Starting from scratch: Q&A with Victor Kumar

I came to Australia as a migrant in 1997. When my wife and I came here, we had AU$4,500 between us. I'm actually a qualified radiographer and sonographer. We both got jobs straight away and started saving.

I asked my brother-in-law, who is Aussie, “What makes people successful in this country?” He said “bricks and mortar”. At the time, I did not even know what “bricks and mortar” meant – I had to look it up!

At that point, I started reading a few books and went to a few seminars – but that gave me analysis paralysis. Then, when I pieced everything together, I realised the fundamentals were all the same. You have to make your money when you buy, look at your exit strategy, have a plan and look after your financing options.

I bought my first home in 1998 after I saved up a deposit. The broker I used at the time said, “You're on good salaries, you should consider investing”.

Q. What was your first property investment?

My first investment property was a unit in Campbelltown, NSW. I bought it for $70,000 in 1999.

At the time, all of my friends said, “Why are you buying in Campbelltown?” But I could see all the changes that were happening in the area. I actually ended up selling that unit for $485,000.

It made financial sense because it wasn't going to cost me much to hold and there was not much that could go wrong. Then I realised I could tap into equity in that property.

Q. What was your biggest investment mistake?

I was speculating. I bought 42 parcels of unregistered land at $2,000 per parcel. The land was supposed to be registered in two years’ time but the developer got the approval through in four months instead. Therefore I was not in a position to settle.

The decision was motivated by greed. It put a huge dent in the quest to get the income I wanted and getting out of the contract cost an arm and a leg.

I also bought some properties based on ego. I bought two serviced apartments up on the Central Coast of New South Wales with the idea of getting all my friends and family there every second weekend. I have owned that now for seven years and I have been there three times.

Q. How do you identify the next area where you want to invest?

I look for the basic fundamentals, such as infrastructure, schools and lifestyle. Then I look for a catalyst for growth. For example, there may be a transport upgrade happening or new major employer in the area.

Alternatively, I might look for an area that has a stigma but the cause of the stigma has been moved away. For example, Minto was 90 per cent housing commission about 10 years ago; now that ratio is about 10 per cent. The housing commission has been replaced by house and land packages that are selling for $550,000. That has changed the demographic significantly.

Q. How long do you hold onto properties before you sell them?

There are some types of property that simply make sense to hold on to forever. But in other cases, when the market peaks, I would look at selling the property down, retiring some debt and using the initial deposit to get into another market at the bottom of its cycle.

For example, right now, I would look at selling some properties in New South Wales and getting into the Brisbane market. It is a sound approach as long as you are replacing that asset with a similar asset.

I look for the basic fundamentals, such as infrastructure, schools and lifestyle. Then I look for a catalyst for growth

A lot of the books and seminars say “never sell” but that’s a long-term approach. I am not afraid of selling. My strategy is more geared towards unencumbered properties with no or minimal debt.

For example, you might buy seven properties in areas that have good fundamentals. Then you start buying other properties that you can renovate or subdivide.

When there is sufficient equity, you sell these down to start paying the others off.

Q. How has your investment strategy evolved over time?

There was a stage where I was putting money in property options and off-the-plan properties. The market at the time suited that sort of investment strategy and I always adjust my strategy in terms of the market of the day.

I never vary away from the fundamentals though. The only one or two times I did vary were the times I lost money.