Jillian Bullock’s third investment—an off-the-plan property in Prahran—was bought in a suburb she knew well through the help of a property investment club.
After two properties, Jillian convinced her husband to invest in Melbourne, where she spent ten years of her life.
“[Prahran is] ... just a beautiful area and it was actually where I went to high school as well, so I knew it, [and] I knew that it [has got to] go up [in value]—that was seven years ago,” she told Smart Property Investment.
For the first time in the couple’s investment journey, they bought a property off-the-plan, a strategy which most property investors tend to avoid because of the risks it involves.
They also decided to try their luck with a property investment club.
Unfortunately for them, an off-the-plan purchase and their “blind trust” to the club proved to be the perfect combination that would lead to a “craptacular” experience.
According to Jillian: “[For] the other two properties, I'd put a lot of time into lots of open inspections and … research … We [just] had some equity that we could leverage into the next property, and it was kind of like, ‘I just don't have the time.’”
“To be fair, it was probably a bit of ignorance as well, but I kind of had this particular investment property club in my peripherals for maybe seven or eight years ... so I really thought that I could sort of just blindly trust them,” she added.
Find out the lessons that the couple learned through this experience and how they plan to continue moving their property investment journey forward:
How was your experience with off-the-plan apartments?
Jillian Bullock: We went down [the block] when a lot of [the properties] had been built—sort of like a pre-inspection. The actual apartment we had wasn't finished, but we could go in other ones that were, and that sort of ticked all the boxes. We made sure we bought the one with the car space, because in Prahran, you can't park anywhere.
I thought I was doing everything right with that, [but] when it went onto the market, it didn't occur to me that the whole market would be flooded to the local real estate agents with properties to rent, so it took, like, three months to rent because there were so many.
How many properties are in that one block?
Jillian Bullock: I think there was 107 or something … It was actually three blocks altogether [all developed by the same person].
How much did you buy it for and how much is it renting for now?
Jillian Bullock: We bought it for $420,000 … I think they said the rent was going to be about $390 [to] 400 … [We ended up renting it for] $380—it's not too horrific.
[There] are comparable [properties that are now worth] either $410,000 or $420,000 … seven years later.
Back when you bought the property, did you think it was going to be valued for more than its worth now?
Jillian Bullock: We had that idea where you sort of double [the value] every ten years … We thought, "Well ... the two other properties in Sydney haven't doubled, exactly, in ten years. They've maybe doubled in 15 years …” We should have gone up half in seven years … We've got another apartment and one villa and they have sort of done that.
How will you describe a property club to budding investors?
Jillian Bullock: My understanding is that they have buyers that go out and things have got to pass a certain criteria—it’s got to be next to transport, and schools, and in growth areas … and then they also assess based on reputation … rental demand [and] rental yield.
Do they only recommend properties which are brand new and off-the-plan?
Jillian Bullock: Yes, I believe so because of the depreciation being highest.
Seeing as it was a negative experience for you, what would you tell the CEO of the property club you joined?
Jillian Bullock: I don't know if I would give him another go again, but if I [would], I would say, "Can you please give me the figures as to why you did this property [to] one of your portfolios, anyways? And then, maybe give me the figures of … everything that was offered that year so that I can see where [the investment is headed] …” [So I would know if] everything they have done was a load of garbage or whether it was just [the fact that] I picked a lemon.
What would be your advice for investors dabbling with off-the-plan investments?
Phil Tarrant: The idea with an off-the-plan apartment is that you secure a property at today's prices, [then] in 18 months or two years’ time or even longer, when it's built and ready, it's going to be worth more than what you paid for it back then.
In theory, that sort of makes sense and some ... really do well out of it, but the reality is that if it's in an area where everyone's building apartments at that particular point in time and there's an oversaturation of apartments, that obviously has negative pressure on prices and also rents [because] there's more choice and a lot of people find themselves in a spot of bother.
What normally happens then is that [you] give it 10, 20 years and there are no more apartments that can be built, the market catches up, and they start doing what they should be doing … The world's not going to end.
Can Jillian and her husband recover from this mistake?
Phil Tarrant [to Jillian]: The location that [you] mentioned sounds pretty reasonable, right?
Over time, that should be okay, and I don't think you're going to go too wrong in the middle of a marketplace, so for you, it's a matter of time.
The situation you're in right now means that it's hard for you to make that next investment because all your eggs are in this one basket, so you need to wait for time to sort of sort out and for all this property to go up in value so you can look to extract that equity and move on.
It'll sort itself, actually, in good time.
Tune in to Jillian Bullock’s episode on The Smart Property Investment Show to know more about the property investment lessons she learned at a young age from her parents, her dreams of property development, and the reasons why she began property investment.