When Kate and Matt Moloney loaded the boot of their car to make a new start in Moranbah, Qld, they weren’t sure what to expect. They had just left good jobs in regional Victoria and had no idea if they would find employment or accommodation at their destination. Undeterred, they took the 2,500km journey anyway.
The move was guided by an ambitious goal. Kate and Matt had been investing in property for just over a year but had reached a critical point in their quest to build a portfolio big enough to retire on. Unable to save up fast enough to get more loans, and realising they could perhaps triple their income working mining jobs in Moranbah, they decided the small Queensland town was the answer to their problems.
There was just the fact that they didn’t know all that much about life there. Like many mining towns, Moranbah had a reputation as a far from ideal place to live, the kind of town where heat mutes human movement and broken glass litters the footpaths. Then there were the town’s roads, which rumour had it were a giant trap. People arrived, drove through a labyrinth of circles and never knew how to leave.
“Some could say it was a risky move, but we figured we had nothing to lose,” says Matt. “We wanted to substantially increase our incomes and we figured that one year of working and saving in Moranbah would be the equivalent of three years working in Victoria.”
Kate adds that they had a goal and stuck with it. “We wanted to be able to retire as soon as possible, but moving to Moranbah wasn’t just about getting higher paying jobs. We identified the town as an ideal place to invest in property.”
Invest in property they have and the pair’s move to Moranbah has been more than rewarded. From this Queensland mining town the couple have built a portfolio of 16 properties with an estimated total value just shy of $8.5m. This currently pockets them over $570,000 in annual rental income and they’re expecting considerably more as some development and renovation projects come to fruition.
The truly remarkable part is that both are just 24 and now in a position to semi-retire. “We’ve done the hard yards, starting our investing when we were teenagers, and now we just want to enjoy ourselves,” says Kate.
That Kate and Matt have had such profound property successes at such an early age has left our judges visibly impressed. For this reason, the couple have been voted this year’s Investor of the Year – with all the bragging rights that come with it.
Kate and Matt say they started their investing as a rather typical young couple. “We wanted to buy our own home and we thought the sooner we did that the better,” says Matt.
At the time Matt was 19 and Kate was 20. They had been together for just over a year and, although Matt was at first reluctant to get into debt so young, they had both crunched the numbers and realised that purchasing a property together wouldn’t impact their lifestyle too much. Both had full time jobs. Matt was working as a fitter. Kate was working at her family’s dairy farm in between studying a bachelor of commerce at university.
The two decided to purchase a block of land close to where they lived in Warrnambool, Victoria. The idea had been to take advantage of first homebuyer grants as well as the stamp duty savings they would get by building a property instead of buying one.
The couple contributed $50,000 of savings into the property and settled on the purchase in October 2008, but it wasn’t until four months later that they considered turning it into an investment property.
“I had read Robert Kiyosaki’s Rich Dad Poor Dad when I was 13 and had always believed in acquiring wealth producing assets,” says Kate. “We realised that if we rented out the house we’d be able to increase our borrowing capacity for future investments and could write off many of the expenses of the property as tax deductable.”
The three bedroom house was completed in July 2009 and because Matt and Kate had been saving up $1,000 a week in between settlement and completion they now had close to 50% equity in a property purchased for $267,000.
Picking up steam
This early success prompted them to dip their feet deeper into the property market. They began searching for their next investment in Warrnambool and got stuck into the due diligence that would be required.
This alone was something of a challenge. “Because we were so young a lot of real estate agents didn’t take us seriously,” says Matt. “They’d meet us and the question would eventually come out: ‘can you actually afford this?’ ”
Kate says this forced her to get creative. “I started dressing up in business suits and carrying a clipboard. Suddenly the agents started assuming I was a fund manager or something like that. No one doubted us again,” she laughs.
Using $17,000 in additional savings, the couple eventually settled on a house and land package which they purchased for $324,000 (97% LVR) in 2009. Kate says that in retrospect it was a mistake.
“We made money off it, but we were investing in Warrnambool because we felt comfortable there. In reality, we should have invested somewhere else, somewhere that would give us much better returns and capital growth.”
Money in Moranbah
Scouring the country for the best returns and promise of capital growth, Kate and Matt learned of Moranbah and the hotbed of real estate activity that was happening there as a result of the mining boom.
They decided to purchase land and build on it, aiming mostly for a high cash flow investment. The day after their offer was accepted, tragedy struck. “I lost my job,” says Kate. “We could no longer finance the purchase of the property on our own.”
Not wanting to walk away from the deal, the couple found a joint venture partner. They would contribute a 10% deposit on the property, while their partner would provide bank funding. They also decided to change strategy. Instead of building a house they realised they would get far better returns by constructing a duplex. “We split the deal 50:50. We got one duplex and our partner got the other,” says Kate.
The result was an overwhelming success. Built for $475,000, the property is now valued at $650,000 and nets Matt and Kate $1,800 a week in rent.
Making a move
Seeing what was possible through property, Kate and Matt made a critical choice. “Our goal at that stage was to achieve $100,000 in passive income by 2014. We realised that if we wanted to do that we’d need to increase our income so that we’d be in a position to borrow more and purchase more properties,” says Kate.
“Our families we’re initially a little concerned when we said we were solving the problem by moving to Moranbah,” says Matt. “Back then I had a decent job in Victoria and, you know, your family just want to protect you. They want to make sure you’re doing the right thing.”
Kate and Matt consoled their families with an insistence that they knew what they were doing. By moving to Moranbah at the start of 2010, they’d be in a better position to arrange property deals throughout the whole central Queensland region and would have much higher incomes to support their ambitions. They loaded the car and never looked back.
Arriving in Moranbah, Kate soon found work as a dump truck driver and Matt as a fitter. As it turned out, the town had more than enough to keep them occupied.
“A lot of what you hear about mining towns, that the only thing to do there is go to the pub, that’s not quite true,” says Matt. “For us, we found there was plenty to keep us busy. We set our sights on some big property deals there and this took up a lot of our time.”
Kate adds that they have a very particular strategy. “Our initial aim was to invest in mining towns and once we had achieved our passive income goal, we would then focus on blue chip capital growth properties to lower our risk and diversify our portfolio,” she says.
Kate adds that before making every next move they always analysed their figures. “We needed to buy a lot of property but there were many times that we were low in equity. As a result, we had to find development deals that would give us, not only cash flow, but capital growth as well. This motivated doing a lot of our deals through joint ventures whenever we didn’t have enough equity.”
In fact, it is through joint ventures that Kate and Matt have had some of their most profitable deals.
A case in point is a Moranbah deal they got involved with in 2011. “After some research we discovered that we could build a unit for roughly $300,000 and get a bank valuation after completion for $600,000. Unfortunately at the time we didn't have the required equity to do such a deal, but we had the knowledge and experience of how to do it, as well as a strong borrowing capacity,” says Kate.
The couple sourced a joint venture partner who had cash, but no time or borrowing capacity. The partner put down the deposit, while Matt and Kate borrowed the money and managed the construction.
It ended up being a bigger project than they anticipated, costing $300,000 for the land and $920,000 for constructing a triplex on it. The total cost of the land, construction and additional costs came in at $442,000 for each unit, but a bank valuation showed them to be worth $645,000 each.
As a joint venture they made more than $600,000 in instant equity over the space of 12 months, according to Kate, who adds that each unit is now rented at $1,400 per week. This takes them well into positive cash flow territory.
“Our partner got a cash flow positive unit, plus all her deposit back, plus a substantial amount of equity in her unit,” says Kate. “We ended up with two of the three units, positively geared with a substantial amount of equity, all for no money down.”
Moranbah JV triplex
Valuation at completion
Annual rental income
$218,400 (on all 3)
Kate, Matt initial money down
It hasn’t been just in Moranbah that Kate and Matt have done power deals. In 2012, they turned to Mackay, another prominent mining area in Queensland.
Kate says they instantly spotted an opportunity. “There is a severe shortage of all types of rental accommodation in Mackay, but we noticed that a lot of the local motels were constantly booked out and we found from local business owners that they were knocking back work proposals because they couldn't house their staff.
“We thought there may be an opportunity for fully furnished rental accommodation. We interviewed a few property managers but they all said fully furnished properties were a bad investment. The numbers didn't stack up.
“Eventually we found a local property manager who said she was getting $570 a week for furnished 2-bedroom units. She suggested we locate a central unit with two bathrooms, which we did. We found a cheap 2-bedroom duplex that needed renovating. It had been on the market for months and we were able to negotiate a good discount.”
Kate and Matt bought the duplex for $430,000 and spent $100,000 on a renovation, along with $12,000 furnishing both sides. Within a week they secured a corporate tenant for $630 a week, well beyond their expectations. At $630 rent per week on each unit, Kate and Matt are getting $20,000 in passive income each year (based on 100% interest).
Having reached their goal of $100,000 passive income two years early, Kate and Matt are looking at the future with a lot of optimism. “We’re heading on our first round-the-world trip – business class,” says Matt. “We’re quitting our jobs and heading to Africa, North America and Europe for a well-earned rest.”
Kate adds that she is finding it hard to contain her excitement. “For the last couple of years we have been far from your typical young people,” she says. “We haven’t partied, or spent all our money drinking or buying clothes, we’ve been very responsible. We feel that now it is time for us to reward ourselves.”