Expanding during a downturn


Financial independence is the name of the game for most property investors, and Evelyn Thomas is no exception. Her aim, she says, is to provide a carefree life for her family, but she also plans to extend that giving spirit to those in need.

“I currently work for Mission Australia Housing, a non-profit organisation providing housing for socially disadvantage people. It's such a great reward to work for this organisation and see first hand the homeless being placed into modern homes,” says Evelyn.

“I believe we all deserve to live in a great house or apartment we can call our home, and what I want to achieve with my personal investments is to develop homes for the homeless in Australia and worldwide. I am a strong believer in helping others, and through property investment I will be able to achieve my personal goals within 10 years,” she adds.

Starting small

Before putting her ambitious 10-year-plan into action, Evelyn needed to start small and get her first property investment on the go. Having worked for several years in the banking and finance industry she was familiar with the intricacies of funding a property purchase, and this experience proved to be invaluable back in 2007 when she decided to dip her toes into the world of property investment for the first time.

With her finance career behind her Evelyn was living with her parents at the time, had no savings and was on a modest salary of $42,000, yet she was still able to fund the purchase of a $185,000 two-bedroom apartment in Blacktown, NSW, through some deft financial juggling. 

The trick, says Evelyn, was to seek pre-approval for a home loan, negotiate a long-term settlement on the property (11 months in this case) and then take out a personal loan to cover the deposit in the meantime.

“I paid the 10% deposit and was able to repay the loan within 11 months, then request a formal approval from the bank. In the meantime my deposit was sitting in a trust account with the agent, which gained me interest and was available to me after settlement. This little trick I learned after working in banking and finance for over 10 years,” explains Evelyn.

A timely tip off from the estate agent that the owner was keen to sell also played its part in the deal, allowing Evelyn to negotiate a $10,000 discount from the asking price and reduce the size of the required loans.

“I was also informed by the agent that the vendor was migrating overseas, therefore a quick sale was necessary. The property had already been on the market for 12 weeks, so I had the upper hand,” she explains.

With the deal sealed, Evelyn spent the next 11 months paying off her personal loan before gaining formal approval on her mortgage, settling on the property and finding a tenant. She initially set the rent at $180 per week (yielding 5.06%), but has since seen the unit’s value rise by $75,000 to reach $260,000, and the yield jump to 7.59% ($270 per week in rent).

Looking north

A year after the Blacktown purchase, Evelyn heard that there was a good deal to be had further afield in Redlynch, Cairns. The developer of a 20-villa project there had been struggling to shift the last eight properties off-the-plan, and to attract buyers he was offering to stump up their deposits himself. He’d also employed the services of a finders’ agent who’d spoken to a mortgage broker friend of Evelyn’s about the deal. He in turn passed the news on to Evelyn, and she was quick jump on board.

“The developer had a few units that were still available and was losing money, so he paid the 10% deposit to get the buyers in. I’d researched the area through RP Data and thought, ‘I’m not going to lose any money here’,” says Evelyn.

“It was a great location, the 10% deposit was paid by developer, there was a two-year rental guarantee and long-term tenants had been lined up, so of course I signed up straight away.”

Evelyn only needed to put down $1,000 of her own money as a holding deposit, which the developer would return on completion. She knew however that, despite only having to put down such a small amount of her own money, getting approval on a home loan would take some more fiscal gymnastics.

“Having previously been a credit analyst for a major bank, I knew banks do not like deposits from developers,” she explains. “There’s a risk factor involved, because there have been cases where developers have promised a 10% deposit, but would then only provide 5-7%. So it’s high risk, you’ve got to know what you’re doing and you’ve got to have a good broker to back you up.”

To satisfy any worries that the bank might have, Evelyn was given a helping hand by her parents, who offered to stump up the deposit if needed and wrote a letter to the bank saying as much. As it turned out, the developer was good to his word and promptly came up with the deposit, but without the help of her parents Evelyn’s sure that her loan application would not have gained approval.

Within six months the property was completed and settled, and Evelyn was able to add a $223,000 one-bedroom villa to her portfolio. The property’s now valued at $240,000 and rents for $250 per week, yielding 5.83%.

The land of the free

So far, so good, and things were about to get even better for Evelyn when a year later she married her husband Dale; a man who she simply describes as “wonderful”. He also turned out to be interested in property investment, and the two newlyweds soon set their sights on investing overseas in the USA.

Regular readers of Your Investment Property will have heard a scare story or two involving US property investments, and Evelyn was at pains to make sure that her experience didn’t become another cautionary tale. To that end, she buckled down and did the hard yards on the research front before jumping in to the American property market

Her first port of call was an online search to find a reputable buyers’ agent, and Evelyn was drawn to a London-based agency that had represented a lot of Aussies investors in the US. Before engaging the agency’s services, Evelyn picked the brains of some its clients to satisfy herself that she’d found a trustworthy company.

“He’s got a lot of Australian investors, so I found a few investors and had some Q&As to find out if they’d had any problems with tenants or the property. So I did my research and then went ahead with the agency,” explains Evelyn.

But the hard work didn’t end there. The agent sourced a promising investment opportunity in Rochester, NY, for Evelyn and Dale to consider, and soon enough she was on the phone to the local council to check out the area’s credentials.

“I actually rang up the council and had a one-hour conversation with the poor guy,” she says. “I had three pages of questions. The area has three primary schools, and the majority of the population are young families – about 35% owner-occupiers. So I did thorough research, and then phoned the council to double check the local economy.”

“We did have another property in mind in Detroit, but it was in a low income area and as an investor I thought I didn’t want to purchase anything around there due to the high risk,” she adds.

On this occasion Evelyn and Dale were buying the property outright, so they were spared the arduous task of being a foreigner trying to secure finance on an investment property in the US. The asking price for the property (consisting of two 1.5-bed, 1.5-bath dwellings) had been set at AU$41,000, but Evelyn bargained hard and was able to beat the vendor down to AU$31,000 including all settlement costs.

“Every property that I am interested in, I always negotiate on the price. Especially if you knowledge of the area and finance approved, you’ve got more leeway to negotiate because you can easily just go and buy another property. I’ve walked away and then had real estate agents come back to me straight away and say that the vendor has reconsidered my offer,” says Evelyn.

The property now rented out for a total of AU$995 per month and she’s yet to encounter any problems of note. Evelyn and Dale plan to go out and see their piece of the USA for the first time this year, and the couple may well find themselves purchasing a second home in the land of the free whilst they’re there.

“We’re going to the US and will be meeting our property manager there. I quite like Rochester, it’s a nice town. So if we see a property that we like there, I don’t see why not. But again, do your thorough research. It’s exactly the same as purchasing a property in Australia; don’t  go in with a blindfold on,” Evelyn explains.

Pushing on

Aside from further forays into the US market, Evelyn and Dale have big plans on the domestic front. They’ve just secured a $598,000 three-bedroom, two-bathroom property in South Hedland, which was part funded by an equity release on Evelyn’s parents’ property, and are about to have a go at their first renovation project.

“It’s cash flow positive, and the lease has just been renewed for 12 months,” says Evelyn of the South Hedland situation.

The renovation project will take place closer to home in Sydney. Evelyn’s done her sums and chosen a location that she knows well but, as always, is taking her time to research each potential property thoroughly before making a final decision.

“This is going to be our first renovation, so we’re very excited. It’s going to be the next big step for us. Every weekend we’ve been gong to auctions and looking at run down properties. We’ve got a couple in mind, but I don’t want to just make an offer. I’m the kind of person that needs everything in writing,” she says.

“It will be in the inner city around Leichardt or Lillyfield. I live there so I know that area very well. My husband’s been there about seven years, and I’ve lived there about four and a half.”

If all goes to plan, Evelyn and Dale intend to move on to more challenging structural renovations – overseeing two projects at a time – to push on with the 10-year plan. It’s going to be a big ask, but for somebody with Evelyn’s drive, determination and noble goals, it seems that the sky’s the limit.

Whether you are looking to buy your first home, move home, refinance, or invest in property, a mortgage broker can help. Access loans from all the major lenders, get help with paperwork – plus there is no charge for this service. Get help from a local mortgage broker

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  • Annie says on 27/12/2011 09:50:38 PM

    Your story has inspired me and my partner and I are now investing in property.

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