5 properties by 28 & what I learnt

Hi everyone,

I haven’t been the most active person on this forum and for most of the time, I’ve been a long time reader of this and Somersoft. Some of you I’ve met but for most, I haven’t had the pleasure

As the title suggests, I went out and bought 5 investment properties by 28, which I can say I’m genuinely proud of. This honestly would not have been possible without being a member of this forum. To say I’m grateful for the learnings, advice and people I’ve met is an understatement.

If I had my time again, I wish I had discovered these forums sooner because along my way there were a few things I could have done a lot better.

The purpose of this post is to pass forward what I learnt with the intention of helping some of the members of the forum. At the risk of this being a huge essay, I've cut a lot of details out.

Anyway, this is all about what worked for me and what I learnt along the way with each property.

Enjoy!

As soon as I could work, I was one of those kids who saved hard, squeezed every penny and at times worked a few jobs.

I never really knew what I wanted to do with my savings. A good friend of mine put the idea in my head of being a property investor and going to collect the rent directly from tenants...I thought this was a pretty cool idea but nothing ever eventuated from that.

Fast forward to when I started to work in Wagga at one of the major banks as a graduate. During that time, a colleague gave me a property investing book. That day changed my life forever when I read it from cover to cover in one night. I learnt that you could use property to build wealth outside a 9 to 5 job and I was so excited!!

This ultimately lead me to buy my first investment property:

IP 1 - Wagga Wagga NSW - 2013
Property Type: House with 3 bdrm, 1 bath and 1 car.
Price: $171K
Worth today: 200K
Rent: $230 pw

Lessons learnt:
1. Take Action
Sometimes taking action can be really hard for first-time buyers because there is so much to learn and understand. Even when you know quite a bit about the process, it can still be really daunting to just start - I know this all too well because I was one of these people. I spent a lot of time reading property magazines, property investing books and attending loads of seminars. Doing all this was a good thing but in hindsight, I did this for far too long and got ‘analysis paralysis’.
Learning:

• I should have pounded the pavement and spoke to agents way sooner.
• Let the numbers do the talking. It takes the emotion out of it and helps you arrive at a decision way easier.

2. Buying With A View Of Moving Forward
One thing I failed to recognise, is that when you're looking at building a property portfolio, you have to buy with a view that it will allow you to move forward to the next one with ease.
Unfortunately with this one, I hadn't made any value on the way in from either renovating or just buying well.
Learning:

• After all the dust has settled on the purchase, I now had to find my next property at a much cheaper price than I had previously anticipated.

3. No Significant Growth Drivers
I bought in a regional centre where there were no significant growth prospects. Compared to most regional centres, Wagga does have more going for it than other regional centres because it doesn't rely on one particular industry, it is quite diverse and it has a pretty high population.
Learning:

• The big learning I had from this, especially in hindsight now, is that when you're looking for growth drivers you have to look for things that will increase jobs and encourage people to move there.
• There were no big things that we're coming that would significantly influence prices (Like a Uni being built, Westfield or lots of multinationals chains).
• With the little cash that I did have, I had to buy something cheap and renovate for ‘sweat equity’.
• This then led me to do my first ever renovation project and boy what a project it was!

IP 2 - Orange NSW - 2014

Property Type: House with 2 bdrm, 1 bath and 1 car.
Price: $80K
Reno cost: $50K
Reval $180K at the time. Today it is worth $234K
Rent: $230 pw
This was so cheap because it had been damaged by fire about 2 years prior and had been left vacant ever since. This was one where you could literally see right inside the ppty and walk right into the dining room from the street. See below.



1. Interview potential members of your team
I didn't know any of the local tradespeople, property managers or other professionals in Orange.
I was very lucky that I knew at least one person who lived there and even more lucky that they had done many renovations themselves. They put me in contact with their builder.
Based on the quote I received, I could tell he didn’t want to do it, so I asked for 3 others that he could recommend.
Learning:

• This taught me the power of word of mouth and leveraging relationship connections.
• I then ‘rinsed and repeated’ the same process with property managers, solicitors and anybody else that could help me with the project.
• I’d then interview a string of these professionals and pick the ones who were investors or had extensively worked with them - I wanted someone who has my interests at heart.

2. Pay people to do the things you can’t
Very early on in the process with my builder, he wanted to know what he needed to do and what I was going to do. To save on costs I pretty much did everything that regular people could do. Truth be told, I was as green as they come! I couldn't erect structural beams, close the ceiling or install windows...let alone know how to work a paintbrush
Learning:

• The learning here is that you need to pay people to do the things you're not good at.
• The same thing applies when it comes to using a solicitor, property manager etc.
• Just focus on what you're good at!

3. Leveraging your property manager pre & post renovations.
Learning:

• Before buying, I got my property manager to do an appraisal.
• This helps with forecasting for completion but also can give you a second opinion as real estate agents normally provide one too.
• When I was getting close to finishing renovations, I got the property managers to look at the place a week before the builder was done and handed the keys over.
• This gives the builder enough time to fix anything that might be outstanding and keeps them accountable.
• It is much easier to get your builder to finish before the final progress payment than it is after!

To see the valuation come in higher than I thought was a huge sigh of relief. I was able to use the equity to go and purchase the next property.

To be continued...

 

IP 3 - Kingston QLD - 2015

Property Type: House with 3 bdrm, 1 bath and 2 car.
Price: $215K
Reno cost: $20K
Reval at the time was $280K. Worth today $350K
Rent: $330 pw

1. Property Forums

I took to the forums and read so much content. I took stock of what people were saying, where they were buying and I then went off to do my own research.
Learning:

• I quickly learnt that people on this forum were generally ahead of the curve when it came to property investing.
• Also, a lot of the members were either seasoned investors with huge portfolios or professionals who had serviced the industry over many years.
• Everyone had so much knowledge and what I loved most about it all, as they were willing to share it all!

2. Buying an interstate
This was a real mental challenge. I owned two properties in my own state, which I could drive to if I really had to. However, buying in another state, some 900kms away was next level.
Learning:

• After speaking with my broker about this, he asked me what would be the worst-case scenario?
• I then answered it myself by saying “well, I guess the worst case would be I fly to Queensland and do whatever needs to be done”.
• He then asked if I had good property managers, would I still need to do that?
• My answer was no.

I came to realise that if I ‘rinsed and repeated’ the learnings from my Orange property, then I would have nothing to worry about.

3. QLD contracts

What I really liked about buying in QLD, was the way that their contracts are set up to favour purchaser more. This was very different to NSW because those tend to favour the vendor.

Learning:

• In QLD, depending on the conditions, you can have a second go at reducing the originally accepted price or use a condition to exit the contract without losing your cash.
• Some common conditions include subject to finance approval, building and pest report, strata report, pre-settlement inspection etc.
• This is why QLD contracts generally give more power to the buyer - there is more flexibility.

IP 4 - Browns Plains QLD - 2016
Property Type: House with 3 bdrm, 1 bath and 2 car.
Price: $250K
Reno cost was $50K
Reval at the time was $330K - Worth today $350K.
Rent: $330 pw

1. Material issues whilst renovating

I hired a sole trader builder who operated by himself. During the renovation, he told me that one of the rooms had a lot of loose electrical cables stored in the roof from the original build. These had to be removed he told me because it was dangerous.
Learning:

• I naively took his word at face value, never questioned it and never asked for photo evidence of it.
• In hindsight, I wish I had now asked for evidence of it because to this day I don't know if that really existed or not.

2. Renovations: New or second-hand appliances?
Through renovating the 4 properties, there were a number of times I bought second-hand appliances.
Learning:

• If you can afford it, it is just way better to buy brand new appliances whilst renovating.
• Don't cheap out and buy second-hand.
• The risk with buying second-hand is it you don't know what the previous owner has done with it and the shelf life of the appliance won't be as long...plus it's not covered by warranty.

Since all the renovations, I've had a few occasions where I had to replace second-hand purchases, which just cost more money…It’s not worth it!

IP 5 - Kippa-Ring QLD - 2017
Property Type: House with 2 bdrm, 1 bath and 2 car.
Price: $328K
Reno cost was $15K
Reval at the time - never did it. Worth today: $375K
Rent: $330 pw

1. Long Term Value Add
One of the reasons I bought this place was because the large garage was legal height and had the potential for another bedroom making it a three-bedroom house. I never had the plans to convert this with my immediate reno but it was more a long-term plan.
Learning:

• My learning here was, to look for options to add value when inspecting properties.
• You may be surprised by the number of people that overlook these things and it's always good to keep this in mind when inspecting.

2. Limited floor plan in the kitchen
This house had a small-sized kitchen to work with and I wanted to make it bigger.
Learning:

• To his credit, my builder and I came up with a strategy to split the cabinets by bolting some into the ceiling and the remainder into the floor (after demolishing the old kitchen).
• This maximised space and didn't interrupt the view into or from the kitchen either.

My three biggest learnings
Throughout this journey, I've learnt way more than what I've shared here...however, these are my biggest three learnings.

1. Education and taking action

• It's all good and well to educate yourself and know the ins and outs of buying property. However, nothing truly starts, until you decide to take action.
• My recommendation is to speak to as many people as you possibly can.
• Speak to those who weren't successful, those who were successful and learn from their experiences.
• Speak to as many people as possible.

2. Relationships are keys to success

• Part of having a lot of success in anything is having good relationships (as they say, ‘it’s not what you know but who you know’).
• This transfers to property investing too. I cannot stress enough how important it is to have a ‘good team’ around you. Select an accountant, solicitor, builder, mortgage broker who all have a vested interest at heart.
• I personally went out of my way to make sure that I hired these professionals on the basis that they were property investors and they are also good at their core job too.
• This means I could lean on them for property advice but also their main job.

3. Meeting like-minded people face to face.

• The biggest learning and message that I have for anyone reading this is, you have to meet like-minded people face to face!
• When I discovered the forums, I would direct message the people who had done what I was wanting to do and asked for their time over a coffee.
• Why? So I could glean from speaking online with word limits, missed details (like this post) and emotion.
• Everyone has their own experiences and I was determined to find those pearls of wisdom.
• If anyone is serious about learning or building a property portfolio, I’d recommend doing this!

Finally, I’d like to take this opportunity to thank my mortgage broker and mentor, @Michael_X Without your guidance, wisdom and patience, I can’t imagine where I’d be today without it. Thank you so much!
Also a big thanks to @Taku Ekanayake and @skater for organising the meetups! Coming to these really accelerated my learnings and I really appreciate you guys for running these.


Thanks everyone and if you have questions, feel free to ask in this thread and I will do my best to get back to you.

Cheers,
Morgan.

 

Congratulations! You've done well! Is there an IP No6 coming any time soon?

 

Well done mate.

 

Good job! Keep it up!

 

Awesome!
What a great read. Thanks for posting the details of your purchases.

What I would add is that part of your team are also the person that gave you that book, your friend in Orange. The team isn't only the people you pay.

 

This is a wonderful and inspiring post - thank you!

 

well done @MorganHB

 

Wonderful read. Congratulations and well done @MorganHB!!

 

Thanks @skater that's really a question for my broker

 

well done @MorganHB Love the lessons, great story.

You shared the lessons relevant to each deal. But what would you say your over arching lessons are? Perhaps top 3?

 

@John_BridgeToBricks thanks very much.
It's actually towards the end of the second post but see below!

 

Thanks for sharing.congratulations and well done.

 

A good read! You did really well with the property in Orange. Your timing was amazing - I remember looking there around then and it was deinitely a depressed market - so different to now. Also, very brave to get a house in that condition.
I'm sure the Wagga house is worth a lot more than 200K now.

 

Looks like we both bought Orange at the same time, strong growth since then, can't say much for the previous 10 years.

 

This is inspiring as its my goal to teach my children to be financially free by 30, well done!

 

Gosh, when I first bought in Orange I had FOMO because it had experienced a nice blip of growth following work that happened at the mine. Did you ever end up buying in Orange?

 

Thanks Colin!

 

That Orange property is an ex-housing commission property. As most know, I've bought a lot of them in Mt Druitt area, hence how I can tell, just by a photo. I did look at Orange, at one point for similar type properties, but I wasn't confident of the abilities of PM's we interviewed, so left it alone. Plus, at the time, when we looked around the area, it looked like there were more issues, tenant wise, than Western Sydney.

How has it been performing?

 

Good Post and Inspiring. Thanks