5 lessons learnt by a first-time property investor

Had she chosen to buy a new property, she would have qualified for the First Home Owner’s Grant in New South Wales and be exempt from paying a stamp duty worth around $20,000. However, upon multiple inspections with builders, engineers and architects, most of the new properties in the particular area she’s looking at proved to be structurally substandard.

According to the budding investor: “The quality of the developments in New South Wales were enough to make your eyes water, particularly in parts of western Sydney. I've grown up with engineers, architects and builders around me and I dragged a lot of them along to some property inspections where things didn't feel quite right.”

“There were some units where you could hear through the walls. The builder and the developer could be the same person. Some won’t even seem to abide with boundary lines. Some building sites were so messy. Some builders are liable for only six or seven years, just eager to get away.

“Just be so careful. New doesn't necessarily mean better because if it's built poorly and if the foundation of it is wrong, you're in serious trouble. That's going to come back to you at some time in the future,” she added.

The property that she ended up purchasing was a 75 sqm two-bedroom unit with a parking space.

When she saw the unit for the first time, it was tenanted by a family of five so, from her perspective, it was an ‘absolute war zone’. Some parts of the ceiling have also caved because, at some point, someone put light fittings that were too heavy.

While she was ready to walk out of there as soon as she could, a family member who had a significant building experience made her realise that everything she was worried about isn’t exactly the nightmares that she thought they were.

She said: “ I actually had my dad with me and I said, ‘Is this fixable? Or is it asbestos? Is it going to be a nightmare to fix?" He was like, ‘No, it's plasterboard. Easy fix.’ Try to just consider—is this cosmetic or is this structural?”

2. Look beyond aesthetics

Ultimately, Ms Taurian put her concern about cosmetics behind and chose a property that checks all fundamental investment requirements, including proximity to transport networks and major cities.

Dig deeper than what you can see—or smell—and inspect the structural quality of the property. As their a piping issue? Is the foundation of the building strong enough?

Ms Taurian said: “If you walk into a place that's been tenanted forever, it's going to look and smell and feel like an absolute dump, but that can get fixed. The bare bones of a place are the ones that are problematic to fix, so that's what you need to be looking at.”

“Condition is a consideration because, obviously, it needs to be livable. But all cosmetic things, you can either fix with elbow grease or through renovations down the track. It certainly shouldn't be core to your decision as an investor,” according to her.

After spending time cleaning the place as in taking care of nicotine stains, black mould and dirt, the unit became a liveable two-bedder with 70s red brick wall up, lots of space, a decent-sized kitchen and living area and good-sized bedrooms with built-ins. The package is completed with a parking spot.

Shortly after she put it up for rent, the property was immediately tenanted by an ideal candidate based on her own standards.

3. Think 'financial'

Even though she had to spend some time living in the property before putting it up on the rental market, Ms Taurian approached the purchase as an investor.

Aside from considering the location of the real estate asset, which was near transport systems and major cities, she also made sure that all of her decisions ‘made sense financially’, especially considering her plan to implement a long-term property investment strategy.

According to her: “At the beginning of that process, I wasn't necessarily sure what the outcome was going to be with it, but I always wanted it to have those fundamentals there.”

“Even someone who is super stressy like me could see past those cosmetic flaws and know that it was going to be okay. When I saw black mould everywhere I made sure that there were no water or dampness problems. I really just made sure that there are no signs of something underlying,” she said.

At the end of the day, it’s all about making sure that she will be able to make the most out of her investment without having to spend unnecessarily and eventually overcapitalise along the way.

4. Engage professionals 'across the board'

One of the most important things that helped Ms Taurian make the best decisions for her growing portfolio is her team of professionals, who guided her throughout the process—from building inspections to financial management.

“I made the decision, independent of any professional, that I was going to buy property, but I would honestly say that without those professionals, including my mortgage broker, I don't think I would have gone forward with the particular unit that I ended up buying,” she said.

As in the case of most first-time investors, the entire process was foreign and a little too complex for Ms Taurian. Had she been unable to engage professionals as early as she did, she would have had a hard time right from the negotiation part.

Having experienced eyes looking at the property and telling her it was worth her while was definitely comforting for her as an investor. Being guided by these professionals countered all the overwhelming worries that she had and helped her proceed with more confidence.

According to the budding investor: “There was a lot of complexities in terms of getting the process done in time by settlement date, negotiating with the other parties. All of these things that are pretty stock standard for a broker or for an accountant or for my solicitor even but, for me, were just so foreign.”

“If I didn't have someone saying, ‘It's pretty normal for the other side to play hardball. It's pretty normal for these applications to be held up around this time’, I think I might have just passed up this particular property.

“There were certain red flags that came up for me and the pro team said, ‘No, that's okay’, as well as certain other things that I didn't recognise and the pro team said, ‘Hang on a second. That's a red flag,’” she added.

Aside from helping her pick a good property, her team also helped her understand mortgages and select the best loan product and features based on her personal goals, capabilities and limitations.

Ms Taurian strongly advised her fellow investors to avoid going cheap on professional services. After all, with the value that they could add to your portfolio, they are certainly going to be worth their weight in gold.

5. Save, save, save

Finally, Ms Taurian encouraged all aspiring property investors to protect their cash flow and start saving as much cash as they could as early as they could. By doing so, they can enter the market sooner than later and maximise their earning potential.

She also advised doing research and due diligence way before making the first purchase to ensure that you are getting the best deal right from the beginning of your investment journey.

According to her: “I was a bit of a maniac about making sure that they were always in cash accounts with the highest interest rates. You can get a lot of introductory offers and stuff if you're clever. That really makes a difference—the compound effect is real. The principles of superannuation is compounding.”

“As much as a lot of my ability to save speaks to my privilege more than anything, I think just that principle of just tucking away everything you can and keeping your eyes on the prize is effective as advice,” she highlighted.

At the end of the day, property investment is a long-term play and, as most successful investors strongly advocate, it’s all about time in the market, not timing the market.

Tune in to Katarina Taurian's episode on the Smart Property Investment Show to know more about her journey towards growing wealth through property.