From school dropout to property millionaire

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For many of the world’s most successful people, mainstream education was not the path for them.  Richard Branson struggled with standardised tests due to dyslexia, Steve Jobs dropped out of college after six months and Bill Gates left Harvard to develop one of the world’s most successful companies.

While the name Martin Clay might be a little less well known than these giants of the business world, they all have something in common. School was not for them.

“I got the third worst score average in my high school and did not do well academically throughout my school years,” says Martin.

For some people the shackles of education can be more of a hindrance than a help. Martin Clay is the perfect example that one size does not fit all and he has a portfolio worth $1.68 million to prove it.

But success does not simply appear out of nothing. While Martin knew school was not for him, an interest in property can be largely attributed to his father.

“My father was a finance broker and would show me the potential of investing in real estate when I was going through high school.

“I would go out during holidays and see what he did. He’d drive around and show me different houses. We would look at their potential, the pros and cons between the others by just driving past them.

“I knew I wanted to grow a profitable real estate portfolio from hearing the success other investors had.”

By the age of 20 Martin had bought his first property. At the age of 29 he now has eight.

From humble beginnings

It’s safe to say Martin is very money driven. The idea of one having complete financial freedom is one that has been engrained in his mind for a long time. Having little money when he was younger proved to ignite a burning desire succeed.

“My parents have always struggled with money,” he says.

“From an early age I’ve just thought I don’t want it to be an issue for my future. That’s probably my biggest driving factor in looking at different investment strategies. It laid a platform. It’s what makes me tick.”

Once leaving school Martin began working in freight and logistics for Australian Air Express with the intention of saving every penny he could.

“That was good solid steady income that laid the platform,” he says.

After two years of solid saving and with a little help form the first home owners grant, Martin was able to purchase his first property in Margate. The three bedroom house was halfway through a renovation which he secured for a steal of $255,000.

Living in the house for 4 and a half years gave Martin the opportunity to ease into the property market with plenty of time to finish the renovation. Now valued at $380,000 it is easy to say that the effort paid off. However, living in the house for so long stalled Martins plans considerably. Looking back he now suggests a different path would have been easier.

“Buy to invest and not to live in,” he says.

“Keep emotions out of it and view the property as an investment vehicle, not as a long term home of that type that you want to live in forever.”

While taking up the homeowners grant meant Martin did have to live in the house for a while, he could have eventually moved back in with his parent to save money.

“Living with parents has the benefits of low rent, if any and you can save a lot faster to buy the next property, combined with the income and equity from capital growth of the first property.”

Five years later at the beginning of 2011 Martin really began to knuckle down on his dream. Gone were the days of easing in, it was time to take the plunge. Over two years he purchased two blocks of three units to take his portfolio to a total of seven properties. He chose Dalby as the location for these investments and it’s safe to say he had done his research.

“Dalby is the centre of a diverse and productive agricultural area with rich black soil allowing the production of crops such as wheat, cotton and sorghum,” Martin says.

Just this year Martin made his most recent purchase, a three bedroom home in Scarborough. With the intention of renovating the property this is yet another step on the ladder to achieving his goals.

How he got there
Strategy is something that Martin takes very seriously. As he has continued to grow his portfolio, Martin has taken several steps to not only speed up the process, but also protect it from potential pitfalls.

“It’s pretty much been to diversify,” he says.

“I’ll have certain properties in place where I’ll hold on to them, obviously pay off the mortgages on them and use that as another income. Then also have other ones purely to free up cash flow.”

While all of Martins properties are all located in Queensland, he has made sue to purchase in a variety of areas and invest in both houses and units.

“Worst case scenario if something did happen to one sector at least I still have the others going.”

Instead of just sitting on these properties, Martin has also taken proactive steps to increase the capital of his investments. Renovation has been a key part of his strategy for several of his properties.

“The first property that I bought was half renovated and just seeing what capital was released in that one, what profit we made and the equity that was released showed huge benefits.”

The next big project was upgrading his first block of units in Dalby. Martin maintained a line of credit with his bank as a buffer more unexpected costs. Increasing this when he secured a loan, Martin was able to fund his plans and jump straight in with a hands on approach.

“With the majority of the work I did what I could. Obviously you need to leave the experts to their work like the tiler, putting the kitchen in, the plumbing and the electrical work. Where I could do things was like in demolishing or helping out and getting the materials.”

Even something as simple as installing a new kitchen and giving the place a fresh coat of paint paid off. The renovations he made increased the value of these properties by $55,000. Martin was able to use this new added equity to fund his future purchases.

However, to get in this strong position, Martin first had to ensure he did some serious research. Taking a different strategic approach to each property, in turn meant undertaking different approaches to research.

“With my first property which I’ll be holding on to long term it was all about location. Proximity to the airport, the CBD, public transport, shopping centres and schools made it a good choice.”

His Margate property has proved to be successful. Since moving out Martin has had a stable tenant for two years and since purchasing the house in 2005 it has increased in value by $125,000.

With some of his other properties, Martin took a different approach.

“I look for areas that might have pockets of properties that I believe are currently under market value and should see price growth overall soon. I have also given attention to areas which should see an increase in demand on existing housing available due to significant changes in industry and resources nearby, such as mining areas or development such as processing or refinement plants.”

Dalby might not be the first area that pops to mind when one thinks to invest. Located over 200km in land from Brisbane it hardly screams out opportunity. But for the savvy investor it’s a place that is likely to pay off. Martin has six properties located in the small rural town, all of which are leased and increasing in capital value.

“It is the centre of Australia's richest grain and cotton growing area. Industries in Dalby include large-scale engineering, coal mining, and fuels (ethanol).”

Martin’s current primary place of residence in Scarborough is just up the road from his first investment. Just like his Margate property, this one was chosen due to its location. Just 500 meters from the water and with huge renovation potential this property should get him well on track for the next step in his plan.

Where to next
The strategies Martin has employed so far have proven to be successful. With eight properties under his belt he has no intentions of slowing down any time soon.

“I’m just going to keep replicating it,” he says.

“Just build a bigger platform and a bigger portfolio so that at some point it can take over my full time job. This is what I want to do full time.”

Currently working as a commercial real estate agent Martin is looking to diversify his portfolio even further.

“The reason I got into it was purely because I knew nothing about that sector. I just wanted to learn and know more about it and I’ve gotten what I wanted out of it.

“The next step would be to get into commercial property as well. With the current market how it is I find it would be a good time to renovate and flick a couple and either use that to buy into commercial or to pay down some of my long term holdings.”

While strategy and research have played a crucial role in the development of this portfolio, they are only part of the equation. Martin says personal development has played a significant role in his success.

“The personal development side of things, like reading books and having a mentor is something that I’m doing currently.”

Focusing on improving his own mental outlook has helped Martin to solidify his goals.

“The biggest thing is just being confident in what you’re doing . . . I guess everyone has an issue where if you are going into something new then fears do come up. A big part of it was being able to recognise areas where you have done well when you have stepped out of your comfort zone. Just concreting that and being aware of previous success.”

The world of property is not solely a complex bond of strategy, research and smart investing. Martin says it can be as simple as sticking to a plan and keeping motivated.

“Have a plan and stick to it. You need to keep learning from others. For me it is people like my father and anyone out there that have experience in their certain strategy. So just constantly learning what worked for them, what didn’t and then just taking form that what you think is going to make your own successes.”

You can see an in-depth breakdown of Martin's property portfolio in the July 2015 edition of Your Investment Property magazine.

Martin's Top 6 tips for beginning young investors

  1. Establish a savings pattern with a paper trail
Lenders (and mortgage insurers) want/need to see that you can repay the loan which means meet the repayments from a reliable on-going source, which means you haven’t won the money from a sport bet on a football game or “other illegal sources”.

They also want to see that its steady on-going savings; that you haven’t been gifted the money, inherited the money or borrowed the money from elsewhere such as friends or relatives.   If you have borrowed the money from elsewhere it would have to be repaid which would affect your ability to make the repayments on the new home loan.

They want to see some “hurt money” in there from you, that you bled to save the money for the deposit and will lose if the property is repossessed.  They want to know its not a case of easy come easy go.

You have to have some sort of provable evidence, such as savings statements or share market purchases and sales.
  1. Listen to others who have been there
It pays to listen to someone else who has walked through the minefield before you have to.

Sometimes you will encounter people who over inflate their own worth or talk rubbish but even then you can learn something from them.  Discard the bull and keep the gems.
  1. Don’t get emotional about the purchase
This is not your home for life.  It is a vehicle to help make you wealthy.

Don’t get attached to the property either, if it isn’t performing or you have made a mistake, or local changes in the area have had a negative effect on the property, such as “Sons of Anarchy”, setting up headquarters next door, consider cutting your costs.
  1. Always inspect the property in person
Do your research on the marketers/sellers of the property and go on your gut instincts and feelings when inspecting property. Make it a must to physical inspect the property photos are not enough to go off or from.

  1.  Give the property time to perform
Before the boom in the Queensland market, late ’90, there were a number of interstate investors that did buy Queensland properties that were overpriced. They sought advice from financial counsellors/advisors and were told to cut their losses and sell out. 

As an example a residential property 3 bedroom home at Helensvale on the Gold Coast) worth $120,000 was bought for $160,000. They investors were then advised to cut costs and sell. It sold for $122,000 but after purchase costs and sales costs including agent’s fees and loan break costs lost another $15,000.  The 2nd purchaser of the property at $122,000 held onto the property and saw the value exponentially to $400,000, within 8 years. 

The big booms might have gone, but still give the property time to perform and do some research on market trends.
  1. Be careful with your credit rating
Non-payment or late payment of phone bills, cable internet/tv, car finance or appliance finance can affect adversely your credit rating and consequently your borrowing capacity.
 

Can you afford to buy in this suburb? Find out how much you can borrow

Top Suburbs : albion , leumeah , mortdale , campsie , midland

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Comments
  • Tayla Flint says on 12/10/2015 10:16:03 PM

    Great advice for first time investors, Martin. Many people won't have your drive to succeed, but good financial planning and market research will result in solid real estate investments.

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