Investors In Focus - Ian Ugarte And Christine Manning
Financially constrained by negative gearing, Ian Ugarte and Christine Manning took a radical approach to their property portfolio - reimagining a future through smaller dwellings and affordable housing solutions.
Financial pressure from a negatively geared property portfolio drove Ian Ugarte and Christine Manning towards a niche investment strategy that now provides income and affordable housing solutions. Always keen to invest, Ian had known real estate would be a highly feasible wealth creation path but his lack of specialist knowledge became stifling. With six of their seven properties negatively geared, Ian and Christine scrambled to come up with nearly $700 each week required to cover expenses on their portfolio. It took them even further away from Ian’s aim to leave the workforce and kept him locked into a job he no longer enjoyed.
“I didn’t realise the pain of negative gearing until my new boss showed up,” Ian says.
As a head teacher in the TAFE system, his passion for education had been his life’s work until that point. When things soured, Ian realised he’d be stuck until he sorted out the cash flow problems relating to his underperforming portfolio. “I got educated regarding property investment strategy and got my headspace right,” he says. “We looked at each property and saw what we could do with them.”
Ian and Christine sold all but one of their properties and lost $300k in the process - but were left with enough money to start again. “It’s projected us to where we are today,” Ian says, of what he now can see was their best investment decision.
Since then, they’ve employed multiple strategies to add value to properties - by at least threefold or more in some situations - reconfiguring floorplans and opening dwellings up to more residents using unknown policies across the country. This involves taking the standard 4 bedroom house and increasing its capacity in a modern version of the old boarding house format, Ian says.
By focussing on contemporary fit-outs, Ian and Christine’s new portfolio is built from properties that supply accommodation to the singles and couples that make up 60-80% of our population. When they assess an investment’s potential nowadays, they want to ensure their proposal makes a positive impact on the community. “Our catch phrase in our company is that it needs to make SENSE before it makes dollars” he says. As such, they now focus on projects that provide affordable housing solutions in Australian capital cities and regional centres.
“It’s a very niche strategy that’s been missing for over 50 years,” Ian says.
Now as an industry expert in small spaces, Ian says his focus has shifted from monetary gain to providing ‘Circle of Life’ development opportunities. To this end, he’s currently working on a masterplan for a 10 hectare . The proposed development would offer a central community hub encircled by a range of living options, designed to take an individual through their various housing needs. A resident could start in a tiny house, then move through into more of a rooming situation and ultimately into a small home.
It’s a long way from Ian’s original investment goals, but provides the kind of satisfaction his life has been missing. “In 2013 I wanted to be the biggest developer the world had ever seen, until the hollow hit,” he says. “I’d chased money for 32 years of my life and had money in the bank… I thought it would make me happy but it didn’t.”
Ian says this major realisation has made it possible to create a living from property that can affect the population in a good way. By building smaller and getting bigger outcomes - both emotionally and financially - he’s started working all over the country. Now helping others to achieve their property dreams, Ian is sharing his philosophies into small housing solutions and sits on numerous government policy advisory committees.
In what he admits is a big play, Ian through his company, says they now aim to deliver 1 million self-accommodation homes across Australia - both through their own portfolio and their growing community of investors. “In the short-term they will do well, then an oversupply will happen as numbers increase and give wages growth time to catch up.”
With so much experience now behind him, Ian says while their cash flow crunch during the first incarnation of their property portfolio was tough, he wouldn’t consider it their worst investment situation. That crown would go to a subdivision - which the council inspector said was the second hardest he’d ever seen.
“And I chose that for our first one,” Ian says. The developer approved block had 16 neighbours and saw the entirety of Ian’s budget go into earthworks including a 110m driveway and sewer works four metres underground. It rained for 11 weeks straight during the project and Ian often used to sit on the driveway and cry.
“It lost us a lot of money, but I now call that my ‘property HEC’s fee’ because it taught me everything I know about subdivision,” he says.
In terms of experience, Ian admits it was an invaluable exercise that has now ended up making them money through the vast amount of knowledge they gained. It’s to this end Ian encourages new investors to educate themselves on their chosen path. “If anyone wants to invest in property, you need a mentor to educate you through the process,” he says.
“Also look at and cater for what the market requires, not what you want to live in. [Most people] don’t want four bedrooms. They want smaller houses that are more affordable so they can buy their own homes.”