Why this property investor let go of only 1 out of 2 investment ‘mistakes’

The Bowen property, which costs him $12,000 a year to hold and was recently valued at $100,000 less than what he purchased it for in 2007, remains in his 11-property portfolio.

SOLD: The Shore Bay battle-ax block

According to the property investor, it was initially “a dream” property for him because of the investment’s potential, especially around the holidays.

Eric shared: “[The] battle-ax block can have some holiday letting up there and we found that, as we tried to holiday let, it was booked every time we wanted to get up there. There's a hundred other people trying to use the property at the same time.”

Due to the pressure of short-term rental, he decided to find a long-term tenant, but it proved to be the wrong move because of the bad state of the area’s “socioeconomic”.

The tenants he found skipped rent, and after a few arguments, he had to take them to tribunal.

“[It was] problem after problem, basically. [It was also an] old house, [needed a] lot of maintenance, and the rental terms weren't very good. I didn't see any growth at all and [there] was no yield,” he shared.

Eric ended up selling the property for $2,500 more than he paid for—a price that did not take into account all the costs that he had to maintain to hold the property over a period of time.

At the end of the day, he was just happy to have cut it out from his portfolio.

He said: “The thing with Shore Bay was, if I can unlock my deposit money, [and] even if I sell it for the same price I've made it for—I had a hundred grand deposit down on that—what could that money have done for me over 10 years in a different market?”

“It's embarrassing to look back and think, "Wow, it could've been amazing for me." So, the decision was, let's unlock that, cut my losses, walk away and then reinvest that money somewhere where it will make a bit of a growth,” the property investor added.

ON HOLD: The Bowen property in a mining town

Like many property investors before him, Eric took a risk and invested in a regional area, believing that there would be benefits of mining flowing into the Bowen market and its surrounding areas.

According to him: “All the workers were supposed to be fly-in, fly-out, [and] they were supposed to use Bowen as their base. That didn't happen [because] they are building camps on the mine so that all the workers actually [stay] out there.”

“The selling agent sold me all these dreams and promises and the upgrades [but] none of that actually eventuated. It was a lesson learned, a valuable lesson learned,” he added.

While the value of the property has gone down to $100,000 less than its selling price 10 years ago, Eric decided to continue holding it in hopes of getting back what he lost through renovation and development.

After all, once he sells the property, he’s bound to lose more than $100,000.

The property investor said: “It's still got the potential to put 11 units on that block up there, so once that does get going a little bit, there will be some upside in that. But I've just got to make sure I can handle the pain.”

Aside from its potential upside, the Bowen property also serves as a reminder that he is not “bulletproof” as a property investor.

This “scar” in his property portfolio helps Eric go forward in his property investment journey with eyes wide open—understanding the risks involved in the business of creating wealth through property and equipping himself better for the challenges he’s bound to face.

Right now, Eric is moving on to more sophisticated investment strategies.

He has recently bought a warehouse in Lilyfield and hopes to dabble once again in property development and transform it into luxury apartments.

“I do have quite a high appetite for risks. My thing to make me a better investor is to try and minimise that a little bit and try and pull myself back. Lucky enough, my wife, my partner, sits on the other side of the risk profile. We sort of balance each other out,” he concluded.

Tune in to Eric Brown’s episode on The Smart Property Investment Show to know more about the power of buying at the right price and the challenges that property developers may expect to face in the future.