What did this investor do when growing his portfolio was ‘impossible’?
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What did this investor do when growing his portfolio was ‘impossible’?

By Bianca Dabu
Growing investment portfolio, property investments, finance high rates

Back in February 2016, Julian Lancey was living life on the edge—holding and self-managing a six-property portfolio in an unpredictable investment landscape. Several months later, he faced one of the most common problems in property investment: The inability to secure financing due to high rates.

The property investor started his journey knowing that his ability to service his portfolio is under threat with each rate rise. However, he continued purchasing assets, keeping his costs down by self-managing and utilizing his own handyman skills for minor renovations, and devising exit strategies for when he “goes belly up”. For a while, he was reaping the fruits of his hard work, but soon enough, he found out that pushing his servicing capacity to the max doesn’t always work as a good investment strategy.

However, he continued purchasing assets, keeping his costs down by self-managing and utilizing his own handyman skills for minor renovations, and devising exit strategies for when he “goes belly up”. For a while, he was reaping the fruits of his hard work, but soon enough, he found out that pushing his servicing capacity to the max doesn’t always work as a good investment strategy.

He told Smart Property Investment: “It's interesting how, [in 18 months], much has changed and how much hasn't as well.”

“I wish I could say I've bought a couple more but I haven't. I haven't been able to buy anymore and that hasn't been a lack of my effort, so to speak.

“I've gone to banks, I've gone to brokers, and the restrictions that they've placed on investors in those past couple of years or year and a half have basically made it impossible for me,” Julian said.

Find out how Julian stayed afloat in the past 18 months, and why he could never see himself putting a stop on his property investment journey just yet:

 Why have you not bought any property for so long?

Julian Lancey: I haven't bought anything [even if] I've wanted to. I've actually had one loan approved, but it was the only one I could get approved was with a Mickey Mouse bank that nobody knows and nobody's heard of and just on the internet, and really high rates, and it wasn't worth it.

What are some of the “quick remedies” you did?

Julian Lancey: I've refinanced, which is good, so I pulled a bit of equity out. But … I guess, [the] bad news is that I haven't been able to buy a place? I guess it’s frustrating because there's been plenty of people who buy them.

Is it normal for property investors to stop buying for a while?

Phil Tarrant: I've gone through cycles in my portfolio where I haven't done anything for a little while. Well, if you bought the right properties, they go up in value.

A lot of people talk about how difficult is now to secure financing. And for our listeners who aren't really up to breast on some of the challenges facing investors right now, banks have really elevated their serviceability requirements to secure finance, so they're looking at people's ability to repay debt at 7 plus per cent, PNI. Banks have been more reluctant to give money to investors because they have caps on how quickly they can grow their investor loan books.

These are all mechanisms that have been put in place ... by APRA, the Prudential Regulation Authority, to try and slow down investor lending and I think by doing that, they're going to slow down the property market and make property more attainable for all Australians.

Where are your existing properties located?

Julian Lancey: It's all in city … Potts Point … and Darlinghurst … and Northern Beaches and Western City.

Have you seen an increase in value on any of your assets?

Julian Lancey: Yeah, definitely. It's gone crazy … I can honestly say, I'm not very good with statistics … but I just turned 40 a couple of weeks ago and if I sold all my properties, I'd be a millionaire.

That's a wonderful feeling to know—that in my life I've never been given anything when it comes to handouts when it comes to family or government, or stuff like that. To turn 40 and think, ‘Oh wow, I've hit a million bucks,’ that's a big [achievement].

I'd probably move to Thailand and, I don't know, buy an island or something … but I'm still here working.

Are you the same property investor you were 18 months ago—hungry and passionate?

Julian Lancey: I [still] love listening to these shows and reading about it and I'm on every email list I can be. I'm just, I guess, I've hit a wall. I can't get another one … I would buy if I could buy. [But] I can't, so what can I do? I've done different things—I've renovated, I've fixed this, I've fixed that, I've refinanced [but] I just can't get another one.

Do you think there is hope for property investors who have hit a wall in terms of serviceability?

Julian Lancey: Hopefully, these walls aren't going to be there forever. Maybe they'll be gone in six months.

Phil Tarrant: Everything moves in cycles … What has happened [is that]: The dynamics in the marketplace, is in response to perceived—some would say actual—unsustainable rampant increases in property values. And you know what? Yeah, they're probably right. There's been a lot of people in the market buying property who perhaps shouldn't buy property, who are redlining it.

Will you continue investing in properties after you have passed this hurdle?

Julian Lancey: Well, there's no better investment, you know? There's property, there's shares, there's … starting your own business … and property is the best.

[This is] very frustrating. I hope, [in the future] … I can say [that] I've got a couple more places because I don't want to lose that desire. Buying property has been one of the best things in my life. I love it.

What would be your final advice for property investors facing financing issues?

Phil Tarrant: Things move in cycles as well … [There will] be a point in time when the banks are able to take the handbrake off some of the way[s] in which they lend. And let's be honest, banks want to lend money. That's how they make money.

Tune in to Julian Lancey’s episode on The Smart Property Investment Show to know more about the challenges he endured when renting out his investment to drug addicts, the importance of landlord insurance, and his insights on how to avoid making the same mistake.

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What did this investor do when growing his portfolio was ‘impossible’?
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