Not content with the 9 to 5 lifestyle and with an ambitious goal to retire within ten years, Nadja and Jamie Moore decided to plunge into the world of property investing and are now on their way to achieving their dreams
All it took was a two-hour conversation with a friendly real estate agent who was also an investor, to convince Nadja and Jamie, both 27 years old, that investing in property was their next calling.
After travelling overseas for two years, Jamie and Nadja arrived back in Australia in May 2007 and six months later they moved into their very first home.
“Jamie and I bought our first home, which is still our principal place of residence, for $390,000 in Canberra. At this stage our only aim was to pay it off as fast as possible. It’s what you’re raised to do – get rid of the debt,” recalls Nadja.
IP#1 - Queanbeyan, New South Wales
Purchase price: $180,000
Buying their first home introduced them to the world of real estate and they decided that buying, renovating and selling properties might be both more fun and financially rewarding than simply paying off their mortgage in weekly increments.
“I found a small 2 bedroom property online which could have done with some basic renovations,” says Nadja. “I was really interested in renovating and selling so I called a local real estate agent we’d been told knew a lot about investment properties.
Jamie and I met him and he talked to us for over two hours. He broke the figures down for us and we realised if we were to sell the property after renovations we wouldn’t be making much profit at all. The real estate agent, who was a property investor himself, showed us how his portfolio had grown over the last 10 years. We liked what we saw. He never tried to sell us any property and was simply a genuine, nice guy who was kind enough to share some knowledge with us. I guess most people will meet someone in their lives who changes things forever.”
After that meeting, their thoughts changed from renovating and selling a property to buying an investment property and holding onto it.
The couple started looking in Canberra and then eventually shifted to Queanbeyan, a small town in New South Wales, just outside of Canberra.
“It's a cheaper alternative to Canberra, the unit prices at the time were reasonable (2 bedroom units were around the $220k - $250k mark),” says Nadja. “We visited one of these places, a two bedroom unit in Queanbeyan which the owners wanted to get rid of ASAP because of the stress they had encountered due to a troublesome tenant.”
The couple saw an opportunity in this property, so in October 2009, they exchanged contracts to buy the 2-bedroom unit for $180,000 – well below what other two bedroom units were going for in that area.
To finance this purchase, Jamie had their PPOR re-valued and was able to take a $50K line of credit on it as a result. Somehow, the couple managed to leverage this measly amount to buy three properties totalling approximately $800K.
The place really needed a good clean so the couple made it their first job. They decided to paint the inside of the unit, add a new kitchen, tile over the bathtub tiles, add a new vanity and install some storage cupboards in the large bathroom.
“In total we spent $2,565.00 so our credit card bill was pretty high at one stage but we managed to pay it off before the interest kicked in.”
“Making $40k in one month for carrying out a few renovations after work made us realise that property investing was for us! The property is currently tenanted at $265 per week and we manage it ourselves. We used the $40k added equity as a deposit on our next property.”
IP#2 - Wagga Wagga, New South Wales
Purchase price: $165,000
Following their successful first attempt, the couple shifted their focus to cash flow properties.
Jamie did quite a lot of research for their second investment property zeroing in on Wagga Wagga in NSW. He looked up council websites, called several real estate agents to see how areas were doing in terms of growth and rental yields and sought advice from a fair few locals and people on online forums.
“We drove to Wagga and looked at several houses in varying socio-economic areas. We liked Wagga Wagga – it’s had consistent growth, is a growing regional hub and cash flow positive/neutral properties aren’t too hard to find. It's in an area that's undergoing gentrification.”
“At this stage, we wanted to grow a portfolio that was at least cash flow neutral – we decided that in the event we move to a single income within the next few years to start a family, we didn’t want the burden of servicing negatively geared properties,” says Nadja.
To finance this purchase, the couple borrowed 90% and then capitalised the Lenders Mortgage Insurance (LMI) on the loan. The deposit, stamp duty and other purchasing costs were paid for by the remaining equity from the couple’s PPOR.
“We aim to use as little of our own money to purchase property and if we have a choice of paying LMI or missing out on an opportunity – then we’ll pay LMI,” says Nadja.
The couple decided on a three bedroom house in an area where the Government was selling a lot of its houses. The property costs $165K and achieves $250/week rent.
IP#3 - Calwell, Canberra
Purchase price: $415,000
For their third IP, they wanted something close to home that they could eventually renovate and get enough equity to purchase further investment properties.
“The Canberra market was pretty strong and we were house hunting for about 4 weeks when we found a three bedroom house on a large block, close to schools and shops,” says Nadja.
“It was actually quite hard to get this one because there were over 100 people at the open house and about 30 people submitted an offer. It was fairly competitive but as we had done our research (through building relationships with agents and watching the market very closely) we knew exactly how much to offer.”
The couple bought this property for $415K and currently rent it for $425 per week, self-managed.
To finance it, the couple once again relied on the equity gained from renovations on IP#1 to finance the deposit and other purchasing costs. This time, they borrowed 95% LVR and capitalised the LMI.
“We're now looking at purchasing another property where we can add value through some small renovations,” says Nadja. “We avoid using our own cash to purchase investment properties - we’ve always used equity. Our overall LVR is about 90% and we plan to use any equity we gain straight away to purchase more property. We want to be fairly aggressive while we still can. We're so excited to be $1.2 million dollars in debt and can't wait for that figure to increase!
