Investor Lloyd Edge has successfully built an 18-strong property portfolio with assets spread across three states, now valued at $12 million. How did he make it possible?
For 18 years, Mr Edge has gone across NSW, Victoria and Queensland, both in capital city markets and regional markets, to build his portfolio, implementing different strategies to maximise profit.
As a teacher in 2002 without superannuation, he sought financial security and ultimately realised that real estate would be the best way to go.
“At first, I didn’t really have a strategy, and I was really just sort of buying a few properties willy nilly. Most of those did quite well simply because I was probably a little bit lucky… It was later on when I started to really develop a strategy and understand why I was investing that I got a lot more gains, a lot more returns out of my properties.”
Mr Edge’s first property was his principal place of residence, which was then a newly built one-bedroom apartment in Rockdale. Since it was well located, it didn’t take long for him to realise its potential as a rental property.
The investor then moved out of the Rockdale apartment and bought his second property in Ingleburn to move into. For a while, he bought one property after another, moving into them each time before eventually renting them out.
This second property was sold in 2012 to finance another purchase – a decision that turned out to be one of Mr Edge’s earliest mistakes as an investor.
“I did make some money on it. But the market kept going, and if I had held it to about 2016, I would have made more money on it,” he said.
His third property was in Blackwater, a mining town in Central Queensland, which cost $260,000 and returned about $800 a week in rent.
During the mining boom, it was getting about 23 per cent growth year-on-year, so Mr Edge held onto it, until the boom collapsed by the end of 2012 and values went down. From being valued at almost $700,000, the property is now sitting at $200,000.
“I really learned not to invest in an area that has only one industry. Now I’m really big on investing in areas that have several pillars of growth… It was a big learning experience.”
Still, despite the bad experience, Mr Edge did not veer away from investing outside of capital cities. In fact, some of his better performers are located inand Toowoomba.
According to him: “I’m now buying in areas that have several industries, about four, five and six pillars. Also, a university, a hospital, a major upgrade in their shopping center, rising population and clear government spending – they’re the things that I like to look for.”
“Whenever you’re investing in a regional area, the growth is going to be more limited than in a capital city. I’m really big on actually adding value to your property, so if I’m going to invest there, then I’m going to have to develop it or subdivide it or renovate it. But I’m not just going to do a buy-and-hold strategy because then the growth won’t really be there like it would be in Sydney or Melbourne if you have a market boom.”
While he has maintained positive cash flow for the most part, Mr Edge reminded his fellow investors that it’s not the main wealth-creating factor in property investment.
Instead, investors should be chasing capital growth, according to him.
“Some people try to buy just cash flow positive properties in regional centers. They might buy 10 of them, but if those don’t get any growth over a 10-year period and it’s worth the same as what they bought it for, then they’re actually no better ahead because the cash flow positive rent that’s coming in is just simply paying off the weekly mortgage. They’re not actually creating any wealth because they’re not getting any capital growth.”
One of the many strategies that Mr Edge implements is purchasing or building dual-income properties in the right locations. Essentially, this means a duplex or a property with a granny flat.
“Investors starting out, including myself when I started out, don’t really have a lot of funds. So, you build that up over time. And I think what’s important to note is that, to get wealth and become a successful investor, you do need that capital growth. You can’t just chase cash flow positive properties and expect to actually become a successful investor just like that,” Mr Edge said.
His advice for fellow investors seeking to make their portfolio positively geared: Get the structure right.
According to Mr Edge, it’s not wise to jump into an investment without understanding the purchasing structure and the benefits and risks associated with each one. Thus, he strongly encourages engaging the right professionals to get the best advice.
“Are you buying in a trust or a company structure versus your personal names, for example? You need to speak to your accountant about that, understand that, and find out what’s right to do. Get advice on which is right for which properties. Ask about diversifying across different states as well, because then you’re going to have land tax.”
“You really should get some advice and understand that before you even buy your first property so you can prepare yourself.”
Mr Edge advised seeking to map out a roadmap and a strategy for the short, medium and long-term with the help of property professionals in order to fully understand how to get where they want to go from the beginning of their journey.
“It’s really getting that structure right. Where is that property going to be? How is it going to fit into your portfolio? How is that going to help you buy the next property? Education is paramount to getting into property. Get some advice from mentors or from people who have maybe done what you’re trying to achieve. Really just get educated before you move ahead with any such purchase,” he concluded.