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How to invest in property as a team: two investors share their secrets

By Staff Reporter
How to invest in property as a team - two investors share their secrets
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This week Alana and Robert Jones are in The Smart Property Investment Show studio, sharing their tips on investing in property with your partner. They each had one investment property when they met and together they share a love of property investment and a growing portfolio.

Now on nine properties, the pair are looking into development. They join host Phil Tarrant to discuss how you can prepare yourself for developing your investment, why it’s so important to network and why you should never be scared to change mortgage brokers.

All this and much, much more on this episode of The Smart Property Investment Show.

Tune in now!

 

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Phil: Good day everyone. Welcome to the Smart Property Investment show. It's Phil Tarrant here. I am the host of the show and also editor of Smart Property Investment. Thanks for tuning in. It's that time again, that time of the week, where we have another installment, one of Australia's, if not Australia's top show for property investors, which is pretty cool. I'm joined by Tim Neary one of my regular really co-hosts. Tim, how are you going?

Tim: Good Phil. Thank you for having me on the show again.

Phil: That's good mate. I hope you are going to lend a hand, in terms of having a chat to the two people we have in the studio today.

Tim: I certainly will do Phil.

Phil: Interesting case study this one. I think it's going to be love, property, marriage and…

Tim: Wealth.

Phil: And Macca's, that's how I'm going to summarise the upcoming podcast. I've got Alana and Robert Jones in the studio. How are you going guys?

Robert: Good thanks.

Alana: Good, thank you. Thanks for having us.

Phil: Recently married?

Robert: That's right. Only two months ago, the 1st of October. It's very good, I guess. I don't want to sound bad but our wedding was great and all but I think for us, it was in the bit of the background at one stage because we were always focused on getting our first development deal this year and finally, we got it.

Phil: You put property before the wedding?

Robert: A little bit. It was a joint thing, right Alana? We'd kind of let our friends help us out a lot and we just focused on trying to get our first development site, which was quite interesting. It was a actual sales rep that actually gave us our block of land. I was always going through agents, asking them.

I just built rapport with project builders because obviously, once you buy, you want to build and one of the project builders actually gave me a link to this realestate.com vacant block and that's the one we actually went for.

Phil: We'll have a chat about this. A couple of things we want to try and cover off in this podcast. Alana and Robert actually have a really nice property portfolio and just chatting before we come on air and that's what we were just discussing then.

They've just gone through the process of buying a block that they're going to look to develop. We'll get into that but a bit of background guys, how many properties do you have in your combined portfolio?

Alana: We have a portfolio of nine now. We've just settled on our ninth, which is the block of land.

Phil: You guys interestingly, were both property investors before you met and now have become husband and wife. Can you tell us about that story? How did you both end up investing in property and I hope there's a really good love story, that you met at a Bunnings or somewhere other, while you were shopping for renovation stuff?

Alana: Not at all. I think we kind of property in the background but it wasn't before we met. We only had one each when we came together but we both seemed to have the passion for property and wealth creation, I guess and creating a better future and that kind of thing, to just feel to what we've done in the last about almost three years now, to go from two to nine.

Phil: Two to nine in three years?

Alana: Yeah.

Phil: You're working pretty hard at it. What do you guys do for a living? I imagine you both got jobs and stuff but what sort of work do you do?

Alana: I work in disabilities, as a manager in accommodation services.

Robert: I'm a garbo.

Phil: You're a garbo?

Robert: Yeah.

Phil: It's pretty late for you mate. We're recording this at 17:30 at night, you got to go to bed soon.

Robert: Yeah, no right. I’ll be going to bed after this.

Phil: How many hours you put in a week?

Robert: Yeah, maybe 65, 70 hours a week.

Phil: 60, 70 hours a week?

Robert: Yeah. They're long days.

Phil: Plenty of overtime?

Robert: Yeah. That's why I'm there.

Phil: The overtime, doing that, obviously you get time and a half and stuff.

Robert: Yeah. That's right.

Phil: Is that help super charge your ability to save deposits and go on the property and I guess, what I'm getting at here is that, you're working damn hard to create a property portfolio, that's going to provide for you in the future?

Robert: That's right. Yeah. Just for example, the first house I got in 2012, I saved 90% of my wage for six months and I didn't see anyone for six months but I knew what I wanted because I had a good influence with older friends and they said, "You should get into property. You spent enough time on sports cars."

I had my fun with that and you spend a lot of money on them and then obviously want to do ... They encouraged me and that's what helped me to motivate to save heaps. At that time, I think it was the existing grant was ending, so I had to really jump on it. I had enough and then I had two weeks to get a property, otherwise I'd miss out on the grant, which I think was 7,000.

Phil: Yeah. The first home owner grant.

Robert: Yeah, which really helped. I had the deposit and then my solicitor who was also a conveyancer said, "You still need 11 grand for stamps," and I didn't even know what stamp duty was back then. Lucky that seven grand really helped, which is good.

Phil: Your first property Robert, you saved 90% of your salary for six months, to raise a deposit to buy your first house?

Robert: That's right.

Phil: When was this?

Robert: This was 2012, so September I got the property. I think I started saving the beginning of 2012 but I was using a high interest rate saver at the time. I think it was Ubank and they were paying 5.7%.

Phil: Pretty good.

Robert: If you would save more, they would reward you, so that's why I stayed with them because everyone else was paying low five's. If you could save more, they reward you, which was a good thing to see, once you look at your charts, how they're going up online saving.

Phil: You're working heaps of overtime then as well, I imagine?

Robert: Yeah. Same hours. Yeah, same hours.

Phil: You could get as many shifts as you wanted, to ...?

Robert: I was a permanent casual, so I was doing six nights a week, every week. It was like 21:00 PM to 08:00 AM.

Phil: When you're working, were you thinking why you're doing this? Was that a big motivating force for you?

Robert: The savings really helped me, really motivated me to go, "All right, I've just got to keep doing this for a while," and eventually I started looking at properties. You just try to figure out the 10%. I was getting close to the 10% because obviously, 20% would have taken longer.

I just thought, "Well, I'll pay LMI, it doesn't matter. As long as I get my foot in the door." Definitely, the more I kept looking at my savings account going up and up, it really motivated keep going because you know, I could keep doing it. I just got to just keep watching myself and be motivated.

Tim: We see that a lot, don't we Phil, on the show when we talk to investors like this? The determination that they have to have the goal and then to save for it and to make it happen. I know we were talking off air as well with Alana and you were saying that you're working at Macca's and just working through Macca's and saving up. You bought your first property at the age of 18, is that correct?

Alana: Yeah, that's right. I started working at Macca's as soon as I could and basically put every penny away. Didn't really know what I was going to do with it at that time but I knew I wasn't frivolous with my money. I was pretty cautious and smart.

I put it away and started looking at property, just as a good basically, something to put it. At the time I bought it, it was in 2008 and the first home owners was at its peak, with the 14 and no stamp duty. I kind of had pretty good luck there.

Phil: Double whammy.

Alana: Yeah. I got the double whammy on that one, so that helped me get in. Then I moved into it with a couple of friends, so it was like paying a small rent, rather than a full mortgage to myself.

Tim: That was sort of dove tailing at the same time.

Alana: Yeah.

Phil: What your first property Alana? What did you buy and when was it?

Alana: It was a three bedroom house in the Hawkesbury area, in Bligh Park.

Phil: Okay. How much was it? What did you pay for it?

Alana: I paid 307,000.

Phil: Back in 2000 and ...

Alana: Eight.

Phil: That's pretty good. What's the valuation on it now? Do you still have it?

Alana: I had it revalued not that long ago actually and it came in at 580, 560?

Robert: 565.

Alana: 565. There you go, somewhere in that range.

Phil: The way you played it was, you just got a bunch of friends in there. You had one bedroom, you got somebody in the other two rooms.

Alana: Yeah, that's right.

Phil: To help under-ride the cost of the mortgage?

Alana: Yeah.

Phil: That's pretty good. What was your first property, Robert?

Robert: I bought in Penrith. That was 2012. What sold me on the house, was it had a drive through garage. I had to get it.

Phil: You go in through and out the other side?

Robert: Out the other side. I could wash my car in the back yard, which is a boy thing. I got that for 308. They had offers at 299 and that's when you could put offers above and all that and I said 305 as initially because I just kind of wanted and then they said 310 and I said, "He's biting off more than he can chew," so I just said, "308."

Phil: Is that a three bedder?

Robert: Three bedder, yeah.

Phil: In Penrith or one of the suburbs near Penrith?

Robert: It's in actually the border line.

Alana: It's Penrith.

Robert: Yeah. Penrith. Between Penrith and Cranebrooke, there's a Andrew's Road which divides it, so it's right on the border of Penrith.

Phil: You paid three ...?

Robert: 308.

Phil: I reckon that's worth a lot more than that today?

Robert: I got it valued, I think last year, for 480. It was a bit low but obviously, you can just get it revalued again and it should be in the five's easy.

Alana: It's interesting. I don't know if you picked up that we pretty much had the same purchase price?

Phil: Yes, I know.

Alana: Three years apart or a bit more than that.

Robert: Four.

Alana: When we got together and we started investing, they had a very similar value, so when we revalued them, it was interesting that it was early days with us and we were able to withdraw the similar amounts of line of credit, to do our joint stuff. It was interesting that we had the same purchase, the same value when we met, so we were on very level playing fields.

Phil: Coming into the relationship, with exactly the same assets, which is good. When did you guys work out that you had a common passion for property? Was it quite early in your relationship or was it something that took a little time, before you started going down that path? I sound like a relationship person.

Tim: Everything on the show, Phil. Everything on the show.

Robert: I think that's what brought us more together, was a passion for property and then eventually we just didn't know how to convert it to wealth and then we did go to a Grand Design show in Sydney. There was a stall for, I think it was a guy who would ... There's someone was saying that you want to promote wealth in property and then we just went to a day thing. It just opened our minds on what else you could do.

You can get out there and try and do renovations or accumulate a lot more properties, to get a bigger yield by doing a granny flat and that's why we thought, "Well maybe we should join forces more and actually get out there and buy some more property because one each, is not going to do anything for us." We can have a PPI and one rental, it's not going to do much.

Alana: It started us on a bit of a journey, I guess.

Phil: I've been doing this podcast for sort of a year or so and something that you just said there, which I think was probably one of the most distinct things I've heard, you said convert a passion for property to wealth. I think that's a really good important point. A lot of people have a passion for property but they don't actually know why they have passion for property.

Some people might watch The Block and they go, "I have a passion for property and the passion for property is, I want to make something look nice or put some fancy furnishings in or isn't a really cool bath tub tap," or something or other. Their passion for property is very design orientated or very sort of stylistically orientated.

A property investor, needs to have a passion for property, very important but that passion needs to be for wealth creation. This is why you do it.

Alana: Very much so.

Phil: What's the long-term goal? With that in mind, what's the long-term goal for you guys to turn ... Obviously a passion for property, that you have but what is those wealth goals for you and why have you set those goals?

Robert: With what we've got now, unencumbered would be a nice amount per ... As annual ... I think it's about 2,500 per week, the rents, if they aren't encumbered. That's where we are. We're kind of like consolidating a bit but to get that to knock obviously the debt down, we want to do more developments to obviously get chunks of cash to perhaps keep going with joint ventures later on, when serviceability runs a bit low.

I want to slowly transition to maybe spending more time doing project management later on, after I do this development. Obviously got experience, I can help others and joint venture with other people. In terms of what we've got, we're happy with. I just want to try and knock down the debt of it. That will be the next kind of step.

Alana: I guess the goal is, financial freedom and not being tied to a job and is our choice what we do with our day and I guess, as Rob touched on, project management is something we'd really like to get into and helping other people do these sorts of deals. The biggest scale developments as well, which you can only do when you have cash right behind you, so I guess that's our kind of longer term goal.

Phil: You guys, you have a shared passion for property, which is good and that passion is for wealth creation. I think what I'm hearing and Tim, I don't know if you can tell me whether I'm summarising this correctly is, property investment is going to give you guys the freedom to have choice in the future and what that choice is going to be, is probably going to be influenced by what you want to do at that period of time.

It's an empowerment thing, property investment. It is the fact that, if you have equity, if you have a substantial asset, that you do not owe too much money on, you've got the freedom then to actually do something with it. You pull the money out and use it to do other things. You can keep growing and evolving your portfolio. You mentioned Robert, that you have just recently acquired a block of land, is that right?

Robert: Yeah. That's right.

Phil: You've got nine properties in your portfolio and I think there's 10 dwellings on it, so I manage one's got a duplex or something on it, is it?

Robert: A granny flat on the back.

Phil: Okay, so got a granny flat on it. It's quite a large portfolio. Have you sold any of your properties that you've ever bought?

Robert: No.

Phil: It's just buy and hold?

Robert: Just buy and holds so far, yeah.

Phil: Your first property ... They're both sort of Western suburbs of Sydney, the first that you bought before you met each other. Where are the properties located?

Robert: The first one we bought together was Werrington, which is obviously just down the road.

Phil: Is that Penrith way?

Robert: Yeah because we just wanted to do the whole granny flat thing, to get the yield up. We bought that for 405 in January last year. Did a three week reno and it got revalued at 510. Obviously it was during the boom too, so that kind of helped a bit but we did a bit of a reno on it.

That was all right. Then we went to Nowra down south. Main reason is, there's a massive infrastructure overhaul there.

Phil: Yeah. The new roads going through there, through Berry which is speeding everything up quite a lot.

Robert: Yeah. They're kind of bypassing Berry, which is bad but it's going to Nowra, so it's all right. Our area still gets hit but we wanted to get something with a bit of land, so maybe do a sub-division later on. We bought like a shack. It wasn't a shack, it's more of just a fibro house with an extension.

It's a three bed originally and then did a reno for a four bedroom, two bath and that one we bought for 228 but they had 250 on it. Because we had some data, we had CoreLogic, we managed to check that it was on the market for a good two months. Eventually when we came to the property, I mean there was a car seat out the front, that the tenants were using and there was old pants in the front yard.

Phil: It wasn't marketed very well?

Robert: No.

Alana: No and it had some very bad tenants in, which is an interesting story for a bit later, I guess, when we get to what we did with the reno, about six months or so after we purchased it.

Phil: That was property number three?

Robert: Four. From Penrith and now ... Yeah. Then we went to Queensland. We got your block, your unit.

Alana: Yeah. I bought a unit in Eagleby in Queensland. Relatively cheap, mainly field, when we first started. We went back up there, to have a look at what else was up there and we got a big corner block, that we're planning on developing in the future. It's a 1,200 square metre corner block. We're looking at developing that when we get the opportunity.

Tim: You moved out of that area to Queensland. Do you follow it yourself or are you working with buyer's agents?

Alana: There was obviously a lot of talk at that time, about the growth quarter in Queensland and going up there, so that was one of the reasons and the yield with growth potential, hasn't gone up an awful lot but you've also got that cash flow coming in, so it’s less risk than just banking on yield.

Phil: It's 1,200 square metres with a three bedroom ...

Robert: Queenslander on it.

Phil: What you pay for that?

Robert: It was 3-0 ...

Alana: 305.

Phil: 305. Okay, on 1,200. On a corner block?

Alana: Yeah.

Phil: Something that you can split down the middle and put two residents on it?

Alana: At least two, possibly three.

Phil: How did you go about understanding the council regulations with battle-axe or splitting titles or dual residencies on single blocks? Did you research that heavily before you purchased the property?

Alana: Yeah, reading DCPs and getting an understanding of what the council will allow and where they're going.

Robert: I guess at the time, we didn't think too much of developing it straight away, so we just ... At the time, you could do three, four hundred square blocks on it but we didn't do enough research, to find out they were changing the law ... Not the law but the zoning. It's different now but you can't do that at the moment.

You can split it into two and put a granny flat on the back, so you've still got three dwellings on it but you couldn't do three separate titles. There's still a cash in a possible sale later on, if we had to but there's potential there still. Then we thought we'd get some cash flow up, so we went out to Broken Hill.

Phil: Broken Hill.

Robert: Drove out there.

Phil: Australia's most affordable suburb, they say or city.

Robert: It is.

Phil: You still buy out there for 80,000 bucks.

Alana: We got it for 45.

Phil: There you go. What did you buy for 45,000 out in Broken Hill?

Robert: Three bedroom miners cottage with a tenant in it, paying.

Phil: For 45 grand?

Robert: I had 55. The agent said, "Give them 50," and we just went straight for 45. It was a deceased estate, I think.

Tim: With a tenant in it, you say?

Alana: Yeah. Tenants in it.

Robert: Absolutely.

Alana: Absolutely. 15% rental yield.

Phil: What do they pay? Were they paying low?

Alana: 130.

Phil: 130 bucks a week.

Alana: Yeah.

Phil: On 45 grand.

Robert: Yeah but that's I think, half disability pension or something like that. Half of it is secure.

Alana: It's stable.

Robert: It's stable. He's got kids. He's been there for seven years. We did the background before we even bothered going up because we don't want to buy a property that's vacant. Then we need to obviously fix repairs and then obviously advertise it. That's time or money that we're not making on it.

Tim: Your goal was to generate some cash there anyways, you said.

Robert: That's right.

Alana: Yeah, cash flow.

Robert: Even it out.

Phil: What do you think of Broken Hill? Did you spend long out there? It's a long drive.

Robert: We stayed overnight. We left Friday at 19:00 PM, got there at 08:00 kind of Saturday morning.

Phil: You drove overnight?

Robert: Yeah.

Phil: Just the same shift you've been doing at work?

Robert: Yeah. That was all right. She did the sleep shift and I just kept driving. I was like this, just got to keep focus because it's so flat, you can see lights far away and there's always road trains of course but you just got to stay focused because of the kangaroos.

Phil: Was there heaps of roo's bouncing around?

Robert: Oh, yeah.

Phil: Everywhere.

Robert: On the wrong side of the road. They're just sitting there and I'm doing like 90K's an hour. Just like freaking out like, "Don't jump in front of the car please."

Tim: On the wrong side of the road. They don't know the left and the right.

Robert: That's right or you don't see that many cars at night.

Phil: How did you find the agent? How many places did you look at when you were out at Broken Hill? Was it only the one or is it ...?

Robert: No, it was about four or five.

Phil: All getting marketed by different real estate agents?

Robert: Yeah.

Alana: We went to about three different agents, so we went around with three different agents to a couple of houses each.

Phil: How did you find that experience? Did they drive you in their car?

Robert: No, we followed.

Phil: Do you follow?

Robert: They all had utes with the cowboy gear on. Well mostly had the jeans and the cowboy shoes.

Phil: It's real Australia out there, isn't it?

Robert: It is.

Phil: It's great. I love it.

Robert: It's good but you know, it's not that bad of a place. They've even got a massive Reece. You think Reece is a pretty high end bathroom place.

Phil: Plumbing company, yeah.

Robert: Yeah. They had that there. The main street was very clean, very honest.

Phil: I think it's brilliant. I had my bucks party out in Broken Hill, yeah. A little town called Silverton.

Robert: Yeah. Went to there.

Phil: Which is really, really quite close. We stayed there and there's a pub there.

Robert: The pub's awesome.

Phil: Just out of the way. I thought Broken Hill was excellent.

Robert: Yeah, nothing wrong with it.

Phil: I don't know if I want to live out there.

Robert: No. Good investment place.

Phil: In terms of a cash yielding investment, if that's what you're looking for, it's probably not a bad place to go. Where-after Broken Hill then? What was the next property?

Robert: Went to Moree.

Phil: Just another similar type of town. Northern New South Wales, Moree?

Robert: Yeah. That's about only a seven hour drive. It's not too bad. I did that in a day.

Phil: Is that another cash flow play?

Alana: Yes.

Robert: Yeah. I think the yields not as good. It's about mid 14.

Phil: What did you pay for your Moree place?

Robert: Paid 85 for 230 a week.

Phil: That's not a bad yield.

Robert: The thing with that one is, we originally went there to see a block of units. In the photos, it looked great but then we got the actual block and it was ripped apart. The air-conditioners were all ripped out of the ... This is kind of a lower social demographic area of Moree. The bricks were being pulled out of the wall. It was pretty extreme.

Phil: You're looking to buy the whole block, were you?

Robert: It was a good yield. I think it was about the same. It was about three units, yielding about 14% as well. We went there and were like ... It's good to get on the ground because you actually get a feel for the area and see where the good and bad bits are. Some agents are pretty helpful if you actually show up. The side I'm seeing, you can still get a good buy but it's good to get a feel of where you could.

Phil: Ground truth.

Robert: That's right.

Tim: There's a lesson in that, isn't there Phil then? Do the work.

Phil: A massive lesson. You've got to do the miles. If you're buying in regional towns and buying in regional towns, depending why you're buying but buying in regional towns, is very different than buying in suburban or metropolitan locations.

You need to be very clear about what your strategy is because a lot of people get burnt going to regional towns. It might be cheap to buy there but why is it cheap to buy there?

Robert: That's right. Well obviously the main reason for most, is mining towns and people still think Broken Hill is a major mining town, it still is but the actual main driver now, is actually health. Because of the demographic of the area, they've actually ... The state New South Wales, actually put a massive new hospital there. It was still getting constructed when we were there and it was pretty nice. The second is tourism and the third's, mining.

For Moree, it's agriculture, is the main driver there and obviously there's a lot of land. Unless you have a massive natural disaster, there's heaps of land to be found. With this one we bought, it actually wasn't on the market yet. It was a deceased estate as well but we asked the agent. We said, "Oh, do you have anything else that might be coming up," and then she showed us this one.

Alana: Yeah. It wasn't actually one of the ones that we had on our list to see while we there and just talking about what we were looking for. She took us to this one. I don't even think she officially had the listing but because we were there.

That's what I always say, you got to get on the ground because you're a person and if you're not a person, they'll sell you anything but they're not going to sell you rubbish when you're in front of them. It helps establish that relationship.

Phil: Moree was the last property before you bought this most recent block, is that right?

Alana: Yeah, that's right.

Phil: This block that you've just bought in sort of Hawkesbury region.

Robert: Cranebrook.

Alana: Penrith.

Robert: That was Cranebrook, Penrith again.

Phil: You bought in Cranebrook, did you?

Robert: Yeah, that's right.

Phil: Cranebrook is a suburb of ...?

Alana: Penrith.

Phil: Penrith? It's sort of North, South, East, West of Penrith. I'm trying to work out geography.

Robert: It's between Londonderry and Penrith, I suppose.

Alana: It's almost next to it. It's pretty close.

Phil: I think I know where it is. What's the size of the block?

Robert: 792.

Phil: 792 and it's on a main sort of thoroughfare?

Robert: No. It's in the first sub-division of Cranebrook.

Alana: It's not far off. You're close to everything but you're not on the main road with all the traffic.

Phil: It's a new sub-division?

Alana: No. It's in the established area actually but there is two new sub-divisions either side of it. It was a very rare find to find this land.

Phil: Okay, so it's just a block?

Robert: That's right.

Phil: With just a bit of scrub on it or it.

Robert: There's a few trees on it.

Alana: A couple of cars.

Phil: A couple of cars.

Robert: Coronas on there. Yeah.

Phil: What did you pay for the block?

Robert: That one was 480.

Phil: 480 for the block, for sorry, how many squares?

Robert: 790.

Phil: What are you going to do with it?

Alana: We're building two houses on it. They're going to be a detached duplex, so they have to be strata'ed because the block's not big enough to have a torrents title but they're going to be completely detached.

Our plan with that is to sell of one of them and then we're going to live in the other one. That's going to be our principle place of residence, where we move into and pay down the debt basically.

Phil: They're going to be strata'ed though.

Alana: Yeah, they are.

Phil: You're going to live on strata'ed premises, so whoever buys the other property, will be part of the strata?

Robert: That's right. We'll have some common property. Yeah.

Phil: What's the cost associated with strata'ing that and the long ... The immediate cost to strata it and then the long-term cost, in terms of the compliance associated with strata?

Alana: The cost of in compliance with just the two, is going to be very, very low because it's basically just a shared insurance and having a plan done. There's no ongoing costs, like in a unit, that you have put a maintenance budget in and all of those things. What I was saying was, there's actually a new kind of estate pretty close to it, that they have quite a hefty strata for a free-standing torrents house but because they've got all this shared property.

They've got shared parks and pools and all this private area in this landscaping. I guess, the area's kind of accustomed to it but because it's just the two of you, it's very, very low.

Phil: You put two free-standing side by side. Identical properties?

Alana: Not quite identical but very, very similar. A couple of different windows and a couple of different colours.

Phil: What's the bill cost for each of the properties?

Robert: About 250 each.

Phil: 250 each. You're going to drop 500 on it?

Alana: Yeah.

Phil: Plus your 480, so you're all in it for a million bucks, once you pay for everything else, yeah?

Alana: Yeah.

Phil: And a bit more. What are going to sell the property for?

Alana: Low to mid sevens.

Phil: You'll sell one of them for low to mid sevens?

Alana: Yeah.

Phil: The objective for you guys in this case is?

Alana: To have as low a debt on our PPR as possible.

Phil: That's what you're trying to do. Will you look to utilise that equity, to keep buying in the future do you think or are you going to try and drive down your principle place of residence over time, so it's completely unencumbered?

Alana: The beauty with that is, we can revalue it and have the line of credit and it won't be the PPR debt. It will be investment debt, that we can write off from the taxable income still. I guess we'll see how we're sitting with serviceability, when that is all done.

I guess one of the things that's really pushed us, when it comes down to sacrifices, we moved back home with our parents, to get our serviceability going. To basically be able to jump start all this. Once we do move out and we will assess where we are at the time.

Phil: You're still essentially making sacrifices then, living ... It depends if you want to say it's a sacrifice but I couldn't live with my mum.

Alana: It's sacrifice.

Phil: If me and my wife, Victoria, moved in my mum's and it's not going to work, I don't think but again, it's just going to back to sacrificing or compromising. How long are you back at home with parents, before you think you can get out and have your own home?

Alana: As soon as it's built, we're moving in. We would have moved into one of the properties but because we are building, we've got the land debt, that with no rent obviously. To move into our other ones, that we'd be responsible for that debt as well. Just from a smartness ... Then we'll have the building loan, so we're just basically staying there until the build's ready and then we'll be moving into that.

Phil: Is it hard to get someone to construct the property for you, seeing that you're in a area, Western Sydney, where there is immense amount of building going on right now. There is developments popping up everywhere. Can you actually find someone to build a place for you, so you don't have to hold that land any longer and pay interest on it?

Robert: Yeah. I have spoken to a few project builders. I'm just trying to get what they actually can do because obviously these days, narrow lots are the way to go. That's how most project builders are going because that's the way the new sub-divisions are.

It's not a lot about the width anymore. They go back heaps and are very short in width. That's what most builds are based on, that's why we tried to get a block that we could work with and this one is pretty good in that type of concept, so it fits well.

Alana: We tried to find a plan that fitted our block, so where the builders have their designs.

Phil: Like an off the shelf type thing, so you don't have to fiddle too much with it because that's when, as soon as you make alterations, things start getting expensive.

Alana: That's right. Yeah.

Phil: How you're going with financing all your properties? Do you have a mortgage broker or did you do it all yourself?

Alana: We do have a broker. We're on our third broker actually but no, we've got a really good one at the moment.

Phil: Is that a local broker, that lives out that way?

Alana: Yeah.

Phil: How did you find them?

Alana: At our property meetings actually. Just events that we were at and we just got talking to her.

Phil: You approached the broker or the broker approached you?

Alana: No. Well just generally meeting, "What do you do?" Build a relationship and then when we were looking at re-financing and we chatted to her and she was very good, so just keep going back to her.

Tim: Just felt like there was a connection.

Alana: Yeah, that's right.

Tim: Understood what you wanted to do.

Alana: Yeah. Very much so and it's very much a broker that understands what you want to do. You've hit the nail on the head.

Phil: Are they a property investor themselves?

Alana: They are. Yeah.

Phil: Okay, that's good. The decision to go from your second broker to your third broker, what didn't the second broker do, that meant you didn't want to stay a client of theirs?

Alana: I guess, looking forward and also they did the loan that we went there for but they never really tried to say, "Hey, do you want any more?" It's more, they actually maxed us out with the single bank and that was pretty hard to get out of, which we had a bit of untangling to do with this other one.

We basically got maxed out and couldn't borrow anymore and had to re-finance, move some, so that we had our lending spread out. They were very much just looking at that one deal and what we wanted to get through then, rather than looking at the forward picture and how many we're going to potentially have over our portfolio and investing.

Tim: Yeah. How many different lenders do you have now?

Alana: Three.

Tim: Three different lenders. Major banks, are they? You can name then, I'm okay with it.

Alana: Yeah. Commonwealth, NAB and RAMS.

Tim: You're with RAMS, are you?

Alana: Deal between the three, yeah.

Tim: How did you end up with a RAMS loan? Was that a direct thing or did your broker put you into them?

Alana: No. That was one of our brokers actually, that we came across from another person that we met at an investing event that we were talking to and they said, "I've got a really good broker. Talk to these guys," and that's how we got onto do RAMS.

Tim: How are you going with serviceability? You mentioned a bit earlier that it's getting a bit tighter but can you keep borrowing, do you think?

Alana: We're good at the moment but that's because we said a lot of sacrifice, no kids yet, we're still at home, so all of the mortgages are looking after themselves and we've got very good jobs. At the moment, it's very good but ...

Tim: If raising a family is something that you're going to look at in the future, is that going to put the brakes to you think, on property investment or do you think you'd be able to have both?

Alana: We definitely want to have both. We're definitely looking at even doing joint ventures, developments with others. We want to keep going with the property stuff, even if we're not doing it all ourselves.

Tim: That's good.

Robert: Yeah. Pretty much to what she said but obviously, for serviceability for us on our portfolio, they were kind of good where we are now but in terms of trying to get chunk deals and that, as well we'll get more out of the box, doing offline deals and that. At the moment, all we've done is online stuff, which is good. It's good to get used to how the process works, talk to agents.

Get your team behind you but obviously if you want to get ... Some deals are very profitable. You've got to get out there and actually talk to owners, one on one or build relationships with builders and actual people that can help you do a development or just the right people in the right area, that are happy to share time and skills.

Alana: Yeah. We are looking at paying down our portfolio at the moment. We're in quite a good position in what we've got and the rent that's coming from them. As we pay down the debt, that will be more in our pocket.

Phil: Good. So we're going to wind up. We've run out of time. This has gone for half an hour, which is longer than what we thought, wasn't it Adam? Yeah.

Tim: What we're allowed from Adam.

Phil: He's got a wound up ... Let's just finish off with a couple of real quick questions. What's your number one tip for people who are looking to start developing?

Robert: Know what the council requirements. If you start with a good ball, then obviously you're going to be on their side. If you try and change the earth with them, then it's going to be harder for you and it's going to take more holding costs and it's going to put you two steps back.

Just stay the DCP or LEP, which is just what council requires and obviously try and build within what they want to do. Don't try and push the boundaries too much because that's going to cause dramas and put you behind a bit.

Phil: Your number one tip of researching where to buy, what would you say?

Alana: Get educated and network. That was going to be my tip for the first one as well, so I guess it comes to the same thing. Put in the time, get on the floor.

Phil: Did you say network, did you?

Alana: Yeah, network.

Phil: Network with who?

Alana: Like-minded people. People that can fuel your passion but you can get advice and it's people that have done it before and make you believe that it's possible.

Phil: What's your number one tip for investing with a partner?

Robert: A lot of patience. She's put up with a lot of crap from me.

Phil: Investing as a team, is probably a way to go. It's probably a better way to frame it.

Robert: I guess to have a goal together, you can work towards because if you've got two different goals, you're not going to work together. Obviously focus on what you guys want financially and then work towards that and try and bounce ideas off each other.

Alana: It's about being on the same page.

Phil: Like most things in life.

Tim: Working as a team together, just listening to you guys talking this afternoon, it's very clear that you work well together and that you dove tail well together. It's been awesome to watch that. Good luck with that as you go forward. I know you guys are going to do well.

Alana: Thank you.

Phil: Let us know what's happening. We'll let you back in and once you finished this build, you've probably got grey hair then.

Alana: He's already got grey hair. I've been dying it since I met him.

Phil: The one point I would finish on is, the comment you said Robert, which I thought as really pertinent, was convert passion for property into wealth. You guys are definitely down that path. Good on you. That's excellent. Thanks for tuning in everyone. Remember to go to smartpropertyinvestment.com.au over on all the social stuff.

If you've got any questions for me and or Tim or if you want to write in and ask Alana or Robert anything, contact us at [email protected] Remember we're back every single week. If you like what we're talking about, please rate us on iTunes. It's always good, the more ratings and rankings we get, the more people will listen to us. We're trying to continue to build this property investment community.

Thanks again and we'll see you next week. Bye bye.

 

Listen to other instalments of The Smart Property Investment Show:
Episode 61: The ins and outs of strata: what buyers should consider
Episode 60: The pros of using a buyer's agent: why this investor brought someone in
Episode 58: When do you stop investing? The SPI Show answers more listener questions
Episode 57: Wealth creation through property: trends and themes to think about in 2017
Episode 56: The SPI Show accountant reveals all: How to pick your financial team
Episode 55: The reluctant property investor: How necessity drove an 18-property portfolio
Episode 54: The SPI Show Q&A: Listener questions answered honestly
Episode 53: 6 properties in 2 years: how this investor is achieving his goals
Episode 52: Will property prices fall? When? And by how much? What investors need to know
Episode 51: SPECIAL EPISODE: SPI team reveals all the financial details of its portfolio
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