Stock market crash sharpens focus on property
A living testament to the adage that ‘everything happens for a reason’, 31-year-old Alex Veljancevski turned his first failed foray into the share market into an extensive property portfolio and career.
A living testament to the adage that ‘everything happens for a reason’, 31-year-old Alex Veljancevski turned his first failed foray into the share market into an extensive property portfolio and career.
The Sydneysider with an entrepreneurial flair had forged a small but successful electronics business importing cameras from Hong Kong and selling them in Australia.
But with unfortunate timing, he channelled much of his profits into the share market right on the cusp of the global financial crisis of 2007-2008.
“The shares did alright at first as the mining boom unfolded but after the GFC hit, I learned a valuable investment lesson that the good times aren’t guaranteed and what goes up can also come down,” Mr Veljancevski said.
“I came to the realisation that you should invest in quality assets with long-term value, rather than make speculative punts where you could lose your investment overnight.”
He turned his sights to the physical solidity of property in 2010.
As a 19-year-old university student, Mr Veljancevski used his remaining camera business savings to pay a deposit on a three-bedroom apartment in the Sydney suburb of Liverpool, which he bought for $342,500.
As a full-time student, his strategy was to purchase a property as close to cash flow-positive as possible.
The rental return was $400 per week, giving him a yield of 6 per cent. The rent covered his principal-and-interest loan repayments, so he was only out of pocket for utility, council and strata bills.
“This was more than manageable on my part-time wage,” Mr Veljancevski said.
“Six months later, I realised I could afford to buy another property, thanks to the strong yield on my existing unit.”
The money for this deposit came from his electronic business, which was still going strong.
Sticking to what had worked the first time around, Mr Veljancevski then looked no further than the same complex as his first purchase, paying $361,000 for a three-bedroom penthouse apartment.
With a focus on more affordable properties below the capital city median prices, he made a series of buys in 2015 and 2016 in Queensland to complement his earlier Sydney apartment purchases.
“When I first started in investing in property my 15-year goal was to be able to build my dream home by the age of 35,” the now 31-year-old said.
“I am now in the process of building a new home in Sydney that will be most likely be my forever home
“I can put this down to the investment choices I made early on that have allowed me to realise my goals.”
Mr Veljancevski’s next aim is to purchase an acreage property around the Kangaroo Valley area within the next decade.
This popular tourist destination is nestled between the Southern Highlands and NSW South Coast, about two hours’ drive from Sydney and Canberra.
“This would be a nice way to complete my overall property portfolio.”
| Location | Property details | Purchase year | Price paid | Now worth | Rent yield (or income) |
|---|---|---|---|---|---|
| Liverpool, NSW | Apartment | 2010 | $342,500 | $600,000 | $450 p/w |
| Liverpool, NSW | Penthouse apartment | 2010 | $361,000 | $650,000 | $460 p/w |
| Bethania, QLD | Freestanding dwelling 610sqm land | 2015 | $323,000 | $435,000 | $380 p/w |
| Bethania, QLD | Freestanding dwelling 710sqm land | 2015 | $307,000 | $405,000 | $340 p/w |
| Beenleigh, QLD | Freestanding dwelling Zoned for apartments 580sqm land | 2015 | $305,000 | $420,000 | $340 p/w |
| Woodridge, QLD | Freestanding dwelling Mortgagee Sale 600sqm land | 2015 | $260,000 | $370,000 | $350 p/w |
| Deception Bay, QLD | Freestanding dwelling 600sqm land | 2016 | $326,000 | $450,000 | $350 p/w |
| Deception Bay, QLD | Freestanding dwelling Zoned for apartments 910sqm land | 2016 | $370,000 | $550,000 | $430 p/w |
| Sydney (Inner West) | Principal residence being built now, 4-bed property | 2020 | n/a | n/a | Under construction |
Despite starting at such a young age, Mr Veljancevski said he not had to make significant sacrifices to build his nine-property portfolio.
“All of my properties have strong rental yields, which assists in keeping my holding costs very low and therefore it doesn’t really impede too much on my lifestyle.”
The low-stress approach to property investment has also extended to management of the properties, all of which are managed through real estate agents.
“The agents do a fantastic job and I don’t get too involved in the day-to-day running of these investments — the property managers pay for all the outgoings on my behalf and attend to ongoing maintenance," Mr Veljancevski said.
“The most time-consuming part would be organising the summary reports for my accountant at tax-time, which usually takes me about four hours every year!”
Branching out
After graduating from university in 2012 and starting work at a major bank, the decision was made to close his electronics business so he could focus on his finance career.
He has since gone on to utilise his property expertise as a lending specialist and director at Eventus Financial.
In 2014 the two Liverpool properties were valued at $600,000 and $650,000 respectively, allowing him to refinance the properties so he could access this increased equity and add to his portfolio.
However, this was in the middle of the 2013-2017 property boom. Sydney’s prices had experienced very strong gains, causing rental yields to drop.
Undeterred, he looked further afield, eventually settling on the Moreton Bay and Logan regions in Queensland.
“Rental yields were really strong — in the region of 6 per cent compared with Sydney, which at that time was around 3 per cent,” he said.
“My research also showed signs of increasing sales activity and that’s generally an indicator of future price growth, as there tends to be a lag between increased activity and property appreciation.”
Modest growth in the first few years was followed by a boom over the past two years.
The south-east Queensland property market has experienced a sustained upswing and a recent revaluation of his properties revealed they were all 30-40 per cent above the purchase prices.
Lessons learned
One of the big lessons Mr Veljancevski has learned along his investment path is there is never a right time to buy property.
It’s a lesson that served him well during the first COVID-19 lockdown. Despite the uncertainty, he and his wife snapped up an off-market property in a blue-ribbon location within the Inner West region of Sydney.
“While we were nervous, we also knew this opportunity wouldn’t come around again,” he said.
“We bit the bullet and secured a great price and we’re about to start building a four-bedroom, double-story home that has everything we have ever wanted in our own residence.”
“If it wasn’t for the investment decisions I made more than 10 years ago, I wouldn’t have been able to purchase a house in Sydney at age 30, let alone build a new property.”
For anyone looking to replicate his investment approach, these are Alex’s top 10 tips for new investors:
- It’s never too early to set your goals
- Investing in property is long-term, so you have to be patient
- There is never a ‘right time’ to buy property – rather, the best time to buy is when you are in a financially sound position to do so
- Purchase property with strong rental yields, so your holding costs are manageable
- Buy properties in areas with increasing sales activity, and those close to amenities and infrastructure
- Look for suburbs with low vacancy rates and a low supply of rental properties
- Have a financial safety net for unexpected expenses, such as emergency repairs
- Pick the right mortgage broker who will structure your investment loans so they align with your goals
- Consider using a buyer’s agent, especially if you are buying property interstate
- Have a good accountant who properly understands property investment, including the potential tax deductions.
