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A guide to preventive maintenance

By Bianca Dabu

Smart Property Investment’s Phil Tarrant and his team are currently working on a $20,000-renovation—what are the steps they should take to ensure the safety and livability of the property?

The two-storey three-bedroom property in KingstonKingston, QLD Kingston, ACT Kingston, TAS, which was purchased back in July with a few maintenance issues, was left in a worse state by former tenants.

Instead of doing a quick fix, the investor decided to bear the burden of vacancy and do an extensive renovation: in contrast to simply wanting to improve his cash flow situation, his main concern is achieving tenant longevity.

According to Right Property Group’s Steve Waters, more than price growth, the longevity of tenants contributes more to an investor’s success.

He explained: “You can have a gross high rent, but if your tenants keep changing over it just erodes that netability.”

In order to accomplish his goal, Mr Tarrant needed to make sure that his property is as safe and livable as it is presentable. After the tenants vacated the property, the investor sought the help of professionals to help him make the most out of his investment.

“I need to make sure this is 100 per cent compliant … [to Occupational Health and Safety standards] … What can I do … to make it a better proposition for someone to rent … [and] eke a few more dollars out of a week than what I was getting beforehand?” he said.

Prioritising the safety of future tenants is not only about decreasing vacancy rates but, more importantly, a landlord’s moral obligation, according to Mr Waters.

The property professional highlighted: “Clearly, you never want to be a slumlord. That's just never going to get you anywhere and it's not morally correct.”

Mr Waters and Mr Tarrant outlined the renovations they plan to implement to improve the rental property and ensure tenant longevity:

Replacing broken window glass

According to Mr Tarrant, doing necessary repairs on windows is important because, before being an aesthetic concern, it is a safety issue.

“[We are] replacing broken window glass in [the] upstairs bedrooms. You've got to get that right—that's a safety issue,” he said.

Bathroom renovation

The leaking upstairs bathroom has been one of the oldest issues in the property, Mr Waters said, and it ended up being one of the most expensive components of the renovation.

Mr Waters explained: “We had tenants in there and we didn't want to upset the tenants. We didn't want to disrupt the tenants either whilst there was cash flow coming in, but we did know that sooner or later, we were going to have to address that.”

After the tenants have left, they discovered that tiles were loose because it has only been laid over old Masonite—so as the water leaked from behind them, it has also started leaking downstairs. Tradesmen recommended removing the tiles and the old Masonite, resheeting with villaboard, waterproofing the floor area, and retiling over the bath and over vanity with grout and silicone—a process that will cost about $4,500.

Luckily, the team took advantage of the bathroom concern way back during the time of purchase and knocked off around $10,000 of the original selling price, which they plan to use now to improve the asset.

Full-yard cleaning and garbage disposal

Mr Waters described the yards that were left by the tenants as "The Amazon"—lawns are overgrown and there are garbage and pests everywhere. 

The team decided to do a full cleaning for both the front yard and the backyard, which will cost nearly $1,000, Mr Tarrant said.

Fortunately, the whole bond was kept, which will certainly help in the overall renovation cost.

“Somewhere in that jungle [is] actually quite a well-loved garden at one stage, so that's all being revealed [now],” Mr Waters said.

Kitchen renovation

As per the “less is more” recommendation of the tradesmen, Mr Tarrant and his team decided to remove the kitchenette downstairs—a process that will entail more than just taking down a part of the house. They will also have to look at pipes, wallboards, and tiles.

“[We’re] removing the old kitchen from downstairs and not replacing it, so … [we] got to cut back all the hot and cold water pipes … [remove] the wallboard, make good the damage, replace missing tiles on the floors,” the investor said.

This will give future tenants double the floor space, which Mr Waters expects to lead to more demand for the property and, ultimately, growth in value.

The property professional highlighted: “Even from a valuation point of view, [it’s good] because there's the comparables to support the fact that they will get that little bit more [space], as opposed to … a low-set standard three-bedroom, small, weatherboard house.”

Fencing

According to Mr Waters, this step is not merely about boundaries but a full-scale renovation of the home’s exterior, including the pool.

He said: “I'm talking about around the house—the bushes [needed to be] cut back. [Then] … imagine the pool fencing that you have, which is glass … [It has to be] safety glass … because someone could just [walk] straight into that and cut themselves in half."

Floor varnishing

Finally, Mr Tarrant’s team will ensure that the floors are free of any issues that may lead to any untoward incident.

“Sand and varnish floors for upstairs—punch all holes, fill all holes in the floor, sand and varnish all floor area, two coats [for] the whole top floorboards,” he explained.

Mr Waters said that, aside from ensuring tenants’ safety, this will also provide longevity for the floor surface. The team expects this process to cost around $2,200.

Builders’ cost

Most parts of preventive maintenance require unskilled labour, but some investors, including Mr Tarrant, prefer to engage professionals to ensure quality work.

Moreover, they can also help you save time and money in the long run since their expertise pretty much ensures that you won’t have to go through processes again and again due to mistakes.

Mr Waters said: “I call it 'unskilled labour' because you … don't have to be licensed [to do it] … It's the stuff that adds up very, very quickly ... A handyman will be somewhere between $45 to $65 an hour, so it adds up.”

“[Simple repairs] would take ... a whole weekend ... if I was going to do it,” Mr Tarrant quipped.

Moral responsibility

After all the efforts and costs that will be dedicated to this renovation, Mr Waters does not expect any significant increase in the original rent price of $350—it could even go lower once the property is up in the market again.

“Remember, the market has come back and [the previous tenants] were a large family. They were potentially paying for the privilege to be there as well, being such a large family. We should be [leasing it for] around ($350), maybe a bit less,” he explained.

However, at the end of the day, there’s more to renovations than immediate rent price increase, he said.

The property professional highlighted: “[This] costs a fortune, and there's not capital upside, there's no cash flow upside, [but] it's a moral responsibility.”

“[Phil doesn’t] even have to do it legally in this scenario because it's a complying building from yesteryear, but from a moral point of view … [it’s his responsibility],” he added.

According to Mr Tarrant, being able to invest in property is a privilege, so you have to understand that you’re not merely creating wealth for yourself but also providing a home for other people.

If you’re unsure about how to keep your property up to the Occupational Health and Safety standards, he recommended engaging the right professionals to help you accomplish the job.

 

Tune in to Phil Tarrant's portfolio update on The Smart Property Investment Show to know more about the thought process behind the transformation of his rental property.

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Katie Koo’s property journey began completely by chance.  While waiting to meet her mum in Hurstville at age 18 on what was a rainy day, Katie sought shelter in a nearby home - which just happened to be open for inspection. She fell in love and bought it.

In this episode of the Smart Property Investment Show Katie joins host Phil Tarrant to talk through her portfolio more than ten years on, which now boasts 5 properties and a minimal amount of outstanding debt.  Katie will discuss how she has grown her portfolio, why she no longer self manages and shares her future portfolio plans.  

Katie will also share how her first renovation cost her just $500 thanks to her drive to learn the art of DIY, as well as how her work as a financial adviser is helping others to achieve their property goals.

If you like 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: FacebookTwitter 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!

RELATED AREAS OF INTEREST:

What makes a good investment suburb?
Entering the property market as a millennial
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AREAS MENTIONED:

Hurstville
Riverwood
Baulkham Hills
Wentworth Point
Rhodes

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Tune in to the latest episode of Property Showcase, the podcast with the inside track on the products and businesses that will help turbocharge your portfolio, maximise returns and make your overall investment experience seamless and stress-free!

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To hear more about these services, make sure to tune in to this episode of Property Showcase!

 Make sure you never miss an episode by subscribing to us now on iTunes!

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    In this episode of Property Showcase, director of investment services for Open Corp Michael Beresford,\u00a0joins\u00a0editor of Real Estate, Tim Neary to share why he disagrees that the cooling market means that the best times are behind us.<\/p>\r\n

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Smart Property Investment" ["page_heading"]=> string(33) "Our Property Investment Portfolio" ["secure"]=> int(0) ["page_description"]=> string(11) "sample desc" ["page_rights"]=> NULL ["robots"]=> NULL ["access-view"]=> bool(true) } ["initialized":protected]=> bool(true) ["separator"]=> string(1) "." } ["displayDate"]=> string(19) "2018-07-18 05:50:45" ["slug"]=> string(78) "18297:mortgages-in-a-tighter-lending-economy-and-why-brisbane-is-a-good-option" ["catslug"]=> string(20) "82:property-showcase" ["link"]=> string(106) "/podcasts/property-showcase/18297-mortgages-in-a-tighter-lending-economy-and-why-brisbane-is-a-good-option" }
Mortgages in a tighter lending economy and why Brisbane is a good option
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  ["title"]=>
  string(82) "Stories of success: The migrants that became Australia’s renowned Property Twins"
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  string(89) "stories-of-success-from-living-in-low-socioeconomic-sydney-to-becoming-the-property-twins"
  ["introtext"]=>
  string(318) "

Sana and Mona Ali moved to Australia from Pakistan at the age of 15. Years later, the once-struggling migrants successfully turned their $40,000 savings into a $5 million-portfolio, earning the moniker “The Property Twins” — all before the age of 30. How did these millennials make their way to the top?

" ["fulltext"]=> string(9784) "

The Ali sisters lived in low socioeconomic conditions for years since arriving in Australia in 2000, but instead of accepting their fate, they used their circumstance as motivation to work hard and achieve financial security.

According to Sana: “Moving countries was a huge personal challenge. We were living in a low socioeconomic area of Sydney and we just saw people around us living really good lives. It really pushed us and made us wonder, ‘What if we could buy more than one house?’”

They initially wanted just a strong financial foundation for themselves and their family and the sense of security brought about by owning a home. In less than a decade, they got all of it and more.

Aside from being able to build a 10-property portfolio, the Ali sisters were also successful in establishing a mortgage business that aims to help investors make the best decisions for their own wealth-creation journeys.

“We just want to feel that Australia is really home and to have our roots here,” Mona highlighted.

How it all started

What they lacked in funds, the Ali sisters made up for continuous education, training and mentorship.

In 2009, they have both spent years in the Information Technology and Project Management fields before progressing through finance roles. The high-net worth individuals that they constantly work made them realise that there’s more they can aspire for than corporate jobs.

They started doing research and eventually bought their first property in Parramatta through their combined savings of $40,000 and the aid of the First Home Owners Grant. Seven months later, they bought their second property in Blacktown.

Mona shared: “I personally wasn’t a good saver, because I loved shopping and shoes. Nothing wrong with that, but looking back, it's like a ‘need it versus want it’ question. Obviously, I did buy a lot of shoes but we didn’t go travelling and all of that. So, we did have some savings.”

The Ali sisters opted for cheap properties in the lower end of the market to jumpstart their investment journey for low-entry prices.

“The cash flow meant when we did rent the properties out, they could look after themselves,” Mona highlighted.

Sana and Mona advise investors to avoid being afraid of starting small. Being realistic instead of aiming for a dream home on their first shot at investing helped them enter the market sooner than later.

After all, property investment is a long-term commitment and, essentially, a kind of “delayed gratification”.

The twin’s property portfolio grew to consist of eight more properties spread across Western Sydney and Brisbane, including units, villas and townhouses.

Strategies

Not long after they started investing in properties, the Ali sisters sold their first two properties in Sydney to take advantage of the property boom that happened in the city. Prior to selling, they did cosmetic renovations on these properties to add value and eventually extracted equity from them.

The first property returned around $330,000 while the second property returned around $190,000.

Mona and Sana used the extracted equity to make their third and fourth property purchase, which are strata properties located in Blacktown. Less than 10 years later, the same properties have increased in value by 90 to 100 per cent.

As the market went more stagnant, Mona and Sana continued increasing their savings to improve the buffer for their portfolio. They saved 20 to 30 per cent of their salary, sacrificed travels, minimised eating out and drove a Kia Rio for years to save as much as they could.

For years, they carefully weighed their needs and wants to determine the things they could live without as they are building their portfolio.

Where to buy

The Ali sisters deliberately chose to buy most of their properties in the Western Sydney region, between Parramatta and Penrith.

According to them, having properties in such good locations, as in close to transport and other valuable infrastructure and establishments, helped them maintain good cash flow and minimise the impact of property investment on their finances and lifestyle.

While they have implemented different strategies throughout their investment journey, good location is one of their non-negotiables.

Sana explained: “We wanted to make sure the properties were well-located. That’s formed the foundation of our property strategy, where we make sure that properties are close to the train station, or a big shopping centre, because that’s what’s going to drive the demand down the track.”

Who to work with

Unlike many investors, the Ali sisters didn’t recognise the value added by property professionals to their portfolio in the beginning. In fact, it took them four purchases to seek the guidance of experts. Needless to say, it turned out to be among their more costly decisions.

According to Sana: “You don’t know what you don’t know, and we didn’t know any better. In hindsight, it would have been good to work with a broker for our initial couple of purchases.” 

Through online forums, they found out about the benefits of working with a mortgage broker and has since worked with a few throughout their investment journey. They taught them not only what they needed to know about mortgage broking, but also what they want to be done differently.

Eventually, Mona and Sana grew to love the “numbers side of property” and went on to establish their own mortgage business, The Property Twins. The business aims to empower investors by offering different services, including building portfolio roadmaps and finding better loans.

According to them, their personal experiences as investors consistently help them provide the best customer service and most effective advice even amidst changing broking spaces.

Mona said: “We really look at building road maps for our clients upfront. On paper, we really put the options down — lender A, B, C, D, in that order — so you continue maximising what's really possible for you."

“Whilst you have no control over the lending policies or where your interest rates go, if you’re making that strategic choice, you’re keeping a lot of doors open for later investment," she added.

Helping investors

As investors-turned-mortgage brokers, Mona and Sana seek to improve the knowledge of Australian investors and ultimately help them achieve their financial goals. Their experiences as investors who, quite literally, started from the bottom allow them to provide realistic and well-rounded advice to different types of investors.

Instead of acting as mere intermediaries who bring borrowers and lenders together, they take on a holistic approach and help budding investors establish a good foundation for their investment journey.

The most important advice they give to their clients is to always implement long-term strategies, but also be flexible enough to alter plans accordingly along the way.

Sana explained: “You need to look at the big picture rather than just one product or one rate focus, because it's a long-term strategy for you.” 

“We are taking our clients on a journey. It’s not about one transaction at a time, it’s about the big picture and really educating them through the process, through the decisions that they are going to be making — just talking through the pros and cons, the rates and how it's impacting them and what their plans are in the next six to 12 months," Mona highlighted.

Finding the right mentors is critical to success in property investment, according to them. Finding the ones who will be willing to understand your goals, capabilities and limitations as an investor and give you tailored advice will certainly help you fast track your wealth-creation journey.

In fact, Mona and Sana themselves have made it a point to stay in contact with their mentors even after they have successfully crossed the $5 million-line.

As mortgage brokers, the Ali sisters go above and beyond their responsibilities to serve as lessons and inspirations to budding investors.

Mona said: “It’s been really rewarding to see the changes that people have had or the smart decisions our clients have made over the last couple of months. Whilst we’re not property coaches or mentors, that naturally comes to us.

“We pretty much hold their hand and say, ‘Look, this is what we would buy, this is what would make a good property and this is what you should be looking for, and where you should be looking.’ When you’re working with someone who’s been there, where you want to go, you cut down 10 years’ worth of effort,” she concluded.

 

The information has been sourced from propertytwins.com.au, realestate.com.au, Daily Mail and the Smart Property Investment website.

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Stories of success: The migrants that became Australia’s renowned Property Twins

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