On the surface, northern NSW town Bangalow would seem far from an ideal spot to pick up an investment property. The population is small, employment opportunities are limited and rental returns haven’t traditionally been high. It’s also home to multiple colonies of screeching foot-long bats.
It wasn’t an obvious choice for Sydney based entrepreneur Lisa Messenger either. Used to investing to buy and hold in popular capital city suburbs, she dismissed the whole Northern Rivers region as an area where rental returns were too low to justify the $600,000-plus average asking price of houses there.
It was only when she started doing some research that she saw opportunity come a knocking. She realised that beneath the town’s uninspiring investment credentials was a region bursting with tourist potential.
“I realised that Bangalow had a number of strong points,” she says. “People had been telling me for years that they were looking for a quieter tourist escape in the region – and that’s what Bangalow promises.”
Warming up to the region
Some 12km from tourist mainstay Byron Bay, Lisa discovered that Bangalow‘s status as a sleepy town was changing to a cosmopolitan destination popular with day-trippers. It was also slowly emerging as a popular place to stay among tourists seeking a less-crowded alternative to Byron Bay.
Baited, Lisa was still yet to bite. She knew that even though the area’s capital growth prospects were good, vacancies and rental returns would always be a problem. If she was going to invest money into the region she needed a bigger incentive than mere tourist appeal.
It was only when she holidayed in the region in the summer of 2011 that she changed her mind.
“I had just spent two weeks up there doing a house swap with a girlfriend and, coming back to a quiet January, was having a look on Domain – still in holiday mode and dreaming. The first property that came up just looked too good to be true.
“It was an incredible property, which had been on the market for $925k. It was three dwellings: a 2-bed, 1-bath house; a 1-bed, 1-bath studio; and a retreat. I knew that the property could lend itself really well to a holiday letting, so I put in an offer.”
From her research Lisa learned that the house had been on the market for 18 months and had been with three different agents. Without emotional attachment, she put in an offer of $590,000, which the vendor eventually accepted at $599,000.
Taking the plunge
“I wouldn’t have bought the property if it weren’t for the price,” says Lisa. “The garden was overgrown and the house was covered in cobwebs and patchy paintwork. The building report showed really good bones though, so I knew that most of what needed to be done to whip it into shape was cosmetic.”
With the help of some friends, Lisa fixed the house up for $20,000 and it was soon on the market as a holiday rental. She was lucky to have had experience doing cosmetic renovations and knew some simple improvements that could instantly beef up the property’s appeal. She painted the buildings a new colour scheme and fixed up some of the flooring. The turnaround was instant.
She adds that since going on market, the response has been phenomenal. In an area where rental yields can be as low as 2%, depending on the property, Lisa is getting 6%. She forecasts this to only improve as more people hear about the accommodation.
“It’s been getting back great returns. A good friend of mine is the manager, and thanks to a lot of marketing, the house attracted huge interest over the Christmas period. We’re expecting 11% yield within the next 12 months.”
Lisa adds that the key to the property’s success has been thinking differently. To buck long-established investor wisdom of sticking to high growth areas in prominent regional towns and cities, she’s had to be creative.
“The Bangalow property has required a lot of work and there have been many additional unforeseen overheads. Through various marketing channels I have and just word of mouth, the purchase is slowly being built into a solid investment.
“My background is in marketing and I had studied a degree in the Northern Rivers area, majoring in tourism, so I knew I had the business and marketing acumen to give this new venture a red hot go.”
An appetite for risk
Taking risks and thinking differently is something Lisa is used to. In addition to her property investments, the three time Telstra Businesswoman of the Year finalist has started a string of businesses and has authored and co authored 16 books. She even won the Thought Leader of the Year award for 2008.
“I’m a serial entrepreneur. I think I am totally non-risk averse. All my business decisions are made 95% on gut feel and 5% on calculated research. That said, I’ve found it’s a lot easier to follow your intuition when you have spent a long time doing the background work. My nature is to just jump in and do things. More often than not I will buck the trend.”
When investing in property, Lisa says that she has developed a greater appetite for risk because there are so many different strategies and so many different people giving you advice.
“What can be tricky is working with people like accountants, mortgage brokers and banks, who have more of a ‘traditional’ business approach and don’t necessarily think like an entrepreneur. They usually don’t want you to borrow more money and be so highly leveraged.
“I like to buck the status quo. I think: if it’s not hurting me, then why can’t I buy more? I have big plans in property for this year so it’s going to be interesting getting through the red tape and naysayers.”
Lisa began her property investment journey in 2007. She had been interested in property for years, but only decided to take the plunge after she received an inheritance from her grandfather. This helped her secure a deposit for a two bedroom apartment in Bondi.
At the time she stuck very much to a friend of hers’ strategy: buying two bedrooms, 500m from the water. She bought the property for $539,000 and poured as much funding as she could into getting it paid off within two and a half years.
Lisa says she has come a long way since those days. “I didn’t realise the power of leverage at the time and thought that’s what you did.”
Her second purchase was another two bedroom apartment, also in Bondi. Using a buyer’s agent she bought the property off market, getting what she says was a good price at $650,000.
It was only by her third purchase that Lisa decided to go off strategy. She bought in Birchgrove, within Sydney’s inner west, and decided to buy a property that was selling as a distress sale. It had exchanged for $890,000, but the deal had fallen over just as the vendor had purchased another property. Lisa made an offer of $790,000, which was accepted.
“I would say my biggest lesson has been changing my mindset from thinking that you pay your property off in its entirety to being highly leveraged. The original thinking was ‘why pay all that interest’. Then I realised that if your capital growth is exceeding your annual interest payments, it makes more sense to use other peoples’ money, i.e. the banks, to purchase more properties.”
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