‘Good gifts come in bad packaging’: How an ‘eyesore’ property turned out to be a ‘win-win’ deal

Find out how she worked to make a worthwhile investment out of a “badly-packaged” property, as well as her advice to budding property investors who are only focused on finding brand new real estate assets:

How many properties do you currently hold?

Jacqui Zielinski: We've got 10 properties, between my husband and I. And, in total, value's around that $3 million mark … [with an] overall [debt] position ... sitting just under 65 per cent LVR [loan-to-value ratio].

Where did you buy your first property?

Jacqui Zielinski: It’s probably one of the cheapest properties I could afford at the time because I was only on about $40,000 and I had about $6,000 deposit, plus the $7,000 first time owner's grant. Interest rates were pretty high at the time—they were about 8 per cent—so I pretty much put everything I could into it … That's how I pretty much started.

[It] was in Wagga Wagga, around the CBD area. Two bedroom apartment … [worth] $185,000.

Was it a good investment?

Jacqui Zielinski: It was an okay property. We made some money straight away … there was instant equity, which was good. But long-term wise, it wasn't really the best-performing property that we've had in our portfolio. Rents started off strong and then there became quite an oversupply in that area for the types of properties. And so, over time ... we ended up selling my first property.

When did you work out it that it was not a very good property?

Jacqui Zielinski: Oh, for a while. I'd say for a while … We knew for a while [but] we kind of just held onto it because we, at the time, just thought, "What else are we going to do … ?” At some points, it just should have been returning a lot more at the time. We weren't getting the cash flow and, considering how long we'd had it for ... we weren't getting the growth [as well] … I just thought, "Let's pull out the money now. We can use that cash for either our own home down the track or for another investment property." I just prefer to get rid of one potential property.

When did you sell that first property?

Jacqui Zielinski: We sold that one last year, just a few months before I left [my job at] the bank.

How did you get to your second property?

Jacqui Zielinski: The story is a bit of a funny one, actually. So, what I did was when I was at the bank, I actually was chatting with ... this client ... He was telling me about [his] property in Lake Albert, which is ... the suburb my parents live in. And he was saying to me, "Oh, I just need to get rid of it. I've started renovating and I just don't have the money to do it, I just want to get rid of it. I need it off my case." And I was like, "Oh, really?" I said ... "Oh, well, maybe I'll come have a look at it." I thought at the time, "Oh, you know, I can buy properties, it'll be fine."

And so, I had a look through and this property had been half-renovated. He'd had an attempt on the bathroom, and the kitchen had somewhat been half-ripped out and it looked like he'd just given up and he just wanted out. I negotiated with him, like a private purchase … [However], I didn't have a lot of equity in my other property, because it had only been ... six months or something like that.

Somehow, I convinced my parents, for a short-term, to guarantee me on a v-lock—a line of credit, I should say. For … [around] $50,000 … and I said to them, "This is the deal, it's an amazing deal, I'm buying it well below market. Let me just do the purchase and then I'll top the loan up and get you out of there." And that's what I did ... I look back now and go, "They probably thought I was crazy at the time."

What did you pay for the property?

Jacqui Zielinski: I paid $200,000.

What did you do to the property then?

Jacqui Zielinski: [So my parents] backed me and ... I quickly used their line of credit, did a renovation, finish it up, got it rented out, and then got it re-valued.

How much did the renovation cost you?

Jacqui Zielinski: I would say, it would've been about $20,000.

And it was revalued at?

Jacqui Zielinski: About $290,000 or $280,000.

What lesson can property investors learn from this purchase?

Phil Tarrant: Some of the best gifts come badly wrapped, right? And you're talking about a property which is probably an eyesore, but you're able to have the vision to be able to see what the upside is. So, we talk about instant equity or manufacturing equity—that was very much understanding, "What's this probably worth? How can I get it to that…?"

Jacqui Zielinski: When I look back at it now, it was very much a win-win. That guy wanted out [and] I even paid for his legals and things to help him along … It's just really trying to make it a good scenario for everyone.

Tune in to Jacqui Zielenski’s episode on The Smart Property Investment Show to know more about the impact of educating yourself, how to find a balance between business work and investment, and the simple but effective ways to improve your current portfolio.