Buyer interest in $1m properties soars
The low cost of debt and high household savings are enabling Australians to buy more expensive properties, new research ...
At 27, chiropractor Wayne Hedley has successfully bought a $415,000-Gold Coast townhouse that generates more than $400 a week, busting the belief that the younger generation has been ‘priced out’ of the market. Find out how his financial team has helped him build a strong foundation for his property portfolio.
Like many young people who wanted to start an investment journey early, Mr Hedley saved his way to his first investment property, sacrificing several night-outs and vacations to save enough cash for the deposit and other upfront costs.
“The main perception is it's pretty tough and you can't do it, but it only takes a bit of sacrifice and a bit of savings. Anyone can definitely do it, especially if you look outside of Sydney,” he said.
The decisions that he has made since beginning his investment journey late last year were guided by the knowledge he has acquired through self-education and good mentorship.
Apart from utilising most of the available resources to first-home buyers, Mr Hedley also engaged experts and professionals throughout the process. For one, his buyer’s agent has helped him identify Mermaid Waters as a good investment location due to its consistent population growth and proximity to significant infrastructure. The same property professional also helped him take advantage of the renovation potential of the property without overcapitalising.
Moving forward, the budding investor will continue to rely on the knowledge he acquires from research, self-education and the guidance of his financial team to grow his portfolio and ultimately achieve his goals.
Through research and mentorship, Mr Hedley has learned to expect that his first property being negatively geared is just one of the challenges of the acquisition phase of property investment.
While it’s generating $430 in rent per week after an $85,000 cash out on deposit, renovation and other upfront costs, the asset is currently costing him around $5,000 in holding costs annually, all before tax.
As unextraordinary as it sounds, the budding investor expected no more and no less.
According to him: “I made a few spreadsheets and kind of overestimated the costs and underestimated the rent, so it's worked out better than I thought. You'll have to do a break even between the capital gains and how much it costs you to hold and I think I'm ahead so far,” the budding investor said.
Seeing how his first property purchase has worked out on his favor, Mr Hedley plans to hold this first asset long enough to be able to see it grow in value and extract some equity from it to fund his next purchases. He will also continue saving so he can build a good cash buffer for his portfolio.
Upon the conclusion of the financial year, he will engage his financial team, particularly his accountant, to crystallise his investment strategies for the future.
One of the strategies he will continue to implement is purchasing properties in affordable corridors.
In Kellyville, where he lives, properties could go for up to $1.2 million, whereas several locations outside Sydney offer affordable alternatives with the same wealth-creation opportunities.
The reality that some areas are just priced way over his financial capacity has made Mr Hedley learn to be comfortable with buying properties away from his backyard.
He said: “Borrowing capacity, I guess, kind of limits you. Sydney is not affordable but it’s certainly had a pretty good term. Right now, I can go looking into other areas to try and get that uplifted equity to keep going instead of staying in a flat market. I think Sydney's started to flatline a little bit.”
Mr Hedley will also continue to work with property professionals for the management of his assets and his portfolio.
At the end of the day, the budding investor is thankful to have made a good experience out of his first property purchase. A lot of first-time buyers or young aspiring investors are often not as fortunate—buying the wrong property and giving up property investment altogether due to drained out finances.
His advice to fellow young investors: Don’t hesitate to spend time and effort educating yourself.
Contrary to popular belief, an investment journey does not start with the purchase but with the first step you take to learn about the ins and outs of the vast and ever-changing property investment landscape.
After all, you cannot make the right decisions if you don’t know what your options are. More importantly, no two investment journeys are alike, so the path to success is the path you create for yourself.
According to Mr Hedley: “I made a good decision because I did a fair bit of research and tried to understand everything. I went different seminars, with a couple of spruikers even, just to see the difference in how they push you into either direction. Then, I can start to pick the bad advice from the good advice.”
There will certainly be bad advice out there, and the secret to avoiding them is by doing your own research and crafting your own strategy based on your own goals, capabilities and limitations as an investor.
Understand the parts and processes of property investment—from finances to management—and how it will all fit into your investment journey.
The budding investor said: “Understand the working parts of it, like how your loan works, how an offsetter works, what type of assets perform better than others. Make sure you got enough cash flow to sustain it”
“You can get all of the information and have different scenarios running through your head. Just keep it simple and go, ‘You've got time on your side. You're buying an investment that could be worth more in ten years.’
If that’s your thought process, it’s probably a good buying decision,” the budding investor concluded.
Tune in to Wayne Hedley’s episode on The Smart Property Investment Show to know more about dealing with challenges in the property market as a young investor.