Property success after a string of setbacks


Maree Prowse embarked on her property investment journey just over 10 years ago. During this time she has faced challenges, but has acquired a portfolio worth $2m, a passion for renovation and a fiancé

Much like other journeys, be they a globetrotting odyssey or a process of self-development, the average property investment journey is full of peaks, troughs and surprises. With some spectacular highs, some daunting lows, and a particularly romantic surprise thrown in for good measure, Maree Prowse’s journey is the perfect illustration of this. After a little over 10 years of property investing, Maree has nine properties, including a block of land she is in the process of developing. Her portfolio is now worth just under $2m, but once her current development project is completed, it will be worth around $2.5m. Along the way, she has had to contend with the destruction of a property courtesy of the 2008 floods in Queensland. But, on a happier note, she was also introduced to her fiancé, Wayne, by one of her early mortgage brokers.

It may not have been entirely professional behaviour on the part of the broker, but she is very glad of those matchmaking efforts, she says. “It is our 10th anniversary this year, and we are a great team.” Romance and property go hand in hand for the couple. While they maintain separate property portfolios, they enjoy working on their various properties together. Maree, who works full-time in education, also keeps an eye on offshore worker Wayne’s portfolio and development projects when he is away for work.

Early insights
This degree of life-work property entanglement means she has learnt much about both the value and challenges of property over the course of her journey. However, her interest in and awareness of the benefits of property investment started at a young age. Her grandparents owned a large farm, which spanned over half of what is now a current suburb of the Redlands in Queensland, Maree explains. As they got older, they slowly subdivided this property and sold it when land became more profitable than farming. In comparison, her father worked six days a week, for his entire life, to provide for his family, and still struggled to have enough to fund a
proper retirement.

“This meant that early in life I made a conscious decision to make changes to my financial situation to ensure less stressful future for me. Property is something I understand more than other forms of investing. So I found myself in it and I kept educating myself until a hobby grew into a decent portfolio and business.” Although Maree bought her first home in Queensland when she was just 23, she didn’t start seriously investing until seven years later, when she moved to Sydney. Her first investment property was funded with a deposit of $11,000. She acquired this by investing her savings of $5,000 in the share market. In a short time, her shares doubled in value and provided her with the deposit she needed.

The first property she bought was a  unit in Mackay, Queensland, in 2004. Her mother had found the unit, which was already tenanted and in Maree’s price range; it didn’t need renovations and was also in an area she knew. “So I bought the unit for $98,000 and rented it out for $250 per week,” she says. “But my mother’s word was the extent of my research. Now, it is very different: months of research – using everything from RP Data to ABS statistics, property magazines to property network groups, to knowledge from locals – go into a purchase.”

Expanding the parameters
Over the next few years, Maree purchased three more properties using equity from her properties. These investments included a three-bedroom villa in Whyalla, SA, for $81,000, now valued at $170,000; a three-bedroom house in Blackwater, Queensland, for $195,00, now valued at $350,000; and a one-bedroom unit in Cairns for $115,000, now valued at $120,000.

Her first four properties were all purchased with a straightforward buy-and-hold strategy in mind. However, when the GFC hit and the property market started to flatten out, Maree decided it would be worthwhile investing in properties that had the potential for her to manufacture her own equity growth. This prompted her next investment. In 2008, she bought a duplex in Toowoomba, Queensland, for $275,000. Now as two separate two-bedroom units, it is valued at $140,000. In 2010, she bought a three-bedroom house in Cessnock, NSW, for $210,000. Feeling more ambitious, she dedided to add a granny flat to the property in 2011. This project almost ended in disaster at the hands of an inept project manager and a builder who went bankrupt.

Fortunately, Maree somehow managed to see the project through to the end - on budget and ahead of her time schedule. The propery now has a two-bedroom granny flat on it. Not only is it currently valued at $400,000, but it brings in $550 rent per week. Her most recent investment in 2013 was a half-renovated house on two titles, which was purchaed for $320,000. "The owners were trying to bring the bathroom inside the house and either gave up or ran out of money, so they were selling a house with a hole in the middle of it," she says. "I finished the renovation, fenced off the house block and sold that for $320,000 to cash up, but kept the vacant land to build a duplex with two three-bedroom, two-bathroom units and a double garage.

“The land is currently valued at $140,000 and only has a small loan attached to it. I intend to keep the duplex when it is completed. The total project should give approximately 20% ROI when all completed, and the duplex has an expected 7% rental yield".

Strategic thinking
Employing a buy-and-hold strategy worked well for Maree initially, but she has largely switched to a manufactured growth strategy. This means she buys a property, supercharges it via development and  renovation, and then gets a dual income from the single property.

The tactic increases both the equity growth in a property and its rental yields faster. Fully utilising her duplex and building a granny flat are examples of how she has achieved this. Both properties now have two separate tenants, which means double the rental income from one property. She still tries to hold her properties permanently, though. “That is because when you sell a property you actually spend a lot of money: you have the buy costs, like stamp duty, and then you have the costs like real estate agent commission and capital gain tax. This really eats into your profits when you trade real estate,” Maree says.

In terms of property selection, Maree’s criteria are now based on her purchase/development strategy for the project at hand. However, she does have certain requirements that stay the same for all her projects. These include rental vacancy rates, population, and proximity to infrastructure. 

Risk management is also a crucial part of Maree’s strategic thinking. She practices lender diversification throughout her portfolio, moves between fixed and variable interest rates, and maintains a buffer of savings for emergencies. She also protects her assets by purchasing in trusts, insuring fully, and using professional and experienced property managers.

Lessons from disaster
While the importance of both full insurance and hiring good property managers is widely known, Maree has a particularly fine appreciation of these risk management tenets. In 2008 her first investment property – the Mackay unit – was destroyed by f lash f loods. Then, just a year later, it was destroyed again by an infestation of black mould resulting from poor post-f lood reconstruction.

When she first heard about the flooding, she panicked. But she had always made sure she had a comprehensive insurance package in place, so once she had settled down, she realised she simply had to deal with the financial backlash
until the insurance kicked in.

Maree’s tenants didn’t have any insurance and they lost everything, she says. “They just hadn’t thought about it, so it was tragic for them. And it was a big lesson for me. It emphasised to me just how important insurance is.” For Maree, it was a matter of buckling down and getting her property rebuilt. Unfortunately, not long after the rebuild, the black mould infestation forced her to go through the whole process again. Today, with the property fully renovated, it is valued at $270,000 and rents for $300 per week. This equates to 1.5 times equity growth in 10 years with a 16% rental return. In 2010, the project manager Maree had employed to oversee construction of her granny flat turned out to be less experienced and effective than she purported to be. A quarter of the way through the project, the project manager had to be removed at a cost. Also, the builder she had recommended went bankrupt, which delayed the project. This experience left Maree painfully aware of the dangers of listening to self-proclaimed property experts. The property investing industry has little regulation and control, so any spruiker can claim to be a property expert, and many do, she says.

Finally, in 2012, one of her rentals suffered a significant decline in value partly due to the neglect of a property manager. This led to property damage and poor tenancy. As a result, Maree says investors shouldn’t leave property managers to solely manage their properties. “You always have to keep your property managers in check. Most of them are inexperienced and have no investment properties of their own, so they have no idea how to take care of your asset properly.”

The joys of renovation
Perhaps surprisingly, the various challenges Maree has encountered have left her with a deep-seated love of renovation. In order to achieve better rental returns or force capital growth, she and Wayne have carried out a wide variety of renovations on their various properties. This work has ranged from ‘soft’ reno work, like painting or landscaping, through to more extensive reconstruction work. While they do get tradespeople such as builders, plumbers and electricians to do the major jobs, the couple enjoy doing such work as tiling, painting, strip-out and prep work, fitting kitchens and gardening themselves. They find it fun, Maree says. “People say that you have to factor in the value of your time. But we actually do the renovating for the enjoyment that we get out of it. It might take us a bit longer, but it adds to the whole experience that we get from the process as a whole.” However, she has learnt that planning is the key to a successful renovation and that it is best to buy fixtures and fittings from wholesalers, auction houses or online sites like Gumtree, rather than retailers.

Future goals
Maree is motivated by the goal she and Wayne share of gaining time and choice from their investments. “Essentially, we want to have the time to enjoy whatever we choose to do. We want our property portfolios to make money for us 24 hours a day without us having to work on it every day.”

They are not quite at that point yet, but she expects that they will get there in the next few years. In the meantime, she plans to continue looking for properties to buy and develop for further equity growth.

This article was published in the July 2014 edition of Your Investment Property magazine. You can subscribe to the magazine here


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