The success story of a young property investor and what we can learn from it.
In 2015, Brisbane local Roberto Lofaro bought his very first real estate investment at the tender age of 20. Fast forward about 18 months, and the young investor is preparing to sell his current portfolio of three properties to buy his first “live in” home at 21. And he’ll have up to $150,000 to put towards his deposit. So just how did he do it?
Be disciplined and start early
Like anyone buying property, Roberto needed a deposit to get him started. As he was living with family and saving on rent, it just took a little extra discipline and about 6 months for him to come up with a $15k stake in his first investment property in Toowoomba. Sounds too good to be true? Just remember that 25 weeks rent at $600 adds up to $15,000… plus, Roberto made sure his spending habits were modest enough to meet his ambitious savings goals.
Here’s how he managed to turn one property into three in less than 18 months:
Roberto installed airconditioning and a dishwasher in his first house in Toowoomba and repainted the property himself. He had it rented out in no time. 3 months later, the property was valued $40,000 higher than the original selling price.
Using the $40k equity in Property 1, Roberto financed a similar house in Toowoomba and carried out a modest renovation to get it ready to rent. Within 5 months, he had gained $30,000 in equity from the second property.
With his extra $30k equity, Roberto bought a 3-bedroom house and made a slightly bigger investment in renovations – wooden floors instead of carpet and a partition wall to create a 4th bedroom.
In 2016, his portfolio of three Toowoomba houses is valued at around $730,000, financed by 3 loans adding up to $570,000. He now plans to sell all three properties, giving him up to $150,000 to spend on his new home in Brisbane.
Shop for a bargain in the right location
So how did Roberto know where and what property to buy? According to him, it’s the location, not the condition of the property that really matters.
“The value of a property depends a lot more on where it is,” says Roberto. “To get that increase in equity after you buy, you just need to be looking for a cheap property in a good location. If it’s near a noisy main road or railway line, you can’t change that and it’s going to affect your equity potential.”
Make your offer first, then inspect
Roberto’s buying strategy was very fast and objective. He made a spreadsheet and filled it with listings, within his budget, in areas where he wanted to buy.
“Then I would call the agent for each property and make a low ball offer,” says Roberto. “And eventually, someone would say yes, and then I’d go and inspect the property. It’s smart because it saves you from getting emotional. Because it’s not about getting the right property, it’s about buying in the right place, at the right price.”
Act fast to bag a bargain
By being ready to act quickly, Roberto could also drive a hard bargain. He’d approach each vendor with finance pre-approval, offering a fast settlement period and even waiving the building and pest inspection if it would get him a lower price.
“If the property is already listed at a cheap price, it’s because someone is having problems with it and they want it sold,” says Roberto. “If you can make it easy for them, they’re more likely to accept a lower offer.”
Work with the experts
Roberto is quick to point out the value he’s found in having expert advice during his investment journey. He advises anyone with plans to buy an investment property to find a good mortgage broker, real estate agent and accountant.
“Your broker is essential because they save you time on getting your pre-approval so you can move fast,” says Roberto. “And don’t even think about trying to manage the property yourself like I did – definitely a rookie investing mistake. It’s too much hassle to take care of it yourself if tenants get tricky. And investing in a good accountant to save you money on tax is really worthwhile.”
Are you planning to buy to invest to get started on the property ladder? Share your thoughts in the comments below.