfolio. This has since seen 25% growth in 18 months.

I suspect many people would have the same thoughts about not knowing what they want to do with their careers and have felt the pain and regret of buying at the top of the market. But the universe tends to reward action, and had I not bought that first property, I probably wouldn’t have bought anything at all.

Anyway, that’s about all I have for this year… I have to ask Tash for leave tomorrow to go to Katoomba to rebuild the deck. The property has performed great, by the way, with an internal rate of return of 18-20% even after buying the top. Property is a very forgiving asset.

I hope you all enjoy your Christmas and New Year’s break. Spend time with your family and friends doing the important stuff, and I will see you again in the new year!

PS. Rhiannon you did me dirty with that picture!

Posted by Gavin Chau, on 17th Dec 2024