Property mentor and renovations veteran Brendan Kelly on common investor mistakes, quitting your day job, and pumping up roofs with a car jack
How did you get your start in property?
I started with a project where I renovated the property while living in it, eventually selling it. It was in an area of growth. The first thing I did was study the ripple effect within a group of suburbs around what I could afford to buy. I noticed a ‘funnel effect’ happening within Richmond (Melbourne) at the time. All the suburbs around this pocket in Richmond had gone up, but this pocket hadn’t done so yet. My budget was tight and enthusiasm was strong, so I purchased an ex-milk bar, converted it into a renovated residential oasis, and sold it sometime later for three times the price I bought it for!
What do you think is the biggest mistake new investors make?
One of the key differences between those that gain property investing success versus those that do not is the awareness of how and what each property purchased will contribute to the goal that the investor is looking to achieve. Without this clarity, it is very much just a game of ‘hope and pray’. This is not a recipe for success.
You left a six-figure corporate job, where you were managing 24 staff and millions in inventory, to invest full-time in property. Was that nerve-wracking?
Yep! But within that was the sense of confidence (or perhaps a little arrogance?) and the inherent need to ‘keep going’. I had done my research, done my numbers, purchased two properties with staggered settlement periods, and was ready to go. I walked out of the office on Friday and was on site with hammer and tools on Monday. It was a very exciting time. With hindsight, it was a tough road with more risk than I saw at the time. I certainly do not encourage others to do the same. With age and wisdom I can assure you there are far less risky ways, with more certain outcomes, than the approach I took back then.
What’s your worst renovation experience?
In the early days I was doing a significant cosmetic renovation and removed the plaster from a wall in the centre of the house. For the convenience of getting large ladders from one room to the next, I removed some studs from this wall without checking the ceiling. It turned out that it was a load-bearing wall. Over a period of days I noticed that the tiled roof was getting lower and lower. I was about a day away from the roof collapsing around me when I realised the problem. I immediately purchased a six-tonne car jack and pumped the roof back up. The lesson: always look up before removing supports.
What’s the one line of thinking you can attribute most of your property investment success to?
Never get into a property without knowing your numbers! There is a whole lot of wisdom required to ensure your numbers work, but, with time, anyone can be confident in knowing their numbers.
Being based in Melbourne, you’re obviously aware of the frequent negative and sometimes contradictory commentary the property market gets. As an active investor in the city, what’s your take on the current environment?
All indicators are that we are currently in a seller’s market. There is a lot of buying activity right now. This is fantastic news if you own property, although I’d encourage investors not to sell right now unless they really need to. If, however, you are looking to buy, expect to pay more than you think you need to in order to secure a place.
That said, within the year you’ll begin to see market changes. Some suburbs will continue to accelerate in price growth. Others will plateau or fall. The trick is to know which suburb will do what. Funnily enough, the consequence is that all commentators will be able to find suburb-level evidence that their predictions were right. My take: don’t invest anywhere just because someone said so. Spend the time to skill up in reading the market and its variations. Get on the ground in the area you want to invest in, and buy because the evidence says it’s a good buy.
If you had $100,000 in cash and could get a six-figure loan from the bank, but it could only be used for property investing, what would you do?
In this market, I would chat to my real estate agent friends and put the thought in their heads: “If you come across a vendor who needs to sell now, I have a pen poised over a blank cheque – I can help them out!” In doing this I wouldn’t be competing in the open market, the property would be presented as is, and the vendor could get on with their life problem free. I’d then add value to it wherever possible, and depending upon predicted market movements, I’d either sell it now, or keep it for a short time and sell it next year.
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