Home buying intentions hit a new high in March
Home buying intentions hit a new series high in March, reflecting an increase in home loan applications, new data has re...
This week Katie Simpson is in the Smart Property Investment studio to discuss her investment portfolio over the last 15 years. After buying two of her own properties at a young age, Katie and her partner have now settled on a sixth investment, with no plans to stop buying in the future.
Katie joins host Phil Tarrant to discuss the pros and cons of using a buyer’s agent, the importance of property as financial security and why she believes investing is much like being your own boss and taking control of your financial future.
All this and much, much more on the latest episode of The Smart Property Investment Show.
Tune in now!
Did you like this episode? Show your support by rating us on iTunes (The Smart Property Investment Show) and by liking and following Smart Property Investment on social media: Facebook, Twitter and LinkedIn. If you have any questions about what you heard today, any topics of interest you have in mind, or if you’d like to lend your voice to the show, email [email protected] for more insight!
Speaker 1: Welcome to the Smart Property Investment Show with your host, Phil Tarrant.
Phil: Good day, everyone. Phil Tarrant here, Editor of Smart Property Investment. Thanks for tuning in to the Smart Property Investment Show. It's always a pleasure to have you with us. Today, our guest Katie Simpson, who, like all of our other guests on the show, I typically know absolutely nothing about. Katie's coming to the studio today to have a chat to us about her journey investing in property.
In the brief one-minute, sort of pre-on-air-chat that we had, I've worked out that she's five properties and another one on the way and that's pretty much the extent of everything I know about Katie. How you going, Katie?
Katie: Good, thank you.
Phil: One of the reasons why, Katie, we keep the show so unscripted is, number one because I'm sometimes disorganized and I don't put everything together so I know everything about someone ... But I quite like the idea of meeting someone straight off the bat, face-to-face, live on-air because it's just the conversation we have is the conversation our listeners have.
You mentioned beforehand that you listen to the show, so thank you for being one our loyal listeners since, we've been going for ... Adam, our producer here, is nodding his head .... we've been about a year or so now in the game. We're going to have to celebrate number 52 I think, as well at some point. He's nodding his head. Katie, so you listen to the show?
Katie: Yes, I do. Regularly.
Phil: Why do you listen to the show?
Katie: I started listening because I used to subscribe to the magazine, and then when I found that it was becoming all-digital, I got a subscription to the digital version, and then I just came across the podcast when it was mentioned in the magazine. I just thought, "Oh yeah, why not? You know, everyone's got different ideas and viewpoints and stories, so why not get involved as well and listen to them."
Phil: When you typically listen to the podcast?
Katie: I listen a couple of times each week, so I just go through and see if there's any new ones that have been put online.
Phil: Do you typically listen to it when you're doing something else?
Katie: I listen to it on the train on the bus, because I don't have a long commute to work, sometimes I have to stop it halfway through when it gets to a good place and then I think, I've got to go back and listen to it on the way home to finish it.
Phil: It's good. The reason why I ask is that, more and more often we're seeing is that, listening to a podcast it's like ... and I do it myself, I always listen to a podcast on the way to work, and I don't actually think too much about it, but it's sort of like learning through osmosis. You just get information, you don't really realise that you're receiving this information. It helps shape the way you think about stuff, so hence the reason why I was questioning you on that. Let's talk about property. How long have you been investing for?
Katie: I started investing in 2001, so it's about 15 years.
Phil: You've been at it for a little while?
Phil: What's your portfolio look like today?
Katie: We've got five properties at the moment, and we're currently going through the settlement of our sixth property.
Phil: When do you settle?
Katie: We're looking at about the 21st I think, so the next week or two.
Phil: Next week or so.
Katie: Yeah. Or the 28th.
Phil: You still get the same excitement or buzz around settling on a property?
Katie: No, not really. Not like the first one. Nothing beats the first purchase and then I think the second, because there was quite a long time between the second as well. That was another time when I got the high from buying, but now it's just like, another notch on the belt I think, for me.
Phil: Do you think that some part of its process orientated, so it's not a new thing which is a good thing. Do you think it's more so a confidence type of, like, all those ‘what-if's’ questions that you probably have when you first purchase, you don't have them anymore when you buy?
Katie: No, I don't. I don't have the same reluctance that I had when I first started buying, and the more I buy, the more confident I get, and reassured that I know what I'm doing.
Phil: Do you invest by yourself or in conjunction with someone else?
Katie: Originally, when I bought my first property, I bought it by myself and the second one and the rest have been with my partner.
Phil: Okay, so you invest together on all the properties that you buy?
Katie: Yeah, we do now.
Phil: It's interesting when people, whether it's a husband and wife or a partner or it's a business partnership, there's typically one person who is more gung-ho than the other in one of these, in all relationships really. Is the same thing in the way you guys are?
Katie: Definitely. Yeah, it's me.
Phil: It's you?
Katie: Yeah, I do everything: I do all the research, all the running around, calling people, getting the team together to let them know that we've got a property in mind, so it's all me. Because I'm the driver, because I was the one that started investing when I was young, and I started earlier than my partner did. So I'm always the one that initiates it, definitely. When I think we've sat around for a bit too long, and we haven't done anything…
Phil: Are you the agitator?
Katie: Definitely. I always need a project, and if there's nothing going on in my life, and especially if work's boring, I need something. So it's always in property that I tend to chase that project. Refinance.
Phil: Is your partner obviously supportive of it – are they just like, go and do it ... if they champion, or do they challenge you along the way?
Katie: There's been times when I've been challenged, but I've always tended to win. There was one time when I didn't win, and I was a bit upset because it was a really good deal too, but he put the brakes on and said, "No, we've borrowed too much money." He wanted to pay off our principle place of residence.
Phil: That's a bit of a strategy thing really?
Katie: Yeah, he wanted to pay off our main mortgage, rather than...
Phil: Which there's nothing wrong with doing that, by the way.
Katie: No, there's not. I mean, the traditionalists and our parents would say that it's better to pay off our main property that we live in and not to go and buy investments.
Phil: Why are you investing in property? What's the goal?
Katie: To be financially secure at a young age, I guess, would be the main driver. I find it easier than buying a business and running a business, so it's comforting for the rest of our life that we can retire early, or if something happens that we can manage ourselves and our money.
Phil: You mentioned that, this rather than a business, in many ways. I view it as having a property to follow is like running a business, it requires the same amount of massaging and work and emphasis. Property's quite an interesting one, because if you don't do anything with it for a while, you're okay if you're buying the right stuff, whereas a business you typically need to be constantly grinding it. What’s the work do you do?
Katie: I work in human resources.
Phil: Okay, so you've just got a professional career, you're a PAYG, you get a pay slip every day, or every week or month or whatever it is. I find that a lot of people in that particular situational circumstances, that invest in property get a lot of buzz out of the property part of it, because they're actually feeling power to make decisions and be their own boss. This analogy of a property investment portfolio is like running a business. For a lot of people, it's a way in which they can be the master of their own domain, and make their own decisions, and make the call on things and make mistakes, and hopefully not bad ones. Do you sort of get the same feel out of that, the same sort of controlling?
Katie: Yeah, I do. It's that whole, looking for a new project-type mentality and knowing that you're on top of it, and initiating different things that you can do to make it better or to find something new in the world.
Phil: Five properties, you're just about to settle on the sixth one, but once that sixth one happens, what's your portfolio look like? What's the total value of the portfolio?
Katie: Total, it's about three I think?
Phil: Okay, so three point something million?
Katie: Yeah, 3.6, I think it was.
Phil: Okay, so it's a nice portfolio and what debt would you have on that?
Katie: About 1.2, and out of that 3.2, we've got two in self-managed supers, so yeah.
Phil: There's quite a lot of equity in your portfolio already, which is pretty cool.
Katie: It's probably more like, say 1.5.
Phil: Okay, so it's a couple million bucks nearly in equity, which is a great resource to have in terms of drawing equity out of it to keep purchasing property, or just letting it sit there and do what it needs to do, and at a point in time you can start paying it down, the debt, or you can sell a couple and be completely unencumbered. What's the long-term goal for you guys? Is it to go from the sixth property to seventh, eighth, ninth, tenth? Is there a portfolio size or an equity position that you hope to be in at a particular point in time?
Katie: We don't actually have a goal of how many properties we want to buy. We've got, we would like to buy a few more next year, but we just want to have a passive income in the next five to 10 years that will allow us to possibly retire a bit earlier than what we normally would have.
Phil: That sort of equity level, I imagine your portfolio is pretty good cash flow then.
Katie: Yeah. It is, yeah.
Phil: Yeah, so it's putting money in your back pocket. Every year, or is it...?
Katie: I think we're probably about break even, just breakeven with the ones that are outside the self-managed super, the three that are outside the self-managed super, two of them are investments and one is our principle place of residence.
Phil: It's mostly equity sitting in your principle place of residence?
Katie: Yeah, definitely.
Phil: Is that completely paid off now?
Katie: No, it's not.
Phil: If you had your way, would you look to draw down more equity out of it to buy some more stuff?
Katie: Yeah. That's where we're getting the money for the next load of properties, including the one that we're currently settling on.
Phil: You mentioned beforehand that, when you get your teeth into something, you say, "Okay, let's do it again, let's buy another property," you said you're the person that puts your team together. Who is that? Who do you refer to as your team?
Katie: For this purchase, it was basically just the financial advisor, the mortgage broker, and the solicitor. Now, for the property that we're currently buying, we've hired a buyer's agent, so it's now getting them to talk to the solicitor, the mortgage broker, and the accountant sometimes as well.
Phil: Two questions, why did you start using a buyer's agent for, and then how did you find that buyer's agent?
Katie: The main reason we used a buyer's agent for this one was because the purchase is our first interstate. It's in Queensland, in Brisbane and we don't know the area at all, so listening to the show has given us more advice as to where to look in Brisbane. I know that the magazine has purchased a couple in, one in Woodridge, and I think the other is...
Katie: Yeah, so I've been watching those and reading a lot more online. The main reason was so that we don't have to go out there and look at the property, because sometimes we don't have a lot of time to go and see them. That would allow them to be able to find the property that meets all the criteria that we have, and just to narrow it down to the best areas. Some of them have potential. The one that we're going through at the moment has a big land size and has the ability to have a granny flat put on the back.
Phil: Okay, so it's got potential for upsides.
Katie: Yeah. So that's the thing that we wouldn't normally look at, and the other side is... see, being in Sydney we always look for something that's close to a station whereas in Queensland, Brisbane, you don't tend to look for those ones that are really close to transport or that sort of thing.
Phil: Was it a part of the process that you actually need to pay a fee to a buyer's agent to actually go and source the property for you, when that money could have been used to probably pay for a big chunk of the stamp duty?
Katie: Yeah, so originally we didn't go with a buyer's agent as well for our previous purchases because there was a fee involved, and we knew it would be probably at least $10,000. Now, we're at the point where we can afford that, and to me, it's like, it’s saving me time and stress, so I'd rather pay that money and get someone else to do it for us.
Your previous question about how we found the buyer's agent, I listen to the show, so they mentioned Wright Property Group.
Phil: Okay, using those guys, are you?
Katie: Yeah, so we went and had a few appointments with some of the buyer's agents that we'd heard of through the show, and we just chose Wright Property Group.
Phil: They're a good outfit.
Katie: Yeah, they're very good.
Phil: Interesting. The property that you've sourced is on a large block with potential for upside, putting a granny flat on. Going back to your point around the fee that you pay so for you, paying that fee reduces a lot of the stress, the time component of it. Were they the main drivers for you for using a buyer's agent, or do you think that the property you're buying, do you think you would have gotten the same deal as what your buyer's agent would have got on that property, or do you think you might not have even found the property?
Katie: Well one of the other reasons we went through a buyer's agent is because some of them get off-market properties that don't go online to Domain or realestate.com. They've got the knowledge, they've got the contacts within the industry, makes it easier. So, would I have found that property if I was looking online? Maybe, because it was actually advertised on Domain, whereas other properties that they might put forward in the future may not be. I was looking at a different, when I was doing my original searches, I was looking for a different subset of properties. I was trying to keep it a bit lower so that we could buy more, so the purchase price was for maybe a $250k property that could have been a townhouse or a unit, more a townhouse or a house.
I wasn't looking at the size of the land, because I wasn't looking at the laws for, like putting a granny flat on the back. Apparently, they're quite relaxed in Queensland as opposed to other states, but now going into the future, that I've got that in my head, I will be looking at different properties with those sorts of features moving forward.
Phil: This property that you're settling on in a couple weeks' time or a week's time, what's the purchase price of it?
Phil: Okay, and do you feel as though you've got it at market, or under market value?
Katie: I think we probably got it at market.
Phil: At market value?
Phil: What yield are you expecting to get from that property's salary?
Katie: There's tenants in there paying about $310 a week, and they're on a lease 'til March.
Phil: Okay, that's good. The yield is not too bad on that. Was the primary goal of this particular property that you purchased, is it a capital growth play? Because your yield's not bad, and your portfolio yield, I imagine, it's not bad at all if it's around usual. Is this a longer term hold for you guys over time, and even if you don't do a granny flat, that you're expecting capital growth in the future?
Katie: Yeah, this is a long-term capital growth project.
Phil: That's good. I imagine when you sat down with your accountant, they've done your financials. I know our accountant, my accountant will say, "Well, you need to find some better-yielding properties to help underwrite some of the portfolio expenses," or he might say, "Look, cash flow's pretty good, yield's pretty good, you could probably go after more of a capital growth play." Now, everything we try and find, we'd like to have really good capital growth prospects and also really good yielding or cash flow.
You can't always have both of them, we try and find both of them but at different points. This is an important message for our listeners, is that at different points in your portfolio, you're going to need different types of property that best suit your needs. A capital growth property play, your LVR and your portfolio's pretty low as well, so go out and grab those. In terms of your experience with a buyer's agent so far, would have you done anything differently, in terms of selecting them and using them?
Phil: No? That's pretty good. If you go back in time 10 years, would have you told yourself perhaps you should've started using a buyer's agent earlier, or are you quite happy with how it's worked out?
Katie: I wouldn't have used a buyer's agent in my first few properties, because I started buying in 2000's when buyer's agents weren't really heard of. I think I would have used one when we bought our principle place of residence about three and a half years ago. It drive us mad going around every weekend looking for something, because it was for us to live in. We were thinking about using one back then, but again, the fee was the main driver that stopped us from doing it, even though we didn't realize at the time how hard ... and as the weeks got on, how hard it was, how many people we were trying to beat. But then, the extra $10,000 or whatever you pay as a buyer's agent fee, long term, all that time that goes into trying to find somewhere, you just think I should've just hit the bullet and got it done.
Phil: I hear that a lot. The benefit of a buyer's agent is, hopefully they put you in a property which is going to meet your investing goals, and that might be as we discussed, a capital growth play, or a cash flow play, or both hopefully. For me, I use buyer's agent. The reason why is that I want my weekends to be my weekends with my family, I don't want to be racing around looking at properties. A buyer's agent can do that job a lot more effectively than I can, and I'm happy to spend money to do that, to free up my weekends.
That's not the only reason. I think if I was doing it myself, I probably just wouldn't do it, so if you use a buyer's agent, you might get into a property earlier. Therefore, if you wait 10 months to find the new ideal property, that's 10 months that you're not in the market. If you buy in a good market, your $10,000 could potentially, if that's the price you pay, it can potentially pile into significance in terms of the growth that you can get. Having money in the market and growing at a particular rate. Just an important message for our listeners. How do you go with managing your properties? Are you pro-managing agents or anti-managing agents?
Katie: We have a real estate look after, separate real-estates looking after all of our properties.
Phil: Do you manage the managers? Are you the person dealing with them, and they go, "Oh, the hot water's broken," and you say, "Okay, go and get some quotes and fix it"?
Katie: Directly, yeah, I do. I'm quite proactive with that. If they call me and say there's something wrong, I always pretty much give them permission to fix it straight away, even if it's not an emergency. Like, we had one of our tenants requested some air conditioning, because it was really hot. It was summer out west, and ... I went, I looked up, asked how much they were, and just said. "Yeah, just put it in."
Phil: Just do it.
Katie: Yeah, because two and a half to $3,000 now, even though they weren't prepared to pay extra rent, I could claim it back on my tax. It just added to, not the value, but the likelihood that we could get another tenant in there later on.
Phil: Yeah, if it's going to…it's going to be one of those nice-to-haves that might influence them to tenant. Do you have a problem with tenant vacancies? Or you've typically got people in your places?
Katie: No, we've been very lucky because we're in areas where there's a very low vacancy rate. Every time we've had to, our turnover for tenants isn't high either. I think I've had probably, in one of the properties that I've had for, the first property I've bought for 15 years, I've had probably four different tenants over that time.
Phil: That's pretty good. You're up in, you mentioned Logan Shire. Where else are your properties based?
Katie: I've got one in Granville, very close to the Parramatta CBD.
Phil: When did you buy in Granville?
Katie: That was 2001.
Phil: You've done very well out of that.
Katie: Oh, yeah. Really good. Even though, it's in Granville, so some people are a bit shy, like well got this thing where attached to Granville because it's not parameter on the deed, so they get a bit funny, even though it's walking distance. It's about 10-minute walk.
Phil: What did you buy the Granville one for in 2001?
Katie: 2001, yeah. I bought it for $189,950.
Phil: Okay. What's it worth now?
Katie: Probably about, $430,000, and that could be underestimating slightly. It just depends on the market.
Phil: From Granville, where did you go after that?
Phil: Also good? Yeah?
Katie: Still very west of that area.
Phil: After Merrylands?
Katie: My partner had an apartment at Bondi, so we started transferring our properties together and I borrowed a portion of that property Bondi, so that was Bondi Beach. Then we bought in Cremorne. We still had the three properties, investments, so we bought Cremorne as our principle place of residence. Then after we bought Cremorne, we sold Bondi, and so we got some capital from that to put into our main mortgage. Then we bought in Mount Druitt. After reading your story about purchasing a unit in Mount Druitt.
Phil: How'd you go in Mount Druitt?
Katie: Wonderful, really good.
Phil: Yes? Pretty good? Okay.
Katie: Yeah. It's probably on, I think it's on the same street. We're on Luxford Road, across from Westfield. We could be in the same block.
Phil: Maybe. They're all the same, those ones.
Katie: Yeah, they do.
Phil: Yeah, we bought out there for 179 grand or something like that for a two bedroom.
Katie: Even the price that I paid was ridiculous, and I still think, "Why couldn't I have bought for that price that you bought for?"
Phil: Yeah, "Why couldn't I've bought more when I've bought this," it's perpetual problem. After Mount Druitt you...
Katie: We actually bought in Mount Druitt again, but this was a different one. It was an off-the-plan, it was our first off-the-plan, so that was another thing that we had to go through, so we didn't know ...
Phil: How did that go, off-the-plan?
Katie: It ended up being really, oh I shouldn't say easy, but it was.
Katie: Yeah. It went fine because even though it was off-the-plan, we didn't buy it sight unseen because the owner had bought a few other properties in the block, and then he held them for a while and then he started selling them because he wanted the wanted the money for another development. We bought when the building was nearly finished. We still got to see how ...
Phil: Pretty much finished, yeah. A secondary style of my purchase.
Phil: You've bought in really good places and now you're up in Brissy.
Katie: Yeah, hopefully. We haven't got the building and pest report back yet. We're waiting for the buyer's agent to come back with that and finance as well, but that should be okay.
Phil: Would you say that you've been a good investor?
Katie: I would say I've been... I'm setting myself high expectations... I'd say, reasonably good. Even though I've got quite a good portfolio, I think I could have done better.
Phil: Okay, and in what way?
Katie: Bought more. I wouldn't say I've done badly in terms of what I've bought and what they're worth now, and the growth in them, but I think could have bought more on the way. I wanted to, but my partner was a bit hesitant and restrictive about what he wanted us to purchase.
Phil: Every successful or smart property investor I've ever spoken to, when you ask them what they could have done better, you're not alone. Everyone says, "I wish I bought more then, because I could have." I think a lot of people are held back by fear, confidence, perhaps prejudices about particular areas or types of properties. I'm not saying I wish bought more when I was buying, I could have easily bought more properties. I've got a thousand excuses why I didn't do it, a lot of them good reasons why as well, but if I really wanted to I could have.
I think, it's not a bad mistake to make, the fact that you didn't buy more. It's more of a missed opportunity than anything else, but the portfolio that you've created here ... You've bought in areas like Granville or Merrylands in early 2000s, and now they're up, so I wish I bought properties there then because they're in-demand areas, they're very close to the Parramatta CBD, which is going through a massive ongoing development.
You've got a lot of big businesses moving out there now and people need somewhere to live. A lot of people are sick of the commute, so I think you'll continue to do well there. You've got some good diversification with having a place in Bondi Beach, I can't go too wrong there. Might not be going up in value as fast as perhaps some of your other properties and then Cremorne as well.
You've certainly got all your places covered in terms of Western Sydney, and then also places close to the CBD, but some diversification up in Brisbane as well. It's good. If you could speak to any new investor who is thinking about investing in property, what would you tell them?
Katie: Do your research and don't listen to everyone that tells you not to do it. Also to go and buy, even if you don't want to live in Mount Druitt, still go and buy there because no one wanted to live Parramatta or Granville when I was living there and buying there, and now it's seen as a really big cities, like Sydney-second CBD.
Phil: It's bigger than Adelaide, Parramatta. It is a big city. It's the capital of the western suburbs at least, and one in five Australians live in the western suburbs of Sydney.
Katie: Don't listen to the ...
Katie: The naysayers.
Phil: That's what I was saying, the potential, all the reasons why you shouldn't be investing, one of them is just prejudices about a particular area. Most of the time that's generated from your own experience. You might not even think about these areas, investing up in Logan Shire right now, it's not that dissimilar from the western suburbs of Sydney.
It's very similar, western suburbs five or six years ago, very similar price points, very similar dynamics, very similar type of housing, very similar type of yield potential. That's the reason why we invest up there now, because it shows all those dynamics, which would indicate areas of Brisbane, that would indicate ongoing growth over time. It's good to see you're up in that market as well.
We're going to have to wrap up I think, running out of time. Adam's nodding his head. Very good. Thanks, Katie.
Katie: Thank you.
Phil: Enjoyed it. Best of luck with this most recent purchase. You'll have to send us an email and let us know how you're getting on, I'm sure our listeners would like to know. If anyone's got any questions for Katie or myself, you can email me [email protected] Is that the email you emailed us on? Would have been? Probably?
Phil: Yeah? Good. Remember to check out smartpropertyinvestment.com.au. We're on all the social stuff, Facebook, Twitter. You can follow me on Twitter @philliptarrant if you like. That's a good tweet what's going on. Thanks for tuning in. We'll see you next week. Bye-bye.