Can you imagine buying your first property at 20 and it growing in value by a whopping 55 per cent in just 18 months?
Well, that’s the reality for investor Beau, who started his property journey by thinking outside the traditional investment box and is now reaping the rewards.
Beau, now 22, was inspired to invest in property from an early age but also understood that it would be difficult to invest in his hometown of Melbourne because of affordability.
So he started researching which locations might offer good investment prospects and settled on Ballarat.
“Affordability was a huge factor. Everyone always complains that it’s so expensive further in, so why not go further out?” he says.
“They may not grow as quick, but it had good cash flow and I could get it at a good price, could do something to it and get it revalued.
“I looked at yields and population growth forecasts, which looked OK. It’s quite a big hub. It’s got its own train-line and unit. For what you pay, I thought it was good value at the time.”
Beau, who lives at home with his mum and dad, bought a three-bedroom house on a 650 square metre block in Ballarat for the lowball price of $135,000 in 2015.
The property was also a deceased estate so he managed to pick it up for under market value.
What’s even more extraordinary is that the property is rented for $200 per week, which is a gross rental yield of 7.7 per cent.
Then, 18 months after he bought it, Beau got the property revalued and learned that it had grown in value by a staggering $75,000 or 55 per cent.
The rapid equity meant he had the funds to go and buy two more properties – which he did early in 2017 and in the same street.
“I had ideas of maybe developing it or putting it altogether at some stage because they’re all quite close,” he says.
“They’re on the same street. I’d like to hopefully make the street a bit better. There’s only 50 in the street. If I could buy 10 in the next 10 years that might do something.”
Those properties are also three-bedroom houses, were bought for $160,000 and $170,000, and achieve rental yields of 7.15 per cent and 6.73 per cent respectively.
Beau says his strategy all along was to invest somewhere else first so that he could build enough equity to buy closer to Melbourne.
And with three regional properties in his portfolio in the space of two years that meant that he had enough equity to invest in the city.
His latest purchase is a two-bedroom unit in Docklands that he bought off a seller desperate to offload it.
“It’s about three years old. The owner lost a lot of money on it. He just wanted to get rid of it,” he says.
The 22 year old’s fourth property was bought for $355,000 and again achieves a spectacular gross rental yield – even though Melbourne’s inner-city is supposed to be in the midst of a unit oversupply.
“I got an offer yesterday for $510 per week and we had about 40 people in the open home the other day,” he says.
That’s a rental yield of 7.47 per cent, people.
A strategy for success
Beau admits that he couldn’t have achieved his quick investment success without looking further afield and having the ability to still live at home, too.
“If you are rentvesting or living at home, you don’t have that debt that’s not actually producing you income, so your borrowing capacity is always going to be better,” he says.
“I’m a big fan and when I eventually move I will probably rentvest. Even better is living at home and investing!
“By going further out, it allowed me to go further in, which is what I wanted to do the whole time.”
Beau’s long-term investing plans involve buying a mix of cash flow and capital growth properties to ensure his portfolio has balance as well as the ability to keep duplicating.
He says he just wants to keep moving forward and potentially have the option of not having to work by the time he’s 30.
His main piece of advice for young would-be property investors is to investigate other locations and recognise that everyone has to start somewhere to end up where they dream to be.
“The home that you purchase first isn’t going to be the one that you end up in,” he says.
“It’s better to get in the market rather than wait three years because the prices keep going up and then you miss out.
“Often going further out, will allow you to get further in where you ultimately want to go. That’s what happened to me. I wouldn’t want to live in Ballarat but I’d love to live in a flash apartment in the city. It’s having the end in mind.”