'How I overcame dodgy builders to manufacture $100k in equity in less than a month'
podcast

'How I overcame dodgy builders to manufacture $100k in equity in less than a month'

By Tamikah Bretzke

Blake Roeleven says he’s learnt the hard way when it comes to renovating property – but working with “shonky” tradesmen and builders-gone-bust hasn’t turned this investor away from creating equity in his portfolio.

In fact, Blake’s determination led him to manufacture nearly $100,000 in equity for one property in less than a month.

In this episode of The Smart Property Investment Show, Blake joins host Phil Tarrant to explain why he's holding himself accountable for the overall success of his wealth-creation efforts, the steps he's taking to keep himself on track to achieve his goals, as well as his top tips on how investors can identify "shonky" tradesmen for themselves.

Tune in now to hear all of this and much, much more in this episode of The Smart Property Investment Show!

Blake's renovation

 

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Suburbs mentioned in this episode:

Drummoyne
Melbourne
Brisbane

Related articles of interest:

How to avoid a bad builder
Property rose by 300%, but owners shouldn’t get cocky
Winter weather exposing Sydney vacancy rates

Listen to other instalments of The Smart Property Investment Show:
Episode 105: New podcast: Investor reveals the opportunities for migrants in Australia
Episode 104: New podcast: Q&A session with Paul Glossop – more questions answered!
Episode 103: Special Episode: Phil and Munzurul talk steering the growth and development of portfolios by managing cash flow
Episode 102: Investor reveals how to find the perfect property manager
Episode 101: From 12 to 100 properties – how this investor will achieve his goals
Episode 100: Property investor talks research, teamwork and balance in his portfolio
Episode 99: Portfolio update: SPI opens its books to reveal all the nitty-gritty details
Episode 98: Buyer's agent forecasts what’s to come for Aussie property market
Episode 97: ‘How we achieved financial security through property’ – the Property Twins reveal all
Episode 96: Tips for tackling pest and building inspections head-on

Full transcript

Phil Tarrant: G’day, everyone. Welcome to The Smart Property Investment Show. Phil Tarrant here. I'm the host of the show and I'm under pressure today. I've been told to try and change up my introduction, so on that basis, I won't to welcome everyone for coming because I know you come here because that's a lot of value. Adam's giving me a smirk at the moment because he's telling me that I'm getting a bit repetitive in saying, "G’day everyone."

I'm going to mix it up a little bit today. I'm not sure yet how, but we'll work it out. As you know, this is a show for property investors and we try to make sure that property investors with information insights, to be better at what they do and we like to share stories and sharing stories is what we do here. I share my story and I hope you enjoy it. I'm happy to be open and accommodating to responding to people, if you want to know more about what I'm doing in property investment. You may have seen, we did an upload on our portfolio. I'm happy to announce that we've now settled that property and I'll be getting my buyer’s agent in at a point soon to run you through where we've bought and how we've done it and what we've got and what we're going to do with it.

We're not stopping there. We have other irons in the fire right now and we're looking to get pretty active up in the Brisbane market in particular, north Brisbane. We'll share some of those insights, but in terms of sharing stories, I'm not going to talk about me. I've got someone in the studio here, Blake Roeleven. I hope I pronounced that correct.

Blake: Yeah.

Phil Tarrant: I have? Blake. Hey, Blake's a property investor. As you know if you're a regular listener to the show, this is not a scripted deliberate we're going to chat about. All I know about Blake is that he invested in property and his backstory, which I found quite interesting and I like it. He listened to a podcast that we did some time ago around goal setting and it got him thinking about how he can be a better property investor. I don't think and from what the quick chat we had, Blake, you didn't really crystallise what those goals where.

Blake: I did.

Phil Tarrant: You knew what they were? You had an idea, but you weren't crystallised. After listening to a podcast and I get great satisfaction when I hear this sort of stuff, you wrote those goals down.

Blake: Yeah, basically what I did was a short, medium and long term goal setting task and it was sort of by coincidence. I listen to the podcast in the car usually in traffic and basically I said, "All right, fine, that's it." Listed my goals, formalised them and then I sent them through with the intent to review post-period and talk life and property and all that stuff that happens in between, basically.

Phil Tarrant: What you've done, you've put your neck on the line.

Blake: A little bit.

Phil Tarrant: There's literally tens and tens of thousands of listeners to this show. You're putting yourself out there and you're going to tell me your goals today.

Blake: Yeah.

Phil Tarrant: We're going to call you back when you reckon you want to see whether or not you've been accountable to them.

Blake: No pressure.

Phil Tarrant: See if you've made the grade or you've fallen behind. Goals change.

Blake: Absolutely.

Phil Tarrant: It's prefaced with what you're saying today might be different in years’ time, but as long as it gives you some clarity of thoughts and guidance, some strategy to press ahead, I think it's a good thing to do. We'll make a commitment to get you back and see if you realise these goals, but let's talk about them.

Blake: Cool. In terms of property.

Phil Tarrant: Property goals, life goals, whatever goals.

Blake: I've got a lot happening at the moment. My typical fashion, I've bitten off more than I can chew. This year, basically the goals were to acquire a third property, a house. So I've bought a property just on south east and suburbs of Melbourne. Basically from there, I'm sitting on about $2.1 mil in terms of property holdings and I'd like to be in a position by 2020, to be holding three and a half mill with a property, that's equivalent to about three, four $50K purchases, thereabouts. Within all of that basically, the goals being over a longer term period to hold unencumbered debt against properties, to give myself some income, basically. What I'll be looking at, more or less over the next two years in terms of a short term time frame. Melbourne's being settled, so that only settled a couple of months ago.

Phil Tarrant: That's your third property?

Blake: Correct. Then from there, I'll be looking to acquire another property, potentially in Brisbane market. I'm sort of half, half at the moment, in terms of all the tax noise coming through from the May budget. I'm just trying to understand how that level sinks out, if I need to do anything differently. More often, I'm just going to press ahead and keep going. A Brisbane property's on the cards. That'll be a high yielding property, 6 per cent gross yield that I'll be targeting for that one and that will balance up the portfolio. I'll have a look, add another property and that might potentially be a build. I might build something and go from there.

Phil Tarrant: Your goals, you got short term. You got a long term goal, which is wealth creation?

Blake: Yes, correct.

Phil Tarrant: An unencumbered property to generate income so you can do what you want to do, but you've broken that down, it would appear, into what you need to do to realise that and these short term incremental steps. As I mentioned before, it probably will change at some point, but at least you've got something to aim towards. Is that the reason why you've set these goals?

Blake: That's exactly right. With so many things happening between and speed bumps, road blocks. All that sort of stuff that happens in normal people's lives and it's so easy just to put everything on the back burner for a bit and say, "You'll get to it." It's a classic thing with property, the negative noise that comes through and it's very easy to fall within that and just say, "I'll do it later," rather I'd be more keen to take the opportunity, take the chance. Mitigate your risk accordingly and then be in a position to look back and say, "Okay, well what have I learned from that? I've actually moved forward, rather than stayed still."

Phil Tarrant: What was the catalyst you think that got you ... Obviously you had a prompt about goal setting, which was the podcast, but what do you think was the catalyst that actually made you go, "Oh, I got to get some direction." Anything in particular?

Blake: Yeah. I've done lots of reading, lots of research. Most property investors do. The common thread that runs throughout is the guys that are successful usually have a quite defined tasks or goals as to what they want to do. My general nature is that if I've set myself a task, I'm pretty damn determined to achieve it and I'll work really hard to get what I need. That's it, it is hard work. I make sacrifices where I need to, to get where I need to get, but in saying that, it's quite rewarding to be able to see a portfolio build. Go from there.

Phil Tarrant: Are you a deadline oriented sort of guy?

Blake: Yeah, a little bit. I'm a bit of a task master. Yeah, yeah. I've set myself by the end of 2018, I need to acquire two more properties and then I'll give ‘19 a break while I properly spend money on something silly and enjoy myself a little bit. 2020, I'll pick up another one.

Phil Tarrant: You're a pretty young bloke there. How old are you?

Blake: I'm getting there. 33.

Phil Tarrant: Oh, yeah? Okay.

Blake: Yeah.

Phil Tarrant: You look a lot younger.

Blake: Oh, I'll take that as a compliment.

Phil Tarrant: Should do, but you're not old, right? You've got how many properties now?

Blake: Three.

Phil Tarrant: Three, three in the portfolio. 33. What do you do for a job?

Blake: I'm an operations manager.

Phil Tarrant: Reasonable sort of income?

Blake: Yeah, yeah. Good income.

Phil Tarrant: How have you gone about creating this war chest to start investing in properties, savings or was it something else?

Blake: Yeah, definitely. I've had the benefit of living with my parents. We've got a granny flat. I live in that, pay much less rent than what a typical person would.

Phil Tarrant: Do you get your washing and stuff done by your mum still?

Blake: I'm not going to lie, yeah. It's good, there's perks.

Phil Tarrant: Excellent.

Blake: Basically with that, when I was younger I was the anti-investor. I was doing all the stuff young people do and I bought fancy cars. Did all that sort of stuff. I wanted to move out, get into property. When I bought a property, my first unit in Sydney, I had some major defect issues appear six months into it and that forced me to invest in a property to get the tax write-offs while they did the massive repairs and the special levees and everything. Once I was there, I refinanced and there was equity in the property. Things aligned and I was like, "All right, hold on, I can probably use this for something else." Got a buyer's agent, just went straight into the deep end and bought a property in Brisbane and then the equity continued to build through the initial property stacking away a lot of cash, a lot of savings. Sold off the fancy cars and all that sort of stuff and decided diverting my money into building an asset base.

Phil Tarrant: Did you reduce your debt? What did you have, car debt?

Blake: No. Well, yeah. At the time, I actually had a really good windfall off the ASX when I was younger. I tipped in a heap of cash into blue chip shares right at the GFC. I didn't know at the time and a couple of years later, I pulled out a fair bit from the stock market and did a scene from an investment point of view. Spent it on a car, but you live and you learn. I enjoyed it, sold the car off and then bought a property.

Phil Tarrant: It hasn't really slowed you down too much.

Blake: No, that's the thing. I listened to, I think it's Paul Glossop on here, and I really related to a lot of the stuff he said around ... For me personally, I've really got to enjoy the journey. So, I might not be as aggressive as some other investors. I might look back in time and think, "Damn I wish I was," but right now what I'm doing, I'm comfortable. I'm progressing at a pace that I'm happy with and I'm able to live life on my terms and try and get that magical balance. It's one of those things.

Phil Tarrant: It's interesting. Most property investors I speak to are people with considerable portfolios. They often lament about the fact that they should have done more when they could have done it and I fall into that camp as well. I'd look back and go, "I probably could have gone at twice the speed or three times the speed as I did," but there was reasons why I didn't. It's quite easy to look back saying, "Yeah, I could have easily done that financially," but when you look at it in the context of what you do, something else would have to give in order to have gone at that speed. It's not a bad problem to have, as long as you're conscious about it. If you can juxtapose that into the real world where you are today, how can you make sure that you keep that same mind set? Can I go harder? If I am willing to go harder, what is the consequence of that? It's compromise. You've got to go at the right speed.

Blake: At where I am at the moment. I just purchased in Melbourne, so it's south east in Melbourne. The dust has settled on that one, it's all done, but from a capacity and serviceability standpoint, I'm just getting my ducks in a row in the background. Trying to work out what I need to do to go forward with these next couple of properties. I'll probably turn the heat up a little bit. I might dip into some LMI if I need it. At the moment, I'm sitting at about 76 per cent LVR across the portfolio, so I'm quite comfortable, but there'll be a point in time I think where I potentially dip into the LMI territory and pick up a couple quickly.

Phil Tarrant: A lot of people don't really understand what LMI does and I've taken LMI out when I started investing quite early days. I've done a little work in the past years with LMI top businesses like Genworth and stuff, so I understand their messaging and what they're trying to do. LMI's an enabler, so it gets you into a property. You might pay a premium in terms of LMI or Lenders Mortgage Insurance in order to get the property, but what is that consequence of not doing it now and doing it six months’ time? The $4,000, $5,000 you might spend LMI, which by the way gets put into your mortgage so you don't actually cop it. It's capitalised into the loan. Stop you from seeing growth today, so you're saying that you're happy to finance about 80 per cent if you can get the finance?

Blake: Correct.

Phil Tarrant: It's getting harder, pay a little bit of LMI to give you the capacity to accelerate your portfolio and a lot of that will be waited on where you are in your portfolio growth, what's your cash flow situation, et cetera, et cetera. How do you view it all?

Blake: Basically, I wanted to build a foundation portfolio with properties that I was comfortable on an LVR basis, that I could sleep at night. When you're tipping in 20 per cent, generally your outgoings are of a lower nature because you borrowed less. That all panned out quite well. I'm about five grand out per annum in terms of pre-tax, but once all the tax benefits come in, I'm seeing about flat. For me at that point, is now that I'm comfortable, I know I need to chase a little bit more yield. I don't want to wait two, three years to get back into the market. I'm comfortable with what the properties I currently have are performing. The opportunity there is to accelerate that a little bit more, press a little bit harder and then use LMI where appropriate. I can dip into my current properties if I'm holding them at 75 per cent LVR, I can just jump into, maybe bring them up to 85 per cent.

Phil Tarrant: How many times have you re-financed your first property now?

Blake: Three.

Phil Tarrant: Three times? Okay, so you've milked it pretty hard?

Blake: Yeah, I have.

Phil Tarrant: There's three proprieties in portfolio. Let's really quickly just look at them. The first one was in Sydney. Two bedroom unit, is that right?

Blake: Sydney, yeah, one bed plus study in a west.

Phil Tarrant: Whereabouts?

Blake: Drummoyne.

Phil Tarrant: In Drummoyne? Okay.

Blake: Bought that property $570k and it's nice, Harbour Bridge view, all of that sort of stuff. It was intended as a PPR, so there's a bit of an emotional purchase involved. Then obviously we had some remediation issued and things.

Phil Tarrant: Was it quite new?

Blake: '09 build. I bought it in mid-2012. The guy lost 30 grand on it when I bought it.

Phil Tarrant: Because of the remediation that he didn't know about?

Blake: No, I think he just bought it off the plan new and I come in and bought it cheaper.

Phil Tarrant: $570k. What's it worth valued now?

Blake: It was valued a couple of weeks ago at $830k.

Phil Tarrant: You've done reasonably well out of that.

Blake: Forty-five per cent.

Phil Tarrant: Did you cop any costs associated with the repairs or maintenance?

Blake: Absolutely, yeah. They hit me with a 30 grand special levee and I felt sorry for the guys in the penthouse, but 30 grand special levee hence why it pushed me into keeping the property rented out. I'll claim the tax benefits and that's still going until today. I was actually just at a strata meeting.

Phil Tarrant: Is it a building defect? Is the building getting sued or something or other?

Blake: The builder's gone...

Phil Tarrant: The builder's gone bust?

Blake: Yeah. It's pretty common. Loop hole, so he's gone bust.

Phil Tarrant: Sounds like a phoenix scheme. It just-

Blake: The thing is, it's really important to understand how the way the strata budgets are managed, because now that I'm all over it, if you look at what the sinking funds were, what the proposed sinking funds and the 10-year maintenance plans. We were signing up for a…chaos, so that's all being rectified under a new strata management.

Phil Tarrant: What's the problem with the building?

Blake: Water ingress. All the windows, they're facing the wrong way in terms of the flashings or something. I'm not too technical around it. Concrete cancer in the balconies.

Phil Tarrant: On a 15, 16 year old building?

Blake: Yeah, so it's just a whole heap of things. Electrical in the basement, plumbing. All this sort of stuff. It's about a 1.2 mill with the repairs for the residential and then about 800K for the commercial.

Phil Tarrant: Is commercial at the bottom of there?

Blake: Yeah, a little bit of commercial.

Phil Tarrant: Where abouts in Drummoyne is it?

Blake: It's at the top intersection of Victoria Road and Lion's Road.

Phil Tarrant: Okay, there's a pub there on the corner.

Blake: It's opposite.

Phil Tarrant: Okay, yeah, I know where it is.

Blake: There you go.

Phil Tarrant: Okay, yeah. Getting off topic, but I'm interested. You weren't aware of this when you ... You didn't pass during the inspection?

Blake: Yeah, I did all of that. Didn't find anything. Obviously it looked great. The building looked great, it's actually a bit of a ... I'll watch out for people buying units, particularly new ones. The builders who have good track record, you've got to know what you're looking for in a strata of documents and I've learned the hard way, basically. Little bit funny about buying units from that. I'm a little bit burnt, but I either sold it and probably took a loss on it for the money from the purchase or I held onto it and got it rectified. There's a little bit of an emotional attachment to it, so I ended keeping it.

Phil Tarrant: How did the issues come to bed? Did someone just go, "Oh, something's not working." Then someone looked at it then they just found a levee of...

Blake: Water ingress into some of the apartments. The paint bubbling on the wall and stuff like that.

Phil Tarrant: How big is the block?

Blake: There is 32 residential. Probably about 15 commercial. Something like that.

Phil Tarrant: It's a headache. You held onto it. Did it effect the val, do you think, of the property?

Blake: No, 'cause they weren't aware of it when they ... When you read the vals, there's no issues with the strata titles or anything like that, so they don't look at that. The only thing they get me for on it is a little bit of road noise. Environmental factors.

Phil Tarrant: It's a good location there, you can't go wrong.

Blake: Fantastic location.

Phil Tarrant: 15 minutes into the city on the bus. The ferry down at the end of Lion's Road, I believe.

Blake: Correct, yep. It's a really nice apartment. I went from there and then I was like, "All right, I've had enough of strata, I'm buying a bit of dirt."

Phil Tarrant: Number two then, next property.

Blake: I used a buyer's agent for that one and that was in Jamboree Heights. In Jamboree Heights, south west-ish of Brisbane CBD. That was a three, two, two purchase of 530 and around top of 15.

Phil Tarrant: $530k, it's up there for Brissy.

Blake: It's up there.

Phil Tarrant: You get a lot more expensive there.

Blake: Yeah, felt I paid a little bit too much for it – by about $10 or $20k.

Phil Tarrant: What do you think it's valued at now?

Blake: Well I got it re-valued the other day and it was $570k.

Phil Tarrant: When did you buy it?

Blake: That was October 15th.

Phil Tarrant: You've had that for a year and a half.

Blake: I did some work on it couple of months ago, added a fourth bedroom, converted the formal dining to a fourth bedroom.

Phil Tarrant: Did that give you the uptake in valuation, you believe?

Blake: Got the val in the rent.

Phil Tarrant: In the rent?

Blake: Yeah. The value is, obviously it's a volume game there and I think when I read the val, they still marked it as a three bed. Had the old red cross on it, so if I get it re-valed soon, I'm expecting it to come in at $570k. That's what it's come in recently at. $570k…

Phil Tarrant: What's the rent you're getting on it?

Blake: 520 a week.

Phil Tarrant: Okay, up from?

Blake: 500 when I purchased it.

Phil Tarrant: You added $20 bucks a week?

Blake: Yeah.

Phil Tarrant: Because you put another bedroom in?

Blake: Yeah, that cost me about $2,600 bucks to do that.

Phil Tarrant: Just a wall and a door?

Blake: And a built in.

Phil Tarrant: And a built in. It's got a window?

Blake: Yeah, it does and a fan. It's a proper bedroom.

Phil Tarrant: Good. That hasn't diluted the living area?

Blake: No, it worked out quite well. It was pretty good. The buyer's agent, when he flicked it through to me said, "Look, you can definitely do this pretty quickly. You turn it from a 3-2-2 to a 4-2-2. It's not a bad option for you."

Phil Tarrant: It's a really good thing to look for when you're looking for properties. We picked up a place. You can check it out on smartpropertyinvestment.com.au up in Berkeleyvale on the Central Coast of New South Wales. Well it happen to have a really big lounge dining room that someone knocked a wall out just so they could put some tables and chairs and have family dinners and stuff. We just stuck the thing straight up, turned it into a three bedroom straight back and it just boosted the val. They're good things to look for when you're searching for property. Second property. Third property was?

Blake: Third property was Seaford Victoria. This was something a little bit different than what I typically would do. Basically the issue with this property was I only had a 10 per cent deposit. I got my dad to go as a security guarantor on the property and then he-

Phil Tarrant: He put his equity in his property against?

Blake: Yeah, correct.

Phil Tarrant: Okay, all right. He was happy to do it, yeah?

Blake: Yeah, he was fine. Basically with that, the intent was to spend a bit of money renovation the property and get it re-valed and then release the security. Which it did, but the renovations were extensive. It's very hard to manage an interstate renovation on a tight timeline. We did it. We went down, my dad and my uncle, myself and renovated the property.

Phil Tarrant: Sorry, how much did you pay?

Blake: Property was $600k.

Phil Tarrant: $600k, okay. You bought it with a tenant in there or no tenant?

Blake: No tenant. It was owner occupied.

Phil Tarrant: Okay, so at settlement, you-

Blake: It was post-settlement, we did all the work.

Phil Tarrant: How fast after you settled did you go and do the work?

Blake: Settled at 3 PM on April the 7th and I had the bobcat in there at 3:05 PM. Chopping tress down and you name it.

Phil Tarrant: You all flew down there and got a hire car.

Blake: Airbnb and a hire car all that sort of stuff.

Phil Tarrant: How long were you down there for?

Blake: Two weeks. Then we had to come back for a few days, driving down to Melbourne for two days of work and then driving home was torture, but people were saying we were nuts and if I look back at it, I won't do it again for a while. I learned a hell of a lot through the process. I've learned there's a lot of shocking tradesman in Victoria, building boom. Everyone's the professional tradesman. We got ripped off a few times, but I managed the budget pretty well, which I was pretty happy with. We ended up spending $35k on renos, $2k on expenses and stuff like that. We got it done in three weeks, which was completely new bathroom, gutted from the sub frame up. New kitchen, ripped off all the titles, polished timber flooring, repainted, three built ins, front and back yard. The whole thing. I got it re-valed last week at $700k. It released the security. It did what it needed to do for me.

Phil Tarrant: They just sit there. What's it rented at now?

Blake: $450 a week.

Phil Tarrant: $450 a week.

Blake: It's quite low yield on that one.

Phil Tarrant: Is your dad and uncle builders or are they ... ?

Blake: Uncle is, ex-builder/posty and my dad is a senior banking executive that can seem to do lots of things.

Phil Tarrant: Did everyone take time off work to do this?

Blake: Yeah.

Phil Tarrant: It was like annual leave.

Blake: Yeah.

Phil Tarrant: Then you said, "Oh come down, do this."

Blake: Yeah.

Phil Tarrant: I'm quite interested in this. You all go down and do it. First day would have been really exciting, hard day's work. Sat down there, probably went straight to sleep. Next day went, "Let's go get a schnitzel. Or a palmer down there and have a couple beers." When did you go, "This actually sucks?"

Blake: 6 AM on the third day. We took the bathroom floor off, we had a very tight schedule. Subfloor, waterproofing, tiling, all that sort of stuff lined up. Once we took off the bathroom floor and we saw that there was no drainage, electricals are screwed, we were like, "All right, things are going to get pushed back." I'm a bit of, like I said before, a bit of a task master and I'm just trying to work out the time slots and how things are working. I was like, "All right, this is going to be a headache." My dad's the eternal optimist, "Well get it done, don't worry about it. It's fine."

Phil Tarrant: When did morale hit its lowest? Was it then or was it after that?

Blake: It was pretty low I'd have to say throughout the whole thing. We managed the budget pretty good. That was fine, if you're going to spend the money, you want quality work and you want the right finish. In the back of my mind, it's just a rental property, get it to rent. Throughout the process, it was just one road block after another, shocking tradesman that really made things really difficult.

Phil Tarrant: By shocking, what do you mean by shonky?

Blake: I've experience just about every level of shonkiness.

Phil Tarrant: What's your top five tips of spotting a shonky tradesman?

Blake: If they're readily available, then they're probably not that great. Good guys are flat out booked. Then they typically charge more, so you get what you pay for. I had one guy come in to tile the kitchen splash back and basically it was a dog's breakfast. When I came back from Bunnings with a trailer full of stuff, said to my dad, "Did this guy leave? He's demolished the kitchen. He's got to come back and fix it." The problem was he used brick mud, so the tiles were already set. We just re-Gyprocked the whole area. We had to cut all the Gyprock out. I've got another guy to come and do it.

Phil Tarrant: Did you pay him?

Blake: No, I didn't pay that guy. The other guy came to fix it while we were back in Sydney and he took my money and my keys. He was non-contactable, so we drove back down to Melbourne to fix everything and we had no keys and $500 missing and no work done. We had to break in through the back door.

Phil Tarrant: Properly, you just got ripped off.

Blake: Yeah, got properly ripped off on that one. It's just one thing after another and you just want to get it done well at that stage. You're just like, "I want to get the damn thing done and move off."

Phil Tarrant: What sort of hours are you doing, do you reckon in a day?

Blake: Well we're starting at 6:00 and most nights we're finishing at 9:00.

Phil Tarrant: Did you Airbnb right near there? Could you walk?

Blake: 15 minutes. We were at Mount Eliza.

Phil Tarrant: Did it ever kick off between the three of you? Did you get pissed off at each other?

Blake: Surprisingly not. My dad and I clashed a little bit and stuff like that. We had a little bit of trouble, but typically not what you would expect. We got through it pretty smoothly.

Phil Tarrant: That's good.

Blake: Considering.

Phil Tarrant: How'd you thank them? Say, "Oh, thanks for taking three weeks off work."

Blake: I paid my uncle. I gave him some cash and he had to work out what I needed for my dad.

Phil Tarrant: You owe your dad?

Blake: Yeah, I owe him.

Phil Tarrant: Fair enough. It's good. Lessons learned after the third property.

Blake: Lesson learned after the third property. If it's been a renovation attempted, beware. Buyer beware, particularly if the renovations look half cooked. There's usually more than meets the eye once you start pulling away some stuff. I tried to get access pre-settlement, but they wouldn't budge. That would have helped a lot. Buying in a hot market usually means that you've got less opportunity to flex contract conditions and things like that. We sort of had to do what the vendor wanted to secure the property. If I could do it again, I would have been more forthcoming with what I wanted. He wanted to release the deposit early, but wouldn't let me into the property. I was like, "It doesn't work like that. You give and take." I think just understanding basically what you want for the outset for the property, what you're prepared to part with, in terms of the cash position and renovating's hard work.

Phil Tarrant: Were you satisfied then? Did you sit back at the end of it and go, "You know what? That's pretty cool."

Blake: I was satisfied when the val came through. I thought it had come through, I got one val at $670k from the original valuer and then I had another one come through for $700k. As long as it came through at that, I was satisfied that what I needed to do was done.

Phil Tarrant: You manufactured $80,000 in?

Blake: Yeah. I bought it for $600k, spent $35k and got $700k out of it.

Phil Tarrant: You manufactured $100k, less your cost of $35k.

Blake: Correct.

Phil Tarrant: Plus two for expenses. Between settlement and getting it re-valed, how long was that?

Blake: Three weeks.

Phil Tarrant: You added $100 grand in equity in three weeks’ time?

Blake: Yep.

Phil Tarrant: Which often is the case. Normally if you go a reno, you need to wait a little while because the valuer will go, "No. You just bought this."

Blake: That was the problem. My broker was saying they don't like the re-val so early. You've got to walk them through. I went down and I had a little portfolio to set the valuers through. One of them didn't care, they just whizzed around and two of the others actually physically measured the dwelling size and I took them through the property.

Phil Tarrant: You sold them.

Blake: I tried. That was the intent.

Phil Tarrant: $100 grand you've manufactured in equity, less $37 grand in hard cost.

Blake: Correct.

Phil Tarrant: Less three weeks of holy cost. I call that a month.

Blake: Correct.

Phil Tarrant: At $450 a month, I call that another $1,800 bucks.

Blake: Correct.

Phil Tarrant: Plus your sweat equity and what you had to sort out and take annual leave. You've been paid pretty well for three weeks work.

Blake: Yeah, absolutely. I think it did what it needed to do. It unlocked the property, got me to 80 per cent LVR and the way I managed a lot of the invoicing and a lot of the builders and stuff like that was being really clear with them. If this is a repair, i.e., you're fixing the back yard and re-leveling, doing all that sort of stuff, I need it marked as that. If it's a replacement for wardrobes, then fine. I did some rough calcs. I got about between $4 and $7k as a tax piece.

Phil Tarrant: Well it's been hard, because it's probably a question for a quantity surveyor.

Blake: They're going in next week.

Phil Tarrant: All the scrapping of the assets within it gets a bit complicated, because it needs to be a rental property, prior to you doing the work on it.

Blake: It was advertised for rent, so I made sure I got the leasing agent to put it up for rent. She's done all that for me.

Phil Tarrant: That's a really important point. If anyone listens to this is going through this process, before you start doing anything, make sure you speak to your accountant or speak to a depreciation guy, because they'll actually give you the idea. You get a lot of value out of this. If you pulled out kitchens and bathrooms and carpets and light fittings and all this sort of stuff. This is going to change moving forward with the budget, but it's in price with that.

Blake: I think that's the thing behind the scenes, was before I went live with doing the renos with the property, I had meetings with the accountants, the property manager, all that sort of stuff, so I knew exactly where I stood.

Phil Tarrant: Sensible. The fourth one, is it in the bag yet or is it-

Blake: No it's not. I'm looking now, I thought I'd give my fiancee a bit of a break from property, 'cause that's all she hears from me. I am looking and I'm trying to work out. It's going to be a 6 per cent gross yield minimum. Probably $450k. I'm just trying to work out what I do.

Phil Tarrant: Where and how and when.

Blake: Yeah, Brisbane's on the radar and I know that like the land tax threshold has got a bit more room in Brissy. I won't be going to Melbourne for a little while again. Scarred from that, but Brissy looks like it's on the cards.

Phil Tarrant: Blake, man, I've really enjoyed the chat. What I'm going to do, we've never done this before. It's a first for my property investment show.

Blake: There you go.

Phil Tarrant: I'm going to allow you to give yourself a verbal letter to Blake in a year’s time.

Blake: I feel like I'm being the guinea pig.

Phil Tarrant: Talk to yourself mate, because if you find yourself wavering as you get on this path of being a property investor, you can press play on this and you can remember what you told yourself.

Blake: All right.

Phil Tarrant: Talk to yourself.

Blake: What I'll put to is, how about we'll set something in the diary for, say mid '18. When I would have acquired another property by then. I would have renovated my Sydney property as well. So I'm going to put that both on that cards, with the objective being to unlock further equity for a fifth. I'll be hunting again for another property on the back end of 18.

Phil Tarrant: All right. That's you, mate. Just talk to yourself.

Blake: One acquired by mid '18 and another on the cards for back end of '18.

Phil Tarrant: What do you think? Adam's our AV guy, he’s nodding his head.

Blake: Good plan? All right good.

Phil Tarrant: Good plan. Good one, Blake. I appreciate you sharing your story. You've been very frank and honest and accommodating, so I do appreciate it. I'm sure our listeners do as well.

Blake: Yeah, no worries.

Phil Tarrant: It's great. Remember check out smartpropertyinvestment.com.au, or the other podcasts are there, plus a whole bunch of articles we write up around them. Plus plenty of other stuff including our portfolios. Go and check it out. One thing you can do for me, if you can, can you please, if you're listening to this, just leave a review on iTunes, just saying how much you love it obviously. Five stars is good, but if you've got any feedback as well, please do let me know. You can email the team [email protected] and I'm sure Blake, you're a testament to the fact that we do get back to you and stuff happens.

Blake: Absolutely.

Phil Tarrant: Get in contact if you want to get on the show. We'd be happy to have you. Maybe look at all the social media stuff. You can follow me if you'd like on Twitter, @PhillipTarrant. See what I'm up to. Other than that, I think that's it for this week. We'll see you next time, bye bye.

Disclaimer: The information featured in this podcast is general in nature and does not take into consideration your financial situation or individual needs and should not be relied upon. Before making any investment, insurance, tax, property or financial planning decision, you should consult a licenced professional who can advise whether your decision is appropriate for you. Guests appearing on this podcast may have a commercial relationship with the companies mentioned.

 

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'How I overcame dodgy builders to manufacture $100k in equity in less than a month'
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