Young Investor - Joey D'Agata
With not much more than $45,000 and a dream, I’ve been able to turn my initial deposit into something far greater than I could have imagined and I’m definitely not done yet.
Working full time while also attending university, full time, my goal was to earn enough money for a deposit on a property. I had always been a good saver and living at home certainly helped! Thanks, Mum and Dad.
Upon graduating from uni I managed to stumble into my very first property, a nice little apartment by the beach of Maroubra in Sydney’s Eastern Suburbs. Being 21 had its advantages, I was willing to take the risk many might have talked themselves out of!
The investment was a safe and secure one, leased to a long term tenant. To be honest, I never paid much attention to it.
About two years later a family friend was looking to sell a property they owned in Liverpool. I wasn’t sure if I had saved enough money to put down a deposit, so I approached the bank who to my surprise said they’d lend me 100% of the purchase price. What? How? I was amazed as to why they’d do that.
That was my ‘aha moment’ we so often hear people talking about. The value of the Maroubra property had increased enough that I had sufficient available equity to leverage into another property. I was able to control such a large asset with $0 of my own cash.
About nine months after I settled on my third property, which was more of a cashflow play to help balance out the portfolio as my previous two properties were taking money out of my pocket. I was looking for one that was going to put money in my pocket albeit at the potential expense of greater growth. This purchase was in Southport on the Gold Coast, and to this day I haven’t inspected the property and nor have I had a single drama. The property is paying itself off hassle-free.
At the same time, my Maroubra property became vacant and cashflow ceased for over a month as the place needed some work before I could re-let it. With the help of family and friends, I was able to pull off a tasteful and modern renovation with a very skinny budget. As a result, I was able to increase the rent and now that property is beginning to pay for itself too!
Another nine months later and weaker market conditions favouring the' buyer' in Sydney, I decided to capitalise on a distressed sale in Rockdale. The purchase was a no-brainer, being only 25 minutes from its front door to Central Station on a direct line. The growth prospects are phenomenal but more importantly, it was secured much below the market value and over $100,000 less than an identical property in the same block.
That brings us to today, where I am active in the market, looking to purchase property number five and potentially six in quick succession.
The overall portfolio is a fairly steady ship that sets me back a couple of hundred dollars per week to hold over the course of a year - before any tax advantages have been considered. This factors in all costs including rates, strata, water, management fees and any maintenance.
I don't invest to ‘negative gear’. Negative gearing is merely a tax outcome and should not be considered an investment strategy. I manage my cashflows and am forced to practice good money management and honour the notion of delayed gratification - sacrificing today for a better tomorrow.
When people ask about the amount of debt I hold, the answer often baffles them. It’s about understanding your overall portfolio’s position and cashflow. To be able to continue purchasing is one thing but being able to hold them while not impacting your lifestyle drastically is the key!
Stress test yourself, every investor must do so.
I run numerous spreadsheets that calculate the position of my portfolio and I run scenarios with what percentage interest rate changes would do to the portfolio to determine if I'd sink or float when times get tough. Understand your cashflows, have adequate cash buffers and factor in worse case situations.
You wouldn’t want to do all the hard work in amassing a sizeable portfolio only to find out you need to sell off as you cannot manage repayments. There are multiple moving parts and an investment portfolio is an ever-changing beast! Seek guidance and reach out to those who have experienced what you plan on achieving.
The end goal is financial freedom - to have choices later in life.
I don't want to rely on superannuation or government assistance in retirement nor do I want to be forced to continue working at retirement age. To be able to build achievable and sustainable intergenerational wealth is the dream that I’m working towards.