Australians have long been in love with the idea of building wealth through residential property investment, but is it really as simple as…
buy a house,
build equity, and become rich?
Everywhere you look, there seems to be someone making a small fortune in property.
Visit a bookstore or head to Amazon online and you’ll find a list of reads that depict glowing property success stories from men and women of all ages and backgrounds, claiming their rags to riches journey was but a mere case of “keep buying more houses”.
It seems everyone who buys a property makes money.
But do they? - really?
I’m here to warn you, it isn’t as simple as that.
The stories you don’t hear are the ones I’m going to share. Not as a scare tactic but as a reality check so that when the time is right for you to take the property investment plunge, you’ll do it with your spidie senses in tune.
But before I delve into the doom and gloom, let me share with you a brighter tale of a man who became one of my greatest mentors in property.
Ascot Investment | A traditional Queenslander home I purchased off-market in 2021 for investors based in Macau. These same clients have re-engaged my Buyer’s Advocacy services for purchase number 2 following a healthy equity gain in just under two years. You can read their testimonial here.
Introducing the crazy, rich, white man who became my first property mentor.
Bob came into my life at the humble age of 19. At the time, I was working for a local real estate agency in Redcliffe on Brisbane’s north, and I was primarily hired to serve the sales guys coffee, empty their ashtrays and receipt rent money from tenants who paid cash over the counter. Back in those days (circa the year 2000) houses in Redcliffe were selling for around $100,000. A waterfront residence - the creme-de-la-creme of real estate was a whopping $250,000!
Seems like loose change now.
Bob was a long time friend of my 70 year old boss and was renowned for his fast talking and big ideas. “Crazy Bob” as we called him, was the typical secret millionaire. You wouldn’t pick it, but this man had made a small fortune in real estate and was actually retired. That’s why he had the time to sit for hours on end in our office, terrorising the sales staff and chaperoning my boss to his daily four hour long lunch at the local pub.
He was a passionate man and for reasons I can’t really explain, he made it his mission to teach me how to buy property.
Dressed in a cheap shirt and thongs, he would pull up out the front of the office in his white banged up Toyota van and fly in the doors like a whirlwind on steroids, Redcliffe Herald newspaper in hand, ready to sit with me and run through the real estate section scouting for properties “we could buy”.
“What are we buying today?”, he would ask, waiting for me to apply the skillset he had taught me and deliver “the numbers” on what we should buy and why it stacks up as a good investment.
“How much deposit do we need?”
“What’s the rental shortfall?”
“How do we get it through the bank?”, he would bark.
A young (and naive) 17 year old Wendy Russell on the reception desk in 1997 at United Estate Agents in Redcliffe.
Could I really retire at 30?
Bob’s goal was to teach me how to retire at 30 on an investment property portfolio. During this time, he gifted me a book titled, Making Money Made Simple, by author Noel Whittaker.
You may remember this book.
It’s an oldie and I think it has been re-written a few times over the years but I have to say, back in 2000, this book was my bible. I studied the concepts that Noel Whittaker shared and along with Bob’s advice I applied the learnings to my first property purchase, and a few months later, my second… and then my third.
By the time I was 23, I had three houses and $250,000 in equity.
This was in 2002. I was single (with a boyfriend on the side) but I had enough equity to pay out my home loan entirely and be mortgage free at 23.
The Property Investment skills that allowed me to build a 7-figure portfolio.
Fast forward to today and as a 41 year old independent real estate professional I still reflect on those early learnings Bob taught me. The skills he preached back in 2000 have proven to be timeless and continue to form the basis for my good decisions in property. (Pity I didn’t listen to his words of advice when in came to love, or my portfolio would be even greater today!)
As an example, Bob owned several blocks of flats. They were run down old tired looking things but they made him a small fortune in rental income each week and the land they were sitting on appreciated in value year on year.
He always told me to buy flats.
“You get the double whammy - capital growth and passive income.”
“Don’t worry if they look daggy - the money you’ll make will outweigh the way they look, and you can always renovate.”
He was right. The flats in Dicky Beach that Ben and I purchased in 2019 for $1.2M are now valued at $2M and we just leased the downstairs one for $425 per week.
Our four flats in Dicky Beach. I have a thing about letterboxes and this was my opportunity to do something a little fun.
Thankfully, I don’t believe I’ve ever made a poor property decision, other than having to sell due to my separation but that’s another story.
But sadly, I know several people who have.
Friends, acquaintances and potential clients who have approached me over the years for advice on their “sticky property situation” have highlighted to me the real risks of buying property if you don’t know what you’re doing or lack the right advice or mentor like I did.
The thing is, none of these people like to openly share the losses or difficult situations that property has pulled them into. I understand it can be embarrassing to admit and sweeping it under the covers is easy to do. Just don’t talk about it.
The only reason I know about these stories is because I’ve been asked to try to fix them, or to give advice on how to go about moving forward to get out of the financial bend.
People only ever talk about their successes.
It’s the success stories everyone hears about and so the average budding investor goes into the game with starry eyes thinking that all they need to do is buy something, anything, and they will make money.
This is far from reality.
I know of buyers who have paid wayyy too much for the wrong property when they didn’t need to, only to have negative equity issues later down the line that keep them stuck and stagnant.
Buyers who buy in under-performing areas and then wonder why capital growth isn’t doing its thing after 5 years.
The ramifications of buying a dud property.
The real costs of a poor decision in property can be far reaching, and often become a flow-on effect in other areas of one’s life.
For example, I know of a couple who purchased a number of investment properties with the “help” of a property spruiker they found online, only to line the spruiker’s pockets with commission and come out the other side with negative equity. The promise was these properties would grow in value in a short period of time, but when I took a look at where they were, I saw very limited scarcity value, no real capital growth drivers, and the developers were just about to release a new land estate in the neighbouring area.
The facts and figures the salesperson had provided looked skewed in my opinion, and although the marketing brochure gave “evidence” to why these properties should outperform, I could see there was a lot of detail omitted.
Yes, there were some positives, but I could immediately point out the capital growth drivers that were missing from this particular type of investment property. Drivers that would have made all the difference.
Because there was no equity, this meant the couple could not sell down these properties when they wanted to buy their family home to accomodate their growing brood.
In the alternative, they were forced to rent a home in an area they didn’t really like because all of their free cash was tied up in holding these properties. Selling meant owing the bank even more money which they didn’t have so this was not an option at the time.
Can you see how that one, well-intended, but misguided decision can impact other aspects of your life?
Devastatingly, it’s not just the finances that take a hit. It’s also your lifestyle, your marriage and possibly your mental state.
How you can avoid buying a dud property.
In my e-book - The 10 Avoidable Mistakes Made By Property Investors , I highlight common pitfalls you should avoid. It’s a straightforward easy read if you’re a newbie to property investment, but if you’re looking for more specific tips on property selection, my upcoming online Property Workshop guides buyers through the shortlisting process I undertake to only choose quality properties that have the best chance of outperforming the market.
(I also show you how to spot the duds and step you through my in-depth due diligence process.)
ABOUT THE AUTHOR
Wendy Russell writes about Property, Career and Success. She is a self-made woman and Independent Buyer’s Advocate based in Brisbane Australia, representing busy professionals in luxury home purchases.
