While property is one of the great ways to build wealth in Australia, it comes with a raft of challenges for first-time investors, one property investor has explained.
Lesson one – Beware the nightmare tenant
One of the biggest fears a property investor has is a nightmare tenant that costs the landlord thousands of dollars.
As Mr Fullerton explained, one of his tenants, without telling anyone, “repainted the entire property inside, including the kitchen cabinetry”.
The same tenant went on to have an altercation with the property manager, to the point where the property manger refused to deal with the tenant.
In the end, “we just said that we’re not going to provide you with another lease. So by default we kind of kicked him out, but in a nice way,” he said.
Mr Fullerton eventually got his bond back, and the insurance company, after some convincing, paid out on the insurance claim for the new paint.
Lesson two – Throw around cheeky offers
Investors can save on the property by throwing out a “cheeky offer” as a way to start negotiations.
As part of the discussion with Mr Fullerton, host Russell Stephenson explained how only one person has to say yes to a silly offer for an investor to save potentially thousands.
“I think that another good strategy for people to be aware of is throwing around cheeky offers. You’d be surprised how many do come back. And I think a lot of people out there will go into an area and they might throw out 10 'silly' offers, let’s call them, in the hope that someone bites,” said Mr Stephenson.
Lesson three – ‘A lick of paint, change the fence, and job’s a goodun’
While many getting into the property market fear the dreaded R word – renovation – Mr Fullerton highlighted that not all properties require a rebuild.
Using the example of his first property, Mr Fullerton noted: “The first time, we just added a fence down the side of the property, and then also a pergola at the back and just a little bit of painting inside.”
Lesson four – Moving in, saving, moving out
As a way of managing finances, Mr Fullerton emphasised the benefits of saving hard, living in the property, and saving for the next one.
As a personal pattern, the property investor said he has lived in each of the properties he's purchased for a couple of years while saving up a deposit for the next one. Once he has a deposit, he rents the property out, finds a new place, and the cycle repeats.
This pattern allows investors to lower cost and has allowed Mr Fullerton to purchase five properties in eight years.
Lesson five – Be careful buying off the plan
It might be a popular way to get into an up and coming neighbourhood, but Mr Fullerton warned would-be investors to read the fine print before buying off the plan.
“I think I’d be very cautious and I would really scrutinise the paperwork a lot more in regards to the fittings and things like that,” Mr Fullerton explained.
What you order and what you end up can be slightly different in terms of fittings with “the wording, it’s a little bit of ambivalent and it’s like the developer can sway if they need to, you know, in the way that the development’s working,” Mr Fullerton said.