Renting All The Way To The Bank
ust a few years ago, the idea of Sydney-sider Ronald Gatbonton saving for a house deposit was a forlorn hope, let alone the prospect of building a multi-property portfolio. Fast forward to 2020, and Ronald and his young family have bought local and interstate property assets and are living in the beachside area of their choosing.
Even as DINKs (double income, no kids), they were priced out of Sydney’s property market and told in no uncertain terms by the banks to lower their expectations. But dedicated research and thinking beyond the save now, deposit later model, led to stunning results.
By becoming a “rentvestor“, the goal of financial security is now well on its way to becoming a reality.
In 2015, your mortgage broker said you would be unable to purchase a property in Sydney due to serviceability issues.
In June 2015 we went to our local bank, one of the Big Four, to ask how much borrowing capacity we have as a Sydney first home buyer. We were told we couldn’t afford Sydney as the prices had gone up already. We didn’t explore options as it was our first engagement with the property market since migrating to Australia in 2013. We also didn't receive any explanation or details about why we couldn't afford to buy in Sydney.
We felt disheartened that even as a ‘double income no kids’ couple, the dream of having our own home was still not possible due to the rising prices in Sydney.
Instead of giving up, how did you overcome this initial disappointment and take the plunge to invest in your first property?
I felt disheartened but it did intensify my desire to learn more about property. I started to read more, research and joined online forums for property investors. I met like-minded people and from their experience I realised that my dream was still viable.
I gained an understanding of the factors that had limited my perceived ability to finance a loan, my borrowing capacity, the various loan structures and deposit options, all of which contributed to making the dream a reality.
What strategy did you employ that enabled you to access the Australian property market?
At the start of our journey, the only strategy we knew was to save hard for a big deposit. I didn't know about leveraging or the meaning acronyms like LMI (Lenders mortgage insurance) and LVR (loan to value ratio). With a more astute insight into property finance, and with the guidance of my mortgage broker, I secured a property at 90 per cent LVR for my first investment property.
Ronald Gatbonton pictured with wife Anne and daughter, Elianah
Lifestyle is an important consideration for your family. How have you been able to live where you want to live while also purchasing the property, when you were priced out of your local market?
My wife and I love the Sutherland Shire (southern Sydney). We have everything within a 20-minute drive. It is near our work, church, family, friends, an awesome beach and is a superb community in which to raise a family. However, during 2015 we were told by the bank that we couldn’t afford the area even if we were both working full-time.
This situation prompted us to look interstate, as recommended by friends that were also into property investing. Since then we have become part of the "rentvestor" community. We enjoy the idea of renting where we want to live and investing where we can afford.
Ronald's current portfolio
|Location||Northlakes QLD||Leopold, VIC||Campbeltown, NSW|
Your second property was also an investment in a different state. What factors influenced your asset selection?
Our second purchase was in Geelong, Victoria. Diversification and capital growth were the strategies behind this asset selection. Our research showed that Geelong had potential for growth and moved at a different property cycle.
What gave you the confidence to invest outside your own backyard?
It was difficult to do due diligence interstate while working full-time. We knew that our property purchase would be our biggest expenditure. Plenty of reading and research was conducted and we also defined our risk appetite, so we knew our limits.
This helped us to make a checklist in our property search. We also engaged the service of a buyer's agent, as we felt our own efforts were not necessarily enough to mitigate the risk of a costly mistake. We were blessed to meet a quality buyer's agent that assisted us from the initial search through to final settlement. We also learned a lot from them on how we can progress in our property journey, as they are also property investors themselves.
Your most recent purchase was closer to home. Can you please share your investment goals behind this purchase and how it fits into your portfolio overall?
This was in Campbelltown (outskirts of western Sydney). Our original plan was for this to be our principal place of residence. We chose Sydney this time, as we saw a dip in the prices and felt this was the window of opportunity we had been waiting for since 2015.
Based on our previous purchases, we had been looking for capital growth signs and trends. For our Sydney purchase, we knew there was no crystal ball to predict price movements. We were aware that we have been taking a counter-cyclical approach with this purchase but since it would be our home, it fitted into our strategy. It’s a long-term hold, with the likelihood of future renovation.
What is your best advice for would-be investors looking to break into the Sydney market but not currently in a position to do so?
Our best advice for couples, families and aspiring property investors is not to be discouraged. Have faith, save, invest time in learning, and be surrounded by like-minded people that can inspire you to realise your dream. If now is not the right time for you to buy in Sydney, then consider other areas and focus on your plan.
Where to next?
We're keeping an eye on what might happen in 2020 with regards to interest rates and the wider property market. We’ll keep our finances in check, and enjoy the journey of raising a young family, increasing our investment and personal finance knowledge, and try to be an inspiration to people that surrounds us.