“At the moment investors are driving the market, but they're not getting a good return, which doesn’t make any sense. It’s also becoming impossible and highly unaffordable for renters,” Ugarte says.
“We’ve essentially cracked the code and found the answer to this, by creating smaller, self-contained accommodation units within one house, including utilities, so people can afford to pay rent and save money towards buying their own property.”
The strategy doesn’t just benefit tenants who are looking for more comfortable, affordable living quarters.
It also enables investors to enjoy a sky-high return, with rooming houses typically generating “double the rent” of a similar four-bedroom home in the area.
“We create a really nice safe accommodation unit, at an affordable price, so the tenant can save some money and live a better life. And for investors, rather than settling for single-digit returns, why not aim for double digits?” he says.
“Ten years ago, if you invested in granny flats, you’d be really well off today – but now everyone’s doing them, and there’s not much profit in it. Now is the time to jump into this type of property strategy is to address the affordability crisis.”
As Australia’s leading micro apartment, rooming house and boarding house specialist, Ugarte adds that he doesn’t just talk the talk – he also walks the walk.
“I would comfortably live in one of the boarding houses we build, I wouldn’t have a problem with that whatsoever. But I realised a little while ago that I had to put my money where my mouth is. I was talking at a homelessness convention and realised I was incongruent, as I was talking about small homes, but living in a big home,” he says.
“So, my family downsized from a 400m2, four-story home to a 72m home, with four daughters. My kids were aged 7, 11, 13 and 17 at the time.”
After downsizing and shifting his family into a two-bedroom, one-bathroom house, he noticed that after a few weeks, the family “started to interact differently”.
“We did cross each other more, but we couldn’t hide in our corners, so you had to sort out any issues. The community starts with family,” he says.