After a run of successful property investments, Lisa Curtin had trained herself to be a cold, hard, calculating machine. She never bought with her emotions, only her smarts. If a property wouldn’t make good returns or promise capital growth, she walked. Then the unthinkable happened.
In 2005, Lisa heard about a property that had recently come onto the market in Rockingham, WA. Knowing it was possibly overpriced and the returns wouldn’t be good, she found it hard to turn her back on the sale. Something about it compelled her. She had to buy it.
She struggled against every instinct telling her it was a bad idea. She tried reason and logic. It was no use. The once-calculating machine chugged and groaned, its circuits puffing smoke. It eventually gave way and the 43-year-old public servant found herself signing on the dotted line.
The interesting thing is that taking on a cash-draining investment hasn’t affected Lisa’s investment success. For most investors, an expensive property with rents that offer little relief from the full brunt of mortgage payments would murder their portfolio, especially with little capital growth. For Lisa, the property has been but one stepping stone in a strong portfolio – and the cost has been more than worth it.
“I had once lived in that house,” Lisa says. “It was our family home when I was a teenager and when it came onto the market I felt sentimental.
“My father had built the house just after we arrived in Australia from England. He had died two years before and I felt I just couldn’t let someone else have it. I had additional mortgage payments on my PPOR (residence) and other investments, some of which were heavily negatively geared, so I was really overextending myself when I bought it, but I simply did what I felt I had to.”
Lisa adds that the first few months after buying the property were the toughest. “Things took a real turn when I had to take a day off work just before payday because I couldn’t afford bus fare,” she says. “I had made an emotional purchase, but now I had to work out what I was going to do about it.”
Getting started in property
Lisa solved the problem by going back to how she started in property investment. A string of cleverly timed projects meant she had built up a collection of properties that she could use to rescue her.
Her first purchase had been back in 1991, when she was working as a radio communicator in the Royal Australian Air Force (RAAF). She had joined the military five years earlier, aged 17 and ready to see the world. The RAAF had posted her in seven different locations, but it was in her favourite – near Penang Malaysia – that she first looked to the Australian property market.
Not wanting to be bogged down with maintenance costs or risks, she simply bought a block of land in Singleton, WA. With the allowance she received from the Airforce she paid down the $33,000 mortgage and sold the property in 1995 for $54,000.
At this time she decided to leave the Airforce and settle down, partly because she was due to give birth to her daughter Isabella. She used the funds from the land sale to purchase her first home, a $67,000 property in central Rockingham, and set up life as a single mum.
“I got a cheap price for the property, but only because of the amount of work it needed,” says Lisa, who adds that she had to knock down a few walls and replace the kitchen and bathroom to update the property’s gaudy 1970s feel.
Life in the property wasn’t easy. “I struggled to pay the mortgage on my government pension and I needed to retrain in a non-military role. I undertook study in accounting at Tafe and eventually re-joined the workforce as a public servant for the Child Support Agency. I had to arrange care for my child and was travelling an hour to work each day. As all parents know, multi-tasking becomes a necessity and this was a skill I brought into the investment game.”
Investment property next
Lisa sold the house in 2002 for $120,000, in hindsight, just before prices boomed in Rockingham City. After her experiences renovating her past home, Lisa became intent on sinking her teeth into a more substantial project.
Her mother had a 1,047 sqm property that she wanted to subdivide and Lisa decided to manage the project herself. The property was in an established part of Rockingham, four streets from the beachfront, and the plan became that Lisa would buy the front block off her mother at market value while her mother would continue to live in the original house remaining on the back block. This would then leave Lisa free to build a house from scratch on the newly divided land.
Lisa used the sale of her previous home to purchase the land and build the house, leaving her with a $127,000 mortgage on a property that cost her $197,000.
“I never felt daunted by the project,” she says. “Maybe some people have struggled with these projects before, but I always knew I’d make it work. There was never a doubt in my mind. I did realise then on a strategy for further investments into the future: I’d buy close to the beach and look for projects where I could add considerable value. Still, I knew I had a lot to learn.”
Ramping it up
Lisa’s real foray into property investing began in 2004. With equity now in her PPOR, she started looking for an area that was on the tip of a boom and settled on Geraldton, an emerging port area some 450km north of Perth. “I wanted a rural area in WA and Geraldton ticked all the boxes,” Lisa recalls.
Sticking to beaches once again, she purchased four 3-bedroom units on a 2,004sqm block close to Geraldton’s Sunset Beach. With the $489,000 price tag, rental returns were initially low, but Lisa understood that they would start to climb as the area developed.
She followed the unit purchases with the house her father had built – the purchase that had landed her finances in hot water. With the units negatively geared, the mortgage on her home just three years old, and the deeply negatively-geared house she had grown up in all taking big slices off her pay check she decided serious action would be needed.
With reluctance, she opted to put the Geraldton units back onto the market, but even here she faced a steep challenge. “The units were on two titles so couldn’t be sold off as single properties. So, during this time I started the process of subdividing them to enable me to capitalise and sell them off separately since they were on large blocks still as single units.
“I had to join them into one title prior to then subdividing them into four, so it was a two-stage process. I completed stage one, but couldn’t afford the work required to split them into four – things like building fire walls into the roof space between units, other small changes and fees.”
Putting the units on the market in 2007, Lisa had to wait a full 12 months before finding a buyer, who purchased for $1.1m. This time she did benefit from massive price increases in the area, considering that Geraldton was in the midst of a massive boom. As a result, her $1.1m selling price was $611,000 up on her purchase price. This equated to some $150,000 of capital growth each year over the four years she owned the units.
“With this money I paid off the mortgage on my home and put considerable funds into my father’s old 3-bedroom house. Capital gains tax was an issue, but I came to terms with it because I figured I would have paid that money in tax anyway if I hadn’t had the great benefits of negative gearing over many years.”
Having amassed such considerable capital growth from her four unit purchase, Lisa admits she caught the investment bug. “My initial plan had been to be mortgage free on my home within 10 years, but I had accomplished this in only four years, so now I set myself a new goal. I decided I wanted to be a self-funded retiree by age 50.”
Having learnt a valuable lesson from the purchase of her father’s old house she vowed that she’d make sure she’d be able to always meet her costs of living and not be overextended again. It was time to be more conservative. For the rest of her investments, she’d buy under the market as she realised there would always be rental demand at the lower end. In addition, she’d look for small opportunities to add value and enable capital growth.
With a proposal to develop a new marina underway, Lisa set her sights back on Rockingham, her hometown. In 2009, she purchased a 2-bed, 1-bath villa for $310,000, tapping into some of the equity in her home. It was just two houses from the beachfront, but needed a bit of tender loving care.
“I did a mini reno,” says Lisa. “I laminated the flooring throughout the property, added a new wall oven and hob, put in new cabinet handles in the kitchen and replaced lights with downlights. I also furnished the place.”
The small improvements and furnishings cost $20,000 and helped push the rent to $550 a week – an initial rental yield just shy of 10%.
As luck would have it, a year later the villa next door went onto the market and Lisa got her hands on it for $316,000. This time she managed the purchase by accessing equity in the 3-bedroom house she had bought in 2005, and also did another renovation.
“I usually renovate as a team,” she says. “It’s me, my daughter and my mother and I get quite proud of some of the work we’ve done. In this instance, I ripped out the old kitchen using just a screwdriver, hammer and chisel. We also installed laminate flooring and air conditioning and replaced all light fittings and fans.”
Following the renovation, the house hit the rental market, unfurnished, for $350 a week, netting Lisa a 5.8% yield.
This year it was third time lucky as Lisa bought yet another property within the same complex as the other two. Having recently settled for $330,000, she has big plans for it. “I’m going to do another reno job over the Christmas period. It will be my little project. I suspect it should rent out for $350 a week, negatively-geared while I wait for rents in the area to pick up again.”
Lisa is still adamant that she will be retiring by age 50 and encourages anyone else daunted at the prospect of investing alone to just go for it. “I’m still a single mum and it has not always been easy, but you can start small. You have to start somewhere.”
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