Making up for lost time

By Staff Reporter

For Philip and Tania Bagley property investment was a discovery the pair made relatively late in life

Like many baby boomers, Philip and Tania Bagley worked hard to pay off their family home located in Runcorn in Brisbane’s south.

But as the big five¬-0 drew closer, the pair found themselves still living pay cheque to pay cheque. With little above their superannuation saved for retirement, Philip and Tania were looking for an opportunity to bolster their income – and their nest egg.

“We were in our late forties but with no disposable income,” tells Tania.

“Even though we owned our own home, neither of us earns a high salary and we never seemed to have any extra money to do anything apart from paying bills.

“We were tired of working to pay everybody else, and never ourselves.”

With this in mind, the pair picked up a property investment magazine, on the off chance of finding some inspiration and found themselves instantly intrigued by some of the investors’ stories.

“After reading other people’s stories, people in similar situations to us, we thought maybe we could do the same,” Tania tells.

At first the couple toyed with the idea of purchasing a property in the nearby city of Logan, which offered affordable but somewhat uninspiring purchasing opportunities.

Then one day Tania noticed an advertisement in one of her property investment magazines which caught her eye.

“I don’t know what it was but I was drawn to this ad,” she says.

So she picked up the phone and gave them a call.

Little did she know that within just a few months’ time, she and Philip would own not one but two investment properties.

A new strategy

The company Tania called was a buyer’s agency based in Sydney.

They sent the pair an information pack and teed up a conference call and the next thing they knew, Philip and Tania were on a trip down to Sydney to find out more.

More than anything Tania and Philip were captivated by the agency’s investment philosophy which offered them positive cash flow opportunities by targeting properties in affordable locations then renovating them and adding a granny flat in order to magnify the rental returns.

“This is something we would never have realised on our own,” says Tania.

“The prospect of a granny flat had never entered our minds! You don’t see many of those in our neighbourhood.”

Conveniently, the agency also offered a complete investment service, which as investment rookies, the pair found invaluable.

In fact, Tania and Philip were so impressed with the agency’s team and the investment philosophy, they were soon on track towards securing their very first purchase.

Trusting to others

For many investors, the idea of purchasing property in a market outside of their own can be daunting, particularly for novices, but Philip and Tania decided to place their trust in the hands of the buyer’s agent.

“Investing in a different state, in a market we knew nothing about, we had to take a major leap of faith,” says Tania.

“But after so many years of being mortgage free and still not going anywhere, it was time to try a different strategy.”

While Tania and Philip didn’t actually see their purchases before signing the dotted line, their agency did send them plenty of photos and there was a lot of correspondence between them.

“I nearly fell over at first,” recalls Tania, “the properties were so terrible. But I had seen what they could do to a property during our visit to Sydney and I trusted them to do the same for us.”

The properties

In October 2010, Philip and Tania’s first property purchase settled. By January 2011 they’d settled a second.

“We really didn’t expect things could happen so quickly, we’re overwhelmed,” says Tania.

Essentially Philip and Tania’s strategy involves targeting established properties which require minor renovations in the outer Western suburbs of Sydney.

“These areas have good local amenities with links to the city and we can purchase properties that are still relatively affordable,” says Tania.

The pair is then able to increase both the property’s value and its rental potential through a simple renovation. The block must also be large enough to add a granny flat.

“This is a major factor because you can create extra income for a relatively small outlay,” says Tania.

Moreover, as the couple point out, the granny flats are great investments as they can always be moved or sold.

As part of their investment strategy, the properties the couple target must also hold appeal for potential developers down the track.

“By doing this, targeting large sites with relatively inexpensive housing, there is the potential developers will want them. We’re opening up our selling market,” says Tania.

With Philip and Tania’s blessing, their buyer’s agent has managed the renovation and granny flat processes for them.

“They would send us detailed lists of what was wrong with the property, where value could be added and what our options were,” says Tania.

The specs

Philip and Tania’s first purchase was located in the Western Sydney suburb of Colyton with a price tag of $270,000.   They have spent approximately $20,000 on renovations and a granny flat is being erected at the cost of $55,000.

“When the granny flat is completed we hope to realise a positive cash flow of at least $12,000 per annum,” says Tania.

The second property is located in another Western Sydney suburb – Werrington County. It cost them $319,000. With a basic renovation and the addition of a granny flat, the couple are expecting to generate positive cash flow of $13,000.

Financing property investment

Because Philip and Tania owned their own home, they were able to use this equity to fund their two purchases.

“Even though we owned our own home, it was basically an asset that was doing nothing for us, except cost money. We decided to use the equity to make it for work for us, instead of us just working for it,” says Tania.

The pair secured an investment loan through NAB which they hope to pay off with the help of their positive cash flow.

“When the properties are completed, granny flats and all, we’ll have them revalued.

“Equity and positive rental income are strategies that will enable us to free our own home from the investment loans. As the properties will be positively geared we intend to use the income to help with paying off the loans over a quicker period of time.”

While there are initial costs, Philip and Tania are focused on the future.

“We are trying to think of the properties as employees. Employees cost money but invest wisely and they will create wealth.”

Better late than never

The only thing Philip and Tania regret about their investment journey is starting so late.

“We’re really kicking ourselves for not doing it 10 years ago,” says Tania.

“Patience is probably the biggest issue for us now. After waiting and doing nothing positive with our home equity for so many years, we are now extremely impatient to move ahead as quickly as possible.”

In particular, Philip and Tania have been overwhelmed by their discovery of positive cash flow and the potential cash flow positive property can offer.

“We thought the only way was to be negatively geared. We never had any idea about positive cash flow.”

Tania says that their two purchases have given them confidence they never knew they could have.

“The biggest advantage without us even realising it, is that we are no longer scared to try a completely new way of looking at things,” says Tania.

Unsurprisingly, the couple are now intent on building a substantial investment portfolio.

“Our immediate goal is to provide an extra income. The long term goal is to create wealth and enable us to enjoy our retirement,” says Tania.

The couple is not sure where their next purchase will be but they are keen to employ the same strategy.

“As always it will be a property that’s in need of a renovation and a granny flat can be added.”

“Our goal is to purchase as many properties as financially possible that are positively geared which will enable us to enjoy a lifestyle that goes beyond just working to survive.

And while the couple would like to explore the property market on their own one day, they believe enlisting a buyer’s agent is invaluable when it comes to starting out – and finding the time to put in all the research and work required.

“When we’re wealthier and have more time we might go it alone, but in the short term, this strategy works well,” says Tania.

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