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Young Guns II

In October’s API magazine, we feature six young guns of Australian property. Here’s more of what they have to say.

Damien Moriarty

Age: 26
Properties: 12
Home town: Darwin

On growing up on an NT cattle property:
“My brother and I, we built our first house out of steel and brought rocks up from the river and we built this property on our own. Our parents were on the neighbouring property and it’s probably something unique to the bush – building your own house as a couple of teenagers.”

On choosing a block for building houses:
“I look for blocks that have great potential for capital gain on a short to medium term – i.e. one to three years. I look at where the blocks are located, the net present value of the allotment and I just want to see if there’s future schools being zoned in the area. The master plan of the suburb is very handy – future schools, shops, the orientation of the block, is it on a busy street? All those sorts of things. Quite often, developers just cut it up on a piece of paper and they’ll price blocks the same price, so you can get rubbish blocks for the same price as good blocks.”

On the Darwin market:
“There is a massive land shortage now in the Northern Territory. Residential housing blocks are running very low. That’s where, if you have rentals at the moment in the Northern Territory you’ll do very well out of them because there’s such a shortage of land.

“There’s a profound shortage of residential blocks in town and at the same time there’s an oversupply of units. I don’t own any units because sales are decreasing but the constructions are increasing.”

On the advantages of smaller homes as investments in Darwin:
“A 130 square metre house (living area) will rent for probably only $10 to $20 less than a 150 to 155 square metre house with a garage. You’re doing a carport on the other one and it’s still getting only $10 to $20 a week less. For that extra 25 to 30 square metres you’ll be paying probably another $50,000 on your house.”

On selling vs holding:
“I’ve only taken profit on one property. The rest of them I’m keeping. My general policy is to hold as many as possible. The one property I did offload, it was just a good deal… What happened is I got the block very cheaply and then the market moved.”

On affordability and cars:
“Young blokes, the first thing they want to do is buy a car. I still drove around in my car from uni until I got my third or fourth house. I had this busted (up) 1992 white Corolla I was getting around in and the houses were going up. A few of my mates got themselves the flash car and got neck-deep in debt on the thing when they drove off the lot and it depreciated by 30 per cent. If you sold them a house for $40,000 and said, hey when I give you the keys it’ll be worth $30,000 they’d tell you that you were crazy. Why would you do it? But they do it for a car.”

On making sacrifices:
“It was almost like having a baby – the investment baby. I’ve been able to enjoy a very good quality of life I must stress… but I haven’t been able to really get away too far because I’ve had the requirement to continue to work. I can take three or four days off but I haven’t been able to take a week off for the last three years. But for me it’s worth the return. I’m willing to put in the hard yards right now to get the success.”

On rising rents:
“I’m very fortunate rents have gone through the roof in the last two to three years because it’s allowed me a little bit more latitude. If the market (hadn’t gone up) I’d probably only have four or five properties, not be going ballistic.”

On how hard it is to invest:
“It’s easier than people think but you’ve got to have discipline.”

In the magazine:
Damien reveals how he’s built up a portfolio of 12 houses while also helping to start a building company. He talks about why you can depreciate more of a house-and-land package in the NT, and unveils plans to move into developing.

Linh Vu

Age: 23
Properties: 5
Home town: Melbourne

On subdivision:
“My warning to young investors – subdivision is not an easy process, and I do know people who actually make losses when failing to subdivide, after paying a premium price for the property with subdivision potential.

“The reason I want to focus (on this) point is lately coming to the auctions, I noticed a lot of people paying crazy prices for corner blocks. I have a feeling they didn't do the numbers right.”

On research and risk:
“I guess I’m not a risky person. I like to do things by the book. I do a lot of research – so my job is to spend eight hours a day in front of a computer and I spend another four or five hours at home in front of the computer just to do research.”

On balancing work and investing:
“At the moment all of my properties have subdivision potential but I’m also looking at properties that have renovation potential. It’s just that at the moment my partner and I are both working full-time so it’s really hard for us to do renovation full-time and you don’t want to do it part-time because it’ll take a long time and you’re paying the interest meanwhile. Doing subdivision is easier for us though it’s no straightforward process.”

On her parents:
“They’re always supportive but they’re a bit concerned too because from their generation having so much mortgage debt is not a good idea. My perception of debt is not the same, so I try to convince them that don’t worry I’m doing fine. “To them, the idea of having too much debt is too risky.”

On starting early:
“I wish I could have started earlier. I remember when I was in first-year uni, houses in Footscray were selling for less than $200,000 and you cannot get a unit at that price nowadays… I think the median price in Footscray has gone up to $450,000 to $500,000 these days.”

In the magazine:
Find out why Linh’s 15th birthday inspired her to invest, why she buys only properties with renovation or subdivision potential and the challenges she faced in one of her subdivision projects.

Kenneth Soward

Age: 24
Properties: 6
Home town: Adelaide

On investors’ salaries:
“It doesn’t matter how much you earn. It’s how much you save that counts.”

On Davoren Park:
“I had a look at the yields that could be achieved out there and the yields were certainly quite a bit higher than they were in other areas of the state. Also, the prices out there are very low.”

On Northfield:
“A lot of people shy away from Northfield and the surrounding areas because of the (Yatala Labour) Prison but once the prison goes and that turns into a new housing estate and you see all of the urban renewal out there, you realise that this is an area that’s only 8 kilometres from the city. I managed to build a house for substantially less than the median price in Adelaide, which is about $300,000. It’s a four-bedroom, two-bathroom, single garage house brand new in a nice area. For $240,000 it’s a 15-minute drive from the city.”

On research:
“I keep an eye on the news and always read the newspapers. I’m looking for things like new developments that could impact property prices in the future… If there’s a new road going in that can impact values. Also, if new industries or businesses are set up that can help a lot as well. I always do research on realestate.com.au. You can research rent ranges and you can see how much houses have been selling for.”

On building new houses:
“It’s easy when you’re building to make mistakes, build in the wrong area and actually lose money. But if you check things like RP Data, you can figure out exactly how much houses are going for because sometimes houses are advertised for a price but they sell for significantly less. If you don’t do proper research, you may end up with a house that’s not valued at a price that you thought it would be.”

On mortgage brokers:
“You really do have to shop around even with mortgage brokers because not all of them have access to a whole lot of loans. The trick is if one person says no, that doesn’t mean that you should give up.”

On starting young:
“The trick is to start as young as you can. I started saving and investing when I was 17… The time to save is really when you’re living with your parents. I have my own block of land and I’m going to be living there within the next couple of years and my portfolio should be paying for itself by the time that I move out and I have my own mortgage. A lot of people in my generation tend to move out and rent a house or move out and rent with friends. Once you’re renting a place it really takes a lot of your money away and it makes it almost impossible to save for a deposit.

“It might not be trendy to live at home but sometimes that’s the only way to do these things.”

In the magazine:
Find out how Kenneth got insider secrets on lending practices – and what those secrets were.

David Stewart

Age: 24
Properties: 3
Home town: Sydney

On education:
“Don’t rely on things you hear on the TV or if someone says there’s going to be a boom in a year or whatever. Learn that type of thing for yourself because if you’re spending that much money (on a property) you’ve got to make an informed decision. You don’t just go out and buy a car for $50,000 and don’t look at all of them, but people that are spending $400,000 or $500,000, sometimes they don’t educate themselves and I just think that’s absolutely crazy.”

On equity:
“It gives me that power to do more, rather than starting (out), like a few of my friends are coupling up and looking to buy something and the prices are just astronomical, and they’re all struggling to buy a one-bedroom unit when I’m just starting to cruise.”

On renovation:
David has done some simple renovation work on his units in order to lift his rental return. He says he focused his attention on “cost-effective” measures such as painting, ripping up the carpet and polishing the floorboards, installing a new stove, and adding nicer finishing touches such as cupboard door handles and light fittings.

“I did all the labour myself to save as much money as possible.”

On talking investment with friends:
“I tend not to talk about it too much because I find that some people can get a bit funny about it. A lot of people don’t know that I would own two places. There might be a bit of jealousy, so I never tend to brag.”

On loans:
In his experience, David says it’s relatively easy to get a loan, even for amounts that you feel you’d struggle to pay off. He advises investors to do their own sums.

“No matter how much they’ll give you, you’ve just got to make sure you can pay off the loan and leave enough fat for keeping your current lifestyle.”

On budgeting:
“I get paid monthly, so coming towards the end of the month things are a bit tight. But bottom line, if I don’t have money I can’t go out and buy something for myself or go out with the boys.”

On the finer points of investing:
Over time, David’s learning more and more about what to look for in a property. When he bought the unit he lives in now, he didn’t notice it had a southerly aspect and didn’t even know that would mean it was cold.

“Right now I would just think that’s common sense but when I bought the place I was just looking at the water, which is just down the street, and I’m thinking, this is absolutely the best. “Now that I’m in a better position I would be a bit more picky about what I was to buy.”

He adds, “When I go and look at a place now, I have a checklist in my head.”

On his latest purchase:
“It’s in South Cronulla, down the road from where I live – a two-bedder with water glimpses. I plan to get a tenant in straight away and renovate bit by bit between tenants to build up the property value and increase rental return.”

In the magazine:
Find out how David bought his first property at 17, having started saving for it at 13.

Adam Drabarek

Age: 22
Properties: 3
Home town: Sydney

On buying his first property in Kalgoorlie:
“Because my income at that time wasn’t really high I couldn’t go negatively geared. The bank had said ‘we’ll only lend you 90 per cent because Kalgoorlie’s a bit of an iffy area, it’s a bit of a risk’. I said ‘that’s fine, I’ll take it’. I had enough money and it went through.”

On the property learning curve:
“Dealing with solicitors, brokers, banks, reading these bloody contracts and going through that sort of stuff, it’s phenomenal the amount of stuff you get to know.”

On buying his Darlinghurst unit the day he spotted the ad in the paper:
“I caught a cab there, met the agent there and put an offer in that morning. That’s how it happened.”

On walking a different road:
“What’s taught in school is to enter the rat race… They’re basically telling everyone: study hard, go to uni, graduate, get a good job, get married, buy a house, have children. You’ve got your mortgage, pay for your children’s school fees, go on a holiday once a year, and then retire when you’re 55 and die. In a nutshell, that’s what you’re taught and that’s what’s expected and that’s 95 per cent of the population. I think that’s absolutely ludicrous…”

On his goals:
“Ultimately the goal is that by the time I’m 25 or 26 I want to buy a unit in Point Piper (in Sydney), whether it be consolidate everything or sell off a few things so I can buy it. That’s been the goal since I started working in the eastern suburbs because I think Point Piper’s just the bomb. I think it’s just amazing.”

In the magazine:
Find out why Adam bought himself a Porsche as a reward, and why he only had it for two weeks.

Glenn Staker

Age: 29
Properties: 2
Home town: Gold Coast

On his early attitude to property:
“I just figured, ‘I’m young, I want to waste my money on cars and enjoy myself before I get a house’. I realise now that’s just an uneducated opinion because you can still do things. After I bought my house, that year I ended up going overseas on a trip to Europe. That’s also probably what put me back another year on getting my investment unit but obviously you’ve got to balance up your lifestyle compared to your financial goal.”

On budgeting:
“I worked out my budget for (my first investment property) so if it was vacant I could still scrape by. I’d probably be living on noodles but I’d still scrape by. That was my main concern.”

On rental returns:
“The rent’s going to go up over time (on my unit). I figure it’s only the first few years it’s going to be a bit tough, similar to the house. It had a long-term tenant who’s been there for four years, so obviously if he’s been there for four years he’s happy to stay there. He’s not going to complain and make me replace everything and be picky, so I was happy to leave him on that rent for the time being until I become more settled with having an investment property, because it was a really nerve-wracking time.”

On his Palm Beach unit:
“I thought of Palm Beach as being like Labrador. It’s too good a location to stay as a suburb with a bad name.

“You go three minutes down the road and you’re at Burleigh and the same unit would probably cost $350,000 or $360,000 so I’m pretty confident in Palm Beach.”

On internet property research:
“It became a bit of an obsession, especially when I was looking for my investment unit. I’d be on there everyday and I’d know every new listing that was coming on.”

On housing affordability:
“I don’t buy into that. It’s just people who are obsessed with their material trappings. They want a plasma screen TV and a nice, flash, shiny car. And of course that stuff’s going to keep you poor… I think that’s why people have trouble trying to buy a place.”

On who to take advice from:
“You get people telling you horror stories about tenants and you see those stories on A Current Affair about these terrible tenants that trash your house and never pay rent. And people tell you that if a tenant doesn’t want to pay rent then they just don’t pay it and it’s a big hassle. But what I realised was most of the people telling the horror stories had never experienced it first-hand. I tend to mainly listen to people who’ve actually experienced it first-hand rather than people talking about it on hearsay. When I actually established who’d had an investment unit before and who hadn’t, their stories weren’t quite so bad. I figure if they’re going to do a story on it on A Current Affair that’s because it’s rare and it’s news. If it was something that happened every day they wouldn’t bother reporting it.”

On using a mortgage broker for his investment unit:
“That was probably one of the best moves I’ve made because she explained everything to me and took a lot of the stress out of my hands. She helped me choose the right loan and the right institution to go with.”

On renovating his house:
“I was on a really tight budget but I’ve actually renovated the bathroom. It probably cost me maybe $1500 or $2000 and it looks like a really good job.”

“I looked up on the internet how to tile. I’m no handyman with tools but I’m learning as I go. And once again, talk to people – people told me how to tile and how to pull out a vanity and all those sort of things. I bought a mirror from Lifeline for $20 and took the frame off it and stuck it on the wall and now it looks like a nice, expensive frameless mirror.”

On sacrifices:
“I had to learn to do without the luxuries like the plasma screens and all that.”

On downgrading from a sporty Toyota Supra to an orange Hilux ute:
“A female friend of mine was over on the weekend and she said ‘that is the ugliest car I’ve ever seen in my life’.”

In the magazine:
Find out how Glenn saved for his investment property, his take on negotiation and what the future holds.