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No Borders To Smartest Property Investment Strategy

No Borders To Smartest Property Investment Strategy
May 27, 2021 Propertyology Head of Research and REIA Hall of Famer, Simon Pressley

Intelligent property investment decisions are made with an understanding that where one likes to live is highly subjective and has no bearing at all on how an asset might perform.

Disregarding where one lives and having an open mind to investing in all corners of this country is generally referred to as ‘borderless investing’. Frankly, there is no smarter way!

The concept requires removal of personal biases and adding a strong structure to the financial decision-making process.

It is akin to a share investor who may work with Qantas or CBA, but they acknowledge being employed by the company has no bearing at all on whether Qantas or CBA is the best stock to invest in.

Essentially, the 200 individual towns and cities across Australia’s eight states and territories is the property investor’s equivalent of companies on the stock market. The historical evidence confirms they are all capable of performing well (and poorly), but the key is learning how to read market cycles.

To appreciate how borderless investing truly looks in practice, herein is a Case Study of an everyday couple with everyday incomes, Adam and Claire.

The Sydney-based couple appreciate that aged pensions and superannuation will not be sufficient to fund a comfortable lifestyle later in life and they understand the significant shortcomings of being a hometown investor.

Between October 2017 and April 2020, with the assistance of Propertyology, Adam and Claire purchased four (4) very affordable investment properties, all in completely different cities.

Collectively, the annual rental incomes cover 100 percent of investment expenses and, by early 2021, the combined capital growth was already a healthy $290,000. Very few people could save that much in just 3.5 years!

Plus, they will now enjoy 100 percent of the growth that the current widespread national property boom produces over these next few years. Exciting times ahead!

Adam got in touch with Propertyology after he’d listened to their Head of Research, Simon Pressley, in a podcast interview.

“Simon said a few things that really resonated with me. He goes into the data and builds a story about why a given location, wherever it is in Australia, offers good, long-term growth potential. It is a very intellectually sound approach to property investing that really won me over,” said Adam.

Property #1 [Brisbane QLD]

Adam and Claire’s first investment was purchased in Brisbane in October 2017. Propertyology’s buyer’s agents found and successfully negotiated the purchase of a solid 4-bedroom house for $410,000 on a good size block.

“That’s incredible buying for a capital city,” said Adam.

Interestingly, the only capital city property in their portfolio of four has produced the lowest rate of capital growth to date. That said, the 16 percent for Brisbane was only beaten by two other capital cities (Hobart and Canberra) during the 3.5 years thus far.

An attractive 5.2 percent rental yield ($415 per week) from Adam and Claire’s Brisbane property means the rental income covers all holding costs.

The respect given to cash flow and an investor’s household budget is one of several advantages of Propertyology’s small-fish investment strategy.

Property #2 [Launceston TAS]

After being impressed by the market research depth and buyer’s agency skill with the first property, Adam and Claire pulled the trigger to go again.

Huge advocates of portfolio diversification, Propertyology recommended a completely different state for their second property. They presented Adam and Claire with thought-leading evidence of rising housing demand through local economic growth along with tight housing supply in the beautiful regional city of Launceston.

Adam confessed that he’s amazed by the firm’s ability to be aware of emerging economic conditions in locations all over Australia. And Simon also puts his own money where his mouth is, investing the same location himself.

In Launceston’s case, it included a series of decisions which would progressively result in expansion of local manufacturing jobs, agriculture and tourism along with an all-time record infrastructure investment in education, health and hospitality.

In September 2018, Propertyology’s buyer’s agents successfully negotiated the purchase of a classy, 3-bedroom house very close to the CBD for just $455,000.

“It’s a character house in a great location and it’s been finished to a really high spec. It was easy to rent to an employee of the nearby university for $415 per week.”

Fast-forward 2.5 years after the purchase, the property has already produced 25 percent capital growth (more than 7 out of 8 capital cities) and Launceston today is one of the hottest property markets in Australia.

The incredibly tight rental supply also means that, when the current lease expires, Adam and Claire could take advantage of conditions and seek a rental increase to circa $480 per week (a revised yield of 5.5 percent and a cash flow positive outcome).

Property #3 [Townsville QLD]

From investing in Australia’s far south, now to the far north. In November 2019, they purchased a very low maintenance, 4-bedroom house in Australia’s 14th largest city, Townsville, for only $386,500.

A non-negotiable of Propertyology’s location selection criteria is economic diversity and Townsville certainly has that in spades.

The military garrison has a strong government presence, one of the country’s largest ports, a major university, a strong manufacturing sector and one of the most impressive (job-creating) major project pipelines in Australia.

Once again, the small-fish investment strategy meant that it required only a small amount of investment capital for Adam and Claire to add to their property portfolio, and rental incomes cover all annual expenses.

The property market was flat when they purchased, but the economic growth originally identified by Propertyology was certainly kicking in. Just 18-months after their purchase, the job creation, growing local confidence, and tight housing supply was reflected in increased pressure on asset values and rents.

Property #4 [Bendigo VIC]

In early March 2020, a couple of weeks before all of the crazy [COVID-19] stuff started, Adam again reached out to Propertyology. In an email to Simon, Adam said “I saw your recent Safe-As-Houses video and I completely agree that now would be a good time to get ready to secure another investment property before the seagulls start to circle later in the year.

To compliment Adam and Claire’s existing property portfolio, this time Propertyology shared their research insights about the ‘mini capital city’ of Bendigo in central Victoria.

Famous for the Gold Rush era of the 1850’s, Bendigo is a beautiful regional city with a wide range of outstanding cultural experiences. Bendigo also offers a great lifestyle, has a youthful population, exceptional infrastructure, and is one of Australia’s biggest beneficiaries of internal migration.

In April 2020, Adam and Claire settled on a neat and tidy 3-bedroom house for just $370,000 in April 2020.

“As with the previous three properties, the process was very smooth and pain-free and I continue to recommend Propertyology’s services to everyone who asks me about how we go about slowly building up our investment property portfolio,” Adam said.

Fast forward 12-months, and Adam and Claire’s decision to ‘beat the seagulls to the chip’ had already paid off. Their Bendigo investment property was (again) paying for itself and had already produced circa 18 percent capital growth with absolutely no sign of easing any time soon.

Working smarter, not harder

Borderless investing pays the utmost respect to that common-sense adage of never placing all of one’s eggs into one basket.

Within just 3.5 years, Adam and Claire have planted four ‘seeds’ and already have a high-performing, incredibly diverse property portfolio that does not require a single dollar of their household budget to support year-to-year costs.

Tried and tested quality controls, overseeing all of the due diligence on each property, and Propertyology’s warm introduction to reputable local property managers, has meant that Adam and Claire’s property portfolio is seamlessly managed.

It is a credit to Adam and Claire for being proactive during their working years so as they have sufficient financial resources to enjoy their retirement years.

“I don’t want to get super rich. I just want to be comfortable in retirement.”

$290,000 growth within just 3.5 years is certainly a good start!

Propertyology are national buyer’s agents and Australia’s premier property market analyst. Every capital city and every non-capital city, Propertyology analyse fundamentals in every market, every day. We 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.

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