![\"Family\"](\"https:\/\/i0.wp.com\/realestatetalk.com.au\/wp-content\/uploads\/2017\/08\/Family.jpg\")
<\/a><\/p>\nHumble beginnings<\/strong> Just under five years later, when they were settled in Sydney and holding permanent visas, the couple used their hard-earned savings to get out of the rental cycle and buy a two-bedroom apartment in Manly Vale.<\/p>\n \u201cWe had been renting along the Lower North Shore in small one-bedroom units, but we knew that to be able to afford to buy our own place we needed to compromise on location and move further out,\u201d Michael says. While he recognised the risk of buying in the same area as his own home, he trusted his extensive research on the suburb \u2013 a manoeuvre that has paid dividends as the unit has almost doubled in value in four years. \u201cThe house wasn\u2019t in a great condition but was structurally sound, so we knew there was scope to update and add value, which we have been doing over time.\u201d<\/p>\n Their multipurpose home in Frenchs Forest \u2013 which Michael chose knowing there would be significant infrastructure improvements in the future due to the new hospital \u2013 has produced the result he was counting on, growing from $920,000 to $1.6m in three years.
\nGrowing up with a father who ran a design and construction firm while working as a chartered surveyor and building designer, Michael was exposed to the world of property from an early age. He began work on his father\u2019s building sites as a labourer when he was 16, and went on to study architectural engineering at Leeds University.
\n\u201cMy dream was to buy and renovate property, and then sell them or hold on to them as an investment,\u201d Michael explains. \u201cThe plan to get a job and save for a deposit took a bit of a detour when my girlfriend and I decided to take a working holiday to Australia for a year.\u201d<\/p>\n<\/a><\/p>\n
\n\u201cOnce we had the loan repayments under control, we felt determined to save as hard as we could for the next deposit, which would be an investment property.\u201d
\nJust over a year later, Michael signed the agreement on his first investment: another unit in Manly Vale worth $378,000.
\n\u201cWe had managed to save up a 5% deposit, and we paid about $5,000 in lenders mortgage insurance to be able to get into another property as soon as possible,\u201d Michael says.<\/p>\n<\/p>\n
\nBelieving it would have been too risky to purchase a third property in the same neighbourhood, Michael decided to diversify his locations when he bought subsequent investments.
\n\u201cIn hindsight, though, it would have been great to buy another apartment in Manly Vale, as the market has been so strong over the last four years!\u201d he says.
\nWith two assets then under his belt, Michael\u2019s ambitions in real estate were no longer a dream. He could truly see property as a tangible device for wealth creation and the path to a passive income; so much so that within a short time frame he was able to access the mounting equity in his Sydney properties and leverage the purchase of four more \u2013 all in less than five years.
\nTargets and tenacity\u00a0<\/strong>
\nFor Michael and Sarah, who is now his wife, one fundamental of their success is a steadfast and binding strategy, one that they drew up after buying their first investment property.
\n\u201cNow we have a robust long-term property investment plan in place which outlines all our income and expenses, assets and liabilities, lifestyle and financial goals,\u201d Michael explains.
\n\u201cWe have a very clear picture of what we want to achieve and how we are going to get there.\u201d
\nMichael\u2019s plan took into account changes in circumstances, including starting a family. He planned to acquire neutral or positively geared properties so that his portfolio would pay for itself while his wife took time off work to have their daughter.
\nMichael\u2019s extensive research into real estate is based on a two-tiered strategy: buying and holding for strong long-term growth, and adding value through renovation and development.
\n\u201cWe prefer to buy within one hour of major capital cities, as this is where the biggest population growth will occur over the next 50 years or so,\u201d Michael says.
\n\u201cWe assess the fundamentals, including employment growth and economic diversity, and then narrow the search down using data from price growth trends, vacancy rates and sales volumes.\u201d
\nMichael regularly checks his investment purchases against his long-term plan.
\n\u201cOur strategy is a bound document that I can benchmark against, and having it written down on paper is a strong motivator,\u201d he says.
\n\u201cSo many people jump into property investment without any strategy in place, then after two or three years end up selling, as they don\u2019t know where they\u2019re heading. Factoring in expenses, these people walk away with little or nothing to show except a strong resentment against property investment.\u201d
\nEven when they upgraded their own home, Michael says he and Sarah searched with an investment mentality. They ended up purchasing a split-level home in Frenchs Forest in northern Sydney, and kept the existing tenant in the lower-level flat \u2013 effectively turning their own home into another investment.
\n\u201cFrom a cash flow perspective it has worked out great, with smaller non-deductible mortgage repayments than we had before, as the rent from downstairs covers more than half of the mortgage,\u201d Michael explains.<\/p>\n<\/a><\/p>\n
\nWhile Michael gives credit to the booming local market, he says some of the growth was also manufactured through their ongoing renovations.
\nCreating $1m plus in net worth<\/strong>
\nMichael\u2019s smart property purchases have driven his available equity over the $1m mark.
\nIn conjunction with the successful Frenchs Forest home, his first investment purchase was another huge boost to his net property worth. He was able to snag the two-bedroom Manly Vale unit under market value, and improved its capital growth by renovating it throughout.
\n\u201cWatching the stagnant on the market, and negotiating well with the agent and vendors, allowed us to purchase the property for almost$60,000 under its initial listing price,\u201d Michael says.
\n\u201cThe negatives of the property were superficial, and the huge effort that Sarah and I put into renovating the unit within three weeks has paid dividends since we have owned it.\u201d
\nAs a result, their rental return has increased from $450 per week to $540 over the last four years.
\nTo diversify his assets and spread the risk, Michael\u2019s next four purchases spanned Queensland and South Australia. His buying criteria included a minimum 5% yield and a vacancy rate of less than 3%.
\nThe two Adelaide purchases also fit his \u2018hold and develop\u2019 approach to manufacturing capital. The houses have the scope and zoning permission for building a set of townhouses on each block, which Michael plans to do in the next eight to 10 years.
\n\u201cBuilding two townhouses will give us future valuation uplift once we have depreciated the majority of the remaining value in each of those houses,\u201d he explains.
\nIn the meantime, the Salisbury North home in Adelaide \u2013 purchased for just $238,000 \u2013 is producing a 6.6% yield, while the Aldinga Beach property returns 5.4%.
\nMICHAEL\u2019S STEPS TO SUCCESS<\/strong>
\n\u2022 Know your strategy and how long to hold on to each property, and understand your cash flow.
\n\u2022 Save money with focus and determination.
\n\u2022 Write your long-term strategy down and refer to it regularly. Manage your risks by having a cash buffer.
\n\u2022 Research diligently, diversify locations and always use the numbers as your guide.
\n5 WAYS TO BOOST CAPITAL GROWTH POTENTIAL<\/strong>
\n1. Buy a property that suits the largest demographic within a suburb, to appeal to the widest pool of tenants and buyers.
\n2. Look for areas with high expected population growth \u2013 generally this occurs around capital and regional cities.
\n3. Buy stock with the potential to add value through renovation or development.
\n4. Add a granny flat or secondary dwelling to the block, if the area demands it.
\n5. Buy and hold, rather than house-flipping. Long-term capital growth is all about time in the market.<\/p>\n