Getting double-digit returns while filling the hole in the market

by Ian Ugarte | 23 August 2018
1 minute read

Getting double-digit returns while filling the hole in the market

August 23, 2018

Have you ever wondered how you can get double digit-returns from residential property and at the same time fix the housing need in the country?

There is no time like now for you to do this, and at the same time alter the long held public perception that property investors are the ones who drive prices up in our housing market. There are unused policies across the country that have huge incentives to attract investors to create double the income from half or quarter of the property.

Every state in the country has their own regulations that allow you to take existing or build new stock to produce smaller housing within the same house. Micro apartments that can have their own bathroom, their own kitchenette, living area and bedroom that renters will take up every day of the week. On top of that, there are land tax exemptions, reduced approval times and in some states, cash incentives for new product.

With any new change in a market there is always the unknown and uncertainty. In some markets though, when the change starts, there is an immediate uptake with the feeling that the financial business sense actually works in parallel, alongside the positive outcomes of the investment.

Never before in the social entrepreneurial landscape has it been possible to create a STRONG business outcome needing only a small change to existing properties and any new property investment whether just built or retro-fitted.


As mentioned above, the high-yielding strategies of creating smaller housing within the same house are less risky than any other property investments. At any one time, the standard investor relies on a single income from their one, single investment. Sometimes they’ll have two incomes because of a secondary dwelling, or the granny flat strategy, and granny flats are sooooo 10 years ago.

The issue is that, when a tenant vacates a property, there is zero income with the same costs, which is very damaging to an investor.

Use the high-yielding strategy and there will always be at least 80 per cent of the income and most of the time 100 per cent of income which is actually 200 per cent of the standard property next door. Same property but different result!

The governments (local and state) of this country can no longer afford to produce housing for those people that need it the most, those people who just want to get ahead and buy their own property. Instead of racking up extra debts, the governments have produced policies that give great incentives for you to produce amazing outcomes for your early retirement from the work force.

When the cost of hotels was high, Airbnb fixed that marketplace. When bad service, body odour and shocking driving was the norm in the taxi industry, Uber fixed that marketplace.

Right now, we have a significant mismatch in the property market place. We are finding that the research and statistics clearly show that 60–80 per cent of the market place looking for rental accommodation are single or double (couple) households, yet 80 per cent of stock available for rent are three-, four- and five-bedroom houses. Massive opportunity for you to fix this marketplace!

Steve Jobs decided he would tell the market what they wanted and produced the iPhone. That market now says that we could not do without the music player with the phone added to it. Same is to be said with the high-yielding property market. Any property that is produced with micro apartments is virtually taken up immediately and with great enthusiasm with double-digit rental returns.

The answer to the social housing market and associated services is not the job of the private investor. That is provided for by government social housing, not for profits (NFPs) and the community housing providers (CHPs). What has happened in the last 20 years is that wage growth has not kept up with the demands of the cost of housing, the public housing maintenance program has been reduced, resulting in a portfolio that is in disrepair and public debt that has not been paid down.

Pressure is now increasing on the bottom of the market to the point that one-third of those people on the social housing waiting list should not be there. Housing costs have increased significantly and they have been caught in the threshold. With a waiting time of 10-20 years to access a standard two-bedroom house, the outlook for any positive outcome has been bleak until now!

The opportunity to create rental returns that fix a housing affordability issue, break the welfare dependency cycle and at the same time make significant profits and cashflow without government grants must be taken up by the early adopters. With their increased debt, government has realised that they can no longer afford to continue to provide social housing and instead have created policy to allow for the private market place to intervene.

This is all well and good as long as these policies are advertised to entities other than CPHs and NFPs. That is why we are ensuring that the mum-and-dad investor is aware that they are the fix to the housing affordability issue.

Maybe you are an investor that has not taken the plunge because you don’t want to create unaffordable outcomes for renters; at the same time, you do not want to lose money. No better strategy adopts the neutral cash flow strategy than by reducing rent below market to allow your residents to save their own deposit and at the same time sitting on your own capital cost base increasing in value.

No one loses from these strategies!

Community is created again in Australia, you receive double-digit returns and if you choose to subsidise your resident’s rent, they save on a weekly basis. The pressure is removed from the government housing supply sector and, as difficult as it is to measure, there is a decrease in depression, less use of pharmaceutical dependence, longer life span and a happier existence.

This is an old property strategy that creates housing options with zero government funding and zero grants. It’s an investment that recycles and distributes wealth.

Getting double-digit returns while filling the hole in the market
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About the author

Ian Ugarte

Ian Ugarte

Ian Ugarte is the founder of the Australian Housing Initiative and co-founder of Small is the New Big. He is a property expert, educator, author and change maker.

He is and passionate about creating co-operative partnerships between Social Agencies, Government and Private Investors to bring back the genuine connection of community through the provision of elegant housing... Read more

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