A flying start
At just 31 years of age, Mani Kaur already has 10 investment properties under her belt – and she bought them all within 15 months.
In 2009, Mani Kaur purchased her first investment property. Little did she know that in just over 12 months’ time she’d be on to investment property number 10.
“Once you start, you just realise how easy it is!” Ms Kaur tells.
“It took me two years to get the nerve to buy one and then that that was it. I thought, well this isn’t as hard as I was making it out to be.”
For Ms Kaur her first brush with property was actually back in 2006, when she purchased her first home in the Sydney suburb of Parramatta.
She happened to be living there already and thought the suburb represented a reasonable price point as well as a convenient location.
“I couldn’t afford anything right in Sydney and I thought Parramatta, it’s the next CBD, you’ve got the train station, the big Westfield… plus I didn’t want to spend more than $500,000 on my first home because I didn’t want to overcommit.”
For $478,000 Ms Kaur secured herself a four bedroom town house with 2.5 bathrooms and two car spaces.
The 31 year old, who is originally from India and came out to Australia to study, always knew she wanted to get ahead, but hadn’t yet determined how.
She had a good job in accounting but didn’t want to be doing the boring nine-to-five forever.
“I was thinking, how long am I going to do this for? When am I actually going to get time to do the things I want to do?
“I didn’t want to work until I was 65 and have to rely on superannuation – and that is not enough for a lifestyle anyway.
“So I started thinking. What can I do? How can I make things easier?”
Ms Kaur spent a long time investigating her options, which basically came down to two things, shares or property.
“I think, that year I was at a seminar almost every weekend!” Ms Kaur says.
“I was just trying to get my head around everything and [determine] what was best.”
But in the end, bricks and mortar won out and Ms Kaur decided property would be her investment class of choice.
The relatively low degree of risk and passive nature of property investment were two key deciding factors for her.
“In the end I decided to go with property because you’re not gambling or putting your money at risk as much [as shares].
“Property is quite a passive investment. It kind of grows in the background without much active involvement – unless you want to renovate of course. But until I think about that I could just keep buying, and in 10 to 20 more years I’ll have much more passive income so I can do the things I really want to.”
Changing paths
Ms Kaur’s original plan was to pay down as much of her loan on her principal place of residence as quickly as possible. But her avid property research and countless seminars had paid off. She knew the faster she acted the better.
“Initially my goal was, as it is with everybody, to try pay as much as I can, as quickly as I can [on my home] and then think about investment properties.
“But that would take too long and in the meantime you’ve missed one of two property cycles.”
And so in March 2009 Ms Kaur jumped on to the investment property ladder.
Her first investment was a one bedroom off the plan apartment in Brunswick, an inner suburb of Melbourne. She’d found out about the development from some friends who had recommended it.
The apartment appealed because she was only required to stump up a deposit bond – offering her more time to get her finances in order.
“I thought if I do this, it will kind of just happen in the background, and after that I’ll decide what to do next.”
Moreover, at this stage Ms Kaur was seeking capital growth and believed an apartment in the inner-heart of Melbourne would deliver.
Not long after however, she came across a buyer’s agent who would turn her property investment strategy upside down.
Rather than targeting top-end property markets, this group recommended buying in much less expensive markets, where solid rental returns could return yields of more than 11 per cent and upfront costs were minimal.
Between September 2009 and April 2010, Ms Kaur purchased six properties with that buyer’s agent.
“Initially I was all about capital growth but then I saw how [negatively geared] they [the properties] were going to be.
“But I was still young and wanted to be doing other things.”
So Ms Kaur’s investment strategy transformed in to a combination of cash flow and capital growth.
“I started targeting properties that still had growth potential but had good rent as well.
“I was almost averaging a property a month!”
These properties were located in areas such as The Entrance on New South Wales’ Central Coast, Orange and Albury – both in regional New South Wales, with property price tags of between just $91,000 and $212,000.
And with rental income of as much as $16,000 per annum, these properties deliver very attractive yields and enable Ms Kaur to maintain either a very small negative cash flow or break even.
“The lowest yield I have is five per cent and that’s in Brunswick, which is in the city.
“My best one is in Orange, giving me almost 11.5 per cent.”
On average, Ms Kaur’s properties return a yield of around eight per cent.
Buyer’s agent advantage
Working with a buyer’s agent has enabled Ms Kaur to leverage off others’ expert market knowledge to ensure she pays no more than and usually under market value.
Ms Kaur points to her two bedroom apartment which they purchased in the outer Sydney suburb of Mount Druitt in January 2010 as an example.
“I bought that for $171,000 and within six months I got it revalued at $210,000.”
That virtually immediate growth was enough to help her get another property on the boil.
Ms Kaur says working with a buyer’s agent has been invaluable.
“You could rely on their experience rather than doing it by yourself, and always second guessing yourself. It made you feel more comfortable.”
While Ms Kaur found the buyer’s agent to be of immense value, she has also built up the confidence to purchase several properties alone – three houses in Dubbo, New South Wales.
Investing by numbers
Working with a buyer’s agent has meant that in many instances, Ms Kaur has purchased properties without seeing them or the location.
But from that very first off the plan apartment in Brunswick, her strategy has been squarely focused on stacking up the numbers – rather than any emotional attachment to particular properties.
“Right from the outset, my mindset was more towards the figures and how they added up. It was not about whether I lived in that area [Brunswick] or knew much about the area. As a part of my due diligence and research, I took into account proximity to schools, transport, shops and infrastructure.
“In some cases, the numbers made so much sense and were so strong that it made no difference where the location was because it was just a no brainer, for example, a three bedroom house for $91,000 on a 590 square metre block. The land value of the property was worth at least half of that to begin with.”
Financing
Ms Kaur has financed her property portfolio by tapping into equity in her principal place of residence, which was last revalued at $550,000 in March 2010.
She also borrows as much as she can, to keep her deposit requirements to a minimum.
“We’ve got a 95 per cent LVR on most of the properties.”
All of her loans are interest only, including her principal place of residence, however she makes repayments on this home loan as if it were principal and interest. This ensures she chips away at the principal of the loan but leaves her open to flexibility on repayments should she need it.
While a large majority of Ms Kaur’s loans are with the Commonwealth Bank she has always used mortgage brokers to secure her finance in order to ensure she gets the best deal.
Certainly, Ms Kaur has employed an aggressive investment strategy but she says it is a strategy she is more than content with.
“In the beginning the high levels of debt were a bit of a concern...But as I acquired more properties, I became more comfortable with the high level of debt to the point that I now want to take on as much debt as the banks will give me happily.
“It does not concern me now as it is a major part of the acquisition phase and is the blood line of a rapidly growing portfolio.”
Still room for fun
For Ms Kaur one of the biggest drawcards of her property investment strategy is the fact that it doesn’t require a mammoth financial commitment on her behalf.
“I still want to be able to go and out and to travel without saying I can’t afford it because all of my cash is going towards paying my loans.
“I wanted the wealth creation but I didn’t want it affecting my life.”
And why choose between capital growth and cash flow? With this strategy Ms Kaur is confident she will see both.