Investment tip: ‘Buy with your head, not your heart’

According to him: “I'm still looking at Brisbane, maybe the $250,000 to $400,000 markets—now, it's no more $250,000 in the places I'm looking at.”

“[I’m also considering] Sydney, if I can find something good, like something which is a real bargain … probably $700,000 to $900,000 maybe … for a house … out [in] The Hills area, like Seven Hills, Quakers Hill,” he added.

At the end of the day, Kevin wants to acquire assets that will ultimately help him achieve his specific financial goals.

Smart Property Investment’s Phil Tarrant explained: “It comes down to understanding what your objectives are in investing—[whether] you're looking for cash flow [or] capital growth. Everyone's circumstances are different.”

Growing the portfolio

Kevin currently holds seven investment properties—three in Queensland, two in Sydney, and two in regional New South Wales. Right now, the property investor remains happy with the performance of his existing assets, even the regional ones.

He said: “I’m getting the rent … but then the capital growth [in regional areas isn’t as] stable, so maybe in two years, you might double but ... for the next five years, it'll stay flat.”

Due to the good state of his property portfolio, Kevin is confident that, should he want to purchase a new property, securing finance would not be a problem—even considering the more stringent lending regulations.

The property investor explained: “All my properties, when I bought [them], [are] either 80 per cent [loan to value ratio] or less.”

“I guess because I've offloaded some of the properties … the new properties that I would be looking at [should have] … an okay rental return so that I can sleep at night.”

“A high rental return means more serviceability, so that would help … For me, [financing is] not really much of an issue because of the market I'm playing in,” he added.

‘Wait and see’

After selling two properties, Kevin now has around $400,000 sitting on an offset account, which Phil describes simply as “a bank account that's connected to one of your home loans”. Aside from being able to “offset the debt” or reduce the amount of cash required to service a property, he also enjoys the benefit of having money “ready to go” for when he wants to purchase another real estate asset.

However, the property investor isn’t planning to acquire as many properties as he could this year.

According to him: “This year [is] probably more of a wait-and-see year. It's not a go-crazy year for me—maybe I would get another property or maybe I would stay the same.”

Kevin’s priority now is to sustain his existing portfolio and just wait for the best wealth-creation opportunities to come along.

He said: “If the right opportunity comes up, then why not … ? At the end of the day, it's opportunity cost.”

“My opportunity cost now is that I'm not putting it in a growth vehicle such as new shares or properties or even business ventures and stuff like that. I'm parking it to wait for the correct opportunity.

“Having said that, it'll probably just be one year because, after one year, I think I'll have to do something either way,” the property investor shared further.

He remains proactive as a property investor by consistently checking on the market and spending the time to assess the current financial situations in different areas across Australia. By being up to date with changes in different property markets, Kevin believes he would be well-prepared when the time for buying comes again.

His advice for his fellow property investors: Don’t rush into any purchase, especially now that some of the biggest markets are currently “in transition”. After all, property investment is not a cheap venture and, therefore, requires thorough research and proper guidance so you don’t end up with a big hole in your pocket.

Phil said: “It's okay to take it slow. Keep your powder dry [and only] strike when the iron is hot.”

Finding the right property

Kevin’s secret to successfully building a multi-property portfolio: “Do your research … but don’t overanalyse.”

Finding the right property depends on one’s personal financial circumstance as well as his capabilities and limitations as a property investor. For Kevin, a property that “ticks all the boxes” is something that has a development potential and a good balance of capital growth potential and cash flow potential.

He shared: “One of the areas I'm looking in is around Ipswich … Redbank Plains, Springfield in Brisbane, or even in Logan, if the correct property comes up … It's got [to have] development potential, which means it's got the good-sized land, it's got the good frontages.”

“It might [also] be a Queenslander [where] the downstairs-level might be legal height, which is 2.3 metres ... so I can put two families in—those are the boxes that I would want to tick,” Kevin added.

The property investor’s final advice for people looking to create wealth through real estate: “Buy with your head, not your heart.”

“Don't overanalyse. Keep looking … Once you think you've found a property and you've done the research and it makes sense, just go for it. Don't waste your time,” he concluded.

Tune in to Kevin Sum’s episode on The Smart Property Investment Show to know more about the right time to haggle commission with your real estate agent, as well as the boxes your property should be ticking and the opportunities you should be jumping on.