Building Wealth with Bricks: Manhattan Real Estate & Beyond | The Growth Booth #94

Aidan 

Welcome to The Growth Booth. This is episode number 94, and today I'm talking about a topic that I love. It's investment, and in particular, real estate investment in my favorite city in the world, Manhattan. I've been able to convince my good friend, investment Manhattan real estate expert, Wei Min, to join me on the call now. If you've been a follower of the show for some time now, you may remember that way back in episode number 22, we had a three-part series about wealth building and the second part of that, episode number 22, was about property investment and we had Wei Min on the call. So a fair amount of time has passed since then, but Wei Min, thank you so much for taking some time out to join me here today.

Wei Min 

Thanks for having me, Aidan.

Aidan 

I found out about Wei Min through a Google search, and I was I want to say it was around about 2015, something like this. I was searching “property investment in Manhattan”, and I started looking to invest in Manhattan because I already had a significant portfolio of property in New Zealand, and the New Zealand properties that I have in New Zealand dollars.I wanted to have start diversifying out and having properties in a completely different market, earning a different currency, the US dollar in this case, and I did some research across lots of different places in the United States.

The one thing that I found about Manhattan is that when there were different credit crunches and crisis happen, the prices of the Manhattan property didn't really drop. They might have like flatline for a year or so, but they never really dropped, and this was really interesting to me, so I started diving deeper and deeper into this. When I was doing some research, I found out about this person Wei Min. I reached out to him and I thought, "This person's probably not going to reply to me. I'm down here in Argentina, they're probably dealing with all the people investing in New York already," and like an hour later, we were actually on the phone. Wei Min was explaining to me that, yes, it's possible for a foreigner like me who's got no ties with the United States to invest in Manhattan. We got to talking, and a short while after that, I was able to buy my first property in Manhattan, which was really all thanks to Wei Min. So thank you, once again, Wei Min. It's funny when you look back and you see everything that's happened, because for me, it all started with that Google search. I think I got lucky by finding someone who was an absolute expert. When did you start with your interest in property in Manhattan?

Wei Min 

My first Manhattan investment I think was back in 2005. Yeah, and back then I got my first apartment. I think it was at $600/square foot, which at that time was expensive. I remember my friends telling me "You're crazy for buying it at $600 per square foot," because he bought it at $200 per square foot. And now the average price per square foot is about $2100.

Aidan 

Yeah, it was incredible. What part of the city was that in Manhattan, that investment? That first one?

Wei Min 

Yeah, that was in Midtown East. And I still have that apartment which I've been renting out and it's very close to the UN, very close to Blackstone Black Rock City group center. That apartment has been doing well and it has increased in value tremendously.

Aidan 

You come from a financial background though, right? You would always end real estate.

Wei Min 

Yeah, correct. I came to the US for college and left for business school, and then I joined Citigroup. I was in finance at Citigroup for about 10 years and I started thinking about wanting to come out to be on my own to be a real estate investor, and from Citigroup, I branched into being a full time real estate investor for about three years. After that, I became a real estate broker focusing on Manhattan real estate. So when I got my first apartment, I was still at Citigroup. I was also investing. In addition to Manhattan, well, the Manhattan place was my primary residence, and I was investing in North Carolina, Raleigh, North Carolina, which was one of the fastest growing cities in the US, and also in Syracuse, New York, not one of the fastest growing, but very nice cash flows.

Aidan 

And before coming to college in the United States, whereabouts were you living?

Wei Min 

I was in Malaysia. I was born in London, and but I grew up in Malaysia. Never really lived in London. I grew up in Malaysia, and I was in Malaysia until I was 19. So when I was 19, I moved to the US and I finished the second half of my undergrad here in the US.

Aidan 

And when you were growing up in Malaysia, in your teenage years, were you already interested in real estate? Or was that something that happened after you came to college in the United States? When did you start getting interested in real estate?

Wei Min 

I was interested in real estate while I was in Malaysia, but being in Malaysia at that time, and you're talking about around 1992 until 1996, when I was a teenager, basically, first of all, the Internet wasn’t up yet. You cannot really research about investing in real estate, so all I could do was observe my dad, and my dad was a stockbroker. He was trading stocks all the time. He would buy real estate occasionally, and then he will resell real estate. What I observed was that his real estate investments did well, but his stock investments, there's the buy, the sell, and usually people talk about how much they make, but no one ever tells you about how much the loss is, right? In Malaysia at that time, there was no such thing as investing in an index fund, which is what we do here in the US. There it's more like individual stock picks. So that was when I realized that real estate, it seems to be a lot more stable than investing in stocks. So that was when I got interested.

Aidan 

Yeah, the thing that always appealed to me about real estate was first the potential for passive income. And I would have been about 18, 19, when I started getting invested, when I started getting interested, I should say, and this idea of being able to buy something that would give me $100 passive income week after week after week after week, even just a very small level, like $100 a week, that was really, really interesting to me. I think it was a very tangible idea as well, because I was buying something that I could feel, I could touch, I could go and visit it, there was a few square meters or a few square foot of something that I actually owned. And that I think is psychologically a bit of a difference between investing in stocks and index funds, which I've spoken about in the show in the past, which I also do.

I'll tell you an interesting story about my very first property that I purchased, and I'd love to hear, I mean, you must have seen some crazy things over the years with different clients and maybe yourself, but I don't know if it'll be as crazy as this one. I was in Buenos Aires, and I bought, it was actually my first property that I purchased was in 2005. It was in Buenos Aires, it was a 30 square meter apartment, which must be about 300 square feet, approximately, so it was a studio apartment. I purchased it for $32,000. So much, much cheaper than the United States. This is you know, South America, Argentina, 2005. Down here in Argentina, even today, it's almost impossible to get any kind of lending to buy property. So people save money, if they're lucky, they'll be able to get loan some money from their family, or maybe they'll even get given a property if they're really lucky. But I had some savings and I had a little bit of help from my parents and I was able to get together $32,000 to buy this property.

I had to then get the money into Argentina, which was a whole adventure in its own right because in 2005, you couldn't do a wire transfer of dollars into Argentina. The country was like locked down there. It was with a government, which actually did a lot of harm to Argentina. And to get the money here, I had to send it, it was very complicated path, I won't get into details, but I had to send it to a couple of different places. Eventually I went to an office, like you imagine going into a building, and you've been to Buenos Aires so you know, go into an office in the middle of Buenos Aires, up the elevator, a guy is waiting there with $32,000 in cash for me, and $32,000, it's not a huge amount of money when you see the notes. It's probably like one-inch high kind of a thing. It's not a huge amount of money. But the guy said, "Look, whatever you do, don't take a taxi when you leave the building, because some people could potentially know that this is where people come to pick up their money." He said, "Make sure you take the subway," so we went on the subway to the bank with the cash, and we were paying for the property. I was handing the $100 bills over the table kind of a thing.

A lot of the Argentines are very particular about the US dollars that they want, if it's got a little mark on it, if it's looking a bit old, may reject it. So they started rejecting some of these perfectly fine $100, and it was getting to the point where "Look, I don't know if I'm going to have $32,000 here because you've gone and rejected like 15 of these notes." In the end, I think they rejected like 10 of them, but it was just madness, paying in cash. There was like the going back to the '80s or something where I didn't have a briefcase full of cash because it was only $32,000, not hundreds of thousands, but going into this little bank office and paying across the table, and they're inspecting every note.

Anyway, I get the keys to the property and I go to the property, and I start doing renovation within the following weeks. I stripped the property right back to the bricks. It was a mess. When I bought it, it was a real dump, and so literally with a big sledgehammer knocking down the walls and stuff, and I'm looking down this one wall, and there's a box inside the wall. And what's this box doing inside the wall? I've ended up there's money in it. So I found money hidden in the wall. It was money, I think it was actually Bolivian money. So there must have, at some stage, there must have been someone from Bolivia, who owned the property. It was like the little treasure chest of money. It didn't have any financial value in 2005, but I'll remember knocking down a wall was like something out of a movie. I was like a kid in the candy shop at that stage. I was like, "I found treasure inside my property, it's going to be a good sign."

So that was my first experience in buying property. The most the most interesting and bizarre that I've ever had. And to make it even more interesting was at the space stage, I spoke very little Spanish. I'd only been in the country for a few months. I practically spoke no Spanish and I was trying to navigate. I had some local help from my wife's family, obviously, but it was just the most bizarre story completely different to how we do property transactions these days.

So what was your first transaction like? I'm guessing it wasn't as interesting as that one.

Wei Min 

Not as interesting as that one, as your story finding money in the property. Wow. Now you have a lot of properties.

Aidan 

Yeah, that's true. I tell you the second property that I got was so much easier, it was in New Zealand for a start, sort of never any of this transferring money around. What I actually did in New Zealand, which has been one of the probably the smartest things I've done in property, is I was when I was looking around for lending in New Zealand, one of the firms that was lending, they offered a property coach, and it was $400 New Zealand dollars, so call it $300 US dollars approximately, and they would guide you through your first purchase. So it was kind of like an upsell of I could get a mortgage with them and they would give me this property coach. It was the best money I spent because I did buy a property, he did help me, but I probably got $10,000 or $15,000 cheaper because this coach was with me every step of the negotiation.

They also showed me what I had to look for. Every market is different, but they showed me what I had to look for and the properties in Auckland and things to be aware of and negotiation clauses to put in and so on and so forth. It was the best money ever spent. I feel like when I started going into Manhattan, I had a little bit of that with you because you knew the market inside and out, and you really bend over backwards for your clients. In some of the negotiation that we've done, has had a similar effect, I think. I guess, I'm trying to make two points really. The first is that if you can work with an expert that can be someone you're paying, or otherwise, a broker or a professional in the area where you're investing, you can save a huge amount of money. And then secondly, negotiation is such an important part.

Do you remember the negotiation that we did during the pandemic for one of the properties?

Wei Min 

Yeah, during the pandemic, we got that condo in the West Village. I think we had a lot of leverage in terms of negotiating the terms, because we actually got it during the bottom of the market, the absolute bottom of the pandemic. It was roughly between May to July of 2020. I remember back then we were not sure as to how long the lockdown was going to last and whether Manhattan was going to recover. The media was all talking about the end of big cities, whereby people are moving to the suburbs, and no one wants to live in the cities anymore. You were very brave, and it's similar to your first experience buying the first property in Buenos Aires. You were daring with that first property and going into buying the property during the pandemic, when there was so much uncertainty. That's another example of you're taking the risks. But anyway, for that purchase, we definitely got some great terms and we did some renovation on it, and the rents have increased a lot compared to when we first went to do that.

Aidan

That's been an amazing purchase. I'd love maybe if you could explain to the listeners a little bit about, you know, when it's a buyer's market, when it's a seller's market, what that actually means. And then maybe we could talk about the different areas of Manhattan a little bit to try to paint a picture for people because Manhattan is small, but it's got a lot of different completely different areas and different types of properties. So first of all, when is it a buyer's market? When is it a seller's market? And what does that actually mean?

Wei Min 

Yeah, okay. a seller's market means it's a market where the seller has an advantage. There's a lot more buyers than they are sellers or properties available for sales. So a lot of buyers are competing for less properties, and therefore the seller has an advantage.

Aidan 

It's like supply and demand.

Wei Min 

Yeah. Seller's market is when the supply is low and the demand is high. So the seller gets to call the shots, and the buyer's market is the other way around. A buyer's market is when the market is down and everyone is afraid and no one wants to buy. There's a lot more sellers who want to sell, and the buyers just have that advantage because the buyers can pick from a bunch of options. In terms of the buyer's market, well in Manhattan, it's usually a seller's market, because in Manhattan the supply of condos is so low. Only 10% of Manhattan inventory comprised of condominiums, another 20% are cooperatives, which basically means that you cannot rent it out whenever you want. You need board approval to buy or sell, so it's less desirable than a condominium. The other 70% are entire buildings, they may be mixed use buildings or they may be rental buildings, but you cannot buy an individual apartment. You have to buy the whole building. 

So because of the limited supply and then there's usually a seller's market, but there were buyer's markets before during the Lehman crisis in 2008, 2009. There was a buyer's market because everyone was afraid and there was a recession. During COVID for the several months that the market was locked down, there was a buyer's market. So for your transaction, which we got in the West Village, West Village is probably the market that is almost always a seller's market. It's a very, very strong, if not the strongest market in Manhattan, and we managed to negotiate that deal during that short window which was a buyer's market because the downturn, the bottom was roughly between January to March of 2020. The market was recovering, it was fine. It was March to June when we had a lockdown, and that was when everyone is wondering whether people are still going to live in the cities right, and then from May to July was roughly the bottom if you track based on historical prices. And by the end of 2020, the market started recovering already. 2021, I think we had the highest or the second highest transaction volume ever recorded. So we managed that also.

Aidan 

That also, I think, coincided with very low interest rates, if I'm not mistaken.

Wei Min 

Exactly. Yeah, the interest rates are super low, there was there was pent up demand. So why did the market recover so strongly in 2021, because there was a pent-up demand, the people who were supposed to buy didn't buy during COVID, and interest rates were very low. And that's why in 2021, who would have accepted? The market is shot up, and it was a total service market, and that prolonged into the second half, the first half of 2022, and interest rates started going up, starting the second half of 2022.

Aidan 

So just add something else in there, there's this concept of buyer's market and seller's market – this is not something that is unique to Manhattan. That happens all over the world, every single market that you can think of. And I think it's an interesting thing to be aware of when you are considering investing. I think it's hard to sort of wait or wait until a buyer's market because it's a little bit like waiting to buy an investment stock. You never really know for sure when it's going to be at a low point, so I would much rather buy something as soon as I've got the money and the availability to do it because at least then I own the asset that can start appreciating, and if the market dips, as long as I'm not needing to sell, then it doesn't really bother me. Because you know, if the property prices in Manhattan went to half now as they were when I purchased, it wouldn't impact me that much from a psychological level because I'm not planning on buying to sell. These are like long term investments. What would concern me more, there's a, for some reason, all of a sudden, they weren't people who were queuing up to rent the apartments. But going back to 2021, in Manhattan, a lot of people were buying. I think a lot of people were also coming back to the city and they realized, "Okay, it's time to get back on with life. I'm not going to be living out in the suburbs." We've seen big tech firms as well really set up shop in Manhattan. What was the one? Was it in Hudson Yards where Google was, that Google that built a 3000-person facility or something?

Wei Min 

Yeah, Google expanded to a second campus in Manhattan, original campus is in Chelsea. Google expanded to Hudson Yards. So Google bought this building. Google is occupying three buildings in Hudson Yards, which is the neighborhood that is north of Tribeca, so it's downtown. Google paid $2.1 billion to buy St. John's terminal, which was the main building. We just drove by yesterday and my wife was like, "Whoa, this is so beautiful," because of all the trees in front of the building. And then Google is occupying two other buildings in the Hudson Yards area. On top of that, Disney is building a brand new Twin Tower in Hudson Yards. So that's why Hudson Yards is one of the really up and coming neighborhoods. Yeah. So during the same time, Facebook was expanding also, and Facebook became the largest corporate tenant in Manhattan. Wow. Yeah. Who would have thought that?

Aidan 

Yeah. And, you know, these are really interesting things to be aware of. This is why when you're investing in a place, it's good to get local knowledge because Wei Min knew these investments were happening and knew that certain areas, which may not have had as much happening before, were going to explode, because these massive corporations are building office space there and they want their employees to come back into the office. I think local knowledge is really key. It's also key not just when you're buying but as part of the negotiation as well, like if you can go into a negotiation, understanding the state of the market, you're in a much, much better position. When we've been negotiating, Wei Min here, we normally had multiple different options on the table. And that allows us to be more aggressive in our negotiation. Because if that one doesn't work, then we've got a good plan B, a good plan C, and so on and so forth. I think this is a good strategy to keep in mind when you're doing any kind of negotiation, but in particular, real estate.

What is it that makes the Manhattan real estate interesting or unique? Because it's not the same as other big cities in the United States. You get an enormous amount of foreign investment. Now, what is it in particular about Manhattan that makes it different?

Wei Min 

It is, because it's a global brand. A lot of my clients are foreigners, and my clients have successful businesses. They usually have properties in their home country or region. They want to diversify. And when you want to diversify into the most prime real estate markets in the world, what do they think of is Manhattan, or London, Manhattan or London. So these are the two most blue-chip alpha ++ cities in the world. Why? It's because of history. These are really historical cities, the most cosmopolitan, the most diverse, the most international, and specific to Manhattan. To my point earlier, only 10% are condos. So supply is very limited, because they've been building Manhattan for the past, let's say 200 years, right? So everything is built up. It's not like there's a lot of land where they can extend, Manhattan is higher. So it's all built up. And to the extent that they can build new condominiums, it's when, let's say, there's an old gas station or an old parking lot, where the developer would buy it, and it's very different from the rest of the US whereby there's so much land, and the developers can keep building further and further away from the city code. Here, there's no land, right? So everything is built up, there's a building next to you, there's a building next to it, and so on and so forth.

Aidan 

There's a genuine constraint in terms of land available, and this plays into that whole supply and demand. Maybe this is one of the other reasons why if you look at, you know, historical prices of property in Manhattan over time, it's almost always gone up. When other cities have plummeted in, the financial crisis in 2008, 2009, a lot of the values plummeted. Manhattan didn't. It just flatlined, maybe, and then it was straight back up into the increasing curve again. So I guess that's another part of it. Like really to hammer your point home, that is an island, and it is a very limited amount of space period. 

Now, when someone is starting out thinking about real estate, and this is not specific to Manhattan, but what would you recommend as a first step, if they want to get on the property ladder? Maybe think back to when you were starting? Or when you are consulting with your clients and so forth? What do you recommend that they do to sort of start figuring things out, if you like?

Wei Min 

The very first step is, I think, to read a few books, but that is very preliminary, because anyone can read books, right? But reading a few books will give you some basic understanding of the financials and what to look for and so forth. And then number two is to try to focus on a market that you know, because or if you want to invest in a different city, make sure that you partner up or you get into your team someone who's a local, because real estate is the sole local where you are not going to find all the answers that you should have by research online, right? Because anyone can research online. In Manhattan, for example, we look at the neighborhood, the growth rate of the neighborhood, the demand for the neighborhood, and then we look at the building, the demand for the building. So there are certain buildings whereby there's so much supply. Why is there so much supply? Because no one wants that, man, a lot of people want to get rid of them. You look at the supply and demand of the building, and from a rental perspective, you want a building whereby there's not a lot of rental supply as well, right?

Aidan 

I've always found it fascinating about Manhattan. How you can get so granular with the analysis and you can look not just at a general neighborhood or an area but at the actual building? And when we're talking about supply, we're talking about availability. So is it possible to rent property in that building today, or is it completely full and occupied? Is it possible to buy a property in that building? Or is it as everything as there's nothing on the market? What's the website, Zillow? The one that you use for that? Or are the other specific websites that you look at for analyzing the supply?

Wei Min 

The main website for Manhattan is a StreetEasy. Yeah, the inventory in the US is, it's all the same. You can get the same information in terms of supply and audit from Zillow and Trulia. Because here, the rule is that the sellers have to list their properties publicly within 24 hours. But just in terms of user friendliness, it's usually StreetEasy. One example of how to choose an apartment within a building, okay, let's say the neighborhood you want, you know, the building you want, but within the building, you have a preferred exposure, because keep in mind, the buildings are next to one another, right? So for each building, you have a preferred exposure, which means you're facing outside…

Aidan 

Outside exposure as the orientation, the way that your windows are going to be facing, and so on and so forth. For the sunlight, I guess.

Wei Min 

Yeah, you can be facing outside, and usually apartments facing outside, which means that you're facing the street, is at a premium, versus you can be facing the back. If you are facing the back. What does that mean? The minute that means you're staring at the wall, you're staring at the building behind you, which is usually not that far away, right? So let's say you're living in a suburb, you may not understand this as well, because the other house is quite far away from you. But in Manhattan, the other building is probably 20 or 30 feet away from your window, if you're facing the back, and you're not going to have enough light, because the building behind you is going to be quite high. So let's say you're on that floor, and you're looking at a building that is 20 stories high, that means all your sunlight is blocked. So that apartment is going to be at a discount relative to an apartment that's facing outside, which has all the light.

Aidan 

Yeah, yeah. And these are all the kinds of considerations that are specific to some market, some property markets, but not to others, so it's a great example. If I was buying a house, in a small town in New Zealand, I would never even worry about that. Because I would have, I would have, you know, I'd have a lot of space all around me, I've been getting sun from all angles. But in Manhattan, you notice something that's important.

I can also remember, in our conversations, we've also spoken about access to public transport. Very few people in Manhattan drive a car because it gets so congested, but having access to the subway lines is important and other things like that as well. I guess it's going back to tips for starting out at, read some books to get a general understanding. And then try to get more specific into your market if you can. So maybe get to know some of the real estate agents, but find a real estate agent that is going to try to, you know, be on your team, essentially, because there are some people out there that will just do anything for a quick buck. They're not really in your corner working for you. They're just trying to make a sale. I guess this is a more challenging part, but after you've had conversations with people, I think you can start getting a feeling for that.

In terms of other resources, your website, Wei Min, is brilliant for anyone interested in investing in Manhattan, if there's someone in the United States or a foreigner, and that's it, castle-avenue.com. We'll make sure that we include a link to that in the show notes. But that was where I did a lot of my initial research and started learning about these different considerations. The path, although I had quite a bit of real estate experience behind me, investing experience behind me when I got involved in Manhattan, it was like I was starting from scratch because all of a sudden. I was diving in a sponge for information talking to people like Wei Min. You know, really getting to know the market, looking at a map, understanding where the different places were, understanding the considerations, reading every single blog article but 3X to make sure I understood it. I think these are things that you can apply to any kind of a market.

One thing I wanted to come back to was just about risks and challenges. And you mentioned that, I was maybe brave when I bought that first property in Argentina and when I bought in the pandemic in the United States and Manhattan. I sort of have thought about, I often asked myself, "What is the worst case scenario from this what could go wrong? And in both cases in Argentina, I was buying in cash. So I wasn't going to doesn’t play. mortgage, I wasn't going to get stuck with mortgage payments that I couldn't cover. Then in Manhattan as well, and that purchase that we made during the pandemic, a large portion of that was also in cash. So I wasn't feeling concerned about, "I'm not going to be able to cover a mortgage payment" or something like this, I guess a bigger concern may have been, "Are we going to be able to rent it? Is everyone really leaving?" But even to me, when I looked at through a long-term lens and think,  I'm not going to think about the, next six months, I'm going to think about the next 20 years." I felt like there wasn't that much of a risk for me personally. So that's, like a psychological outlook, if you like.

What would you say though for most people and most property markets? What are the most common risks that they should be thinking about?

Wei Min 

For a market like Manhattan, and in Manhattan, you are buying an apartment, and apartment means that your responsibilities within the four walls, okay, you are not responsible for the roof or the boiler for the mechanicals and all that. So your main risk is finding a tenant or not being able to find a tenant, during which you have to cover the expenses when you don't have rent coming in. And another risk is if you rent to a tenant who doesn't pay you, and a tenant who becomes delinquent, then tenant delinquency. So it's going to take you at least nine months, you think, someone who's not paying you versus in other cities, you may take one month. But the key difference is that in Manhattan, because the prices are so much higher, for example, a $5,000-one bedroom, okay, we usually require the tenant to make 40X the monthly rent, which means that they'd have to make at least 40 X 5000, and then we review the credit scores. And so we make sure that we review the credit worthiness and financial liquidity of the tenant. But that's another risk potential delinquency. 

In another market, wherever you're buying a house, then your recipe would be similar to that as well. It's going to also cover things like repairs, you need to change the roof, or you paying chemicals. Or maybe let's say something falls off the house, for example, there's a liability risk. So they are more risk-related to the structure itself. But when you are buying an apartment, you have less of these structural risks. But more of the I guess, non-structural risk.

Aidan 

I guess another thing would be understand how much you can afford to pay with the lending. So don't over expose yourself. This is where a lot of people got into issues with in 2008 is all of a sudden they couldn't pay off the mortgages, and the property value had had gone down a lot. And I think, at a basic level, you know, if you earn $50,000 or $100,000 a year or whatever it is, $200,000 a year, then how much money do you actually have available realistically to be paying off a mortgage? And if you're getting a mortgage, what is the rate of interest? So today, you might be able to get, you know, an interest rate at 6%? Or maybe 5%, maybe 7%? I don't know, it's different wherever you are. But understanding what that means, and what is your requirement going to be on a month-to-month basis? And how confident are you in your ability to pay. So for me, one of the things I've always liked to do is be quite conservative in that approach and actually get less lending. So pay more of the principle of the value of the property upfront, and then have less than I need to pay off the lending on a month-to-month basis. Now, that's definitely not getting the most leverage out of out of the money, but it does give me a bit more peace of mind. Because I know that I could liquidate, could sell a property very quickly even if I sold it at a loss and I wouldn't have any debt anymore. I think just understanding the finances a little bit understanding how what you would need to pay what you can afford to buy to pay it sort of mission critical when someone is starting out as well.

Now I am conscious of the time here. I wanted to just touch on a couple more things, though. If, again, just pretend that whoever's listening to this is a complete beginner to investing in real estate, what are some of the big and the big benefits that you see of investing in real estate? Maybe versus some other investments, investment options out there, or not even versus others, just what are some of the biggest benefits that you see and the things that you love about investing in real estate?

Wei Min 

With real estate, there's depreciation, property appreciates, because there's inflation. So whenever there's inflation, real estate is actually the biggest driver of inflation. So there's inflation because real estate or rents increasing, and then there's the cash flow benefit, cash flow, meaning what you have leftover after you pay for the mortgage. It's a tangible property, I think the key difference between investing in real estate versus investing in stocks is that with real estate, you have leverage, you can use other people's money, i.e., the bank's money, and the appreciation is going to be the same, right? For example, if you have $100,000, and you buy $100,000 worth of stocks, it goes up 10%, then your return is 10%. Right? It goes up 10%. That means your investment increased by $10,000. So your return is 10%. But in real estate, let's say you use 50% leverage and it goes up by 10%. Because your down payment or your equity is only $50,000, because you're using 50% leverage, then your return on equity is actually 20%. Right? You get to magnify your returns. When you're doing real estate, because of leverage, I think you can do that in stocks. Also, it's called margin, but it's a lot less common. And it's a lot more sophisticated when you are doing it with stocks, because there's something called mark to market. When the stock market fluctuates, then you may have to put in more funds. It's called a margin call away with stocks, but with real estate, it's locked. In the case of the US, it's locked for three years. And then he also tax benefits with real estate. In the US, if you own it as a primary residence, you get to deduct the interest paid on the mortgage, which means that you decrease your taxable income, and then there's depreciation benefits as well. So if you remember many years ago, there was this article in the papers about Donald Trump having a loss of $900 million, and therefore doesn't pay any taxes, it's because he owns all these commercial properties, which he gets to depreciate. So that is where all these losses are coming from. And it's the depreciation advantage of owning investment, real estate.

Aidan 

You know, one of the other really interesting things that that I often think about when I'm analyzing investing, and not just investing, but success in general, if you look at the wealthiest people in the world, most of them have got an enormous footprint and real estate. Success leaves clues, and what you're talking about there with leverage, it's massive, most people probably don't really think about that. And I didn't even think about that, honestly, on the first couple of properties that I purchased, about this leverage. But if you actually sit down and think about it, and say, "I've got $50,000, I could put that into buying $50,000 worth of stocks, or I could put that $50,000 and buy a property that's worth $200,000 and how that appreciation works." It's just a massive, massive advantage.

Another thing there I think of is legacy. trying to build an investment portfolio that will last beyond my lifetime, and something that I can pass on to my children and maybe grandchildren if I ever have any as well. I think property is something quite unique in that regard. Sure, you can pass on an investment portfolio of stocks, but it's not quite the same as passing on a physical property that you can get into. I think it's also great storage of wealth. Especially these days, would you rather have $100,000 sitting in cash in the bank, or $100,000 sitting in a property, it's actually generating new income? I know which I would want because if there's a lot of inflation and the value of property is going to go up and your money is much safer that way, in my opinion. I think there's a lot to love about it, and that you also remember, there are lots of different types of property.

When I was getting started in my property journey, the first thing I actually bought was a very small apartment studio apartment in [inaudible]. But at the same time, I was looking at I could afford to buy a couple of car parks, or I could afford to buy much smaller things. You don't always have to be thinking, if you can't afford to buy a home or an apartment or a condo, there's always smaller options as well, like the carpark, and then you've got commercial use property, residential property, you've also got things like land. So I own a farm in New Zealand and these different types of properties, they are also giving more diversification. And I think this is something that people can look to build over time, because sometimes when one sector of real estate might not be doing as well, then another one picks up. So I think there's a lot of ways to get into real estate and a lot of different types of property. If you can find one that's really interesting to you that fits your lifestyle, then that can be a good one to start with. My first properties in New Zealand were apartments, condos, let's say, in Auckland, and they were central city, I was able to learn about that market inside out, know every address every building, and it just made it so much easier. So I think if you can find an area of the market that you really enjoy, then that's awesome as well.

To wrap up here, I wanted to ask if you've got any final tips that you would leave people with who are considering purchasing more real estate or getting started in real estate for the first time. Are there any specific tips, things that you learned or things that you wish someone would have told you when you were getting started out? And then I've got a couple to share here with people as well.

Wei Min 

I think Real estate is a people business. Because in buying property, you have to deal with so many different parties, whether you're doing it yourself, or you're doing it with a broker, like, for example, you have to deal with the seller and the seller's broker. And after you buy the property, you need to have a team, you need to have someone to call to do your paint jobs and a plumber and property manager and so forth. There's a lot in relationship management that you need to be good at. Buying stocks is just is this clicking on a mouse or maybe speaking to a financial advisor, like one point of contact in terms of what you should buy. But  in property, there are so many different kinds of relationships that you need to have like as a landlord, you have to deal with the tenant. Anyway, the reason I mentioned that reading books is the very first step right, is that there's a lot more to it right after that you need to know in the market. And then you need to have a network of people that you can rely on because real estate is very people-oriented business.

Aidan 

Yeah. You know, speaking about that, I was also lucky, but I do believe that you sort of make your own luck at some point. I was pretty lucky with when I got started in buying property in Auckland, the woman, the real estate agent that I was working with at the time, I purchased the first property that she ever sold as a real estate agent. We've been on and we've built up this relationship, and over the years, we've done dozens of transactions together. I always go with her because she's actually built this amazing network. I've now got access to that through her, and we've also built up trust because she will always remember that I've done a lot of different deals with her thanks to her help. There's that also extra little piece of that I was her first ever customer to buy a property through her. So yeah, I totally agree with the personal side of it.

We've spoken a lot about buying a property here today, but there's so much more to it than that, the ongoing maintenance, if you like. What do you do when someone leaves the property? Do you paint the walls and make it look new? What's the strategy there? It might be different for each area as well, but it's good to have a little network, and I've been able to tap into that with Wei Min over the years, and that's has been really, really helpful. Also, someone to talk to your strategy about like, you could charge a much higher rate for rent, and that might mean that it's unrelated for three weeks, because it's going to take you three weeks to find a tenant. You could lower the rent a little bit and you might have one day between two different tenants. Over the course of a year, that makes a big difference, something that's not rented for three weeks or something. So, I think having, building up a team of players that you trust that you can talk to, so that would be my first point, would be seek out help if you can do it by hiring a coach.

That's probably not really needed. It depends on where you are, but if you can get with a really good person in a local market, like Wei Min in Manhattan, then the value there is enormous. Finally, if you are smashing down the walls, then make sure you check to see if there's any treasure hidden. In the meantime, you might get lucky like I did.

All right, guys, that's a wrap for this episode. Remember, if you're interested in Manhattan real estate, make sure you check out Castle Avenue, castle-avenue.com, and you'll be able to go there and learn all about the Manhattan marketplace and also get direct contact with Wei Min. If you're looking to expand out into another market, even if you're not from the United States, then Wei Min is definitely the man to talk to about that. You can get all his contact details at his website. This is episode number 94. Head over to thegrowthbooth.com, navigate to number 94 to see the transcript and to get all the different links that we've mentioned in this show here today.

Wei Min, thank you, once again for sharing so much knowledge with everyone here. I feel pretty lucky honestly to have found you early on, and hopefully we'll be able to give you more properties in the Manhattan market soon.

Wei Min 

Thanks for having me. It's a pleasure.

Aidan 

Alright guys, that's a wrap. We'll see you on the next episode of The Growth Booth. Bye for now.