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Hard lessons make for smart investment decisions

Hard lessons make for smart investment decisions
February 18, 2019 Propertyology Head of Research and REIA Hall of Famer, Simon Pressley

Wouldn’t it be nice to get all the educational benefits of a life experience without the expensive hard knocks?

Sydney-based fashion designer Niki and her husband, Chris, hit more than a few hurdles during their investment journey, although it eventually ended happily.

Back in 2007, the 40-something couple tried their hand at becoming landlords. They purchased a new-build in the Brisbane outer suburb of Caboolture. Niki admits that both their timing and property selection were incredibly poor.

“It was a disaster – we lost money,” she said.

They bought a new house-and-land package with hopes of watching values continue to skyrocket, but Southeast Queensland’s market was already at the peak of its second growth cycle in the decade and that was about to come to an abrupt end.

“I’d just had my daughter and I knew it at the time. I said to my husband, ‘I don’t think I’m comfortable with this decision,’ and I should have gone with my gut.”

It was a bitter pill to swallow during a time when they should’ve been celebrating the arrival of their first child. “We learned the hard way!”

Niki said once bitten, twice shy. They decided to stay away from real estate for more than 10 years. That was until June 2018 when their financial advisor invited them to a seminar.

“I thought it was going to be a general talk about investment and it ended up being a marketing seminar to promote a property developer’s products,” Niki said. Again, it was in Brisbane, only this time it was an off-the-plan apartment.

“I went to the meeting and got a bit pressured and we placed a $1000 deposit down.”

Niki and Chris were well on the way to property disaster number two when help came from over the airwaves.

“I listen to (radio station) 2GB a lot and they had a guy on talking about property and he said, ‘Whatever you do, do not buy off-the-plan.’”

The guest was a gentleman by the name of Peter. Niki sent him an email and Peter’s wise council was to get the deposit back and get out of the deal, because they were betting on a losing horse.

Peter also suggested a few reputable property specialists worth contacting and Propertylogy was on his shortlist.

“Peter said, ‘These people are experts in their field – they do it all day, every day.’”

Niki reached out to Propertyology and was pleased with the result.

“I was always under the assumption that you have to buy new for depreciation, but I spoke to Simon Pressley (Propertyology’s Head of Research) and he told me you can buy an established house at a more reasonable price, in a better position, and still get something of good quality with better potential.”

“We realised that this is an investment, it’s not your dream house – it doesn’t matter where in Australia it is.”

“We ended travelling up to Brisbane to meet Simon and he spent about three hours talking with us before we decided to go ahead.”

Niki and Chris then formally engaged Propertyology in July 2018.

Propertyology advised the pair to consider an interstate non-capital city location which offered excellent price-growth opportunities. The couple were impressed by Propertyology’s market research. The methodology was structured and sensible and the depth of what was presented was more than what one could expect.

Just three weeks later, Propertyology’s buyer’s agency team had found the right property, on the right street, and did a great job negotiating an attractive deal.

“It’s a three-bedroom established house with a carport and one bathroom. We bought it for $315,000. It’s an old cottage with character. It needed a couple of little things done to it but nothing drastic.”

Located a stone’s throw from the heart of town and adjacent to an area which will soon undergo significant urban renewal that will include new parks and a new university, the property is tastefully renovated and very low maintenance.

With no problems getting a tenant, the house was rented out for $320 per week. That high yield means holding and maintenance costs are pretty much zilch, which is buying them time to fulfil their investment goals.

The strong regional city that Propertyology strategically chose is just entering a period of the biggest infrastructure investment in the city’s history. The local economy is incredibly diverse and a number of key industries are expanding. The jobs boom means local confidence and demand for housing is sky high.

Niki and Chris got in to this market within 6 months of its growth cycle commencing, meaning they can sit back and ride 100 per cent of the current wave. Propertyology estimates that the value is already up 8 per cent on the original purchase price only 5 months ago. The performance completely defies everything that’s happened in capital cities over the past 12-18 months.

“Our goal is to, maybe by the end of this year, get it revalued and go back to Propertyology and start the process again.”

Niki said they’d love to retire in within the next ten years, and Propertyology’s skill and ethics will play an important role in helping them achieve that ambition.

“Our home is worth a bit in Sydney but we don’t have a lot in savings, and the idea is that when we retire, we’ll be self-funded – and we’ll get another investment property to help us with that.”

Niki said despite the tough lessons, they know that, with the help of Propertyology’s thought-leading market research and award-winning buyer’s agency team, they’ve found the path to success.

“They were amazing – they were on to everything. I didn’t have a worry. I know Simon and his team pride themselves on what they do; they came across as honest and genuine – you couldn’t ask for more!”

Propertyology is Australia’s premier buyer’s agent for property investors. Every capital city, every non-capital city, we analyse fundamentals in every market, every day. Our multi-award-winning buyer’s agents use this valuable research to help everyday Aussies to invest in strategically-chosen locations (literally) all over Australia. Like to know more? Contact us here.