There’s often a certain sense of feeling conflicted when writing this column, which reflects our experience of building a property portfolio. I share a lot of information with our readers – unveiling our buying strategies, successes and failures. I also speak intimately about the areas we’re targeting and why.
While a lot of investors like to keep their cards close to their chests in this regard – mainly to reduce any competition for properties, or to imply they have a secret fishing ground that’s delivering great results they don’t want to share – I see the world very differently.
Transparency in property investment is absolutely essential. For me, this flows all the way from those selling off-the-plan apartments, to commissions on the sale of property or services, as well as how you manage your own portfolio and the information you share with your accountant and other stakeholders.
For me, the dream of get-rich-quick through property is a fallacy – and there aren’t any secret techniques, alternative investment schemes and the like to make a million overnight. Anyone telling you otherwise needs to be questioned; if it’s too good to be true, then it most likely is.
There’s good money to be made from property investment, however, and it can serve as a sound tool for creating wealth and providing for your retirement. While the dream of making a fortune quickly is a nice one, it’s unrealistic and not something we subscribe to.
The reality is something much more boring – but it’s so straight forward.
Property is a long-term game and if you want to build a sizable portfolio and make serious money, you need a long-term outlook.
You typically need to hold a property for a few cycles to truly realise its value. And I’m not saying anything new here either. All good property investors know this and have built a strategy with this in mind.
But back to being conflicted. I share all our information, buying strategies and activities. Yes, it might mean that I’m competing with more investors in the areas I’m investing. But I don’t have an issue with that. Actually I’m quite pleased.
We’ve created Smart Property Investment to better educate readers, and we’re doing a good job. The feedback I get from investors highlights the impact we’re making on helping investors to better think their investment strategies.
While some readers who follow our portfolio and share our journey building a property portfolio engage a similar approach to us – that is sourcing under-market-value properties at lower price points in growth locations – others choose a different path, and many are successful.
The point I’m making here is that your strategy must work for you, and as you build your portfolio you need to be focused and dedicated in order to determine what’s right for you – and then stick to that path.
Reach out for assistance from professionals, use your common sense when considering any purchase, and importantly, enjoy the ride.
I do, and I still get very excited when I’m considering a new purchase. But I always do it with our strategy in mind.
A reason to invest
Our latest property, which settled earlier this month, has been an excellent buy and I’m very upbeat not only about the instant equity we’ve created by buying well, but also the upside for manufacturing equity moving forward.
We’ve purchased in a location that shows significant growth based on its focus on infrastructure development to support planned population increases, as well as being a traditionally owner-occupied area.
So what’s the location?
The location we purchased in is a traditional owner-occupier area, not especially on the radar of investors, therefore reducing competition from them while also delivering a good prospect should we need to sell
in Queensland, which is a wider satellite city created and located to help reduce population growth along the coastal strip from the Coast down to the Gold Coast.
It’s a master-planned community – the largest master-planned city in Australia. It incorporates a number of different sub-communities and is within striking distance of the Brisbane CBD, affording good commute times on the Ipswich line or via the Centenary Motorway. It’s also self-contained, delivering good employment prospects for locals.
South east Queensland currently represents more than two thirds of the state’s rapidly-growing population, with a planned infrastructure program in excess of $130 billion to accommodate the construction of over 750,000 properties over the next two decades.
For Springfield in particular, there are development dollars allocated to continued enhancement of public amenities, transport links and other supporting infrastructure that will continue to attract residents – such as two new train stations to service Brisbane commuters.
At present there are around 26,000 residents, and according to the Springfield Land Commission (SLC), this is expected to expand to 105,000 residents by 2030 – a further sign of the growth plans and scheduled investment for the area.
Indeed, to date the SLC reports $9.7 billion has been channelled into the development of Greater Springfield, and this is set to expand to $32 billion once the master community is complete. There’s also a target of 30,000 jobs in the area, one for every three residents.
Since its inception in 1992, there have been a number of developments (currently six suburbs) across Greater Springfield, with more in the pipeline.
The property we’ve acquired is in one of the older developments and is in close proximity to the Springfield CBD.
A smart buy
While the growth prospects for Springfield tick a lot of our boxes, the particular property we acquired was a major driver behind the purchase.
I’ve yet to see the property – everything so far has been done remotely – but the purchase well and truly stacks up.
We acquired the property via private treaty, it having been passed in at auction. As a mortgagee in possession sale, the property was marketed very quickly and not very well.
It had to be sold swiftly and we were fortunate to hear about the sale via our buyer’s agent, Right Property Group, which is tapped into the agents up there.
In addition, the location we purchased in is a traditional owner-occupier area, not especially on the radar of investors, therefore reducing competition from them while also delivering a good prospect should we need to sell.
Our buyer’s agent attended the auction, but fought the urge to bid. The final offer made was a vendor bid and the property subsequently passed in, giving us scope to negotiate after auction with a base price from which to work. It also offered us the opportunity to purchase via private treaty rather than auction. Why was this important?
We acquired the property via private treaty, it having been passed in at auction. As a mortgagee in possession sale, the property was marketed very quickly and not very well
Well, there were lots of advantages. Not only did we have a starting price from which to negotiate, but by purchasing after auction we entered into a cooling-off period, which gave us time to finalise financing and undertake necessary checks. In essence, it gave us additional time to consider the purchase with scope to extract ourselves should we have needed to.
It delivered invaluable time to assess the property for upsides, get some opinions from builders and local agents, plus position ourselves to truly maximise its potential.
Our assessment was a positive one and we proceeded with the purchase.
Prior to purchase, a valuation of the property with RP Data placed the estimate at $321,000. While it was a lower-end valuation compared to other properties in the suburb – which can exceed $600,000 – the property’s attributes and our research indicated the valuation was a fair representation should we choose to sell in the current market.
But our strategy is to buy under-market- value property, and look to add value. So what did we pay for our house in Springfield?
The grand total of $270,000 for a three-bedroom, two-bathroom, brick property with a free-standing garage on a 500-square metre block. In terms of our goal to secure under-market-value property, we clearly struck gold.
As it sits, I admit it lacks the kerb appeal of other properties on the street, but a weekend in the garden with a lawn mower, a set of sheers and some bark in the garden beds will bring the place up to scratch.
A thousand dollars spent on the exterior and interior would also set the property up for immediate rental. However, we’re looking to add value and increase both capital value and rental return.
Join us next month, as I unveil our plans for renovation and our strategies for elevating this property to extract the maximum value.
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