From Financial Struggle To Success
From Financial Struggle To Success
These days, Jayden Vecchio has become a successful property investor, with a portfolio of five properties around the Brisbane area. However, his journey to get to that point was certainly not all smooth sailing and there was a time when he was stretched so thin financially that he had to use an oven for a heater, as he couldn’t afford to buy one.
Jayden bought his first investment property when he was in his early twenties, but the financial burden left him struggling to make the payments. But in doing so it taught him some valuable lessons about property investment and set him on a path to success.
“Apart from almost going broke, it was a good lesson in what not to do and over-extending yourself. And especially when you’re young and you’re feeling aggressive and pretty invincible, it’s an easier mistake to make, but I could have been in a much worse spot,” said Jayden.
Initially, Jayden was drawn to property after being surrounded my some successful investors through his work in the Mortgage Department at Macquarie Bank.
His first purchase was a home to live in. After that, he really got a taste for property and wanted to expand his portfolio. But being young and quick to pull the trigger, he took out maximum gearing on a loan to purchase a run-down apartment in Alexandria in NSW.
“I thought I could quickly, renovate and flip the apartment - It was basically a converted housing commission unit, inside was really basic, had disgusting carpet, an OK kitchen and a shower curtain baked in mould that hadn’t been changed for decades. I didn't have a budget, but guesstimated it would cost around $2,500 for paint, carpet, change the shower curtains, maybe a new toilet.”
During that period of time, the RBA was raising interest rates and every 0.25% increase squeezed his ability to manage the repayments.
“I spent my nights and weekends after work painting and preparing the property. The painting I thought was only going to take 2-3 days but when I started painting, the ceiling was vermiculite (popcorn ceilings). It ended up blowing out and a month later when I had finished the painting, and the floor was a mess I had run out of money.”
With the noose tightening around his neck from rising interest rates, Jayden managed to finish the work on the property and sold it off at break even.
From that point onward, Jayden realised the importance of understanding your cashflows and doing extensive budgeting and research, before every purchase.
“In the earlier days, I was just trying to get as much leverage and borrow as much as I possibly could, which is good to a point and it works for some people. But I think in the current environment and where interest rates are and everything else, I think it’s important to take more of a balanced approach and look at a lower gearing over time and cash flow because that’s really important.”
These days Jayden recommends taking your time and analysing the different suburbs that you're going to be investing in. To ensure strong cash flows, he suggests that you look for suburbs with low vacancy rates and that have stable rental yields that are at the higher end of the scale.
At the same time, he also looks at the supply and demand situation for a given suburb. In particular, he focuses on suburbs that have a high DSR score. Anything over 50 is considered good as there are more buyers than sellers.
“It’s all about doing your research. There are so many good tools online these days that it's worth taking your time and researching. With property, it’s easier to feel like you want to take a short-cut and find the next hotspot and pay someone to do it.”
“But I think there are no shortcuts when it comes to research. You really want to understand the suburb, and what’s selling around there. It will help you make better-informed decisions. Take time to educate yourself rather than sort of trying the next get-rich-quick scheme as it doesn’t really work out. Short-term thinking’s a huge mistake.”