Journey so far - $75k salary (average), 5 years, 10 properties

Discussion in 'Property Investment - Other' started by Simon L, 11th Jun, 2015.

  1. Simon L

    Simon L Member

    Joined:
    6th Apr, 2015
    Messages:
    36
    Location:
    Sydney, NSW
    Hi Everyone,

    Since the Somersoft meetup in Sydney a few weeks ago, there have been many questions and requests from other members regarding my property journey so I thought it might be worth doing a post and "give back" to this priceless information source where I have learned and gained so much throughout the years. By no means is my portfolio the most amazing ever but I hope it does give some value to those who are starting out.

    First of all, this will sound very similar to another member of the forum, Michael X, of whom when I read his thread, prompted me to get in contact with him due to our uncanny similarity in strategy as well as journey. As a result of our conversations and meetups, I have since been more involved in the community and has helped refocus my personal property goals - Thank you Michael.

    By way of background, I am a 30 year old, Sydney based investor with a property portfolio of 10 and counting. I definitely fall into the cashflow investor bandwagon and yep, you guessed it, most of my properties are in the Logan area. Like many, my main buying criteria are below market value, cashflow positive and potential to add value. Here is a list and timeline of what I currently own with purchase price, current rent and current value (CMV);

    - 2010 - Sydney 2 bed unit - $370k, rent $480pw, CMV - $650k
    - 2011 - Sydney 3 bed house - $377k + $100k 2 bed granny flat build, rent $730pw, CMV - $780k
    - 2012 - Logan 3 bed villa - $155k, rent $270pw, CMV - $200k
    - 2012 - Logan 4 bed house - $233k, rent $360pw, CMV - $320k
    - 2013 - Redcliffe 2 bed unit - $185k, rent $280pw, CMV - $280k
    - 2013 - Logan 3 bed house - $230k, rent $350pw, CMV - $300k
    - 2013 - Logan 3 bed house - $230k, rent $340pw, CMV - $350k
    - 2014 - Logan 3 bed house - $228k, rent $320pw, CMV - 275k
    - 2015 - Logan 6 bed house - $327k, rent $500pw, CMV - $370k
    - 2015 - Logan 3 bed house - $241k, rent $330pw, CMV - $280k

    All of these properties have since seen some nice capital gains with cashflow for gravy.

    I have always had an interest in property and thought little of the 9-5 culture most of my peers embraced. Being quite ambitious also helped me along the way and being inspired by others successes helped fuel the momentum particularly during inevitable trouble periods - ahh the joys of property ownership!

    Growing up in a very middle class household, I have always had a job since high school and along with the usual Gen Y lifestyle indulgences, I gathered enough funds to buy my first property at West Ryde which was purchased right at the peak of the first home buyers craze. (At the time, thought I paid too much). It is worth noting I have had a number of jobs over the years and my income has always been average (plus bonuses here and there), so for anyone else starting out with an average job, don't let your income limit what you can achieve financially!

    I knew about cashflow, read property books by Yardney and Mcknight along with the standard Rich Dad Poor Dad etc and had been following the forums as well. I'd spent every weekend looking at a dozen open houses mainly in suburbs near the CBD; Redfern, Alexandria, Neutral Bay, Marrickville etc. which at the time did not make sense cashflow wise. I was for some reason fixated on an older walkup unit with low strata and neutrally geared, just how other investors were suggesting, and was knocking back 2 bed, 3 bed units selling near the CBD for $400 - $500k which in hindsight is something I should have jumped at at the time.

    My second property came when I got bored with West Ryde and decided I needed more. I had read about the granny flat cashflow craze and realized West Ryde was sucking some income from me every week after expenses, so I began researching and looking at properties in Newcastle and Western Sydney with granny flat potential (glad I got in early on this one!) Once again however, I was knocking back properties in Kings Park, Kings Langley, Quakers Hill etc (primarily because they were priced a little too far for my budget at the time taking into consideration the cost of GF build) - again, should have went for it but who knew!

    Ultimately I ended up in Blacktown with a fundamental issue which I only realized after I bought it, which was the amount of asbestos on site (even the fence was made of the stuff). Google didn't help either as most of the results online was geared towards creating fear which made me freak out even more that I bought a dud (no such worries nowadays though! :) ). $15k asbestos removal bill later, I managed to get everything sorted through Serge (Brazen on the forums) and a builder I met through Nathan Birch. Granny Flat tip: invest in some proper fencing to divide the 2 dwellings as much as possible as your granny flat will come across much like a house on a battleaxe block rather than *another* granny flat :)

    Ahh yes - Nathan Birch. An early inspiration for me (and somewhat still is). Did the MAP session and signed up to his Dealfinder service. Every now and then I'd get a call from him about a unit in Cairns or a townhouse on the Gold Coast which I kept knocking back due to the perceived risk in the areas. Finally I agreed to a 3 bed villa in the Logan area lured by the yield (and impatience) but quickly learned after purchase that most of it was being eaten by hefty body corporate fees. In hindsight, although the property has not been my best performing in my portfolio, the experience did open me to buying sight unseen, interstate and specifically in the Logan area.

    I decided to keep buying in Logan by myself as I was intrigued in the area and enjoyed travelling up every now and then to do due diligence on different suburbs, renovations and network with agents. Being in between Gold Coast and Brisbane (short drive to both), I was amazed at the value of properties and that it could only be a matter of time before it becomes what Western Sydney is doing today. Some of the current planned infrastructure and the new Logan plan certainly suggests we're on the right path. Most of my Logan properties are based away from central Logan as I have always felt Logan Central, Woodridge and Kingston area to be a bit more "ghetto" and found the stock further out to be more suburban, peaceful and less run-down. That said, I will still happily jump at a property in central Logan if the numbers stacked up. Most of the properties I have bought have been distressed sales

    At the time, agents were begging you to take stuff off their hands and I was being extremely picky with what I was buying - ended up with some good deals but could have done so much more! I won't bore you with the details of each purchase (but happy to go into them if requested) but here are some of the lessons I have learnt so far;

    - Don't be too picky, over analyze and just go for it. Do your research, trust your gut instincts and focus on the numbers. Looking back I have missed what turned out to be incredible buys because of umming and ahhing too much

    - Don't get too greedy with cashflow as I have also missed some incredible deals because they didn't hit a specific yield. All you need is the property to look after itself so cashflow is necessary, but capital gains and buying below market value is what will make money and help you grow quickly through equity draws.

    - I realized quickly my job was just a means to fund my day to day, get payslips for the bank and a way to help build deposits (along with equity draws), so I went with jobs that gave me more flexibility during the day to spend more time on property rather than going for a demanding role for more salary.

    - Safety in numbers - This might apply purely for cashflow investors. I find the more I buy the less "risk" there is. If one of my properties becomes vacant for a couple of weeks, I have 9 others to help with cashflow. If you own 1 or 2 negative cashflow properties, even a slight vacancy/arrears will be painful.

    - Finance is key - For average schmucks like me who have to work for money, your key to growing a property portfolio essentially lie completely in the hands of banks, valuations and serviceability calculators. Make sure you strategise your finance from the get go and don't just focus on the lowest rate. Many brokers can help you with this on the forums and needless to say, Michael X is my current go to person.

    - Landlord insurance - I make at least 1 insurance claim a year and the amount I have claimed back over the years has exceeded the cost of policies many times over. I am at a point where I almost hope a defaulting tenant will cause some damage so I can get some insurance funded renovations :)

    - Don't skimp on the property manager! - I cannot stress this enough. This will be the breaker between a successful property or not particularly if you are 1000kms away. I have had some shockers in the past and am more than happy with my current one. Yes I pay a little more but it's well worth it.

    - Focus on the bigger picture and don't get caught up over maintenance costs. In the beginning I always used to stress over each plumbing, electrical, cleaning, tenancy fee etc. This will not only cause you unnecessary pain, but will likely end up costing you more as avoidance and cheap solutions will often lead to a much more expensive exercise down the track.

    - Evolve your strategy and mindset with the market - One of my most costly lessons learned and am still constantly learning today. In 2013 the norm in Logan was amazing yield and bargains galore. I got accustomed to this and when the market started moving I said no to some great deals because I was *used* to the good times.

    - Stay positive - one of the phrases that gets thrown around every day but will often get the best of anyone. Owning property is not all beer and skittles particularly when it hits your back pocket. Focus on your goals and bigger picture and know you're working towards something great. Being a victim of negativity at times myself has resulted in some stagnant periods where I could have acquired more properties before markets have moved.

    - Goals/Drive/Passion - Again, this is something that is talked about often but rarely adhered to. Have a REAL end goal and work backwards to the point where you know what you need to do today to get you to the next step. I am naturally passionate about property and can easily spend weekend nights looking at property (isn't that a true test?) but having goals will help you stay focused. It also helps that I am reminded every morning when I'm forced to get up too early for my liking to catch a sardine can to do someone else's meaningless task. :)

    - Control your spending - This does not mean you have to become a tight@rse but all you need to do is appreciate the money coming into your account and be conscious of how much is going out on unnecessary spending. I was very cautious in the beginning but have become more relaxed with my spending over the years - but still conscious of little things e.g bringing your lunch to work whenever you can. Its not really the fact it will save you a few bucks but more about concreting the attitude and discipline in managing your finances properly.

    - Great team of people - Surround yourself with like-minded people. This forum is an obvious and an excellent platform for that and there are some incredibly successful and talented investors literally a few clicks away. As mentioned in the beginning, meeting Michael has really inspired myself to go further, having a good finance team means I can pull out more equity, having an excellent PM means I don't spend my days chasing invoices/rent and having great tradespeople mean I don't lose sleep at night when things go wrong.

    - Don't listen to just anyone - You wouldn't take medical advice unless its from a doctor so why would you take property advice from someone who hasn't done what you are trying to do? This includes parents, relatives and friends!

    I'm sure you are tired of reading as much as I'm a little tired of typing for now and I will elaborate more in the future. Despite the length of the above, I have been quite broad so if you have any questions please feel free to ask here or via PM. Many thanks again to all on this forum who have quietly helped along the way and again, I hope this and subsequent posts will add value to other investors on the forum.
     
    en_, perky29, Jacque and 7 others like this.
  2. Gockie

    Gockie Life loving Big 4 Banker

    Joined:
    15th Sep, 2011
    Messages:
    288
    Location:
    Northern Sydney
    Awesome post, awesome journey, good stuff and you're only 30? Kudos!
     
  3. Terry_w

    Terry_w Member

    Joined:
    19th Mar, 2012
    Messages:
    9,610
    Location:
    Sydney, NSW
    Great post!
     
  4. D.T.

    D.T. Property Lookerafterer

    Joined:
    4th Feb, 2003
    Messages:
    7,181
    Media:
    6
    Location:
    Perth & Adelaide
    Thats great, well done.

    What's the next chapter?
     
  5. chindonly

    chindonly Member

    Joined:
    11th Feb, 2009
    Messages:
    681
    Location:
    Qld Brisbane
    Awesome work in such a short space of time!

    Where in Logan did you end up buying?

    The unit in Redcliffe also seems to have a great yield.
     
  6. MTR

    MTR Bling Bling

    Joined:
    24th Feb, 2007
    Messages:
    7,683
    Media:
    32
    Location:
    My World
    Well done.:)

    Curious, do not want to rain on your parade, but what if you played in your own back yard during this period, comparable area Mt Druitt? Rising market

    Nathan focusing on cash flow in areas such as GC, Cairns

    What next will you follow the N Birch model?

    Mtr
     
    Last edited: 12th Jun, 2015
  7. Simon L

    Simon L Member

    Joined:
    6th Apr, 2015
    Messages:
    36
    Location:
    Sydney, NSW
    Still acquiring at this stage. May sell Sydney properties later this year depending on market. Longer term I'll start getting into developments once I'm more cashed up and markets cool down
     
  8. Simon L

    Simon L Member

    Joined:
    6th Apr, 2015
    Messages:
    36
    Location:
    Sydney, NSW
    Hi chindonly,

    Logan properties in the following suburbs;

    Woodridge, Beenleigh, Eagleby, Loganlea, Berrinba, Crestmead

    Yes I am very happy with the Redcliffe unit and came across it by chance! 1 street away from the water also :)
     
  9. D.T.

    D.T. Property Lookerafterer

    Joined:
    4th Feb, 2003
    Messages:
    7,181
    Media:
    6
    Location:
    Perth & Adelaide
    Maybe need to acquire cashflow positive props in other states due to landtax caps?
     
  10. Syd Investor

    Syd Investor Member

    Joined:
    26th Nov, 2013
    Messages:
    19
    Location:
    Sydney, NSW
    Well done on your journey so far. You mentioned most of your purchasers have been distressed sales. How did you manage to get those properties? Was it through your own research of did RE agents contact you when they became available?

    How many of those Logan purchasers were purchased sight unseen?

    Cheers
     
  11. Teshy

    Teshy Member

    Joined:
    11th Oct, 2013
    Messages:
    170
    Location:
    Melbourne
    Great insight & Well done! What's next? API interview?
     
  12. Secto

    Secto Member

    Joined:
    10th Jun, 2015
    Messages:
    10
    Location:
    Logan
    Nice work!

    What sort of age are the Logan properties you brought for $220k to $250k?

    How much below asking price are you picking these up for?

    Seems like you have made some really good buys!
     
    Last edited: 12th Jun, 2015
  13. Simon L

    Simon L Member

    Joined:
    6th Apr, 2015
    Messages:
    36
    Location:
    Sydney, NSW
    I actually think the QLD land tax/trust regulations work quite well for me. For the cost of setting up and maintaining a trust, I can have up to $350k land tax on each which, if I buy the right properties, is a small cost of doing business in my opinion.
     
  14. Simon L

    Simon L Member

    Joined:
    6th Apr, 2015
    Messages:
    36
    Location:
    Sydney, NSW
    Hi mate,

    Finding distressed sales for me has been through my own research in the beginning and slowly getting to know agents and each area quite well. There is no real shortcut to this and you will recognize good deals will come to you naturally over time.

    All my properties in QLD have been sight unseen except for 1. If I flew up and looked at each one I know I will have knocked many of them back as I am quite picky so being 1000kms away helps me focus on numbers only. Having the right team on the ground do help you do research, inspections, reports as a part of your own due diligence is very important.
     
  15. Simon L

    Simon L Member

    Joined:
    6th Apr, 2015
    Messages:
    36
    Location:
    Sydney, NSW
    Do you mean the hard copy editions of Somersoft? :D
     
  16. Simon L

    Simon L Member

    Joined:
    6th Apr, 2015
    Messages:
    36
    Location:
    Sydney, NSW
    Hi Secto,

    Most properties are built from early to late 90's which is the bulk of the stock in the Logan area.

    Hard to say how much below asking price purchases were as many didn't have asking prices but they have been around 20% below market value at time of purchase. You do get luckier on some though.
     
  17. roypropertyinv

    roypropertyinv Member

    Joined:
    20th Dec, 2013
    Messages:
    101
    Location:
    Sydney, NSW
    Super post!

    I see you have one in Redcliffe, any plans for more in that area?
     
  18. Investig8

    Investig8 Member

    Joined:
    19th Sep, 2014
    Messages:
    53
    Location:
    Coast
    Well Done! Nice to see the simple formula of acquiring knowledge, maintaining laser focus (or as I like to say having an impenetrable mindset) and taking some direct action to achieve your desired outcome.
     
  19. WattleIdo

    WattleIdo Member

    Joined:
    5th Mar, 2014
    Messages:
    1,536
    Media:
    2
    Location:
    country NSW
    Thanks Simon L that was a really good read. Goes to show how important timing is when it comes to picking up a bargain.
     
  20. aussieB

    aussieB Member

    Joined:
    14th Nov, 2014
    Messages:
    77
    Location:
    Darwin, NT
    Super like. A great post for someone like me. Very motivating.