Personal Portfolio | Bendigo, VIC
This property in Bendigo, Victoria, is part of the start2invest Founders’ personal portfolio. With its close proximity to schools, shops, medical facilities, and transport, this investment grade property (with a large external workshop) on a 719 m2 block has immediate appeal and offers potential for future subdivision and development.
Property Snapshot
This property is a freestanding house with 3 bedrooms and 1 bathroom and a large external workshop on a 719 m2 block, with the potential for future subdivision.
Location Snapshot
Bendigo in regional Victoria is an affordable area with a number of growth drivers, including employment hubs, urban renewal, and population growth.
Strategy Overview
The following strategies applied to the purchase: High Cash Flow, Subdivision, Renovation, and Buy & Hold.
Investment Numbers
Purchase price in 2019: $255,000
Estimated value in 2023: $500,000
Weekly rent: $430
Cash flow: +$1,275/ year
Situation
In 2019, the broader property markets had started to enter a recovery phase, supported by the Reserve Bank of Australia’s (RBA) decision to cut interest rates to record lows, which made lending more affordable. On top of this, the federal government’s First Home Buyer Scheme helped eligible first home buyers to get into the property market sooner, which also increased demand for properties.
start2invest’s founders were still in the accumulation phase of investing — and with four properties already in their portfolio, they were ready to take on more advanced properties to meet their goals.
The couple were continuing to rentvest in Sydney, though with the kids getting older, they had moved to a larger unit. Their family budget was still stretched — largely due to the costs of before and after school care, as well as pre-school. However, they were comfortably managing their property portfolio and loan repayments, with interest rates dropping and rents steadily increasing.
After refinancing and the successful purchase of their fourth property in 2018, they still had some unused equity, which they decided to use towards a deposit on a fifth property — with similar criteria, but in a different property market and location.
Goals & Strategies
The couple wanted to add another strategically located property with future subdivision and development potential (similar to their previous purchase in Caboolture). Not only this, but they were keen to secure a property with renovation potential so they could manufacture some initial growth and equity, as well as increasing their rental returns and cash flow in the future.
These strategies would help to provide more options to actively grow their portfolio in the future, as part of their overall goals to build wealth and leave a legacy.
At the same time, they knew they needed to look for a property they could buy and hold, long term. And they were keen to mitigate risk by diversifying into a new state and property market.
Solution
Preparing the finance was relatively straightforward in this case, as the couple were able to use the remaining equity release from their previous investment. They obtained pre-approval, using LMI to secure borrowing up to a $300,000 purchase value.
With investments in NSW, SA, and QLD, they turned to regional Victoria to ensure continued diversification in their portfolio. Conducting macro level research, the couple focused on identifying regional areas with larger populations that could sustain a diverse and growing economy. In particular, they were keen to find locations that had a shortage of available rental properties, a constrained supply of new dwellings, and were within two hours of Melbourne. It was important to seek out established property markets with high rental yields to support cash flow and holding costs. From there, they shortlisted Bendigo as an ideal location.
Bendigo is a vibrant regional centre with a steadily growing population of 115,000 people, drawn by the attractive lifestyle, affordability, and diversified economy (and local job opportunities). 150 km north-west of Melbourne, Bendigo is connected to the capital city via air, road, and rail (via a 2-hour trip), many locals are also tree changers that commute part-time. The city is known for its rich gold mining history, stunning Victorian architecture, and thriving contemporary art scene.
Within the Bendigo area, the couple conducted micro level research, confirming zoning requirements and building codes with council so that they could identify neighbourhoods and streets that had existing examples of subdivision or secondary dwellings. It was important to identify suburbs with zoning that could accommodate future infill development such as unit development, secondary dwellings, and granny flats.
From their previous experience, they knew they needed a larger block with an existing dwelling positioned in a way that would allow for future development (to improve cash flow), as well as the property itself being closely located to amenities and transport.
Following this, the couple secured a suitable property located at the front of a large block, with an older, cosmetically challenged house (built in 1950) with a good structure and layout (including a large external workshop). Inside, the property was in its original condition, including aged and torn wallpaper and very old carpets. However, you could hear the solid floorboards under the carpet, which had potential to add value and appeal if renovated.
After going through their usual settlement process, including negotiation, due diligence, finance, and property management, the couple completed some initial painting and repairs, totalling around $10,000. Within two weeks after it was listed, the property manager secured a tenant.
In 2022, just three years later, the couple completed a more extensive renovation. This included replastering and repainting the interior, carpet removal (to expose and recondition floorboards), updating the bathroom, and installing modern downlights.
Outcomes
The couple successfully secured their fifth investment in Bendigo, an investment-grade property on a larger block, just 5 minutes’ drive from the city centre and close to schools, medical facilities, a hospital, and retail stores. Through careful negotiation, they were able to purchase the property $30,000 below the asking price and $5,000 below market value for just $255,000.
They also achieved their goal to source another property suitable for subdivision and development, with potential for building two additional townhouse units behind the existing house.
Following their more extensive renovation, they were able to increase their rental return from $350 to $420 per week, while creating an additional $110,000 in equity. In total, they achieved a 94% increase in value and 48% increase in rent from 2019 to 2023.
In future, the couple have the option of adding a secondary dwelling or building multiple townhouses on the block to create additional income streams.
Learnings
Although their fifth property combined several strategies they’d pursued previously, the investors still learned so much from the process. For instance:
Established suburbs are key – If you can focus on an established suburb that’s close to the city centre and employment hubs, you’ll get older housing stock, but benefit from a much larger block size.
Due diligence for subdivision – If you’re considering subdividing in the future, validate any potential plans with council town planners, and be sure to check for easements and water connection points.
Negotiate discounts – When looking at older properties, you can often negotiate a good discount for any issues that require non-structural renovations.
Claim depreciation – You can claim the depreciation for any newly renovated items (bathrooms, kitchen, floorboards, etc.) as a tax deduction to help improve your cash flow.
From $255,000 to $500,000 in just four years might seem too good to be true, but the process and numbers above show that this kind of scenario is possible when you take a strategic approach to property investing.
One more thing… every little bit adds up. So, don’t skip over details, do take the opportunity to negotiate, and always look for cost-effective ways to boost your cash flow.
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