One investor reveals how having tenants go into arrears and be evicted helped him build a better and stronger portfolio.
Steven Ma tells RPM where it all went wrong, and how it all went right.
“Most people would see a tenant defaulting on their rental payments as a bad thing. I saw it as an opportunity.
When the tenant in my property in Bateau Bay, NSW went into arrears and was subsequently evicted, I commenced around $20,000 worth of renovation work. Safe in the knowledge that my landlord’s insurance would cover the downtime in rental payments, and using equity gained from my first investment in Merrylands, suburban Sydney, I set about realising the property’s true potential.
It might seem risky, but soon after works had finished a new tenant moved in on a rate of $360 per week. It had originally been leased out at $300 per week. Better still, the property which I had purchased about two years before for $237,000 was subsequently valued at $320,000.
The flow-on effects from the crazy Sydney market had combined with some mid-level renovations to increase my weekly cash flow and pump more than $60,000 worth of equity into the property.
Gaining equity from a positively geared portfolio is an important component of my investment strategy and the reason I was drawn to the Central Coast in the first place. Two years ago, before things got really crazy in Sydney, I could have still afforded to buy in the city. But I wanted to build a big portfolio fast and not blow all my money on one property, so a buyer’s agent directed me to Bateau Bay. It was a market set to pick up from the Sydney swell, but with affordable entry prices.
Since then I’ve been able to use the equity from this property to help make purchases in Brisbane and regionally and I now have a portfolio of five properties.
The central coast property taught me an important lesson. It pays to look away from capital city markets. It also reinforced my strategy of buying properties that may be in need of work at a price under market value, and subsequently increasing their worth through smart renovation works.
Finally, it taught me that it’s important to start young. I’m now 29 and because I set a good strategy in place from the beginning, and surrounded myself with a strong team from the get-go, I’ve been able to build an asset portfolio without compromising on the important things in life.
My wife and I got married not long ago, but planning for a wedding didn’t mean that I had to stall my investing. I wanted to break the tradition, a lot of people think that when you’re saving up for a wedding you can’t invest and I thought that if you invest properly, if you crunch the numbers properly, then of course you can.
We live in a technological age that allows us to do multiple things at once, even from a distance. We’re planning on heading over to London in a couple of months with the aim of living there for the next two or three years. Because of things like email and phones, I can keep in touch with my property investment team in Australia regardless of where I am in the world.
Location is no excuse to avoid investing, not in this day and age. Nor is investment a reason to compromise on life experiences. A lot of people I’ve talked to about living overseas have said they loved it over there, but when they came back they didn’t have anything. It’s nice knowing that we won’t be in that position.”