In less than 10 years, Michael Lezaja has gone from working as a security guard seven days a week to owning 15 properties collectively valued at more than $5m. He tells John Hilton how he maximises his profit using renovation and diversification strategies
One of the best nights of Michael Lezaja’s life happened 10 years ago when he was in his early 20s. At the time, Michael was working as a security guard seven days a week and had just purchased his first place of residence – a four-bedroom, two-bathroom house in Ingleburn in southwest Sydney.
It was a time before ideas such as renovating and growing a portfolio had even entered his mind. In fact, when Michael moved into the house on that first night, he slept on the floor with just a pillow and blanket.
“It was one of the greatest nights of my life and a newfound freedom,” he says. “Your first principal place of residence is always sentimental, and I love that.
“I always look at every business transaction as a numbers game. I don’t walk into a property and say, ‘I really love this’. However, the Ingleburn property was special, and I actually still live in it today.”
This was the beginning of Michael’s passion for property, and it all came about when he decided that the time was right to move out of home.
“I was originally looking to rent a place, but the rental application actually had more details than a mortgage application. So I made some enquiries and found out I was in a position where I could buy a property,” says Michael. The house cost $380,000, and Michael paid a 5% deposit, plus the First Home Owner Grant.
Now that Michael had the buzz of excitement that came with home ownership, he was becoming increasingly fascinated by different strategies used to renovate and invest, as demonstrated on TV shows such as Location, Location, Location and The Block.
“The good thing about these shows is that you can learn from other people’s mistakes, such as seeing the contestants overcapitalising,” he says.
As Michael has progressed through his property investing journey, he has become more ambitious and taken on more advanced strategies, such as thorough renovating and buying off the plan.
After making a series of smart decisions with his early investments, this enabled Michael to purchase a whopping 14 properties in NSW and Queensland between December 2012 and January 2014.
Now his property portfolio has a current value of over $5m, and they all have healthy yields above 5%.
About two years after buying his PPOR, Michael became so inspired by the renovation experiences he had seen in magazines and on TV shows that he decided the time was ripe to buy an investment property and renovate.
At this stage, Michael was looking at something in a blue-chip suburb that was close to the water and within 4km of the CBD.
When Michael went to an open house for a unit in the eastern Sydney suburb of Bondi, what he was presented with was something that would have scared many investors off. But he saw something else entirely: an opportunity.
“The place had four backpackers sleeping on the floor, and in the kitchen there were cockroaches crawling out of the oven,” says Michael.
“I saw everybody shaking their heads, whereas I wanted to say, ‘I’ll take it’. But I also wanted to keep it quiet, so I kept a straight face.”
At the end of the viewing, Michael decided to call the agent and offer $360,000. The agent refused, insisting they wouldn’t let the property go for below $380,000.
However, after the agent realised Michael was not prepared to budge from $360,000, they agreed to settle on that figure.
“The agent asked if I could at least offer them a couple of extra grand, and I said no. I was really stubborn at the time, because I wanted to get a really good deal,” says Michael.
“It was good for me because nobody wanted to do the renovation, and in 2007 at the time the Sydney market had slowed down, so it was the perfect time to buy.”
As Michael bought this property before the GFC he was able to borrow 100% of the finance through Macquarie Bank.
As soon as Michael purchased the property he got straight into the renovation. This included installing a new polyurethane kitchen which featured stainless steel appliances that would be appropriate for the professional demographic that would target this suburb.
The unit had tiles in the ceiling so Michael had to remove all of those. He also put in a brand-new bathroom with Spanish tiles. Additionally, everything was fully painted and the floors were sanded. The total renovation cost Michael $30,000.
“That kind of renovation today wouldn’t have even got to half that for me. I could have saved some money on things,” he says. “I also learnt many things, including how much everything costs and how to deal with good tradespeople and bad tradespeople.”
Six months later, Michael had the property revalued at $460,000. In other words, the value had increased by $100,000 in half a year after spending just $30,000.
The Bondi property has been nothing short of a dream for Michael. Not only has it grown by a huge $340,000 in seven years but it also helped him go on a spending spree in which he bought more than 10 properties over 12 months.
About two years ago Michael was thinking about selling the property, so he gave the place another good tidy-up. However, in the end he decided to rent the property for $620 fully furnished and the garage separately for a further $60 (as the garage was on a separate title).
For the moment, Michael has no plans to sell this unit.
Michael's Tips to Add Value
- Fresh paint and new carpet are great things for an investment property because they are cheap and can really enhance the look of the place.
- A good-looking property is not the same as a good investment. Investors should not be put off by properties that require a lot of work. On the contrary, they can be an opportunity for a very healthy profit.
- Friends and family are a great help. In addition to being great support, they can save you a lot of money on things such as landscaping.
- Watch TV shows on renovation because you can learn a lot from the mistakes the contestants make. However, keep in mind that there are certain costs that may not be factored into the contestants’ budgets, such as architects’ fees and council fees.
- You don’t have to be passionate about renovations to be a successful renovator. Despite completing plenty of renovations, there are other parts of property investing that I enjoy much more than the hands-on side of it. I really like to project manage, negotiate with tradespeople, and negotiate on deals. But it’s also good that I have been involved in the renovation side because it’s great to know what a tradesman does and how long it takes them to do a job. So when you are buying a property you automatically know what a kitchen is going to cost you, what a bathroom is going to cost you, what a tradesman costs per hour, and how long they are all going to take.
When a three-bedroom, one-bathroom house in the southwestern Sydney suburb of Heckenberg came up on Michael’s real estate alerts one morning, it immediately caught his eye. It was $279,000 on the market, and he knew this had all the makings of an excellent deal, particularly if he could negotiate an even better one.
“I called the agent straight away and said, ‘How much can I buy this for? What’s your absolute bottom price? I will come down in 20 minutes and I will sign a contract’,” says Michael.
The reply was $260,000. Consequently, Michael came straight in, signed the contract, and paid a 0.25% deposit. It was only then that Michael took the keys and went to look at the house.
“I purchased this and paid the deposit without looking at it, because I knew that it was a $300,000 house. So I paid the $260,000, even if it needed a full kitchen, bathroom, paint job, etc. I was willing to take that risk because that would have cost $20,000–30,000 max,” says Michael.
And if there had been something wrong with the house the worst-case scenario was that he would lose his 0.25%, a risk he was more than willing to take.
After Michael had taken care of the contract and financial arrangements, he immediately started planning the renovations.
Firstly, he removed all the carpet and cleaned up all the rubbish. He also transformed it from a three-bedroom house to a four-bedroom house, and added a new polyurethane kitchen and a new bathroom. Then he tidied it up externally and did some landscaping, with a little help from family and friends.
“My dad and his mates came out and I put on a barbecue for them, which is a lot cheaper than having eight landscapers out there,” says Michael.
“I spent about $26,000, and I think the revaluation came in at only $315,000. I was very disappointed with that because I knew if I was going to sell it at the time I could have sold it for $340,000 hands down.”
This property has been another excellent performer for Michael. In addition to rising from $260,000 to $450,000 in less than two years, the property rents out for $400 a week. As far as looks and value are concerned, it’s a far cry from the property that came through on Michael’s alerts.
MICHAEL’S BUYING SPREE IN QUEENSLAND
In 2013 Michael turned his attention to Queensland, as he saw Brisbane as the next hotspot over the coming years, considering the area had not peaked since 2008/9, and he wanted to buy at the bottom of the market. Initially, Michael’s plan was to buy one or two properties there.
“It turned out that the agent had four for sale from the same vendor. So I negotiated a deal and took three out of the four. And a mate of mine took the fourth one,” he adds.
The idea of these purchases was to balance his portfolio with properties that produced a healthy yield. Indeed, many of his properties in Logan currently produce a yield in excess of 7%.
Furthermore, none of his properties in Logan were overly pricey. In fact, all seven of them were bought for between $147,000 and $284,000.
In addition to buying seven properties in Logan over a 12-month period, Michael bought an off-the-plan unit in Moorooka, which is 7km south of the Brisbane CBD.
“I liked it because of its proximity to the city, and I like having property close to the city, as Bondi has done very well for me,” says Michael.
He says he was not put off by the risks of buying off the plan, because he had considered the decision very carefully.
“I had two solicitors go over the contract, so we weighed up the pros and cons. I took out the deposit bond and paid the $1,800,” says Michael.
“My personality is just to go out there and do it. There is no fear. A lot of people ask what I think about the real estate bubble. What if I lose money? Well, what if I don’t make money? What if I stay in the same position I am in right now today?
“I would rather go out and do something rather than worry about ‘what ifs’. The conservative people tend to buy one and then say, ‘Well, that did well for me over the last five years – I should have bought two’.
“Money does not fall from the sky; you have to go out there and get it.”
In 2014 Michael reached the point where he had learnt so much during his journey that he wanted to pass on his knowledge to other investors. Consequently, he became a licensed buyer’s agent and founded ML Property Group. He already had experience running a security company, and during that time he also became increasingly aware of how to run a growing investment portfolio and implement highly effective renovation strategies.
“Now that I have done all this I can show people how they can do the same,” says Michael. “I have turned my hobby into my job, and it is fantastic.”
“I love helping people and I love building wealth – this is something I am excited about.”
Aside from property investing, Michael is also a big fan of motor sports.
“I raced in 2010, but it was very pricey and I did not have a proper team. If I got myself a good team and spent the money, I could do well,” says Michael.
“And in real estate, it’s exactly the same thing.”
Michael's Advice to New Investors
- The most important thing is to build a good team. For example, you need a really good mortgage broker who understands your financial position and what you want to achieve with your portfolio. The same goes for your accountant: have an accountant who has experience dealing with real estate and who understands what your investment goals are.
- A lot of investors will look at rural properties with high yields. However, the true capital growth is more in those blue-chip suburbs. When you have an upswing in a blue-chip area, it is a decent upswing.
- It’s important to balance your portfolio with some good-quality metro properties. This will help you grow your portfolio.
- Invest in a range of property types, such as houses, townhouses and units. They all have different strengths, and ruling out a particular property type could mean an investor misses out on making a healthy profit.
- Set up alerts on RealEstate.com.au for the areas you want to target.
- Don’t mess around. If it is on the internet, then everybody is going to see it, and one savvy investor will be sure to snap it up.
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