Personal Portfolio | Orange, NSW
This property in Orange, NSW, is part of the start2invest Founders’ personal portfolio. Purchased in 2011, it kickstarted their investing journey with a low-risk property that would quickly grow in value (and pay for itself), providing a solid foundation and healthy start for the rest of their portfolio.
Property Snapshot
This property is a freestanding house with 3 bedrooms and 1 bathroom on a large, 800m2 block.
Location Snapshot
Orange is a thriving regional centre in NSW with a strong and diverse economy that offers affordability and lifestyle.
Strategy Overview
The following strategies applied to the purchase: High Cash Flow, Buy & Hold, and Minimise Risk.
Investment Numbers
Purchase price in 2011: $275,000
Estimated value in 2024: $700,000
Weekly rent: $490
Cash flow: +$3,664/year
Situation
In 2011, start2invest’s founders were looking to start their own property investing journey. As young professionals, they had saved a $50,000 deposit from their corporate jobs and had a combined disposable income of $150,000.
At the time, they could not afford to purchase a family home in Sydney, and being pregnant with their first child, they were rapidly approaching a period of reduced cash flow. So, they decided to continue renting and instead purchase an investment property in a location where they could afford to buy (rentvesting).
During this period, Australia was recovering from the Global Financial Crisis (GFC), the property markets were experiencing a downturn, and prices were stagnating. Most friends, colleagues, and “property experts” were advising to stay clear. But in hindsight, this was the best time to purchase in a market with a lot of opportunities and no competition.
Goals & Strategies
The couple’s overall goal was to become property investors, because they realised that building a property portfolio could help create financial independence, generate long-term wealth and passive income, and help to support them in retirement.
Despite being new to property investing, start2invest’s founders already had some strategies in mind. They wanted to start their portfolio with a foundational “bread and butter” property they could buy and hold, long term. Something low-risk with high cash flow, low holding costs, and low vacancies.
They already knew how critical their first or second property would be, with time in the market and compounding growth being key to overall success. And they were determined to not follow the path of most novice investors — many of whom sell within the first 5 years or get locked out of future purchases, often due to slow capital growth and highly negative cash flows they cannot service (a common scenario for apartments and off-the-plan properties, as these take a lot longer to grow).
Solution
As this was their first investment, the couple spent time building on their knowledge and personal network via books, magazines, seminars, courses, and communities with like minded property investors.
They engaged a financial advisor to help assess personal risks and set up insurances to cover future mortgage liabilities (within Superannuation to preserve personal cash flow). They also engaged an investment savvy mortgage broker to access the most appropriate loan product for their investing requirements and to help streamline the financing process.
After doing macro-level research to identify locations across Australia with strong growth drivers, they shortlisted Orange. This thriving regional centre in the Central Tablelands is 245 km from Sydney and well-connected via air, road, and rail. It’s known as the colour city — with beautiful streetscapes, leafy parks, and gardens it offers an attractive lifestyle. Most importantly, it has a strong and diversified economy thanks to local tourism, agriculture, winemaking, healthcare, education, government agencies, and mining/resources. And it appeared to be growing, with many families and professionals relocating there from Sydney and Melbourne.
Next, they conducted micro-level research at the city/suburb level to understand local amenities (shopping, transport, employment hubs, medical facilities, and schools) and identify desirable neighbourhoods and areas where tenants would want to live. They partnered with local property managers to understand the ideal property types and features that were in-demand, like fenced backyards, internal living space, heating/AC, outside entertaining, and powered tool sheds.
After identifying suitable properties, they went through due diligence, including building & pest inspections, fire safety, and flood/bushfire risks. Plus, they organised independent rental appraisals from multiple local property managers to validate investment criteria.
When it was time for settlement, they worked with a conveyancer to prepare everything and transfer the title. Once the property was handed over, they engaged a property manager to advertise and secure a quality, long-term tenant.
Over the following 12 years, the couple were also proactive about maintenance and upgrades, investing in a full bathroom renovation, backyard retaining wall, and hot water system.
Outcomes
Most importantly, the couple were successful in purchasing a property and becoming property investors! Thanks to their due diligence, they were able to negotiate a $15,000 discount against the original asking price, and obtained a bank valuation showing a $40,000 increase in value after 12 months, and consistently strong capital growth since then.
As a result, the couple were able to refinance and extract equity towards their next purchase deposit within 12 months, while continuing to comfortably service their loan. This is in stark contrast to the situation many novice property investors find themselves in — often seeing slow capital growth and negative cash flow over many years, making it difficult to hold their property and grow their portfolio.
They successfully secured a long-term tenant within a week after settlement, and have had four tenants in the last 12 years. Initial holding costs were just $12.88 per week on a 7% interest loan, and strong rental growth meant the property is now cash flow positive (even before tax).
Because the property was able to pay for itself, it freed up capacity for the next property purchase (and the next, and the next), allowing the couple to quickly grow their portfolio. And as it was their first investment property, it has had plenty of “time in the market”, demonstrating the impact of compounding growth.
Learnings
This purchase also allowed start2invest’s founders to learn a lot! Such as:
The benefit of depreciation at tax time to improve initial cash flow
Why you need a detailed risk assessment before you start to invest
The value of experts with property experience (financial advisors, mortgage brokers, accountants)
How LMI can increase borrowing capacity
The importance of connecting with like-minded investors with successful portfolios and real experience (over media coverage and unqualified opinions)
And perhaps most of all, the importance of starting the investment journey with a strong foundational property that minimises risks and holding costs, while enabling future portfolio growth and expansion.
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