In 2013, David Watkins found himself in a situation familiar to many Australians. He was keen to invest in real estate and was aware of the profit potential in property, but had to put that idea on the back burner as his debt was holding him back.
It wasn’t expensive cars, luxury travel or designer trinkets that David had been frittering his cash away on; it was buying his ‘dream home’ that had absorbed all of his finances.
But as much as he loved living there, he realised it was draining him financially, while also stopping him from borrowing to invest.
So, David did something drastic – he sold his home and proposed a joint venture with his parents.
“Basically, I was sick of paying interest where there was no benefit to it. So I started looking for someone who could help me, someone who could teach me from experience, and someone who didn’t have an ulterior motive to sell me a particular property. I began working with Real Wealth Australia in April 2014 and the first thing I began working on was getting rid of bad debt,” he explains.
“I made the decision to sell my dream home to clear the huge mortgage I had. My next step was to work out where I could live and have no mortgage, so I came up with the idea of doing a joint venture with my parents.”
Together, they bought a 25-acre property in Wilberforce, a small township around 60km from Sydney’s CBD. They built a second house on that land and David was able to pay for his half of the estate in cash, with the proceeds of his dream home sale.
“This has worked really well because I can still have all the things I am interested in – like boats, motorbikes and horses – and still have no non-deductible debt,” he says.
Selling the dream home to fund the dream
It’s a fairly drastic and positive turnaround so far, as David went from servicing a bloated PPOR mortgage to living mortgage-free.
He already had one investment to his name – a house purchased in Toowoomba as a joint venture with his brother in 2014 – and this property had almost doubled in value over the previous decade.
While David opted to sell his own home, he held on to his Toowoomba property. He had then created a strong financial foundation, which put him in a perfect position to invest in more real estate. He wasted no time, acquiring no fewer than four properties in 12 months!
David’s first investment purchase was a house and land package, bought in stage one of development in Marsden Park, NSW. The home won’t be ready to settle and occupy until December 2016, so this was a strategic purchase on David’s behalf to enjoy some capital growth out of Sydney’s appreciating property market.
“It’s about 250m from a proposed new shopping precinct and future train station. I felt like I’d get a lot of capital growth in the time between purchase and settlement, without having to outlay the money. So far, based on other sales, I think it has appreciated by about $65,000–$75,000,” he says. David’s next purchase saw him shift his focus to Queensland, where the Brisbane suburb of Morayfield had caught his eye.
Leveraging what he had learnt through his mentoring program, David did extensive due diligence and discovered that property prices in Morayfield were predicted to experience above-average capital growth of 10% per annum for the next eight years.
“While looking for a house to buy in Morayfield, I stumbled across a guy who needed to sell a duplex that had already been strata titled. I asked a property manager that I’d decided to use in Morayfield to do an initial inspection, and she came back with a great report on its potential,” David explains.
Using creative clauses to get ahead
David had already found and purchased a free-standing house as an investment in Morayfield. He paid $345,000 for the property, which returns $350 per week. But this new opportunity piqued his interest, so after qualifying the numbers and liaising with his mortgage broker to ensure the deal stacked up, he put in an offer.
“I jumped on it quickly and submitted two offers, using the clauses we learnt about in the course. One offer included all the usual clauses, and the second offer was a much lower offer, with no finance clause and a quick settlement. I took a little gamble doing this, but knew I had the funds in a line of credit if the worst came to the worst,” David says.
“I had found out from the real estate agent that the vendor really wanted the property sold and settled before the end of the financial year – something to do with his superannuation – so he went for the lower offer with no finance clause. Fortunately, everything went smooth.”
By December this year, David will have a portfolio of five properties, but that number could potentially double when his new development project gets off the ground.
“My brother and I currently have an application submitted to council, to build five units on our Toowoomba block of land, which has just been approved. Now we’re going to decide whether to sell with the approval in place, or go ahead with the build, depending on the profit of each option,” he says.
While he considers this decision, he is also doing due diligence on other potential areas to invest in, with a focus on finding apartment blocks that can be subdivided and strata titled.
“Sometimes I wish I hadn’t bought my dream property, as it restricted me from doing anything investment wise for 10 years. If I could have that time again, I would buy properties and rent my dream property instead,” David says.
“I also want to teach my kids about investing and buy a property for each of them. My ultimate aim is to achieve a passive income of $200,000 per annum from property within the next 15 years; I have made a good start but have plenty to do from here to reach my goal.”
Are YOU ready to supercharge your property investing results?
I hope you enjoyed David’s property story. I’m fairly confident in saying that I don’t think we’ve seen the end of David’s achievements in real estate – in fact, to me it seems like he’s only just beginning!
I’ve loved watching on as David has taken everything he’s learnt throughout his mentoring program and put that education into practical use, which has allowed him to fast-track his property goals and make real savings along the way.
5 tips for new investors
- Clear bad debt ASAP – this should be your number one priority before you even consider investing in property.
- Buy property as young as you can, and buy it so it is affordable to hang on to for the long haul.
- Leverage the expertise of genuine mentors. Don’t listen to people who are giving you property advice where they have a motive to do so, ie to sell you a particular property.
- Don’t be afraid of joint ventures, as they can be a fun and effective way to have everything you want.
- Don’t sell unless you have to! If I had my time again, I would have kept the properties I had bought in the past.
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