After successfully growing a $6.15 million-worth property portfolio from scratch since August 2011, Smart Property Investment’s Phil Tarrant and his team are moving on to reach greater goals through more sophisticated strategies.
Phil started his property investment journey purchasing “boring assets” which gave him sustainable cash flow and lending capability, as well as a good potential to refinance.
“[These are] foundation-type properties… [which] suited our strategy thus far. [It’s] buying under market value properties in affordable areas where we can manufacture equity through renovation, or just by buying well, and it doesn't cost as much to hold them. That's what we've been doing,” he shared.
These foundation properties have enabled the property investor to get to the next level of his journey, according to his buyer’s agent Steve Waters.
At this point, Phil and his team are starting to look for portfolio additions—assets that have “a bit of X factor”—and just recently, they have managed to secure a block of units with five two-bedroom units in the north of Brisbane.
“A block of units in entirety… 25 minutes to the [central business district] of Brisbane… and returning… 7.1 per cent yield, which in anyone's terms is just fantastic,” Steve said.
Phil explained further: “All of these properties are strata’d, so it means that they all have their own title but we control the lot because there's no one else on these properties… There are five properties within this block of land all individually owned now by us.”
This type of real estate asset could be hard to come by because aside from its steep price, every investor, especially the ones who are looking for a 10- to 15-year play, wants to acquire the same asset.
In fact, according to Steve, the entire complex of five units hit the market at around midday, and by 12:10, “we had all but done and dusted the negotiation.”
Why buy a block of properties?
Phil and his team are now after assets that could add to their cash flow position, and with each of the properties in their newly-secured block renting at $275—with a total of $1,365 and $70,980 combined rent—it’s safe to say that they have made the right decision.
Aside from metropolitan Brisbane’s being close to good infrastructures, there are a lot more big-ticket projects that are due for completion in the next three to four years, making the area a prime spot for investment.
“With that structure comes jobs, comes population, comes a demographic shift… and this complex of units is well-positioned to take advantage of that in the future. In the meantime, we're going to enjoy 7 per cent yield,” Steve said.
Phil added: “There's some big infrastructure projects happening up and around this part of Brisbane, which will see not only an increase in the demand for rentals but will actually put a lot of price increases also.”
Outperforming the market
This “upgrade” in portfolio addition could not have been possible had Phil and his team failed to create a good equity position through the foundation properties they have initially purchased.
“We've been able to create this good equity position where we have [the] capacity to draw down on this portfolio. We're currently at 64 per cent LVR, so we're going to have to pull some cash out of it, which will take our LVR position to about 66 per cent... [adding] about another 800 grand of debt into the portfolio,” according to Phil.
He believes that their equity position will remain stable because “what we're pulling out, we're putting back in,” and since the asset is located in a prime location, good growth is pretty much guaranteed for in the next 10 to 20 years.
For Steve, the key to their success from now on will be finding properties that could outperform the market in the long run.
“This [new asset] will because we've bought it right… under market value [and] it's got the cash flow to support it, [as well as] the infrastructure that's not just already there, but there's a mountain more going in which will perpetuate the value of the area,” the buyer’s agent explained.
“Then we've got this net migration numbers from the southern states [because of] big lifestyle change—three times bang for your dollar in terms of the house, and perhaps more opportunities… We're starting to see those numbers climb.”
Tune in to Phil Tarrant’s portfolio update on The Smart Property Investment Show to know more about his acquisition costs, “boring” assets, risk mitigation, cash flow management and yearly income, as well as the inside scoop on a new property that could take the team’s investment strategy to the next level.