Fear of the unknown means that taking that first step into property investment can often be the hardest part of an investor’s journey. That was certainly the case for solo investor Cathy Pihir. She had long believed that property was an excellent investment option. Yet, even after deciding it was the path she wanted to pursue, she continued to suffer from ‘analysis paralysis’ for some time.
Eventually, Cathy managed to bite the bullet and purchase her first investment property. Now – less than a year later – she owns four properties, including her PPOR, and her portfolio is worth around $1.425m. Unusually, she didn’t have a ‘light bulb’ moment that lit her way. What enabled her to finally take that first step and begin investing was managing to overcome her upbringing and her own preconceptions, she explains.
Her coach, David Neradil from Positive Real Estate, played a crucial role in this. But so too did the single mum’s desire to set a good example for her two adult daughters. “I wanted to demonstrate to them the importance of financial security, of being able to provide for yourself and of investing in setting up your future.”
Growing in leaps and bounds
While Cathy has always owned properties, they have always been properties that she has lived in. After buying her first house at just 20, she subsequently owned another five in succession. The concept of renovating a property and selling it for a profit was always with her, she says. “And I have done just that with most of the properties that I have owned over the years. For example, at one point,
I owned a house on a big block. So I subdivided the property and made a decent amount of money on it.” Last year, she reached a turning point when she started thinking about her age and how many years of working life she had left before she would have to retire. This made investing more urgent and prompted her to finally take action. Taking further steps was made easier when she found out that she had a lot of equity built up in her permanent residence – an apartment purchased in 2008 for $445,000 – that she could use to invest in more properties.
The combination of knowledge and experience that she already had, plus her research, led to an interest in positive gearing. She then attended a presentation by Positive Real Estate and liked what they were saying. “When I met David Neradil, we immediately connected because we are on the same wavelength. We are both all about personal growth. With David as my coach, it really helped move things along. He taught me about where to look for property and what to look out for in a property.” With David’s guidance, and using a 20% deposit via equity in her PPOR, she made her first purchase in September 2013. It was a townhouse in Toowoomba (Queensland), which she bought for $175,000.
Moving very rapidly, she next bought an apartment in Richmond (Sydney, NSW) in October 2013, for $315,000. This was soon followed by the purchase of a townhouse in Boondall (Queensland) in February 2014, for $385,000. Both were purchased using a 20% deposit accessed from the equity in her home. Cathy says employing a borrowing strategy using the 80/20 ratio for all her properties best suited her needs.
“It meant I didn’t need mortgage insurance. It guaranteed me getting the loans without any hassles. And it also suited me being self-employed.” As all her properties were purchased so recently, Cathy believes the market value of two of these properties is still around the amount she paid for them. Her Richmond apartment was purchased at a discount and is actually worth around $320,000. She is now taking a break from active investment purchases for a couple of years. “It is just while I build up some more equity and value in my investment properties so that I can go ahead and buy some more properties.”
Taking a methodical approach
In her professional life Cathy works as a business consultant and coach. This means she is used to working in a strategic, step-by-step manner to maximise results. When embarking on her investment journey, she employed a similar approach to her research. Working with David, and some handy software, she first calculated exactly what she could spend on a property. This gave her a clear idea of what properties were in her price range.
Although Adelaide-based herself, she knew she didn’t want to buy in SA. “I take the ‘property clock’ into account when assessing where states, cities and suburbs are in the cycle and establishing whether they are on the move. For example, Adelaide is sitting at about 6pm, which is not great, while Brisbane is at about 8pm and starting to move.” This technique left Cathy interested in NSW and Queensland. Next, she looked at the vacancy rates and buyer demographics in parts of these states. Once she had narrowed her area preferences down further, she then investigated the amenities and services in those specific areas.
To get the necessary information, Cathy talked to a lot of local agents in the relevant areas. But, because agents are ultimately trying to sell properties, she also talked to property managers. “I had put together a list of questions that I wanted to find out about – which I did. But it was a very time-consuming process. It was difficult to do the research properly as well as concentrate on my own business. That was one of the reasons I wanted to get my initial investments out of the way all in one go.”
Another essential part of her research involved joining a property investment group, which was set up as part of the Positive Real Estate program. The group was treated to an array of speakers from companies like RP Data, who shared their professional expertise and advice. This proved to be a valuable tool.
Making strategic choices
Having isolated the areas she wanted to buy in, Cathy pondered a number of different strategies. Eventually, she decided to focus on new builds because of the tax benefits and depreciation possibilities that come with buying newer properties. “I liked that idea of so much being tax deductible. It was just the individual strategy which I felt would work best for me.”
The new-build strategy was reinforced by her decision to buy out of state. As she had done a fair amount of renovation work on her own homes over the years, she did consider buying properties to do them up. However, she decided it would be too difficult to achieve this properly across state borders. Cathy always knew she would buy to hold, so prospective rental returns as well as the potential for capital growth were both important to her. If a property was able to provide good prospects in both yield and growth, that equated to a positive sign for her. “I have no plans to be flicking any of my properties off anytime soon.
So good rental yields are important to me. All of my investments have yields of over 5%. That is one of the things I considered when I was making my decisions.” Now in a position to sit tight and watch the rental returns come in, Cathy has put a number of safety nets in place to protect herself. Most importantly, she has set up a buffer so she doesn’t need to worry if any of her properties are vacant for a while. “The buffer means that I never use any personal funds for payments on any of my investments. This is good as it gives you greater peace of mind. I think this is where a lot of people go wrong: they don’t set up a buffer in case of difficulties.”
She also maintains landlord’s insurance on all her properties and uses reputable property managers to take care of them. This results in significantly less personal stress and allows her to focus on her coaching business.
Learning from challenges
All Cathy’s properties are rented and, to date, she hasn’t had any problems getting tenants, or with tenants. In fact, her Boondall property was even rented out before it was completed, at above-market rent. Despite this, she has faced some challenges over the course of her investment journey. These included some bank dealings; a pushy yet unhelpful lawyer; and the occasional miscommunication.
These issues were probably compounded by the initial feeling that she was struggling with a lack of knowledge. Fortunately, she was able to use David as a sounding board and grounding aide.
“I got a little emotionally involved, even though I was working from the figures. He brought me back down to earth. I might have backed out on some of the deals if he hadn’t been there, helping with the pressure and keeping me focused on the figures.” The whole process is about personal growth in many ways. Cathy believes that investing in property is a way of bettering yourself and your prospects and moving forward in your life.
For this reason, she wishes she had started investing much earlier. She was wary of making a decision for fear of making the wrong decision, she says. If she had invested from around the age of 30, not only would she already be set up financially, but she would have been able to reap the personal benefits of the whole experience for longer.
The road ahead
Once Cathy has built up a sufficient amount of equity in her investments, she plans to buy around three more properties. This should ensure she is well positioned financially when she gets older, she says. “Like many people, when I reach retirement age I don’t want to have to just live on a pension. I want to be able to maintain a comfortable lifestyle. Property investment will help me to achieve this.”
In the meantime, she is already able to be more selective with the clients that she works with in her own business. The keen traveller is also aiming to take one good holiday a year, with a stint in Africa next on the agenda. As a single woman, Cathy is proud of what she has achieved on her own. She hopes her story can serve as an example to other single women of what they too could do.
This article was published in the June 2014 edition of Your Investment Property magazine. You can subscribe to the magazine here.
