A strong work ethic and dedication to the mortgage world has seen Michelle Coleman amass a property portfolio worth $4.6 million while establishing her
own business and having two children. Now, she plans to help other women achieve their goals.
Mortgage professional Michelle Coleman tends not to count her first foray into property.
A house and land package in Western Australia, bought at the tender age of 22, unearths memories of a doomed relationship and a dodgy broker.
“Looking back, at the time, it was a case of thinking this was the way I had to do it,” Michelle says. “It’s the great Australian dream to buy your own home and start paying it off. It was with my partner at the time, and was at Quinns Rocks, around 40km northwest
Michelle says that in 1995, when they made the purchase, most buyers went directly to the bank for a loan.
Her own decision to consult a broker ended in disaster. “It actually turned out that the broker ripped us off,” she says. “He took a $1,000 application fee that he wasn’t supposed to take and we never got it back. We filled in an application form and, during the process, he kind of fell off the face of the earth and we ended up dealing directly with the lender.”
Michelle says the lender asked her what fees she had paid and after she showed them, they told her that she should not have been required to.
“Knowing what I know now, the only reason he went [to that lender] is because he got a bigger commission,” Michelle says.
Michelle and her partner purchased the property for $100,000 and when their relationship ended in the not-toodistant aftermath, she moved on, letting him take sole control of the house.
Finding her feet, and niche
Shortly before the turn of the century, Michelle was working at a law firm, where she had been since finishing her law degree. Before long, she became disillusioned.
“I was deterred by the whole industry,” she says. “I thought ‘I’m not going to be a lawyer’, and ended up working in finance instead.”
Her change of heart ended up shaping the way she viewed money and investing, but not before she was given a kick start by a bit of bad luck that ended up providing her with a financial boost.
“It took me a little while to understand the importance of money,” she says.
“In 2000, I was in a car accident and received a small payout. The main thing I took away from [that experience] was that I had to put the money to good use.
Some sort of instinct told me I had to buy property; that it was going to be a good long-term investment.” However, Michelle’s former relationship had left her with some black spots on her credit record, due to unpaid credit card bills in her name, which were supposed to have been taken care of by her ex-partner.
Her credit record was not due to be cleared until around 2004, so there was going to be some delay.
In 2003, Michelle used the $50,000 payout from her accident to buy her next property, after her father used his strong relationship with his bank to persuade it to lend to her a year early.
“I bought a townhouse in Currumbin, which is on the Gold Coast,” she says. “The funny thing is that I finally found a townhouse that I liked and flew up from Melbourne
to buy it. I made an offer on it for $235,000, subject to finance, but that weekend I had an email alert about another townhouse that was exactly the same, but in the next complex. I ended up buying that one instead, after negotiating $30,000 off the price.”
Michelle cancelled her offer on the original townhouse and settled on the second one, which was actually right next door and in better condition, for $200,000.
“Even though I had owned a property before, I count this one as my first,” she says. “It was a good buy.
I lived in it for about three months, and then used the equity to travel to Europe.”
Michelle managed the property herself and says that while the tenants gave her no problems during the lease, they left her a nasty surprise when they moved out.
“The place was feral,” Michelle says. “It cost me over $2,000 to clean. There
were maggots under the lino and you couldn’t see out the window in the bathroom because the filth had clogged the flyscreens.”
In the years afterwards, Michelle had around $15,000 of work done on the place, before finally selling it for $325,000 with a handy gain of $125,000.
Love in the time of mortgages
Now in possession of her ‘real’ first investment property, Michelle had begun working in a new job since returning from Europe.
“I found a new job working for Investors Direct,” she says. “That [role] was all about investing and I took that education on board. As soon as I could, I took money out of [the Currumbin townhouse] and then bought another one.”
The black spots had been wiped off her credit record in 2004 and she had a solid property investment under her belt, which enhanced her loan eligibility significantly.
Her individual aspirations were put on hold, however, when she met her future husband Pete and, very romantically for a financial professional, helped him buy his first property.
“When we met we had an agreement that we wouldn’t become official before six months, or when he purchased his first property,” Michelle says.
“So I helped him find his first property and arranged the loan. Now we are married and have two beautiful girls.”
Pete’s purchase was a three-bedroom house in Frankston
North, a coastal suburb on the Mornington
Peninsula, south of Melbourne. The property was bought for $164,000 and is currently worth $280,000.
Moving fast for long-term growth
Now that they had ‘become official’, Michelle and Pete decided to invest together. With the help of a colleague of Michelle’s, they entered into a joint venture and purchased a four-bedroom house and land package in Narangba, located in Queensland’s Moreton Bay region, north of Brisbane.
They settled in March 2006, paying $340,000, on a 90% LVR with Macquarie. They have since sold the property for $441,000.
The following two years saw a flurry of buying action around Victoria, as Michelle and Pete used equity to keep purchasing properties with high growth potential.
“Everything we bought had to have equity built into it already,” says Michelle.
“As soon as the first house and land [package] was finished, we drew out about $40,000 and put it into the next one. The next purchase was a reno, and we got back all the money we put in when it was finished. We just kept recycling equity: I was aggressive in the way that I put as much money out for a property as I had and then
put very little in for the next one by using the equity from the previous purchase.
Purchases always had to be in a higher growth area, where I could get equity out, because my plan was to wait for a property cycle, when the values would have doubled, then maybe sell a couple, pay some of the others down, and go again.”
First, they picked up a two-bedroom duplex in East Geelong through a buyer’s agent for $175,000 and spent $45,000 on renovations.
“The buyer’s agent found the property and arranged the full renovation; I didn’t speak to one tradesperson,” says Michelle. “The fee was well worth it. Before we purchased,
we had an on-completion valuation of $280,000, so it took the risk out of the decision.”
Now, the property is worth $330,000 and commands $280 a week in rent, at a yield of 6.6%. In 2007, the couple bought a two-bedroom art deco apartment for $390,000 at Middle Park in Melbourne’s south and a four-bedroom house and land deal in Point Cook
for $336,500. Between them, these properties now bring in over $800 in rent and have raised around $450,000 in equity.
“We found the apartment by accident on realestate.com.au and thought there must be something wrong with the property,” says Michelle.
“We made two offers at the same time, one higher with a long settlement and one lower with a short settlement and they took the higher offer. Not long afterwards we did a valuation and it was worth $600,000.”
Michelle says the double offer technique is a trick she picked up while undertaking a mentoring course in Perth some years ago.
“The one thing I have always remembered is that you should always make two offers on a property,” she says. “Make a low ball offer on a really short settlement and a slightly higher offer on a long settlement. That way, when the vendor is thinking about your offer, they’re not thinking yes or no to one offer, they’re actually thinking about which one they should choose. We’ve used that a few times and it has always worked.”
Four seasons, and properties
The biggest buying year for Michelle was 2008, when she picked up four properties for a combined investment of just under $1.8m. These were houses and townhouses around Melbourne and included her one ‘emotional buy’; a two-bedroom terrace in Richmond that she thinks she probably paid too much for. “I got a little bit excited,”
she admits. “Richmond was the area I wanted to live in and when we went there, I could see the house, the dog and the baby, and that’s sort of where we were at that point, so we probably paid a bit more for it.”
At the time, it was a case of one disappointing experience leading to an opportunity for an immediate positive. “We were actually at another auction, bidding for a house,” says Michelle.
“We lost that one, and then a man approached us and said ‘I’m actually selling my property just around the corner, do you want to come and have a look?’ So we went around and I fell in love with it. From there, we negotiated with the owner directly.”
Michelle says that the $680,000 she paid at the time was about $40,000 too much, but she is still happy with the property’s prospects.
“Long term it will be great as it has a reasonable backyard and off-street parking, which is very good to have in Richmond,” she says. “It’s still going to be a good investment; it will just take that little bit longer to make up.”
Making the grade
For investors aspiring towards joining the 1% club (investors with six or more properties), Michelle says it is crucial that your number crunching is done
realistically. You need to know what loans you are capable of servicing and make conservative assumptions about future success.
“Work out what you’re earning and what you need for normal living expenses,” she says. “I did an exercise once where I took a note pad around and wrote down everything that I spent: the coke, the mars bar, the tram fare and whatever else. It helps to really work out what you spend. Then, when you’re doing the numbers for your purchase, you’ve got to go conservative.
I budget a rate of 7.5%, which is the average long-term rate of repayments
and I don’t take into consideration any negative gearing benefits.”
She also believes that when starting out, you don’t just need good financials, but also the mindset to achieve your goals.
“When I started out, I was probably earning around $50,000, so an average income,” Michelle says. “But because I knew where I wanted to go, I knew that I needed to earn more. It changed the way I thought about what I was capable of and gave me an incentive to go outside my comfort zone. You’ve got to say ‘well this is what I want to have; what do I need to do to get it?’”
Michelle says that the type of investment strategy
you have is not as important as making sure you get going.
“At the end of the day, as long as you’re doing something in property, there’s no right or wrong strategy,” she says.
“I tell clients that if you can’t afford a good growth property, then go for a positive cash flow property. As long as you’re investing, then at least you’re doing something.”
Michelle’s mortgage broking business is currently undergoing a transformation, which she believes will allow her to help other women, both as clients and colleagues.
“We will move from mortgage broking to mortgage management,” says Michelle.
“W Financial will be marketed as being women-friendly. Most of our staff will be women and we will create a really easy lending environment for our clients, so they can get themselves educated without the hard sell or any pressure.”
Michelle’s own story is an inspirational one. She has worked long hours in the finance industry and set herself up with her own business, while continuing to invest in property and having two daughters in recent years.
“I’ve got a three-year-old and a sixmonth-old,” Michelle says. “I only took two weeks off to have both of them, so it’s been a bit of a juggling act, but I’ve got a good support network, which really helps.”
Her new office will offer flexibility to parents and include a day care centre, so that staff members or clients can bring their kids in and know they will be looked after.
“If consultants with kids want to work three days a week, they can,” says Michelle. “It will be a place where women can feel empowered to achieve their goals.
“A lot of people think that if you’re a mum, then you’re just a mum. Kids add to your life but it doesn’t mean everything else has to stop. At our office, you will still be able to get quality time with your kids and also focus on everything else.”
Family and career commitments mean it has been several years since Michelle invested in property, but she is keen to get back in the game at some stage soon.
“At this point, we are looking at starting a self-managed super fund
,” she says. “So we might do a property through that. We also want to look at refinancing and see where we are with everything. Maybe some time in the next 12 months we will buy
another property, at least to balance out the portfolio with a positive one. It’s pretty heavily negative geared at the moment.”
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