The banks wouldn’t budge. Despite Wayne and Kirrily Bennett’s many attempts at securing a home loan for their first investment, the banks rejected their application each time.
“When [my wife and I] bought our first investment property, the banks wouldn’t lend us money,” recalls Wayne. “It took several attempts to get financial approval. The banks kept on rejecting my application due to a lack of savings history. My wife had some money set aside, but we’d used that to buy a unit in her name, so we couldn’t prove savings history or have enough savings for a deposit and cost of purchase.”
This initial setback didn’t deter Wayne. Determined to go ahead with the purchase of the Busselton property, he ended up borrowing money from family members. He borrowed about $60,000 and paid it back within the first year.
This purchase turned out to be the best deal Wayne has done and has given him the confidence to continue investing.
“We purchased this property prior to the WA mining boom and the property had a large block with development zoning and potential to develop units,” he says. “As Belmont has developed due to its proximity to Perth, all of the old houses have been demolished for new triplex developments. The mining boom, zoning and block size have increased our property value exponentially. We bought this in 2002 and have been actively adding to our investment since then.”
Now sitting on a net worth of $1.6m, Wayne and Kirrily own 12 properties in their growing portfolio.
Strategy for success
Like many accomplished investors, the couple’s success lies in their ability to spot good deals by conducting extensive due diligence.
“We identify the potential of a property by looking at the zoning, the size of the land or the demand for the property type,” Wayne explains. “We prefer to invest within capital cities because their population doesn’t fluctuate like in regional areas. We also look for growth areas in high demand. The suburb has to have low vacancy rates, good rental returns, access to public transport and, if possible, redevelopment potential in the future.”
To mitigate their risks, the couple has diversified across states and capital cities.
“We buy and hold different property types in different suburbs across Australia,” says Wayne. “With the interest rates so low, we fixed our interest rates to lock in our yields. We also prefer long-term leases, so we know we have a steady rental income across our properties. We also ensure that our properties have good property managers, have full landlord insurance and are well maintained.
“We have a mixture of units, duplexes and houses in several states of Australia. We look for properties that have potential for capital growth and good rental income. I believe if you can get into areas with growth prospects and decent yield, you will make money over time. We’ve never had a property vacant for longer than a month. We also prefer to invest in boundaries of capital cities, but we don’t let this dictate every investment. We have a few successful properties that are located in regional areas.”
Overcoming cash flow crunch
Early in the couple’s investment journey, they were heavily negatively geared; this meant they were using a lot of their own cash to hold the properties because they weren’t earning enough income to cover the costs, such as mortgage repayments.
“We achieved capital growth and legally reduced our taxable income. However, we quickly found out that we started to run out of disposable income and couldn’t continue to invest any further.
“We tried interest-only mortgage repayments, but we weren’t building enough equity. We’ve seen capital growth go in splutters and sometimes even go backwards. There’s nothing worse than having a property that costs you money and does not go up in value,” Wayne recalls.
“We’ve found that we can buy more properties by trying to get a positive or cost-neutral portfolio. We don’t stipulate that every property must be positively geared or even start positively. However, we ensure that the properties we buy are tenanted easily.”
6 interesting facts about Wayne
1 ”When we got married, my wife Kirrily wrote in my vows that I had to repeat the statement:
‘I promise to love you as much as I do our investments’.”
2 ”I spend most of my time when I’m not at work researching investments. I would like to do a course as a buyer’s agent or financial planner
3 ”We’ve only ever sold one property, and we only sold it due to some major issues. We made good capital growth.”
4 ”We plan to semi-retire in the next 10 years and ensure we can live off our portfolio
5 ”Our cheapest property was $45,000, and we still have that property.”
6 ”I have worked in the mining industry my whole life and am currently living in Newman, WA, with my wife Kirrily and our three boys aged nine, five and three."
Wayne and Kirrily’s portfolio
Top 5 finance tips
1 Use a quality accountant. You need to ensure you are getting all your entitlements and using the best tax structures.
2 Use a quality mortgage broker or financial advisor. They can help you save time and effort in dealing with the banks.
3 Ensure you are not restricted in terms of cashflow, and never overextend yourself in the hope of capital gains in the future.
4 Ensure you have researched all the cost and cashflow requirements for the property you’re buying.
5 Never give up when the banks say no.
Top 5 negotiation tips
1 Ensure you have a local real estate agent on your side prior to negotiating.
2 Don’t be scared to walk away if you’re getting pushed past your requirements. There are lots of investments out there. There’s nothing worse than feeling regret later on in a property transaction.
3 Be prepared to pay for a quality investment. There’s no use losing an investment over 1% or 2% in the long term.
4 You can negotiate with lots of property transactions, not just the purchase price.
5 Negotiate clauses in your contract once the purchase price is agreed. We’ve included furniture, access to property, less deposit to freeup cash. longer finance approval times, longer settlement dates, and so on. Negotiate the requirements that work for you.
Recent best deals
While Wayne and Kirrily’s portfolio has been performing solidly, they singled out these two deals as the most profitable
Beenleigh, Queensland Property type: 2-storey house, 3 bedrooms, 1 bathroom
Rental income: $360
“We like Beenleigh due to the size of the block and its proximity to Brisbane and the Gold Coast. It has good access to amenities and public transport,” explains Wayne.
“We purchased below the median price on a property that had been passed in at auction. The vendor was very keen to sell. I contacted our Brisbane rental manager and asked if they could view on our behalf. The rental appraisal and initial viewing came back OK. Our property manager told us that it had potential to close in underneath and increase the rental yield. The building reports came back with a few small issues. We purchased the property with conditions in the contract to have builders through prior to settlement so they could quote and prepare. The underneath of the house was closed in with another bathroom, kitchen and bedroom.
The property is now a dual occupancy with a rental potential of approximately $410 per week. We also assume this has lifted the price to the median of a 4x2 property. This would have not been possible without our property manager working on our behalf.”
Slacks Creek, Queensland Property type: 3x1 gated townhouse
Gross rental yield: 8%
“The complex has a very low vacancy rate. Again, we purchased under the median house price of the suburb and below the median of the other townhouses in the complex,” Wayne says.
“The property is currently returning 8% on the purchase price and also has a long-term tenant in place. This property has strata fees and more costs, so we always chase higher returns for this type of investment.
“We will continue to hold these investments for the long term as they are a good fit for our portfolio. “We would like to secure a house or property investment in every Australian state. We are keen to continue to add to our portfolio and diversify by property type and location.
“We are currently researching our next investment and will be busy finding the asset that suits our criteria. We believe that a property must suit our investment goals first, then locations second.”
Lessons learned
One of the biggest lessons Wayne and Kirrily learned was how important it is to engage a good property manager early on.
“We had tenants move in, only to find out that the rest of their extended family also moved in not long after. We live remotely from all of our investment properties and rely on our property managers. Property managers are your eyes and ears and your contact point for any issues. We have had agencies that turn over property managers, and every time you contact them there is somebody new that doesn’t know your property. We have agents that are never contactable,” Wayne recalls.
“We’ve learned that the best thing for your property is to have the best property manager. We have started to engage a quality property manager prior to even looking at properties. We would spend as much time researching property managers as investments. A good property manager is worth their weight in gold,” Wayne explains.
“We found that selling agents don’t work for the buyer and will tell you anything to get a sale. It’s always good to have a local agent on your side. Most quality property managers will assist you with all your purchasing steps as they know they will get the property to manage.”
Top tips for making money in the current market
1 Research the best properties that suit your requirements. Ensure you understand all that you read and, if not, clarify it with a professional.
2 Research the best interest rates; we have recently reduced our loan interest rates by doing some research. Ensure you have the best rates that suit your requirements. Don't be scared to refinance - it can save you thousands.
3 Research the best insurance. We have lowered our insurance bills across our portfolio with three phone calls. One of the calls was to notify our current provider they had lost our business. You can significantly reduce your cost base by shopping around.
4 Access your equity. You can borrow against your equity and may be able to borrow more than you know.
5 Don't rush in. You're better off waiting for the right opportunity than overpaying or buying the wrong property.
Top 5 property management tips
- Research your property manager prior to engaging them and signing a contract.
- Ensure you have a quality property manager
who understands your requirements and is working for you.
- Build a relationship with your property manager.
- Ensure your property manager is doing all their duties.
- Give your property manager some control. You need to trust your manager.
