If You Can't Detach From The Decision, Get Help
Entering the market courtesy of the First Home Owners Grant, two properties down Paul Bridgman needed a major rethink if he was going to have any kind of success.
Having purchased deceased estates, Paul realised he’d bought with all the wrong drivers for investment success. Ignorant of capital growth potential, he’d started his portfolio on the advice of family, friends and real estate agents: an ineffective mix of opinions that meant he soon hit a wall. Back to the drawing board - and with an intensive path towards self-education - Paul has completely revamped his strategy in order to build long-term wealth and achieve his early retirement goals.
Back in 2007, Paul moved to Australia from England where he’d spent the past few years working. Originally from New Zealand, he was at that stage a pharmaceutical sales representative, interested in property for its potential to help shore up his finances and provide a secondary income. Basing himself in Brisbane, Paul heard about the First Home Owners Grant and knew it was the way to get his foot in the door.
“For me, that sounded like free money so I jumped on board,” he says.
Paul bought a two-bedroom 1970s unit in original condition - a deceased estate with only one previous owner, just up the road from where he’d been renting with friends.
Regarding it as a stepping stone, Paul lived in it for one year before he was able to move out, find tenants and start looking for his next opportunity. That came by way of the same agent, who presented another deceased estate property in the same area.
Complete with good bones, Paul could see the three-bedroom, one bathroom 1970s era home was ripe for renovation, just as he’d done with his unit. Once rented out, he realised that his so-called ‘investor’s dreams’ were bought using owner-occupier criteria rather than looking at their true potential and future growth drivers.
“Mistake number one,” he says, “Trusting an agent as your main source of information.”
When Paul’s job took him to Sydney, high property prices meant he became a rentvestor, living where he wanted and investing elsewhere. This time around, he took no chances and made what he credits as being his best investment decision - self-education to increase his knowledge and understanding of property and its potential. Having spent much time attending property seminars, webinars, events, reading online and investment books, Paul then engaged a property investment company to help build his portfolio from that point.
“I purchased two house and land packages in different growth regions of Melbourne. Finally, some research and knowledge was put into place and it’s really paid off,” he says.
Paul had the two new properties valued after construction was complete and found they’d increased in value by 18% and 15% respectively. “Not bad in only 12 months, with both properties returning a 5.2% yield.”
The yields on all four properties mean Paul’s portfolio effectively balances itself out to be just positively geared, while the capital growth on his Brisbane investments has been far slower. His unit has only grown by about 10% in 10 years returning a 6.7% yield, while the house has grown by 38% in 9 years with a 7.1% yield. Now aiming to purchase a new property every two years, he aims to stick to his revised strategy of buying house and land packages in high growth regions (that will be positively geared).
Recently Paul has added another string to his investment bow, renting out his Brisbane unit via AirBNB. Completely self-managed, the Chermside property is only 9 kilometres north of the city and generating 50% higher returns than before, with approximately 90% occupancy. Stipulating a minimum seven-night stay has meant a lower hands-on input from Paul’s end, although as a self-employed professional he’s flexible anyway in his ability to take care of maintenance and upkeep.
A decade since his first property purchase, when Paul talks to potential investors the main thing he wants to know concerns the quality of advice they’ve received.
“You can get wildly different opinions from people that do and don’t have property in this space,” he says. “Property investment is like any other form of investment, it needs to be a financial decision.”
Otherwise, Paul warns, if investors aren’t careful, their first purchases could be just like his - bought emotionally rather than with any real strategy involved.
“If you can’t detach from the decision, get help,” he says.