Building a solid property on your own may seem like a formidable task, but as Michelle Curtis-Powys shows, all you need is an equally formidable resolve to do whatever it takes to succeed
I decided to invest in property after my long-term relationship had ended. I did some soul searching on what I wanted to achieve as a newly single woman, and decided I wanted to gain financial independence through investing in property.
I felt empowered due to the role I was in which gave me the income to service a loan, and also I thought to myself, I’m not stupid, so take the leap!
I looked at investing while still in the relationship but my partner was far more conservative than I am and I guess that held back my thinking. His approach was more traditional, ie buy and live in it versus investing and reaping the rewards of reducing tax and leveraging.
After the break-up and settlement, I had a pretty good deposit, so I used this to purchase my St Kilda property, my first investment as single investor. Funnily enough, by the time I purchased St Kilda I had started a new relationship with my now husband Mark, who basically supports me with my hobby but isn’t as driven by it as I am, which at fi rst was hard as I really wanted it to be an ‘us’ thing but now it’s a much-needed hobby for me.
That was 11 years ago. Nowadays I’m busting to do another three deals, two outside super in Brisbane and Newcastle
or Southern Sydney, and also one inside our SMSF. I now own six properties valued at about $2.2m.
If I started all over again, I would have started investing when I was 18 years old as opposed to 31. I would have invested more time early on, in getting educated instead of working so hard professionally, as it would have given me even more freedom earlier in life.
Property 1 – 2003
This was the first property I bought alone:
Property type: 3 bed/1 bath/car park with courtyard
Purchase price: $350,000
Current value: $620,000
Current rental yield: 7%
Location: St Kilda, Vic
Hold is the strategy for St Kilda as it’s ideally located and there is high demand for living in the area, which I foresee will only continue. This has been through a full cycle of the property clock and I am looking at holding it for another one to two cycles. The only downside is the pain you go through when there is a surplus of new units that come onto the market and they affect your value for a period of time, and this can mean a decline in value. Once the surplus is absorbed it starts to grow again.
I bought this property after my 12-year relationship had ended and I was living and working in Sydney. I was earning a $90,000 base; however, I wasn’t confident about investing in Sydney as a singleton. I was fearful I would be too stretched. In hindsight, I would have been OK.
Choosing the lender
- I opted to take a variable loan on an interest-only structure with an offset facility. I set it up this way as my accountant at the time suggested this was the best way to structure it.
- I used $50,000 cash deposit. At the time I was not educated and put in as much as I had because I believed that was the right thing to do.
- At the time, I had a relationship with someone at CBA, so that’s all the logic I used. My education then was average compared to what it is now.
- A few years down the track, I changed over to Westpac and got my own personal relationship manager. They gave me far more personalised service and were there anytime I needed help, had questions or needed advice. I would say to anyone starting out: if you don’t have a mentoring coach in property to ask lots of questions, then meet several banks before committing.
- I looked at St Kilda in Melbourne, which is like Bondi in Sydney, and thought that I couldn’t go wrong. It was close to the CBD, the beach, Chapel Street and public transport.
- There was also an element of emotion driving my decision to focus on St Kilda. I loved hanging out in St Kilda when I came to Melbourne, which was every second weekend at the time.
- I decided to buy this property after a friend of mine, who lived in Melbourne, organised six inspections in the area.
- I didn’t ask for any help or seek advice from any mentor. But I wish I had because, although it has worked out well, there was still 20–30% room for improvement.
- The location was very close to Chapel Street and it was within my budget. I would have lived there – the fixtures and fittings were great, it had a courtyard, and it had a really good feel to it.
- When I compared all the other potential properties, this particular property stood out because the others were a bit more expensive and not as close to the beach or Chapel Street. This property was also within walking distance of trains and trams.
- I inspected six properties and decided to buy this one that day. Spooky! It could have been a total disaster!
- I made this decision purely on gut instinct rather than hard numbers. This is mostly due to lack of education, to be honest. Luckily my instinct is OK.
- Assessing the current performance of this property, I think I could have done better, but it was recently valued at $620,000, which isn’t far off doubling in value.
- In the last six months it was valued at $520,000 due to an oversupply of new units in the area, but this is a long-term investment in an area where the demand for density is only going to grow.
- I haven’t changed my long-term hold strategy for this property. I’ve looked into renovating it a few times, but it wouldn’t increase my rental yield and therefore isn’t worth the investment.
- I’ve had this property the longest and it’s given me the most capital growth to date.
- In terms of my exit strategy for this property, I will review it when the property clock is back in the right place in Melbourne, but I can see myself holding it for a few more market cycles.
- My main challenge in buying and holding this property was my fear of investing alone.
- Not realising there could be issues associated with having tenants, and with cash flow when the property was vacant, I didn’t have a decent buffer to give me comfort and I didn’t have landlord’s insurance.
Property 2 – 2009
- Looking back now, I did reasonably well with the location and in choosing a ground floor property with a courtyard. Initially I was looking for a position higher up with a balcony, as this is what you did in Sydney for the view, but I learnt that Melbournians like a courtyard.
- There was also a higher quality of fixtures and finishes in this unit compared to those higher up. I would have chosen a new property knowing what I do now, as this would have helped reduce my tax, and I would have negotiated a little harder.
- If I couldn’t get a discount now I’d be more inclined to walk away. Back then I was still a little emotional when buying; I looked at it as if I was going to be living there.
Property type: 2 bed/bath/balcony
Purchase price: $340,000
Current value: $433,000
Current rental yield: 6.7%
Location: Homebush West, NSW
My strategy is also to hold this property. The Sydney market has finally started to give us some good growth in Homebush, and I expect this to continue as undersupply puts pressure on the market and continues to give us good rental and growth yields. I will hold this for a few more cycles.
- Unlike the previous property, my financial status when I bought this one was great. I was married by this point and we had a combined income of around $200,000, and tax reduction was key to our strategy.
- At this stage we were far more educated and had joined Positive Real Estate (PRE) so we were working with a property coach. We only put down a 10% deposit and got a loan for the rest at an interest-only variable rate, and it was structured 99% mine and 1% Mark’s, to reduce my tax.
- While we were working with the team at PRE we hit a few issues that were slowing things down, so they suggested that I complete the paperwork and walk into the bank myself, which I did, and was approved on the spot.
- I think it’s important to go through this process because we want to work with a lender that’s going to give us the best deal that suits our needs, as well as to ensure our properties aren’t cross-securitised.
- Our strategy, in conjunction with our coach and property consultant, was to diversify markets. Sydney was in the right place on the property clock; it ticked all of the fundamentals for investing and capital growth.
- I knew Sydney from living there, and there was so much demand and huge undersupply. The property was in close proximity to the CBD and was affordable.
- This time we used all the available resources to make our decision. Our coach gave us a property investment report on the area and they used a property calculator to see if it fit my financial situation.
- Our mentor also drilled right down into what would be the best unit to buy within the complex. To this day we have never been on site to see this investment.
- It fit perfectly with our strategy for the amount we wanted to spend, and the location. It was new, it helped reduce my tax, and we were very confident Sydney was the right place to invest in for the medium to long term.
- It took us a few days to make the decision to buy this property, and it was really about doing our due diligence over and above the reports and guidance we got.
- We were completely divorced from the emotion this time. The numbers stacked up, it was feasible, and so we proceeded with confidence.
- Assessing the current performance of this property, we’re happy with the investment decision we made.
- Late last year we decided to get it revalued and refinanced with another provider, and we were able to access $90,000 in equity.
- This property has been a dream. It’s never been vacant and the managing agents are wonderful.
- Compared to my other properties, it’s up there, but it’s still new.
- With what’s happening in the Sydney market at the moment, it’s only going to grow more and enable us to recycle more equity from it to reinvest.
- I don’t plan on cashing out on this property anytime soon.
- We will invest in another two to three properties, but as we rent in Melbourne and want to buy our own home to live in when the timing is right in Melbourne, we will assess whether to sell down a few properties to use the equity for a deposit and start investing again from there.
Michelle's Portfolio (Click to enlarge)
Property 3 – 2010
- Although we didn’t have any challenges with this property, I wish we had bought a couple in Homebush at the time.
Property type: Unit on the water; 1 bed/study/balcony
Purchase price: $318,000
Current value: $330,000
Current rental yield: 4.87%
Location: Redcliffe, Qld
As the clock is finally positioned for growth in Brisbane, when this is realised in Redcliffe I will seriously look at selling and reinvesting to make up for the lower than expected growth on this investment, or release the equity and invest in another Brisbane deal.
- My finances were good when I bought this property, which was a year after I bought Property 2.
- We duplicated what we did with the Homebush property and put down a 10% deposit.
- - Through our property coaches, we went with ING as they had a good rate and package that suited our needs.
- Looking back we’re completely happy from a finance point of view.
- The property clock was in the right place for investing in Brisbane, the purchase price was aligned with our strategy, and we had both lived in Brisbane so we knew it would grow.
- Just like the Homebush property, we used all the reports and advice that our coaches gave us.
- This property suited us because it was so new and we could, down the track, invest in a furniture package, which would increase the rental yield.
- We chose this particular property after our coach advised us which was the best side of the building for a view of the water.
- When we compared all the other potential properties, this property stood out because it had the scope to increase rental yield with an additional investment, for example a furniture package, which would be tax deductible.
- Unlike the first property, we made a decision to buy this property based purely on numbers, not gut instinct.
- Assessing the current performance of this property, I think we could have done a little better.
- We would not have selected a development that had so much density, and if we had waited a little longer and kept our search closer to the CBD we would by now have realised rental yield increases and better capital growth, which would have allowed us to recycle some equity to reinvest.
- We’re currently waiting to receive some cash, and then we will use $10,000–$16,000 to invest in a furniture package.
- Instead of having a fixed-period lease, we will lease it casually for a higher yield. This means that from time to time it will be vacant, but the numbers stack up to move in this direction.
- Compared with our other properties, this property hasn’t yet realised the capital growth we had hoped for, but we also know Brisbane is well positioned for growth in the next six to 28 months.
- We will review when the clock rises and decide if to hold or sell. My educated guess is that we can make gains when this happens if we sell it, as we could get better results.
The main difficulty in buying and holding this property has been the number of units in the development.
The high number of units has caused a few issues. The area is slow to realise growth, the current yield is average, and I know our money could work harder for us elsewhere.
This feature is from Your Investment Property Issue #88. Buy the copy to read more!
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