From zero to $2.6m portfolio in under two years

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For Melissa and Andrew Matheson of Castle Hill NSW, they had to get over the notion of “debt is bad” to create their $2.6m portfolio including purchasing four properties in a month and some they’ve never even seen. Graham Brown reports

Melissa, 41, is very much the driving force behind the property juggernaut she created with husband Andrew, 43, a senior marketing manager with a global consumer goods company.

This super mum somehow manages to juggle a three-days-a-week job, two children [Hamish, 9, and Georgia, 7], and a bulging nine-property portfolio worth more than $2.6m (gross) which pulls in more than $3,200 in rent each week.
 
“Fortunately we’ve got into some sort of routine but we still have to sit down regularly and compare what we are all doing and with whom,” she says. “I spent the past 12 years as a product manager, but decided my children and husband were my priority rather than continuing a career.”
 
Jumping into the property business was also a huge shift in mentality for the couple. 
 
“We were always focused on repaying the loan on our home and, combined with excellent capital  growth in Beaumont Hills, that meant we could pay off the loan resulting in substantial equity,” she says.
 
“We knew our money should be working 24/7, but we are both quite conservative in that area. And having our parents’ belief instilled in us that  you pay off your home as soon as you  can and debt is bad, we were reluctant to take any major risks.”
 
Melissa says just prior to the birth of Hamish [now 9] they met with a Westpac financial planner and took a loan of $150,000 to invest in managed funds to create wealth.
 
“With drops in the stock market and then the GFC, we crystallised our losses in June 2011,” she says. “Our adviser at Westpac then told us to go and buy our first investment property.
 
“He had already taken us through the strategy, crunched the numbers and shown us what we could do with all of the equity we had in our PPOR. But we were still afraid of the risk. So basically he said, ‘don’t come back until you have some news for me!’”
 
Melissa says that before they had “been toying with the idea on and off for a couple of years but didn’t really have any direction or education on how to go about property investing”.
 
“It felt like a needle-in-a-haystack approach with random searches on realestate.com.au. It was so overwhelming. So it was after that meeting that we took action and made Quakers Hill our target. We chose it as we had to narrow the search somehow and my cousin had just bought her first property there.
 
“Having a focus made the process so much easier as we finally had some direction. We had $400,000 to work with, so we started by looking for properties in that price range. 
 
“We only inspected five or so, with the one that interested us the most going to auction. That was quite nerve-racking.
 
“We bought that through an investment loan of $510,000 out of our home. We allocated $100,000 to renovations on our own home, and used the remainder for our first property purchase.” 
 
She says the purchase price was $380,000 which allowed for stamp duty and other bits.
 
“We already had the funds for settlement sitting in our account from the initial investment loan which meant that post settlement, we provided the title deed for the property to the bank so as to draw the equity out for the next property purchase. It was re-valued at $415,000.”
 
A simple plan
 
That initial purchase, a three-bedroom villa in Quakers Hill, would be the first and last property they would negative gear. She says their plan from then on was quite simple: buy below market value; cash-flow positive; bread and butter suburbs; and close to schools, services and transport.
 
“We were always told that you buy a property to negative gear, so there’s a tax benefit but we didn’t realise the huge benefit of having cash-flow positive properties that generate an income,” she says.
 
“So we took out the equity in Quakers Hill and got Bidwill (NSW) and Parramatta Park (Queensland).”
 
She says they continued the process over each time to purchase the rest of their portfolio including doing four in June, some of which were sight unseen. They also stuck to the 80% LVR rule across all their purchases.
 
“That was a very stressful month in terms of paperwork,” she says. “A lot of people, even at my age, are all about ‘pay off your house, pay off your house’. They have equity in their house that can work for you. We should’ve taken the plunge into property years ago instead of worrying about the what-ifs.”
 
Mother of all jobs
 
“If you are going to renovate, do it smartly. You do it differently than you would your own home. Be careful not to overcapitalise. Know your figures and know your prices. And be disciplined,” she says.
 
She says she did her first ever renovation on the Bidwill property, putting new carpets down, installing a water heater, replacing the toilet and vanity and then painting the interior, all over about four weeks. 
 
“It took me three days to sugar soap the place, it was so disgusting,” she says. “We are talking rodent droppings covering the walls. We had a bath that we thought we were going to throw out, it was in such a bad state. But it’s amazing what some Coke will do when no other chemical will budge a stain.”
 
Melissa sounds like a woman at the top of things and doesn’t see obstacles, just “challenges”.
 
“I wouldn’t say that anything has ever gone wrong, rather that we have had a few challenges along the way and even then we found a solution,” she says. “Nothing in life is ever without its hurdles, it is just a matter of how you handle them and that you keep going no matter what. 
 
“One small challenge was with our Bidwill property which settled a couple of days before Christmas. Trying to get tradesmen between Christmas and New Year was 
quite difficult!”
 
Investor Timeline
 
August 2011: 
Purchase a three-bedroom villa in Quakers Hill for $380,000. An “uncomplicated” purchase, it is the only negatively geared property they have, costing them about $1,000/mth. “It was in excellent condition with no work required at settlement,” says Melissa. “We used some savings for the stamp duty and legals, but mostly the equity from our PPOR (current value $950,000) to fund the purchase. We drew the maximum amount of equity as an investment loan in our name.”
 
December 2011: 
With the Quakers Hill property re-valued at $415,000, they use that equity to purchase a Department of Housing three-bedroom house in Bidwill for $187,000 and Parramatta Park (see below). “The smell alone turned many purchasers off!” she says. With a $15,000 renovation, the value of the property is bumped up to $225,000. 
 
January 2011: 
They purchase a two-bedroom unit in a complex of eight in Parramatta Park, Cairns. They get it for a super-low $96,000 because it is bought as one of a row which helps B Invested negotiate a better price. “We settled three weeks after Bidwill. We didn’t physically inspect it, relying on photos and our own research,” she says. “The attraction was the purchase price and the low vacancy rate.”
 
April 2012: 
The couple then repeat the process and use the Bidwill and Parramatta Park equity to buy a three bedroom house in Emerton for $196,000. “It was also a Department of Housing property and, compared to the state of the Bidwill property, it looked pristine with only a couple of holes in the walls,” she says. “I called it Graffiti Palace. We repainted inside and out, ripped up the carpet, polished the floorboards, and put in new blinds, and light fittings.”
 
June 2012:
With Emerton now valued at $230,000, they used that equity to buy a two-bedroom unit in Kingswood for $165,000. “It was presented to us as an excellent opportunity to buy a positive cash flow property. Similar properties in the area were selling for $195,000,” she says. “I did do an inspection and ordered the strata reports.”
 
June 2012: 
Purchase a four-bedroom house in Tamworth for $117,000 with the equity in Bidwill. “Tamworth and Kingswood were settled on the same day!” she says. “There is already an existing tenant, but we will need to freshen up the place by painting and new carpets. We bought it sight unseen, we didn’t even see photos of the interior. In hindsight, I wouldn’t recommend such a risky approach.” She says she chose Tamworth because the property was below market value and had good rental opportunities.
 
June 2012:
Buy two units adjacent to each other in Cairns, Queensland. “Again it was sight unseen, just from photos,” she says. “We used an existing investment loan available from our Managed Funds Portfolio.”
 
October 2012:
The equity in Cairns and Tamworth was used to buy three townhouses and one villa in Ourimbah for $760,000. “This was quite complex as it wasn’t strata titled, which meant extending our knowledge in this area, as well as a few delays with finance. However, we have achieved $280,000 in instant equity,” she says. At the time of writing, it was yet to be strata titled.
 
How they manage risk
 
Sound foundations:
“Nathan Birch and Daniel Young [of Binvested.com.au] took us through how to set ourselves up to ensure we were protected. It was a no-nonsense approach,” she says.
 
Asset protection:
“We got a health check of our finances with a Westpac financial planner,” she says. “We have always had income protection for Andrew; however we now have insurance policies for the children and for me. 
 
We have landlord protection on each of the properties and opened our first family trust for the next few purchases,” she says.
 
Interest rates:
“We have a healthy rainy day account,” she says.

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