Case Study – Young Couple Purchase Their 8th Property
A young couple in their 30s who are clients of The Property Education Company, recently purchased their 8th property. Their aim is to be able to do the things they want to do without waiting until they retire! Here is their FANTASTIC story.
Q. When did you buy your first property? Was it together as a couple or had you both previously bought property?
A. I bought my first property on my own in 2006 and Sarah bought her first property in 2008. We then purchased our first property as a couple in 2010.
Q. Was the first property to live in or an investment?
A. The first property I purchased in 2006 was a unit in Albury to live in.
Q. In what areas have you purchased and why?
A. We currently have 8 properties including our PPOR. The properties are located in Albury/Wodonga, the western suburbs of Melbourne (Werribee), the Hunter Valley (Muswellbrook), and the Logan and Moreton Bay regions of Greater Brisbane (Crestmead, Waterford West and Caboolture). The two Albury/Wodonga properties were both bought to live in (one is now an IP and the second is our current PPOR). We purchased in Werribee, Crestmead, Waterford West and Caboolture because all of these areas meet our investment criteria of being affordable metropolitan locations that offer properties with both strong long term capital growth and cash flow prospects. We unfortunately bought the Muswellbrook property near the peak of the last mining boom when we were still quite naïve and inexperienced, but the hard lessons from that experience have proved to be pivotal and led to us switching to a lower risk approach of only targeting properties with both equity manufacturing and capital growth potential in metro suburbs and/or large regional centres.
Q. Did you plan to be “property investors” or has it just evolved?
A. We have both always been driven to get to a stage where we are able to cut right back from our day jobs and instead are able to spend more time on the things that we are more passionate about such as volunteer work, travel and family. We don’t want to have to wait until we’re 65 to have the time available to fully enjoy our other interests!
Q. What are your long term goals with property investing?
A. We don’t have an expensive lifestyle, so we are aiming to achieve a modest passive income that enables us to cut right back from our day jobs and frees up more time to devote to our other interests.
As seen in this aerial shot, Caboolture has good infrastructure in place, like a hospital, shopping centre and train services – some key elements of areas with good investment potential
Q. What sort of research do you do when purchasing a property?
A. We start by looking at metropolitan or larger regional areas that have affordable properties within our target price range, and are just starting to enter into a price growth phase (and/or are surrounded by areas that have already had recent price growth). We then check the area fundamentals (i.e. vacancy rates, population growth, employment opportunities, infrastructure etc.). If an area checks out, we then start looking for properties within the area that meet the needs of the people living there, and offer the potential to manufacture equity through a renovation and/or subdivision. The property also needs to be as close to cashflow neutral (or positive) as possible to minimize the holding costs and impact on our lifestyle.
Q. How would you rate the support of a mortgage broker and a good accountant if someone is to embark of the property investing journey?
A. Any property investor is only as good as the team around them! Therefore, having the support of a good mortgage broker and accountant is vital to a property investor’s success. We would have really struggled to purchase any more than 1 or 2 IPs without the tremendous guidance and support provided by Louise and her team. Their experience and knowledge of loan requirements and conditions have become even more valuable as the banks have tightened their lending policies.
Q. Have you always used Louise’s services or did you originally go directly to a bank?
A. The first 2 properties we bought involved going straight to the bank. However, once we started to get a bit more serious about property investing, we engaged Louise’s services because of her dedicated expertise in IP mortgage broking. Louise has now assisted us with 7 property purchases since 2012, and the finance approval process has always run smoothly, and to schedule.
Q. Are you at your limit at 8 (including your owner occ) or will you buy more investments?
A. Time will tell! Our goal is to eventually own enough properties outright (i.e. a ‘base portfolio’) to generate the passive income that we’re targeting. While the number of properties needed to generate this passive income is much fewer than 8, we’re now in a debt consolidation phase where we’re using ‘extra’ properties to help pay down the debt of the ‘base portfolio’. This may or may not require purchasing more properties to eventually ‘flip’ for a profit, or undertaking renovations/developments on some of our existing properties and then selling them for a profit.
As always, if you would like to discuss anything to do with property or finance, please call me on 0412 709 200.
Quote of the Day:
“Don’t let the best you have done so far be the standard for the rest of your life”. – Gustavus F. Swift