Is the renovation revolution luring Aussies into overcapitalising?
Undertaking property upgrades have long been a favourite Australian pastime, and renovation fever has only been intensif...
Investor reveals how he entered into the country's capital and his plans for the future
Curtis Stewart chats to podcast host Phil Tarrant, exploring why he chose Canberra and how first home buyer incentives propelled him into the market quicker.
The 27-year-old reveals the process he took to start climbing the property ladder, as well as the different levels of assistance for first home buyers, and how it worked in his favour in buying his first property.
The Queensland born investor also discusses why took a gamble and purchased two blocks of land in two different developments.
You will also find out what to look for when investing in Canberra, the questions to ask when building a property and how his mortgage broker skills help fuel his investing.
If you liked this episode, show your support by rating us or leaving a review on iTunes (The Smart Property Investment Show) and by 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 insights!
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Announcer: Welcome to the Smart Property Investment Show, with your host, Phil Tarrant.
Phil Tarrant: Good day everyone, it's Phil Tarrant here, I'm the host of the Smart Property Investment Show. Thanks for joining us, we're here to talk about property, property investing and what it is to be a property investor. Someone's going to help me out with that today in the studio. A young bloke, what I understand from a very short off-air conversation I've had with him, someone who's reasonably early on his property investment journey, but he seems to be making some pretty good headway so far. Curtis Stewart.
Curtis, how you going?
Curtis Stewart: Good thanks, Phil. Thanks for having me.
Phil Tarrant: Yeah, thanks mate. I was thinking just before we started talking, and for all of our listeners, if you don't know these are completely unscripted so, the brief I have on Curtis is that he's a property investor, so it's my job to try and extract some information I think our listeners are going to be valuable about what you're doing, Curtis. Couple of things I know, you're not old, you're pretty young, what are you? 27 years old.
Curtis Stewart: Making progress on the two of those.
Phil Tarrant: Relatively new into work, professional life. You're a mortgage broker, and you do that for a living, right, after some other things?
Curtis Stewart: Yeah, yeah. Out of uni at 22, and went to work for the government down in Canberra on financial markets, and those sort of things for four or five years. Then, yeah, mortgage broking now.
Phil Tarrant: Okay. Towards the backend of this chat we'll talk about getting money at the moment and how hard it is. A couple of things I know, you're not that old, you grew up around the Gold Coast way.
Curtis Stewart: Yeah, Gold Coast boy, so Queensland born and bred. Then, yeah, high school, uni, everything there, friends, family there. Then, yeah, down to Canberra for work, then finally up to the big smoke here for the last couple of years.
Phil Tarrant: Okay, so that's what I know about you, which isn't a lot, which I'm quite happy about, because it allows me to explore your journey as a property investor and what you want to do. What do you reckon is going to be the one bit of information, the one thing, the one gem that we're going to be able to extract from you to help our listeners, either change the way they're investing, or thinking about investing, or just having a check?
Curtis Stewart: Yeah, the one gem from me, I guess, well personally I think the most interesting part of my story is, probably the way I started. Got my first investment property, that was down in Canberra a couple of years ago when I was living there. Just entering the market, using a lot of the government grants available, not really having that much, 40 grand or so in savings to throw at it. Finding a way to use that to get into market, I guess.
Phil Tarrant: Okay. Let's start there then. This is my job as a journo, is to work out where the story is, right? That's interesting to me. The backstory for you starting into the markets, starting as a property investor, as a younger person. How did you buy your first property?
Curtis Stewart: I didn't really have any interest in it until 24 maybe. It wasn't something that crossed my mind in anything more than a fleeting way. My savings levels were probably never something that I thought could actually be used to buy a house. You look around and you're like, "Yeah, I have whatever, 30, 40, 50 grand in my account. Useless." Then, in Canberra, I had a few friends that were starting to build portfolios, and started to really do my research about what was possible. What the different options were for someone entering the market for the first time.
A lot of things like, in Canberra, and in a lot of states, they have a First Home Owners Grant, they have stamp duty exemptions. I was running the numbers, finance was a little bit more easy to get then too, especially at high LVRs. I was running the numbers and got to the point where it was, "Cool, my 40 grand, I don't even need to use it all, and I can go and buy a new apartment in Canberra." Something that I can live in for the first six months while I'm working there, and that I can use 20 grand of my 40 grand, I'm in. It took me a while to actually action that, but I dwelled on that.
Phil Tarrant: Did anyone help you work out the opportunities by, let's call it a strategy? As a first home owner, and it changes all the time, the state on state about what you can buy in order to achieve and receive the grant plus stamp duty exemption. It changes all over the place, right?
Curtis Stewart: Yeah, exactly, yeah.
Phil Tarrant: Did anyone help you and say, "Curtis, do you know you can do this? Here's a strategy, do this, buy this, it's brand new. You're going to get First Home Buyers grant, you'll probably get some stamp duty exemptions, and you need to live in it for six months before you can turn it into an investment property?" Or did you work that out?
Curtis Stewart: Not really, I did that myself. I had some friends that were doing ... They weren't using the exemptions but they were looking at their own investment properties. It was kind of a ... I don't know, if it's keeping up with the Jones's, but it was their finding a way to use what they have to move forward in their investing journey, whether it's property or other asset classes, I guess. I was then ... did the research to be like, "Well, how do I use what I have to start climbing up the ladder?" Property was, for me at least, property was the answer.
Phil Tarrant: Did you find it easier to find the information you needed in order to be able to go about doing this? Was it easily accessible?
Curtis Stewart: It's all online, but it's not easy to get your head around. Having worked in government for a little bit I kind of get it now, but they don't present anything in an easy to understand, or easy to access way, or easy to understand terms. Are you eligible? Are you not eligible? Insert pages and pages of legal terms that don't make a lot of sense to you to start with. It probably took me from inception of the idea that, yes this is possible, to executing and signing the contract. It was probably almost a 12-month, nine-month gestation period. In my mind, and then actually going to find something.
Phil Tarrant: Doing it. Did you buy this particular property, and we'll talk about that in a second, but talking about the concept here. Did you buy this property on the basis that it would be somewhere that you would live for the long-term, and then your circumstances subsequently change, and it turned into an investment property? Or did you buy it for the purpose of it being an investment property, but you had to live in it for six months over that first year in order to get the grant?
Curtis Stewart: Yeah, definitely the second one. As it turns out I ended up moving to Sydney anyway, but even if I lived in Canberra the initial plan stayed in Canberra. The initial plan was, buy it, live in it for the minimum amount of time necessary in order to pass all the criteria, move back out and rent for something less than what it would have been bringing me in rental income.
Phil Tarrant: Okay. It was a deliberate strategy?
Curtis Stewart: Yeah, yeah. It was a six month window in order to access the grants and things, which by the numbers made sense to make that six months sacrifice on rent, and basically the mortgage was slightly more than the rental expense I was paying, sharing. It was just the six month window where it was, for the stamp duty exemption, and the 12 and a half K, tick, that makes sense to do that for that period.
Phil Tarrant: Okay. Which is smart. A lot of first time buyers use this particular track into property. Depending where you are in Australia, there is different levels of breaks and assistance for first time buyers. Either they'll give you a lump sum, which is a First Home Owners Grant, and then they'll potentially give you some exemptions around stamp duty. Up until a particular point you might not pay any, and then it'll be a sliding scale after that. I don't want to go into to it too ... What happens in every state, because there's plenty of information, if you just go to the Officers State Revenue website and your respective state, that's cool.
What our listeners need to be careful about if you are younger and thinking about this particular strategy is that you've got to play by the rules, because the government takes a very negative light about people who try and exploit this particular initiative that they've put together. In your case, in Canberra, within the first year you had to live within the property for a six-month period, is that pretty much what it was?
Curtis Stewart: Yeah. I ended up living in it for a little bit longer, but yeah, it was a six-month period. Even though it was my first purchase, and by Sydney standards at least, it's not the biggest purchase, I still viewed it as a pretty long-term asset that I intend to hold of quite a long period of time.
Phil Tarrant: You still have the property?
Curtis Stewart: Yeah, yeah.
Phil Tarrant: Okay. Let's have a chat about the property. What did you buy, where was it?
Curtis Stewart: It's in Wright, it's called, which is one of the new suburbs in Canberra, in the Molonglo Valley. It was about 10 minute, eight minute drive, depending on the whether I caught the red light or not, into work.
Phil Tarrant: Okay. Is that in Civic, was work?
Curtis Stewart: Just on the other side, so Parks, the other side of the bridge. Yeah, there was a whole bunch of new developments, new land releases, new apartment buildings going up in that area. Ended up buying it for 275 off the plan, which is one of the criterias you need for the stamp duty exemption.
Phil Tarrant: It being a new build.
Curtis Stewart: Yeah, yeah. Which has its pros and cons, but in this case, again the stamp duty exemption tipped it in favour of that direction. Yeah, bought it for 275.
Phil Tarrant: In terms of the tax breaks, or stamp duty breaks, or the First Home Owners Grant you received. You got First Home Owners Grant of ...
Curtis Stewart: 12 and a half.
Phil Tarrant: 12 and a half.
Curtis Stewart: I think, yep.
Phil Tarrant: You wouldn't have paid no stamp duty then.
Curtis Stewart: No, no stamp duty at that level, yeah.
Phil Tarrant: Essentially you got 12 and a half K ...
Curtis Stewart: To my deposit.
Phil Tarrant: To your deposit.
Curtis Stewart: Which I'm not paying, yeah.
Phil Tarrant: Okay. Did you finance that at ...
Curtis Stewart: 88
Phil Tarrant: 88%. Plus, did you capitalise LMI?
Curtis Stewart: Yeah, I capitalised the LMI.
Phil Tarrant: Okay. 88%. What was your total deposit? What was your total in? Curtis is picking up his calculator, here. He's tapping buttons.
Curtis Stewart: That's the part you try not to remember, is my total money to downs.
Phil Tarrant: No, no, no. What was your total money down? For our listeners, we're talking about the actual deposit here. If you borrowed 88%, he needs to find $12,000 in cash, plus normally you'd have to pay stamp duty, buy he didn't even have to pay stamp duty.
Curtis Stewart: It was about 20K, and then there was legal fees and stuff. It would have been about 22 or up.
Phil Tarrant: 22,000 bucks.
Curtis Stewart: 22 all said and done.
Phil Tarrant: It was $22,000 of your own.
Curtis Stewart: Cash, yeah obviously.
Phil Tarrant: Money you need to go in.
Curtis Stewart: 22 out of my account, yeah.
Phil Tarrant: Okay, plus the 12 and a half.
Curtis Stewart: Gets you to your 12% deposit.
Phil Tarrant: Okay. So 22 grand it's manageable, you're in.
Curtis Stewart: Yeah, yeah, I'm in. I think that was the thing that was really interesting to me, was that I didn't think there was a way to enter ... I didn't realise that there was a way to enter the property market in any meaningful way with that sort of money. Admittedly, living in Canberra where prices are a bit cheaper, was helpful, but until I really looked into it that was something that I wouldn't have ... if someone had have said, "Oh, you have 20K in your account, do you know you can buy a house?" I would have been like, "No." Or an apartment.
Phil Tarrant: 275, when did you purchase?
Curtis Stewart: Start of 2015.
Phil Tarrant: Okay. Two and a half years ago. Have you had a valuation on the property? What do you think it's worth today?
Curtis Stewart: It's interesting actually. The bank thinks it's worth a lot more than I do, which is always nice. I reckon it's worth about 330, 340 maybe, based on other sales, but the lovely people at CBA, they think it's worth 380.
Phil Tarrant: Okay. Essentially, 100 grand of equity gain according to the bank.
Curtis Stewart: According to the bank, yeah.
Phil Tarrant: According to the bank in 2 and a half years.
Curtis Stewart: Yeah, yeah. If I actually sold it I think 340 is more what someone would actually pay for it. It's always nice when the bank takes a more aggressive position than reality.
Phil Tarrant: It doesn't happen very often. What's the plan with this thing, are you going to keep it?
Curtis Stewart: Yeah, yeah, I'm going to keep it, it yields quite well.
Phil Tarrant: What's the yield on it?
Curtis Stewart: It brings in about 5 and a half, six percent, so it brings in 350 a week.
Phil Tarrant: Okay. Is it a two bedder?
Curtis Stewart: No, one and a little study.
Phil Tarrant: Study nook.
Curtis Stewart: Yeah, a little study and a backyard. Little backyard, courtyard thing.
Phil Tarrant: Who's in it, just some young professional?
Curtis Stewart: Yeah, a teacher at the moment, at a local school there.
Phil Tarrant: That's cool. You can pick these up today, do you reckon, on the market for about 340?
Curtis Stewart: Yeah, 340. That area, there's lots of new ones being built too. There's a lot of supply, I guess, in those particular suburbs. I don't think prices are particularly high, or the pressure isn't too high.
Phil Tarrant: Do you think over time though, because I spent a lot of time in Canberra, and there's a lot of land around Canberra.
Curtis Stewart: Yeah, there is.
Phil Tarrant: What's going to positively put pressure on this thing to grow in value if they're building places like this all over the joint? What makes you think it's a good long-term investment, is the question?
Curtis Stewart: I'm a little bit of a believer in Canberra more generally. I do think, and this is subsequently, I do think land is going to be more valuable than an apartment in terms of capital growth. Which is why my future ... My other two land ... I'm a little bit of a believer in Canberra, I think it's got really healthy incomes, it's got really stable employment, unless the government announces it's going to slash a bunch of jobs, which does happen from time to time. Yeah, I think it's my read on the people and the market there is that there's a lot of owner occupiers at quite low LVRs. If interest rates went up I would imagine Canberra would be one of the last places in Australia to be affected by it. Mortgage stress.
Phil Tarrant: It's quite buttressed, yeah.
Curtis Stewart: Yeah, it's quite a conservative town with a lot of capital and a lot of wealth, and a fairly high income. I think, going forward, the population there has the capacity to pay for the prices and the rent. Yes, there's a lot of land available, which puts downward pressure on prices through increased supply. I think that demand side, the other side of the equation is quite healthy in Canberra, and sustainable as well, which is where I look at some other places. I do wonder how sustainable the demand is.
Phil Tarrant: Yeah. We've written a lot about Canberra on smartpropertyinvestment.com.au. Go and check it out, just go to the search button and put in Canberra. We've had a lot of different people offer commentary around it. A lot of people are reasonably bullish about Canberra, for some of the indicators that you've pointed out. It's a very livable city.
There's talk about, which they've been talking about for years, about this fast train coming up from Sydney. If that gets in place that's really going to change things. I know people who are land banking across from that corridor going through Goulburn, on the pretence that at some point in time it will happen. What will happen then is that people are going to really have tree change type opportunities in that they can actually commute into Canberra or Sydney from Goulburn. Goulburn to Canberra's not very far, it's a bit of a hassle.
Curtis Stewart: Yeah, an hour drive.
Phil Tarrant: Yeah, it's an hour drive, but some people do the commute every day up on the freeway.
Curtis Stewart: Yeah, yeah, definitely.
Phil Tarrant: It's going to change the world.
Curtis Stewart: Yeah. I also am a bit of a believer in, especially on demand side, where there's jobs and job creation, and good job prospects, that underpins that and supports it. Canberra's got, I would say, a fairly robust job market, it's government's the employer, highly educated population. Yeah, so there's some upsides I see there.
Phil Tarrant: This was your leapfrog your first foray into ...
Curtis Stewart: Foot into the water.
Phil Tarrant: Yeah. Subsequent to your Canberra purchase, there's a couple more in your portfolio, so you've moved on.
Curtis Stewart: Yeah, yeah. I've been buying land in Western Melbourne, so I've got two plots in Western Melbourne that haven't quite settled yet, but I'm looking to build on when they settle.
Phil Tarrant: You've got an option to buy the land?
Curtis Stewart: I've already bought it.
Phil Tarrant: Bought it, okay.
Curtis Stewart: They register in the next few months, so the titles ... You can't build on them yet, because the titles haven't registered yet.
Phil Tarrant: Is this part of a new development?
Curtis Stewart: Yeah, new land release, which there is a fair bit of that going on in outer Melbourne suburbs as well.
Phil Tarrant: Are these blocks side by side, or two blocks within the same area?
Curtis Stewart: No, two blocks within 10Ks of each other, but in different developments.
Phil Tarrant: Don't you think it's quite risky to go two blocks of land that you're going to build on simultaneously?
Curtis Stewart: Yeah. I've mapped out my cash buffers pretty carefully to make sure that I can sustain that build, or both builds, I guess.
Phil Tarrant: Are you going to do them at the same time?
Curtis Stewart: Probably, yeah. I also made sure ... This was the tricky part, and why they're not side by side, is that I made sure that I negotiated an on-sale clause, which I found surprisingly hard to do, to make sure that if I, for whatever reason, I need to get out, or I can't complete, or I can't do the build, that I can sell the land. Sell the land on, so I've got it ...
Phil Tarrant: What did you pay for the land?
Curtis Stewart: 210 for both, 405 square metres.
Phil Tarrant: What are you going to put on it, four bedders?
Curtis Stewart: Yeah, four bedder.
Phil Tarrant: Yeah, okay. You've chosen design, you've done all that stuff, yeah?
Curtis Stewart: Yeah, yeah. Not quite finalised but pretty much, yeah.
Phil Tarrant: Do you enjoy doing that part of the process? What asset I'm going to build on this block of land? Or are you being quite detached about it.
Curtis Stewart: I enjoy doing the, what asset? Do I want to build? What are the returns? What are the numbers? The actual, what taps do you want? That part I don't really enjoy so much.
Phil Tarrant: How are you making sure that you build the best product you can, but ensuring you spend as little as possible on it? Rather than putting stone benches in, are you putting in laminate? Because this is going to be investment properties, right?
Curtis Stewart: Yeah, yeah, exactly. I'm definitely not going top of the line, but I do have some ... I've spoken to a lot of people and done a lot of research. I've got some friends that have built, and some friends that are in that industry to be like, what's the middle ground in terms of I don't want something that's going to fall apart, and again, I intend to own them for a long period of time. I don't just want to kick the can down the road, but I'm also not looking to live there. If there's an extra 5K here and there for the enjoyment of the person living there, if it's marginal then I don't need to spend that money.
Phil Tarrant: Okay. You're going to build these simultaneously, have you found a builder yet?
Curtis Stewart: Yes.
Phil Tarrant: Okay. How did you find the builder? Someone you know?
Curtis Stewart: Yeah. A lot of internet searching and chatting to a lot of people. I don't know how many hours I've spent on the phones to various builders trying to suss out what they're doing.
Phil Tarrant: Is it a big builder? Is it a big builder of like a Project Homes and stuff?
Curtis Stewart: Yeah, pretty much. They seem to have the cheapest, they do them out of the box, and they have the cheapest prices.
Phil Tarrant: Are you putting the same property on both blocks of land? The same build?
Curtis Stewart: Yeah, yeah.
Phil Tarrant: It's going to be identical?
Curtis Stewart: Yeah. Yeah, yeah. They're either both good or both bad.
Phil Tarrant: Are they flat blocks?
Curtis Stewart: Yeah, they're flat blocks.
Phil Tarrant: It's just put a slab on it, chuck it up.
Curtis Stewart: Should be pretty straight forward is the plan anyway, but you never know.
Phil Tarrant: This will be property two and three.
Curtis Stewart: Two and three, yeah.
Phil Tarrant: Is there any particular reason why you've chosen to go down a buy a block of land and build it rather than get yourself something established?
Curtis Stewart: Yeah. Partly to allow me a little bit of additional time to build the cash buffers. Obviously, in a nine month window between me purchasing the land and it settling and the build starting, it gave me a bit of a window to tighten belts and ensure that I had the cash buffers there. I also want the depreciation benefits too. I see some upside there on the new builds.
Phil Tarrant: There was change a lot for property investors after the budget announcement and subsequent information coming through from government that only on new build properties can you actually get plant equipment depreciation. Whereas, if you buy something established you can't do that anymore. There is depreciation benefits, which will help with the tax outcome once you do all your tax around it. Yeah.
Curtis Stewart: It was that, and it was also partly a new challenge as well, I guess, that I wanted to take on. I guess, not necessarily that I will be looking to do lots, and lots, and lots of builds in the future, but it's an aspect of property investing that I want to know about, and I want to have experienced, at least whether it's for better or worse. I can add that into my bank of skills and options.
Phil Tarrant: What are you going to do when it all goes wrong, and the builders don't turn up on site? You're based in Sydney, aren't you? They're in Melbourne.
Curtis Stewart: My parents are down in Melbourne, luckily. I might have to get them to help out.
Phil Tarrant: They're going to keep an eye on things, are they?
Curtis Stewart: Yeah, yeah. They're going to keep an eye on things.
Phil Tarrant: Have you seen the blocks yet? Have you actually stood on them and gone, "Okay. Excited about that."
Curtis Stewart: Yeah, yeah. I've stood on them, they're not that exciting to be honest.
Phil Tarrant: It's a bit of dirt.
Curtis Stewart: Yeah, it's a bit different to buying the first one that was an apartment. Even though it wasn't built then, but you go into the mock-up one they have, and you're like, "Oh, yeah." Then when you go out to the new land release you're just like, "Yeah, that's a paddock of land."
Phil Tarrant: Where is the land?
Curtis Stewart: Wyndham Vale, which is Werribee. Out that way, on the V-line, up from Geelong there's a station there.
Phil Tarrant: Okay. Why did you choose to buy land in those areas, or that area?
Curtis Stewart: Yeah. I guess, my investment decision was, after getting the apartment I wanted to switch to something with land content, which doesn't necessarily mean new for my portfolio. Going forward I think land is, in terms of capital appreciation, try and think of Australia in 50 years, land is going to be more scarce. Melbourne has, a bit like Canberra, has some capacity to release more land.
Phil Tarrant: Plenty of space round Melbourne.
Curtis Stewart: Yeah, yeah. If you double the population and you take that really long view, I think that's going to be the better outcome over the long-term versus an apartment. That was where I started with, was on what land, or land content? I was doing a lot of research about where I thought the growth areas in terms of jobs and population growth in Australia. Had a bit of a budget constraint to which pretty much ruled Sydney out, but the rest of Australia was still an option. That Western Melbourne corridor seems to have a lot of ... the projections are, at least that there's going to be a lot of population growth to Melbourne, and a lot of that's going to go there. Melbourne, the government are putting a lot of new infrastructure in, new trains running that way. Werribee's getting a new technology centre. It seems like an area that, to me at least, over the next 30 years is going to change a lot, and it's going to look very different. That was why I ended up there.
Phil Tarrant: I had a chat with Bernard, I don't know if you listen to the podcast?
Curtis Stewart: Yeah, yeah. I'm actually a pretty big fan of his.
Phil Tarrant: Yeah, a smart bloke. About a month ago so, for our listeners, you and listen to it, it's pretty ...
Curtis Stewart: It is.
Phil Tarrant: Did we speak about Werribee?
Curtis Stewart: No, Sunshine.
Phil Tarrant: Sunshine, okay. He's quite bullish about population growth in Melbourne in the decades ahead.
Curtis Stewart: Yeah, yeah. To me the fundamentals that are different between Sydney and Melbourne where you go, okay, if you go out to the other suburbs of Sydney and you want to buy a 400 square metre block with a house on it, it's going to be nearly double what you pay in Melbourne. Part of that does make a little bit of sense to me. Sydney's capacity release, new land in Sydney is a lot less, but it doesn't make sense to me that it's that different. They're going to be cities that have relatively similar populations. I think Melbourne's projected to pass Sydney, but whether that happens.
Phil Tarrant: It's still the same distance into town as well. From Werribee to Flinders Street, how long will that take?
Curtis Stewart: 35 minutes on the train.
Phil Tarrant: Okay, it's a lot closer. If you're buying out in, new releases in Sydney are out towards ...
Curtis Stewart: Gregory Hill's way.
Phil Tarrant: Out towards the back of the Ponds now, you know Rouse Hill way, it's a long way. They've put a new train line in to be fair, but it's still going to be an hour, each town.
Curtis Stewart: Yeah, yeah. I think they're relatively comparable cities. They've got big populations, they've got big job centres, big CBD's. No offence to the other cities in Australia, they're the two big ones. To me, the fact that I can go to Western Melbourne and get something done, or get two done versus I can't go anywhere in Sydney. I think over the next 30 years that gap's more likely to close that widen, which who knows?
Phil Tarrant: Let's hope so, you need a good crystal ball, but, you've got to base it on, going back to the been unsold podcast, what did he call them? Pistons, these big job centres, these pistons that drive the economy forward. Okay, cool. Why are you investing property? What's the purpose? You're a young bloke, why are you doing this?
Curtis Stewart: I often wonder myself, I guess. I probably have less finite goals than a lot of people who have. I want 10 properties or I want a net asset position of X dollars by this day, this month. Mine's more, I'm at a pretty good situation in my life, I've had a really good childhood, good education, I live in a great country. For the human population I've had pretty much every lucky break you could want. At my age it's just, what am I doing to make sure that when I get married, have kids, when I'm older, that I'm in a financial position that's taken advantage of the good run I've had for the first 25 years of my life?
The goal was more, okay what am I doing now to position myself better? So in 20 years time I've got a really healthy financial position. To drill down a bit more, I'm thinking cashflow too. I want to be able to have, if I don't need to work, I don't need to work, or if my income supplemented by the cashflow returns from property, that's what I'm looking at. That was the motivation, I guess, still is.
Phil Tarrant: I guess, in terms of goal setting, your goals will change over time the more you deal with this.
Curtis Stewart: Yeah, yeah. I have some rough net asset goals, so once these are done, I'm going to have at 1.3, 1.4 million dollars’ worth of property, at around an 80% LVR, hopefully. That's position as at end of 27, by end of 30 be looking at hopefully, alright, can I get to 1.75 million? Will probably be the goal. Maybe two, and then step it up from there.
Phil Tarrant: Did you think about goal setting that much, or is it just it'll probably sort itself out?
Curtis Stewart: I do, but I don't go drill too down into the finite numbers. It's more, do I feel that given what I have, I'm using it to my best advantage? It's a bit like when I had that 40 grand there, it was sitting there for ... I probably had that level of savings for three, four years before I ever did anything with it.
Phil Tarrant: Probably getting about 1.5% interest on the savings, yeah.
Curtis Stewart: Yeah, yeah. It's dawned on me, it's like, no I'm not doing the best I can with what I have to move forward. Let's find a better solution.
Phil Tarrant: You've got some savings now, which you're going to use to help underwrite the costs of the build of these properties?
Curtis Stewart: Yeah, yeah. The build and I've already put the money down for the land.
Phil Tarrant: You're a mortgage broker, so let's have a quick chat about finance. These savings that you have, have you got it offsetting some debt somewhere, or is it just sitting in a savings account?
Curtis Stewart: Yeah, well it is offsetting debt but it's an equity release, so it's debt that wasn't there anyway.
Phil Tarrant: Okay, alright.
Curtis Stewart: It's the equity release from Canberra with, like I said, the relatively favourable valuation that allowed me to ... Yeah.
Phil Tarrant: The Commonwealth Bank, they ended up with 380, and you went, "Sure, I'll take that."
Curtis Stewart: Yeah, yeah. I went, "That sounds really good. If you're happy to lend to me based on 380, and also if you want to buy it for 380, I'll also sell it to you."
Phil Tarrant: One of the beautiful things about property is that you share the risk with people who are, obviously, a lot smarter than you, so the Commonwealth Bank in this case, so own a big chunk of the property through the debt they've given you to close it so, they've got that level of confidence. Listen, our banks are pretty good to be fair, compared to global banks, held us in pretty good stead over the global financial crisis, and banks are risk averse.
Curtis Stewart: Exactly. They've got a 20% stake in it. If they way overvalue it, and for whatever reason I go bust and don't pay, if they've overvalued it by more than 20% then their capacity to even get their loan backs, their money backs questionable. Yeah, they're pretty conservative, they don't want to put themselves in a ridiculous position.
Phil Tarrant: Banks don't like to see borrowers go bust, banks don't want to have that position where they repossess. That's the last thing they want anyway. A good relation is good. Are you finding it easy to get money yourself now? Based on serviceability, you're not referred?
Curtis Stewart: Yeah, yeah. My position is still relatively strong. I think once these two get done I'm going to have to start getting a bit more creative. I've definitely noticed over the last 12 months, but six months especially, the credit environment's changed. Banks are ... if they haven't explicitly changed their policies, they're tightening up the way they apply it. I think it's a new world, at least I'd say.
Phil Tarrant: Okay. You enjoy being a property investor?
Curtis Stewart: Yeah, yeah, I do. It's not something that was a lifelong dream or something I really thought about until my early, mid-twenties. I really like what it does for me, I like the numbers, which I guess, when they're working for you everyone likes the numbers.
Phil Tarrant: What sort of a degree did you do?
Curtis Stewart: Finance and Economics.
Phil Tarrant: Alright, well there you go.
Curtis Stewart: I like the numbers anyway, I guess. I like the leverage too, if you're taking at the start of your ... What I'm doing, if you're taking something, a relatively small amount at the start of your life, and you go into some investment asset with a really low capacity to leverage, your ability to turn that into something bigger is much smaller if it grows. Property is a bit unique that you go to 80% LVRs, you go to 90% LVRs you can still do it. If you buy a classic car or a painting or something, you can do it, but your capacity to leverage is not there.
Phil Tarrant: Cool, Curtis.
Curtis Stewart: Cool. Kicking along, I guess.
Phil Tarrant: Kicking along. It's what you got to do, give it a go.
Curtis Stewart: Yeah, yes.
Phil Tarrant: Is this like what you do on the weekends?
Curtis Stewart: Yeah, yeah. It is now. I don't know what my time spent on realestate.com and Domain are but I'm sure they'd be through the roof.
Phil Tarrant: I'm sure they're happy about that.
Curtis Stewart: Even stuff I don't have the capacity to do yet. In Sydney there's a lot of development corridors and rezoning going on. I don't really have the capacity to go into that market at this stage, but still something I follow, just to see what's happening. How prices move when announcements get made.
Phil Tarrant: Got to keep your finger on the pulse.
Curtis Stewart: Yeah, yeah. I think it all gets stored, and even if you don't use it for 10 years down the line. I was there when this happened last time, and I've got a little bit of information.
Phil Tarrant: Let's go back to the chat I had with Bernard Salt. He spoke about numbers are numbers, but it's the narrative behind the numbers. If you can pull in all this information over time, and it helps you form a long-term vision and a story behind why things are happening, and why markets are changing. The time you spent now investing in what's going on, even though you might not do anything, in 10 years time you're going to be able to refer back to it, it's going to help the narrative to help tell a story to allow you to be a better property investor.
Curtis Stewart: Yeah, yeah, exactly. I believe in that, that the more you learn, even if you don't use it straight away, it all adds up and comes to fruition eventually. It's a bit like if I buy in a Per-three zoning corridor in 15 years, and I'm like, "Cool, there's an announcement, why haven't prices adjusted? I remember in Sydney when this happened, and this is how it played out." I'm going in with a little bit more information than if I was just not paying attention.
Phil Tarrant: Cool. Alright. Thanks mate. Really enjoyed the chat.
Curtis Stewart: Thanks Phil.
Phil Tarrant: Keep it up.
Curtis Stewart: Appreciate it.
Phil Tarrant: After you get these two places built, lets get you back on and you can tell me about all the sleepless nights you've had. Yeah.
Curtis Stewart: All the troubles. Yeah, yeah, I'll give you all the horror stories.
Phil Tarrant: May as well, building one, have a headache. If you're going to go two at the same time, be prepared.
Curtis Stewart: Yeah, yeah. Maybe they're the last two builds I'll do.
Phil Tarrant: Maybe, you never know. Get some scar tissue around, there's nothing wrong with that, but as you said, it's a good experience to go through.
Curtis Stewart: Yeah, pretty much.
Phil Tarrant: Yeah, and I appreciate you coming in.
If you've got any questions for Curtis or about any of the stuff we spoke about today, including First Home Owners Grants, or stamp duty exemptions. We've got lots of it online, but email the team, [email protected] Just go and search those terms on smartpropertyinvestment.com.au and you'll get a whole bunch of stuff. Remember, go to the OSR sites, so Officer State Revenue in each of the respective states where you're buying, and you'll see what they're conditions are round about if you're a first time buyer. Be careful, make sure you stay within the rules.
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We'll be back again next time, until then, bye-bye.
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