23 properties in 5 years

[wish-ga]

I've spent the last 8 weeks looking at studio apartments in Sydney. Because I don't have investment experience in real estate I want to buy something small and in Sydney so I have the experience of the whole buying and negociation process.

Dear Sonic
Let us know how you go. I would be interested as I had aspirations of starting off small by gettng a studio apt to rent out. Found it impossible to get finance for anything under 50sq unless I had almost the full amt saved and wanted to borrow only $40G or had to pay about $10,000 in mortgage insurance.

keep us posted...


Dear Karina... YOU LEGEND!!!!!!! Too cool for school

 

[Dos]

Karina,

As per the rest of the group, BIG congrats.

What I would like to know (only if you mind telling), is how is life for you now? Are you still working full-time, part-time, staying at home or cruising a luxury yacht around the harbour and do you have a nice big luxury home?? If you are still working, how long before you will be out of the rat race and on that boat??

Cheers in advance for the insight!!

Dos

 

[karina]

Hi everyone,

Thanks to everyone for your posts. Here are some of the answers to your questions.

Yadreamn...

I have a couple of questions if l may?
SURE

Are your loans cross collaterized?
some of them are stand alone, others are cross collarerized. I have loans spread out across various banks.

Do you purchase through a trust?
I have to admit I never quite got around to learning about structures so no everything is in my name....I know ...I know I should have found the time. It's something I plan to look into soon as soon as I find the time. Have just come back from Goulburn today , been painting the latest IP in goulburn as it is within driving distance to my place. (first reno by the way!) Renovating and a full time job does not leave much time.

Your salary income must be at least 60k plus?
The first 10 properties I purchased with an income of between 40k to 45k, my salary is now just a tad over the 60k mark.

Are all your ips cash flow positive?
I wouldn't have a clue. I don't assess IP's individually in my portfolio. I look at what my overall rents are , how much my total mortgage repayments are as well as rates, property management and insurance. Factoring all the IP's including my PPOR I would be down 15k per year BEFORE TAX and DEPRECIATION. (but having factored in mortgages, insurance, property management, water etc) I would say that AFTER TAX it would be positive not sure by how much though as I have not done all my depro schedules yet. I have worked out that it would take an 8% rent rise for that 15k to be wiped out.
When I add a property to the portfolio I look at how it affects my overall cashflow. While on the subject of cashflow I have learnt a lot from Robert Kiyosaki's CASHFLOW game . I would recommend it for those that have never played it.

Do you ever put a cash deposit towards your ip purchase?
I draw down equity from one of my loans to use towards a 20% deposit. Borrow the other 80% (so actually borrow 100% + purchase costs) I don't save for a deposit NO.

DOS , how is my life going? Things are good, It's very hectic though, working full time, running a household, going to the gym, managing property managers, looking for deals, co-ordinating reno's.... Ideally I would love to give up my fulltime job, that is what motivates me, being free to do with my time as I please, not having to clock in 9-5pm. Not sure when that will be. I want to give my portfolio time, another property cycle. As for luxuries I am not the type of person that needs many of them. I have my own place with a nice water view, it's only small, not luxurios but good enough for me, Just updated my car, nothing flash, its a few years old (don't believe in buying brand new cars ). Plenty of time for luxuries in the future, right now I am just sowing the seeds so that I'll have the money to do what I want later on. I think a LOT of people make the mistake of having their luxuries today rather than build up their assets first.


DD1, sound like you are doing great. Yes it is fun! I love what I do, to me its like a hobby and I guess that's why I dedicate so much time to it. . I also sold down 3 properties this year to improve cashflow and since bought 5 (better cashflow deals) Also I got rid of what was probably my biggest mistake - buying a vacant block of land in sydney. I got it at a good price but I would never buy vacant land again. Talk about having a hole in the bucket, cashflow wise it was a silly decision, I was thinking lifestyle, that beautiful house I was going to build on it. Best thing I did was get rid of that property, no more hole in the bucket! I actually had some beashside houses under contract in Mackay/sarina for just over the 100k mark when I saw this vacant block of land (was about 2 years ago) I cancelled the mackay contracts and went with the land. BIG MISTAKE, Mackay realestate doubled in value and I was left with a whole in my bucket. Although I got my money back on the block the opportunity cost of buying it was enormous. It ruined my cashflow so it limited what I could buy also. DD1, which story is yours in the API? I love reading those stories!

 

[redwing]

Congrats Karina

Congratulations again..as with everyone else's comments, its always great to read a positive story (loved Brenda's as well).

Glad to see you got over the serviceability wall that we all seem to hit..my mortgage broker put the brakes on and finally i had a chat with ed NIXON from Loans approved, we restructured, paid one IP out in full (now own it unencumbered) and we took the others back up to 80%..we are now looking for the next..

Stories about people making headway and gaining momentum are great, especially when if you show how you overcome the common obstacles..

REDWING

 

[grubar30]

Karina,

Cash offers are good for negotiating so its handy to have a LOC (line of credit) that you can access in case you need to pay cash for something and then organise to finance the deal later.

This is assuming finance is guaranteed. You wouldn’t commit so much unless you were certain.

On this topic, if the 'subject to finance' clause fails (i.e. you don't get approval from a lender) on a contract, what then happens to your deposit? Is it an easy process to get it back? I imagine the sellers would be very hesitant to hand-over that carrot that you dangled and they now have in their grasp.

Btw, nice post about your journey so far. Actually, your story is extremely impressive.

 

[Jamie]

Karina,
This is assuming finance is guaranteed. You wouldn’t commit so much unless you were certain.

This isnt actually the case. If you have a LOC already set up, you dont need to worry about securing finance. For example, say you have a LOC set up with a limit $200,000 - this means you can purchase a property up to around $180,000 in cash, meaning you dont need to organise any sort of finance. You just transfer the money from the LOC to the vendor - if need be, the very same day the offer is accepted. This can come in handy when trying to lowball, or when a vendor is desperate to sell.

On this topic, if the 'subject to finance' clause fails (i.e. you don't get approval from a lender) on a contract, what then happens to your deposit? Is it an easy process to get it back? I imagine the seller's would be very hesitant to hand-over that carrot that you dangled and they now have in their grasp.

The vendor doesnt have the deposit in their grasp - it sits in a trust account until either (a) settlement, or (b) the contract falls over due to whatever reason. One reason for having a finance clause is that the deposit isnt in jeopardy should the purchaser withdraw from the contract using a clause. Remember, though, this is only the case is you legitimately get out of the contract using one of the clauses included - if you simply dont go ahead, you are liable for the amount of the deposit (or any amount up to 10% of the sale price should the deposit be less than that).

Sometimes you might get vendors who are hesitant to release purchasers from contracts for whatever reason - thats why its a good idea to use a great solicitor when purchasing

Jamie.

 

[Corsa]

Dear Karina

What a wonderful acheivement and thanks for sharing your inspirational story. I am always pleased to see when people are willing to go into the detail of their specific investments as I think that this really helps others understand why and what areas people are investing in as part of the sharing experience so well done for having this courage.

I was wondering, while you were building up your investment portfolio were you also working as a PAYG employee or investing full time? And also, wondering generally what age/age group you are?

You are a very positive role model for other women who may also dream of becoming financially independant either on there own or with partners/husbands etc. You should be so proud of yourself and your acheivements!

Best Wishes

Corsa

 

[karina]

Corsa,

I have always been employed full time. Having a job has helped me build my portfolio and allowed me to support any negative gearing along the way (like th block of land. (been with the same company 10 years actually). I am 33.

 

[LearningMan]

Well done Karina, a very inspiring post indeed !

I noticed however that no one has asked yet ... Have you had any trouble dealing with BAD tenants ???

I realise that sometimes purchasing homes below market value in smaller towns can potentially attract problems with tenants.

Interested to hear your thoughts ...

 

[Doons]

renewed energy

Thanks for that post Karina....it has helped me to think outside he square a little bit.
Well done, you should be very proud!!!
Doons

 

[karina]

Learning Man,

In 5 years there have been a few problem tenants. Read my post on being out of rent 32 weeks (in the property management section) that surprisingly wasn't in a small town (in redcliffe) but it was mainly due to the poor property management.

I had a problem with a tenant that left town in geraldton and let a friend stay at his place that then did not want to move out. After a while they moved out and the original tenant has been paying off what was owed. It was a bit of a headache but in the scheme of things I just see this as part of running the business. Things don't always go to plan, people don't always pay their rent on time or do the right thing. I think it could happen anywhere really.

I have a tenant being evicted at the moment in one of my geraldton properties (in one of the better suburbs) so you just never know.

Most of my IP's are in areas with 20,000 people or more so I don't consider them little towns really. I have 1 in tassie that I have just bought which is a coastal seaside village in a little town. I am doing a quick reno on it before I rent it out so we will see how it goes. Cost was 90k (off the dept of housing) and I have been quoted a rental of 160-180 per week (its 4 bedroom brick )

I think once you have multiple properties you should expect some headaches every now and then. I have just learnt to accept that things with not always go to plan and try not to stress about things. Every time something goes wrong I just think about everything I have achieved in the 5 years and put everything into perspective.

It's a bit like running a business really, if you run a business will your customers always pay on time and do the right thing?

 

[Nobleone]

Hi Karina,

Your progress so far is outstanding and a great inspiration to me and others.

You mention that you buy a lot of your properties from the department of housing... How do you source these properties?

Is there a department of housing mailing list? Do they have a special web site?

Or are they sourced through just searching the Internet real estate web sites? If so at what stage do you get to find out that what's offered is a department of housing property?

Cheers, Nobleone.

 

[karina]

Nobleone,

I didn't set out looking for x-dept of housing properties. I just came across a listing on real estate.com that was not advertised as such but represented good value. After I bought it I kept in contact with the agent and bought more of them as they came up.

Same with the tassie one. it just looked like good value so I rang up about it and later found out it was dept housing.

I have found that in NSW a lot of the dept housing properties are auctioned , I believe this is the case in most of SA. This does vary from region to region though, There are areas where I would not buy dept housing stock like some parts of dubbo. I rang up about a place in dubbo once and several of the property managers said they would not take on the listings. They told me stories about how houses are boarded up and have been burnt down in the past.

I think you need to understand what % is housing commission when you are buying you don't want to be surrounded by other dept of housing homes as your values wont go up.

In the case of the property in geraldton I bought it was in the worst street BUT in 12 months no more than 1 in 12 houses were going to belong to department of housing as they were selling them of (I bought another one of those actually a few months later but had to pay more for it)

I think it is just a case of talking to lots of agents. You can ask them does the dept of housing sell off homes in this area. Who lists them for sale?

If you are interested in this type of investment read chapter 4 of ordinary millionares by Jim Mcnight. there is a great success story there of how Jesse did just that and created millions in real estate.

I would like to point out that only my geraldton properties are dept housing (most of them not all of them + the place in tassie) and these were all recent 2004 + 2005 purchases. All the earlier stuff was not dept of housing stock.

 

[LearningMan]

Nobleone,

I didn't set out looking for x-dept of housing properties. I just came across a listing on real estate.com that was not advertised as such but represented good value.

Karina, just curious as to how you choose your starting point. Without for example never having been in Tasmania where do you start ? Did you buy a book or did you carry out all your research on-line ? Did you talk to friends living there ? Did you buy some maps ?

For me personally this is always the first challenging step when looking to invest in an area I have never visited before.

 

[karina]

Where do you start, that is a great question.

I originally started looking at areas (redcliffe, redland bay etc) and specifically set out to buy properties in those areas because they were bayside locations of brisbane however as the market changed and prices went up those properties no longer represented good value to me based on the rental return. In order for me to continue to add to my portfolio I needed to be very careful with cashflow so as to not ruin my servicability for future loans so rather than concentrate on an area I was open to ALL areas. I was chasing GOOD DEALS rather than buying on LOCATION only. I wasn't specifically looking for property in geraldton but did a search for low priced properties in WA and a brick and tile listing ( probably 25 years old) fully renovated came up for 63k. After having a quick look in yahoo on geraldton I discovered it was a coastal city with a large population more than 20,000 which is what I like to stick to. Basically I asked myself the question where in Australia in any coastal city with a large population can I buy a brick and tile home for that price????? I remembered that about a year or 2 before I had looked at tassie areas around Launceston and some of the areas around hobart , (houses for around 70 - 80k) rents $130 per week. I almost flew over there to have a look but people told me that prices in tassie never go up , etc etc etc so I never bothered. Big mistake prices have doubled in most places in tassie and I completely missed out on that market.... So getting back to geraldton I see a house 5 mins to the coast, brick and tile and renovated for $63k in a town with a large population (it is x dept of housing) , memories of tassie popped into my head and I couldn't think of anywhere else in the country that could offer such value in a large coastal city. In fact can you even build the thing for that price. I don' t think so!

So I had learnt the tassie lesson and I had read Jesse's story in ordinary millionares, the penny dropped and I knew I was onto a good thing. From there I just kept buying up the place.

I think if you are OPEN to ALL opportunities you have a better chance of finding a good deal rather than just focusing on one area. I don't recommend buying out in the middle of no where no matter how good the returns are. That is just my personal preferance though.

I look at it like Kiyosaki's cashflow game. In the game there are opportunity cards (big and small deals) the more of them you pick up the better chance you have of finding a good deal. Why limit yourself to deals in just one area? They certainly wont fall in your lap. You need to go out there and find them.

I agree with Jan Somers approach of buying ordinary houses in ordinary suburbs. I don't think it really matters so much where you buy but rather that you can afford to maintain what you are buying, can you rent out what you are buying and buy as many of them as you can. In my view there is no point starting out with a 500k investment that you are getting 350- 400 per week rent for (like in sydney currently)

I accept that we are at the end of the boom. I am now thinking about the next cycle. I will continue to buy real estate using the equity I have on properties that have healthy rental yields. By that I mean a yield that is at least the current interest rate, I will look for deals that through a cosmetic reno (paint , carpet air con can improve the yield, buy them on interest only, fix the rates along the way and just wait for time to do the rest.

If it were me starting out today with nothing but a deposit I would be out there buying in QLD or WA something affordable that I could improve, rent out and forget about for a while (with a healthy rental yield) I wouldn't be buying in sydney on 3 or 4% yields.

In saying that though there are many ways to make money in real estate and the sydney properties can work for you if that is the type of investor you want to be. Surely long term you will make money with them but for me I can't afford the pain of trying to hold one of them on such small yields

 

[grubar30]

Jamie,

Thanks for the clear explanation. I understand how it works now.

George

 

[Monopoly]

Hi Karina,

As I said earlier, you have done exceptionally well; congratulations!

If I may ask, can you tell me:

a. The median price paid for each of your properties. For example Jesse's properties were <50K each (if memory serves me correctly).

b. The overall capital growth achieved by your portfolio (eg. paid = $1,000,000 (over 5 years) and current market value is now $1,500,000)

c. Your current LVR (percentage) and how this aids/hinders your serviceability and the prospect of expanding your portfolio.

d. Why ON EARTH are you working full time??? I mean having 23 IPs would be a full time job in itself, and although you have PMs that manage same, the phone calls alone would drive you insane!!!

Keep up the good work, and yes "Ordinary Millionaires" has some very interesting characters in it!!!

Cheers,

Jo

 

[Kennethkohsg]

Where do you start, that is a great question.

If it were me starting out today with nothing but a deposit I would be out there buying in QLD or WA something affordable that I could improve, rent out and forget about for a while (with a healthy rental yield) I wouldn't be buying in sydney on 3 or 4% yields.

In saying that though there are many ways to make money in real estate and the sydney properties can work for you if that is the type of investor you want to be. Surely long term you will make money with them but for me I can't afford the pain of trying to hold one of them on such small yields

*****************************************
Dear Karina,

1. Thank you for your inspirationals sharing.

2. Which specific suburbs will you be buying in QLD and WA? Why?

3. Looking forward to learning from you further.

4. Thank you.

regards,
Kenneth KOH

 

[demoman]

Hi Karina

Hi Karina,

Thanks so much for telling us about your investing travels so far. You are indeed an inspiration to many here ( we need more like you ).

I am grateful for your willingness to share honest answers to the many questions asked of you........great to see someone not holding their cards to close to their chest.

You mentioned Queensland & WA for new starters ( I'm about to jump ) and am looking at queensland ( longterm of course ) so I feel a bit braver now.

Once again thanks for a great read and congratulations to you.

Regards

Jared

 

[LearningMan]

Karina, thanks so much for answering my question.

Your approach in knowing where to start is certainly different to most.

Again ... well done and good luck on the rest of the journey !