Duane Robinson: starting small

Photographer and new property investor Duane Robinson has a dual pronged approach to building his portfolio despite his modest income – buy cheap and partner up. He shares some of his secrets with Your Investmetn Property. 

“I’ve always sort of looked at property and saw that there were people making money, but never really been able to see how to get started,” says photographer Duane Robinson. But last year he certainly did find his way, snapping up three properties despite an annual income of around $40,000.

“What was really the clincher for me was that one of my flatmates sort of opened up the possibility of investing in cheap areas – very, very cheap areas and still making money doing that.”

So Duane set out from his Maroubra, NSW home and headed inland to the regional centre of Dubbo, about 400km northwest of Sydney.

“I spent a weekend there and had liked what I’d seen in Dubbo,” Duane remembers. “But from what I saw it looked like it had boomed maybe five or six years prior, and also my target was to start at $50,000 to $60,000 because I wanted to learn the ropes but I didn’t want to completely lay out everything I had and stretch myself too much.”

The cheapest our bargain hunter was able to find in Dubbo was in the $100,000 range, so Duane made an extra stop on the road back to Sydney at Wellington, a sleepy community of about 5000 that sits about 50km south on the road to Orange.

“I thought, ‘Wow I really like this place,’ it’s got nice tree lined avenues and so I stopped in and had a look at several real estate agencies there and saw that there were several places right around the market that I was looking for,” he remembers.

Duane’s low-budget portfolio

Putting in a phone order

Duane technically ordered his first Wellington property over the phone, but he says it was anything but a rash decision.

“So I drove back to Sydney and spent the next couple of months researching Wellington and just finding out what the industry is there and if there are any projects earmarked,” he says. “And there were quite a few things, nothing massive, but for a small town there were a few things that had happened and that were about to happen.”

He says the new jail employs quite a few people in the area and that it is well positioned to benefit from mining projects in the nearby Hunter region. Also, he says, he has heard that many people were beginning to commute to Orange and Dubbo from the quaint town.

So he spotted a property he liked on one of his scouting trips but couldn’t be on hand for the auction scheduled for the next weekend, so he was forced to hire a local real estate agent to go in his stead with him on the phone. The tactic worked, and he landed the property for $52,000 – about half of the suburb’s median home value.

 Lining up his low-docs

“When he showed me the photos I thought, “My God, I wouldn’t by that,” remembers Duane’s mortgage broker, Kevin Lee of Smartline Professional Mortgage Advisors. Kevin says it was clearly a fixer-upper, and that Duane made it clear that he was committed to doing the fixing.

Despite Duane’s low income and less than two years as a self-employed photographer, Kevin says his loan application did not need too much work. “Of course, we had to do a low doc loan,” he says. “Now, we didn’t tell any lies, we told what income he was actually earning but he couldn’t prove it because he had only been working for 18-20 months at the time.”

Kevin says it was also easy to show the house would be positively geared from the start, which would be especially important given Duane’s lower income when he decided to pull the trigger on his next property play.

Learning reno restraint

Duane’s first house was not much to look at – in fact he jokes that most people would look away and just keep going.

It had been vacant for a number of years and needing some love and attention. And being a proud and doting first time owner, Duane may have gone a lot overboard with that first renovation.

“So, I had a grand plan that I wanted to deck the place out,” he says. “I love DIY, and wanted to put in a new kitchen and bathrooms, and we ended up doing that on the cheap, but it just turned into a massive task.

“I thought that maybe I’d be up there for a week or two weeks and I was up there for two months. Looking back now, there were people that were telling me the place doesn’t need to be schmick, it just needs to be liveable. And people were telling me that but I just didn’t want to hear it.”

Duane says at $17,000 for the whole renovation, he clearly went overboard and says the experience definitely helped him learn restraint when it comes to DIY. “Realistically the difference is maybe $10-$20 per week between doing it real nice and doing it basic,” he admits.

But he is still quite happy with the results and at $160 per week, the property is earning him an annual yield of more than 12%. Better yet, just six months later he had the place re-valued at $85,000 and was able to pull out $30,000 to fuel his next Wellington play.

Duane and Dad Property Trust

“After the success of the first property I was keen to get moving and at the same time as well my Dad was keen to get involved financially and as well to provide a support network,” Duane says.

Duane’s father Dave also contributed $30,000 to the newly minted D&D Property Trust, and Duane says the partnership made more than just financial sense.

“My dad brings brains,” he says. “The finances are a huge help but another massive part is just support, and having someone who is positive and supportive is such a key, and also he helps with the research side of things by doing the due diligence and planning things out.”

That support helped the team find a bargain shoppers dream – a two for one deal.

“It was just a killer opportunity,” Duane remembers. But lucky for him, he says, you had to look pretty hard to see that. “The way they were advertised was probably the worst way you could advertise a property,” he says. “They were advertised as ‘El Dumpo’ and ‘El Cheapo’, and the photos on the website, you would run a mile to get away from.”

'El Cheapo' before and after:

That didn’t bother the Robinsons too much though because for just over $100,000, they had managed to score another two neglected but very promising properties. And this time, Duane says, he was not going to go overboard on the renovations.

Just like the earlier Wellington house, these two had not been lived in in quite some time. Duane says the one that had been labelled ‘El Cheapo’ by the agent was especially horrific. “There was no door on the place and it hadn’t been lived in for like seven or eight years,” he says. “There were wild people living in there – it had been a druggies den, and when we renovated the place we ran across quite a few needles around the outside of the place.”

But both properties cleaned up really well, and for just $12,000 they managed to get both back in shape. Not schmick, Duane says, but definitely liveable. After a couple of months reno time, they were each rented fairly quickly and are currently pulling in more than 12% yields.

Duane says the amount of time he was able to spend in Wellington during the first renovation helped him figure out ways to cut costs, including finding several retired tradies that could come in and do the work for a good price. He was also able to save a lot of money by buying materials second hand and through local salvage operations.

All three properties are cash flow positive, and Duane says this factor has made it possible for D&D property trust to continue rolling on, with slightly bigger targets in its sights.

Moving on up

Duane and Dave have now turned their attentions to Kempsey, another regional NSW town between Port Macquarie and Coff’s Harbour. Duane says the team spent weeks researching their next market and aimed to go slightly up-market, and Kempsey fit the bill.

“It has a lot going for it,” Duane beams like a new father. “It is pretty much on the coast, and it’s only 20 minutes from Crescent Head which is one of the best surf breaks in Australia – and I’m a big surfer so that pretty much sold it for me.

“But apart from that you’ve got this town of 20,000 people that is 20 mins to the coast and halfway between Port Macquarie and Coff’s Harbour,” he says. “If you go a few suburbs down from that toward Port Macquarie and housing is like triple the price. I can’t really work out why that hasn’t boomed yet.”

The area has just started to pique the interest of investors, and has posted double digit price gains over the past year to February, bucking an otherwise flat NSW market.

“If we had a lot of money,” Duane says, “there were probably six or seven places that we would have bought and that would have been instantly cash flow positive.”

Duane says they were looking for everything when they chose Kempsey – cash flow positive, potential for cap growth and potential for subdivision.

And he says he thinks they found it all. “One place just stood out,” he says. “It’s on the corner, on the main road and the house is on the one side. You could subdivide and sell off two blocks of land, and that was our plan.”

Their latest get came in at more than three times the cost of their Wellington properties - $175,000. Also, though the rental yield he expects will be a respectable 7%, it may take a few years for rising rents to put money in their pockets every week.

But Duane says he likes the fact that the Kempsey property has a lot more potential for capital growth and development. “We’re really excited about that property,” he says. “We wanted to start small and then move up the ranks and moving in to Kempsey, I see it as a really strong leap.

“Another thing that is about to happen is that they are building a bypass that is due to be finished in one to two years.” He says they are looking at subdividing the property, but figure it would be best to put those plans on hold until the bypass is complete and traffic is diverted, making the street much more desirable.

But first things first, Duane says he’s looking forward to completing a modest renovation on the new Kempsey house. He’s excited to show once again that he can stay on budget, and he says he won’t mind being just 20km away from his favourite surf spot.