8 Houses And A Unit Block In Burnie - 13 Properties In Under 6 Years
ot one to let the grass grow under his feet, when prolific young investor, Tim Lewinski profited $160K from the sale of his Hobart investment last November, he was keen to reinvest and put his money back to work.
Currently holding an impressive thirteen properties, this time around it was a unit block in Burnie, Tasmania that ticked all the boxes, providing the perfect next piece in his portfolio puzzle.
With a purchase price of $500k and a gross yield of 10%, the numbers simply stacked up.
Having just settled his new acquisition as recently as last week, Tim sat down with API Magazine to share the strategy and learnings behind this latest investment.
Up until now, your investment strategy has focused solely on single houses. How did purchasing a unit block compare?
It was the strong cashflow that made purchasing a unit block the perfect next step.
I have a number of foundational properties that have done well over time from a growth perspective, and now I need an investment that will significantly increase my cashflow position and serviceability in order to progress.
The unit block was an exciting way to achieve this.
What main advantages were you hoping to access through this purchase?
Obviously, the cashflow that the unit block brings was the main attraction and the biggest advantage for me at this stage in my investment career.
Also, the versatility and value add opportunities the block provides was a significant drawcard.
As the units are all on one title, I plan on strata titling each individual unit, which will significantly increase the value of the property and improve my standing from a lending perspective moving forward.
What risks did you consider before purchasing the block?
On the flip side, the fact that the units are currently sitting on one title may be a disadvantage. If I run into financial trouble and must sell all five units on the one title they would take longer to shift as the appetite isn't there from the main pool of prospective buyers.
There is also a risk of all units becoming vacant at once which would impact my capacity to service the loan.
But I strongly considered these risks before purchasing. It is essential to weigh everything up and do your due diligence before jumping into any investment.
How did securing finance on the unit block differ from your previous loan requirements?
As the unit bock included five properties on one title, the lender considered it to be a commercial property.
This meant that I was only able to borrow at 70% LVR and required a 30% deposit. While I understand that some lenders have different criteria, I believe this to be pretty standard across the board.
If the units were on separate titles, it would be more likely that a lender would consider an 80% LVR due to the reduced risk.
From the bank’s perspective in a worst-case scenario, they would be able to sell the units off individually rather than find one buyer interested in all five.
Tim's Current Portfolio
|Location||Date of purchase||Purchase price||Current value||Gross yield|
|Burnie Unit Block||2020||$500,000||$500,000||10%|
How does this investment fit within your long-term strategy?
The long-term strategy is to become financially independent via the cashflow generated by my portfolio.
The unit block is a significant step in reaching that goal.
What is your best advice to investors hoping to emulate your success?
Plan and work out the steps you need to achieve before reaching that goal and then tick them off one by one.
For example, I knew I had to renovate and sell a property to have enough of a deposit to purchase the unit block.