Personal Portfolio | Brisbane, QLD
This property in Rothwell, North Brisbane, is part of the start2invest Founders’ personal portfolio. After a 3 year break, it was time to purchase a third property in another affordable capital city market, strategically located close to major employment hubs, transport, amenities, and lifestyle areas.
Property Snapshot
This property is a freestanding house in a thriving community near to local beaches, with 4 bedrooms and 2 bathrooms on a 500 m2 block.
Location Snapshot
Rothwell is an affordable suburb in Brisbane’s outer-north. It has a diverse economy, a growing local population, and plenty of local urban renewal.
Strategy Overview
The following strategies applied to the purchase: High Cash Flow, Buy & Hold, and Minimise Risk.
Investment Numbers
Purchase price in 2014: $370,000
Estimated value in 2024: $700,000
Weekly rent: $540
Cash flow: +$998/year
Situation
Three years into their property investing journey and still in their accumulation phase, start2invest’s founders were ready to purchase their third property in 2014.
At the time, the property cycle was in an upswing with price growth. Overall, markets had performed relatively well in 2014, with moderate growth in house prices across most of Australia. According to data from CoreLogic, national dwelling values had increased by 7.9% over the course of the year, with particularly strong growth in Sydney and Melbourne, where values rose by 12.4% and 8.2%, respectively.
start2invest’s founders had done well during their three year break from investing, with their first investment property in Orange increasing in value. This meant they had available equity to extract through refinancing that could fund a deposit for their third property.
On a personal note, their second baby was born in September 2014. This meant an increase in living expenses, ongoing maternity leave, and continuing to make it all work — on only one income. The couple continued to rent their small, two-bedroom apartment in Sydney’s Northern Beaches and instead planned to invest (again) in a location they could afford.
Goals & Strategies
The couple’s main goal was to continue expanding their portfolio with a third foundational property — supporting their long-term goals of financial independence, intergenerational wealth, and creating a legacy.
In order to mitigate risk, they planned to diversify further by investing in a new property market with exposure to a capital city. With their stretched family budget, they were looking to purchase a property with strong cash flow that they could buy and hold, long-term.
Solution
To expand their portfolio with a third foundational property, the couple wanted to look in another capital city market and source a property in close proximity to major employment hubs, transport and amenities. They wanted a property with high cash flow (5%+ rental returns) in an area with a tight rental market to ensure future rental growth. They were also keen to target newer properties (built post-2000) so they could benefit from higher depreciation and use tax benefits to further improve cash flow.
Based on their goals and strategies, the couple chose to focus on Queensland. In particular, they began exploring multiple affordable suburbs in Brisbane’s surrounds that offered high yields and the right long-term growth drivers.
To kick things off, they reached out to their preferred mortgage broker to review their portfolio finances, confirm the value of their existing properties, and prepare finance pre-approval. Thanks to strong capital growth, they were able to extract available equity from their first investment property in Orange to use towards a deposit.
Then it was time to conduct macro level research into the market to understand factors like economic drivers, government investment, urban renewal, and supply/demand constraints. From there, they shortlisted the City of Moreton Bay council region in Brisbane’s north, with a particular focus on the Redcliffe Peninsula as a lifestyle and growth location that was soon-to-be connected to the Brisbane CBD via a new train line.
Just 35 km from the Brisbane CBD, Redcliffe offers a good blend of lifestyle and employment opportunities, and is known for its beautiful beaches, rich history, and thriving local centre (with attractions like BeeGees Way and bustling beachfront markets). Unsurprisingly, the area has strong interstate migration, particularly from NSW and Victoria. Nearby, The Mill at Petrie will have its own Olympic Park with a purpose-built indoor stadium, boasting 7,000+ seats to host all 2032 Olympic boxing events. Not only that, but the Redcliffe area is a landlocked peninsula with limited future supply, so it had (and still has) a lot of long-term growth potential.
Micro level research helped to pinpoint more specific locations and properties. The couple called a Moreton Bay Council town planner to understand infrastructure plans for the new train station (opened in 2016), as well as the new University campus at nearby Petrie (opened in 2020). They also assessed flood maps and bushfire overlays to identify risk for different areas. They visited Redcliffe in-person and met with property managers to learn more about which neighbourhoods were in demand, and which streets would appeal to quality tenants. From there, they mapped no-go zones and areas to avoid.
Next it was time to source a suitable investment property. The couple followed the same process they’d used with previous purchases, negotiating with the seller, conducting due diligence, then settling on the property. They engaged a local property manager to find suitable tenants and to look after the property on their behalf.
As always, the couple followed up their purchase with appropriate accounting, cash flow, and tax minimisation strategies. They engaged a quantity surveyor to create a depreciation schedule that allowed them to claim the natural wear and tear of the building against tax, generating a $5,000 refund in the first year. They also set up an offset account that they could channel all their income streams into, including corporate salaries, rental income, and savings. The offset account balance would help to reduce the debt balance, which would minimise the monthly interest charged on the loan. On top of this, they utilised a 40-day interest-free credit card to pay for all family and investment expenses
Outcomes
After a three year break, the couple successfully purchased their third investment-grade property, diversifying their portfolio into another affordable capital city market. The Rothwell property was purchased below market value after negotiating a $25,000 price reduction down from the original asking price of $395,000.
The region turned out to be a good choice, with median house prices now reaching $699,000 in 2023, boasting a 10 year capital growth rate of 6.28%, and a 5 year growth rate of 49.64%. Meanwhile, vacancy rates are just 0.7%, with rental properties in high demand.
As a result of this demand, the property manager secured a quality, long-term tenant just one month post-settlement, and the property has had only two tenants since purchase.
Initially rented in 2014 for $380 per week, the property was negatively geared before tax, but cash flow positive by $2,876 after tax. As of 2023, the property is now rented for $540 per week, and despite the reduced benefits from depreciation, is still cash flow positive by $998 per year. Most importantly, the property achieved 76% capital growth over the last 9 years.
The property itself is located within walking distance to the newly built train station and has good access to public transport, connecting to Brisbane in just 30 minutes. Meanwhile, it’s also a short drive from Redcliffe’s vibrant lifestyle community and family beaches.
Learnings
There’s always so much to learn from every new investment. On this property, the investors gained knowledge and experience in:
Equity release – The power of engaging a professional mortgage broker to unlock available equity and use it towards another property for further portfolio growth.
Offset accounts – If you channel your monthly salaries, rental income, and savings into an offset account attached to your loan, you can make your cash work harder and reduce the interest you pay.
Interest-free credit cards – A credit card with an interest-free period can allow you to put all your cash into your offset. You can pay for your expenses on credit with no extra fees — as long as you clear the credit card each month. Plus, you can enjoy Frequent Flyer Points to take advantage of free flights and other benefits.
Depreciation schedule – A depreciation schedule from a qualified quantity surveyor can allow you to claim the on-paper reduced value of a building (or renovation) against your tax for the life of the building — up to 40 years from construction. This strategy can make some properties cash flow positive after tax, even if they were slightly negatively geared before tax.
To sum it up, even during your accumulation phase, it's ok to take a strategic break from investing when it makes sense to do so for your finances and life circumstances. Then when your situation allows, jump back in and keep on building your portfolio! That way, you can put your available equity to work across more assets and locations for diversification and continued growth.
Want support for your property investing journey?
We’d love to be there for you. Take a look at our services to learn more about what we do, or contact us for a confidential discussion about how we can help you achieve your goals.
Read more like this
