Herd mentality: Q&A with Todd Hunter
Q. What motivated you to begin investing in property?
It was my parents who taught me how to save and that you can make wealth through property. I had seen how they bought and sold properties over the years and made some impressive profits. This motivated me so much and I purchased my first property when I was 20 years old.
Q. What was your first investment property?
My first investment property was a two-bedroom unit in Caringbah that I purchased when I was 20 years old. This property later became my home and I stopped investing for a few years. When I went into buying properties aggressively in 2003, I purchased a property in Bunbury for $133,000, which received $165 rent per week.
Q. What’s the worst investment you ever bought?
I bought a holiday home in Port Douglas, Queensland. As it was a holiday home it was a love purchase. I love Port Douglas – it’s a great place to escape, relax and eat amazing food. The problem with the property wasn’t the actual house; it was the onsite managing agents. They went into receivership and the resort was not being taken care of. That property has since been sold, but I still go to Port Douglas.
Q. What is the biggest mistake you see novice investors make?
This one isn’t exclusive to novice investors, but applies to investors in general: following the herd when choosing a location to buy.
Market timing is everything – you need to find great areas that are not currently performing due to where they are in their property cycle. Buying in a property trough or emerging market means you have little or no competition and many desperate vendors need to sell their properties for whatever they can get.
Q. Do you hold onto properties in your portfolio or do you sell some in order to leverage into bigger deals?
I have a portfolio of ‘keepers’ and ‘sellers’. My keepers continue to create a growing passive income for me. My sellers, which are also cash-flow positive, are sold when they have experienced reasonable growth (after about three to five years) so that I can pay for renovations I am doing on my home with cash, rather than with a loan. As I own my home, I use this as equity to continue to invest in more properties.
Q. How do you identify the next area in which you want to invest?
I always stick to houses and a price point of under $400,000. From that list I then look to see where those locations are and if they are in capital cities or large regional towns that are not solely reliant on mining.
With my vastly reduced list I then look at performance figures, but not in the way you think. I look for the bad performing locations that have been decreasing in median house value for around three to five years. That research alone will reduce your list to fewer than 20 possible investing locations. The research from here gets far more in-depth and I don’t have the space to explain it here!
The best way for me to buy below value is by really low-balling – insultingly low offers
Q. How do you ensure you’re paying under market value?
For me to know that I’m actually buying good value real estate, I research my areas – I’ve gone there, I’ve spent time there on the ground. I have no emotional attachment to the property at all. I look at a whole bunch of suitable properties that I would consider purchasing.
Then, say for example I was potentially interested in 10 properties, I would put low offers on all 10 of them. And the best way for me to buy below value is by really low-balling – insultingly low offers. Then you wait for the real estate agent to come back and say “Look, the vendor won’t take your offer, but let’s negotiate”. And that way you know you’re going to be buying well below market because they’re a desperate vendor who needs to liquidate and get out.
Q. How big is your portfolio now?
My current portfolio stands at 45 properties, which includes two properties in the United States. It is also important to note that my portfolio is leveraged at less than 50 per cent, meaning I actually own over half of it myself.
Q. What’s the biggest misconception Australians have about property investing?
There are a lot of misconceptions around how hard it can be to purchase a property. It doesn’t take a huge deposit, nor does it require a large income. You simply invest to your budget – in fact I still invest in cheap properties and just buy multiple properties at the same time. This helps me to keep the risk low and I can also diversify the risk by purchasing in many different locations.
Q. What is the most common over-spend when people are renovating their investment properties?
Kitchens and bathrooms. Full bathroom replacement and new kitchens can be very expensive, but makeovers can be very cost effective. Resurfacing companies can make dull kitchens and bathroom tiles look new and bright; combined with a new vanity and stainless steel appliances in the kitchen and it will attract prospective purchasers to your property, and then they will inevitably pay more.