This Case study appeared in the Property Millionaire Factory PDF
SIMON Read has recently purchased a $1.25 million home with water views at Burraneer in Sydney. It was a property the 29-year-old says he could never have afforded if he hadn’t started investing in real estate about 10 years ago. “There’s no way, there’s no way,” he emphasises.“You can’t save the amount of money you can get through property. If you have property worth a million dollars and it goes up, say, an average of 10 per cent each year over 10 years that’s $100,000 a year and it’s compounding. You can’t save that.”
Simon, a manufacturing plant manager, owns six properties including his new home, worth approximately $3.1 million in total. Once his debt is accounted for, Simon’s net property worth remains above the $1 million mark. “The method I’ve used for building my wealth was rent and invest,” he explains. He describes his strategy simply as “buying houses, renting them out, building the equity up and then buying more houses”. Simon has sold a few properties along the way in order to take some profits and keep his portfolio on track and expanding. He bought his first property young, lived in it with mates for a year and then rented it out for six years, before selling it, thus avoiding capital gains tax. Having paid $178,000 for the property, he sold it in the early $400,000s and reinvested the profits in more property. The other properties he sold were two blocks of land in Geraldton, purchased for $59,000 and $65,000. He held them for about 12 months but decided to sell them when he saw signs of the market in the west taking a turn for the worst. The timing proved good, as the blocks sold for $104,000 and $110,000.
“You need to focus on a certain sort of property, one the tenants want to be in,” Simon advises.“I’ve always had properties with air conditioning, double garages… something which the majority of people can rent.” He adds,“I always focus on near schools or water or parks.” Simon says his goal was to have 10 properties by the time he turned 30 but he changed tack somewhat in buying his Burraneer home. He decided to seize the moment when he realised the top end of the property market was experiencing a significant decline due to the global financial crisis. He looked for the worst house in the best street focused on location location, location, choosing Burraneer due to the proximity of cafés, schools and Cronulla Beach. He’s now looking to expand his equity, pay down the debt on his home and then use it as a springboard to expand his investment portfolio again. Simon says his investment portfolio is close to neutral in terms of cash flow. He believes knowledge is a big factor in becoming a property millionaire, as investigating where and when to buy is vital. Investors need to be in the market for a considerable amount of time, he notes, but they also need to avoid buying at the top of the market and try to buy as close to the bottom as possible. “If an area has just boomed, boomed and boomed it’s not going to keep booming. Look at the areas adjacent to it or close to it. Or look at the areas that have gone down and down and down, and ask why they’ve gone down.”
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