How this investor secured his great Australian dream

Jaccob chats to Phil about meeting his goal of home ownership before using it to catapult into purchasing the two other properties, why tree-change hotspots are a key part of his strategy and how he’s choosing to expand his portfolio over the next 3-4 years.

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TRANSCRIPT:

Welcome to the Smart Property Investment Show with your host, Phil Tarrant. Hi, everyone. How are you going? Phil Tarrant here, host of the Smart Property Investment Show. I hope you're enjoying your week wherever you are across this great brown, but probably quite green land. I drove down to Canberra a bit earlier this week, and it's very different out there than what it was last time I was down there. It's been six months since I was in the nation's capital and driving around, having a little bit of a nose about, unlike other areas of New South Wales, where I have traveled to. Not a lot of for sale signs up, not a lot of for lease signs, and all indications the Canberra market's doing pretty well. So we're going to concentrate on that, do a deep dive in an upcoming episode, but we are here today, Investor Stories. It's what we love to do. Aussies right across the nation, doing what they do, creating wealth through property. In the studio with me today, Jacob Rotter. How are you going? You well? Yeah, I'm great, Phil. Yeah, it's definitely nice and green down this way, mate. We've been getting a nice drop of rain over the last month. Yeah, the farmers are very happy down this way. Where are you? I'm in Colac, so in Western Victoria. So we're basically an hour from Warrnambool, Geelong, Ballarat, and the beautiful Great Ocean Road. So it is almost the heartland. Mate, nice part of the world. Now, I'm chatting with you, and it looks like you're in a radio booth. I can see microphones on the right-hand side. We're chatting over the marbles and internet.

What do you do for a living? Yeah, so I guess radio is the industry I work in. I'm not an announcer at all. I just work with our local clientele on their marketing. So yeah, this is what I do day-to-day. So I just borrowed the studio for this chat today, mate. Oh, very cool. How's the radio business going? Is everyone pretty happy about it all? Yeah, it's picking up. Obviously, COVID situation, a lot of things closed up a little bit, so that definitely affected revenue. Regionally, we weren't hit as heavy as probably the metro markets, but yeah, it's all definitely picking up now, mate. So hopefully, a bit of a bumper at Christmas and people traveling out to the regions and to our Great Ocean Road would be lovely. Yeah, and I've chatted about it at the moment, but radio stations, the traditional business of radio, they're quite concerned with us upstart podcasters coming in, doing what we're doing, sort of radio on demand. What's the sort of the thought of it all at the moment? Look, definitely podcast has a role to play, and the growth in podcasting has been amazing in the last, I think, five years. Radio still is probably flatlining, but hasn't lost any of its market share. People are just consuming more and more product a little bit. I think more people are consuming a lot more audio now. It's just how they're doing it is the change. So you're in, I guess, a regional radio station. You and your crew that way would be sort of stage three lockdown, so you're able to get out a little bit. You're allowed to go to work, obviously.

How has it been training you, the whole COVID environment in the most impacted state? Yeah, so Colac was actually almost the epicenter of all things COVID there probably two months ago. We went from zero cases to about 100 cases within a week. We had the ADF come in and help us out. We finally leveled things out, and really within a couple of weeks, we got that number significantly down, and we're at zero now here locally. Yeah, so it's great that things are back open and running now. What's the restrictions like? Are you allowed to go to the local pub and stuff? Yeah, I can go for a meal. So I've been a couple of times the last couple of weeks with a few friends and good to catch up with them. So things are getting close to normal just with my local sporting group playing cricket. There's limits on how many you can train at once and all this sort of stuff, but there's lots of protocols out there that we have to keep meeting, and we're finding a way to make sure we're managing it. And yeah, it's great to be able to get out and exercise and catch up with family a little bit more in public spaces and all that type of stuff. Well, life goes on, and as it does in property investment now, you're a property investor? Yeah. Give us some sense for just the size of your portfolio, so to help shape our conversations there. Yeah, just my own property here, my PPOR in Colac, and then I've just got two investments. So one in Hobart and one in Townsville. Okay, good. So you like regional locations. I might get in trouble calling Hobart regional, but it's a metropolitan, don't worry. Let's have a chat about that. We'll go to a break beforehand back in a moment.

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Welcome back, everyone. Phil Tarrant, host of the Smart Property Investment Show with Jacob or Jake Rotter, principal place of residence, two investment property. What come first, the investment properties or the principal place of residence? Yeah, had my own home first. I guess traditionally, a lot of people out this way, you know, a buyer to own their own home, as do many Aussies, I guess. So that was a key focus as a young fellow to find my way into the property space and own your own house. And now I have that with my wife. So yeah, it's been fantastic to get that behind me. And then that's obviously helped then leverage into expanding out into getting a couple of investment properties along the way. So tell us about the principal place of residence. When did you buy it? What is it? What does it look like? You know, what sort of equity position have you got on it? Yeah, so pretty basic four bedroom house, 1950s build. I'm not too far from town. I think we purchased it for about $233,000, probably worth around, there was one just down the road that sold this week, a three bedroom house for $380,000. So Colac's actually been in probably one of the hottest markets over the last few years. So that's also been great with the duplication of a highway right the way now from Melbourne to Colac's doorstep. That's definitely helped drive up those prices. So that duplication come from Geelong to Colac. How far from Colac to Melbourne CBD on that new motorway? Yeah, so it's probably the perfect tree change escape. It's probably about an hour 50, maybe an hour 45, depending on, I guess that's when you get smooth sailing in. Some days it might be two and a half hours, depending on that. But you could quite comfortably get to Werribee maybe in an hour, hour and 10 minutes. What happens in Colac? Is it a regional center, obviously, but farming, what sort of simulates the economy there? Yeah, so the key drivers here are agriculture and then we've got- So it's all like Western districts, right? Are you in the Western districts is how you'd frame it? Yeah, the Western districts. Yeah, the Southwest is probably where we'd summarize it. And yeah, we've got some big manufacturing plants here. We've got a massive abattoirs. We're actually the home of Buller Ice Cream. So I guess we're the ice cream capital of Australia. And then forestry. So one of the big mills here has a couple of sites and they employ a fair chunk of the local residents. So it's about 15,000 probably in the Colac CBD, but there's obviously a catchment further out from that. And you're born and bred in- Yeah, I am. Yeah. I have done a bit of travel as a younger bloke, but yeah, been based here for many years now, guys.

Did you always think that you would call Colac home after school and all that sort of stuff? Or is that just something that's happened? Yeah, it's probably just played out that way. Look, I'm happy to go explore this big brown land at some stage. My wife and I have plans to travel with the kids when we can, maybe take that six months, 12 months off and just hit the open road. So that's all things we've got to sort of fit in around, I guess, acquiring more properties and where that might hurt us in some serviceability areas and that type of stuff. But that'll play out, I guess, over the next three or four years when we feel that the kids are old enough to enjoy it too. So yeah, we've just got to balance that out. That's the connectivity between using property investment, wealth creation as an enabler for lifestyle. And you can't often have both. The best property investors I know eventually achieve both, but there's a very deliberate and technical strategy and execution around getting that right. So the why of yourself and your wife investing in property, like you've got two properties now, we'll have a chat about what they are and what the future looks like, but at a more sort of goal orientated level, why are you investing in property? I guess for time, you know, to choose how I invest my time. I'm on lots of local community boards and groups and I get a lot out of volunteering and helping out and supporting my cricket club. I've worked on a lot of projects here to grow female cricket in the area. So there's those types of things I'm happy to continue to push and grow along with some business sector stuff that I help out with. So yeah, I guess just having that time and freedom with the family and then being able to choose to travel or take a few months off here and there. Yeah. And that sounds pretty good. And is there some sort of financial goal you have as a property investor? Is there a point in time you want to replace your income or how are you sort of framing your goal setting when it comes to property? Yeah. So I'm a pretty modest type of character, really just want to replace my income, you know, take out your mortgage repayments. I think we could live quite comfortably as a family off, you know, $70,000 a year. So not shooting for a massive $100,000, $200,000 a year passive income type scenario. More than happy just to have a moderate income to give us enough to choose a lifestyle we wish and play the odd bit of golf and play a bit of cricket on the weekend, these types of things down the track. And does that include a new cricket bat every year? How often do you replace the old willow? Look, I've got an old favourite, which I think I've had for probably eight or nine years and I've have purchased a couple of newbies to try and replace that bat. But every time I try and replace it, I still go back to the old faithful. It's, it's, it's seen better days definitely, but I still keep bringing out the old GM. So I'll continue with that one for a little bit longer. Maybe when that one busts, I'll have to go to one of the other ones I've purchased along the way. Much like a good property strategy, it should stand and stay the test of time. So let's have a chat about, you know, this replacement of your income to provide, you know, some sort of stability when you have that choice or that point in time, when you do choose to retire.

Have you worked out what your property portfolio needs to look like in order to achieve that? Yeah, I have done a bit of a strategy session with Jacob Field from Ripe House, if you know Jacob at all. I guess he helped me map it out a little bit clearer with what the equity positions are that we have to try and hit and obviously letting time do its thing. And you know, if we hit certain capital growth markers and stuff, this is what it should look like. So that's given me a rough idea of how many more properties we need to probably accumulate in the acquisition phase before we can start retiring out some debt further down the track. So how many properties is that or what value of properties and yeah, based on where you're looking to buy, how many properties would that be? So I think we leveraged it out at about four or five properties, probably most of them sort of around that three 50,000 price bracket, give or take 50 grand there. I can't remember the total equity position that we had to hit there, but obviously it would mature over time and we'd see it play out. But I guess we'll deep dive into that when we're at the next phase of acquisition. We've kind of got two young kids at the moment. So we're down to just myself working, my wife at home. So that's why I haven't been able to leverage things a little bit quicker at the moment, just because simply we don't want to, my wife's happy working with the children at home and we're not keen to bust things at home to just keep forcing this property strategy along. Yeah. And that's important. And that is like, it's a good thing to do. It's a cool thing to do if you can do that. A lot of people get sort of caught up at the speed, at the compromise of potentially family dynamics or how you choose to raise children, all that sort of stuff. But it comes down to the strategy that you engage in terms of investing in property. It needs to be fluid enough so you can make those choices over time. What happens where a lot of people go wrong in property is that they're overly ambitious or they buy the wrong properties or they over leverage early. So they don't get to make a decision like that where you just go, you know what? We're just going to just take it easy for a little while because we want to prioritize other things which are more important at that point in time. So you need to make sure you get your buying right. So if you go from two incomes to one income, you can still maintain your property portfolio without too much stress on cashflow. So you can prioritize those family type of things.

So let's have a chat about the two properties that you have secured. So you said they was one in, remind me again? Hobart and Townsville. That's right, Hobart and Townsville. Which one was first? Hobart. So I've done extremely well out of that. Went over there in early 2016 and had three days on the calendar marked out to see as many properties as we could over there. So I think I probably saw a dozen properties in three days, back to back appointments, had some check sheets and things to run through, gave me all the information I needed. And then I just, I nailed it down to probably a top three to start working on negotiating on when I got home. So then just spoke to a lot of the agents and negotiated pretty hard. Soon found out that the property that I eventually secured, there was some structural defects which were putting people off. It was on a bit of a slope block and people were very put off by this. So I just negotiated that in the settlement process that these underpinning works had to be rectified. So it was about 10 grand's worth of work, but this was putting a lot of buyers off. It had been on the market for a fair while. I think the asking price was around 220. I eventually secured it for 198 and they completed all the underpinning work with a structural certificate and everything. So I overcome that barrier, which was nice. And that was running for 250 at the time. Fast forward 12 months later, I looked at it and it had gone up probably 70 grand. I was thinking, well, that's replaced my income for this year, which was amazing. And fast forward to now, it's probably worth about 370. And now renting for 375, renegotiating soon to probably be around about that 390 a week. And it's bringing in about six grand positive cashflow the last financial year for me. So you'd do that every day of the week if you could again. So that was fantastic. Okay. So, and that was 2016, you secured that property.

If you think about that,you're pretty happy with the outcome of that. Is there anything you would have done differently if you had your time again on that, acquiring the first property? And that's saying that the first property is the keystone to any good property portfolio development. So it sounds like you got the first one right, but would you change anything? Yeah. Look, obviously I did probably 12 months research, listening to podcasts, consuming books, following the right types of people on Twitter, on their socials, understanding, I guess, as much as I could about property before I actually jumped into it. And that led me to Hobart, but I wouldn't change the location. I wouldn't change the house. I was very comfortable with the end result, I guess, with that. There's nothing glamorous about the house, but it's definitely not in the worst street. It's definitely not in the worst suburb, but the bare bones are good and solid and fundamental. The fundamentals are all right. Well, I imagine a lot of people go, wow, I wish I got that as my first property. So you've done well there, six grand in your back pocket, and that should only increase over time. How much debt have you got left on the property? So I refinanced it a little bit when we got into Townsville, but there's about 170 grand outstanding on that one. Okay. So you refinanced that in order to leverage into the Townsville property. Let's have a chat about that. We'll go to break beforehand, back in a moment.

Welcome back, everyone. Phil Tarrant, host of the Smart Property Investment Show with Jacob Rotter, property investor, regional, local, Colac, loving life, it sounds like. Sounds like you've got a pretty good setup there, mate. So you're in Tasmania or Hobart, you've bought well. Even now, even though you've refinanced, it's still positively geared. That's a good result. When did you decide to invest in the next property? What was the catalyst? So what was the light bulb moment that you went, hang on, I'm going to do this? Well, yeah, probably not far into having Hobart behind me. Knew there was some equity there to tap into. Serviceability was fine. My wife was still working at the time. So ready to go again. Maybe I probably tried to find the next hotspot in the next location, maybe a bit too quick and I probably could have gone back to Hobart and tapped into that market a little bit more or somewhere else. I was maybe trying to uncover that next hotspot a little bit too quick. The metrics of Townsville were all leading really well, but I probably got in a touch early, but yeah. So about 18 months after Hobart in early 2018, we purchased in Kerwin in Townsville. So yeah. Yeah. How much of the deposit for that property was drawing out the equity in the Hobart property versus savings? So there wasn't, when we went to refinance, I guess the valuation hadn't really caught up to what the market was doing. So we actually then tapped a little bit into some of our savings. We had offset against our PPLR, which gave us enough to leverage into this Townsville property. Okay. And it's been performing okay for you. What's the sort of cash position on it? Is it costing you money or is it putting money in your back pocket? Yeah, it's probably neutral now. A few extra holding costs, I guess, with Townsville or maybe North Queensland is the insurance with floods and tropical storms and all this sort of stuff. So they probably all add up to a little bit more than maybe your Southern and Eastern markets, a little bit more so, but yeah, it's standing up on its two feet. The rent increase has been there. It's gone from originally we had rented at 260. It's now up to 300, something similar right now. I think you get 320, but we're not trying to push the envelope too much. We just want happy tenants that are going to pay us each and every week and not looking to get every single dollar out of them. So yeah, we purchased that one for $218,000. It's probably worth about $240,000 now.

Okay. And what was it you bought? Was it a unit or a house? Yeah, just a house on a 600 square meter block, three bed, one bathroom, neat kitchen, neat bathroom, air conditioning in each room, which you need up that way. Pretty stock standard sort of house, but something that was very tenable, but also the only occupiers that might come in and buy it down the track are going to be still keen on that type of property. And did you buy that through your own process? Did you have any help? Did you go up and actually see the property at some point? Yeah. So much the same as the first time around. Went up there, spent I think four days up there, back to back appointments, probably went through 15 properties up there and whittled it down to a couple of properties that we were really keen to negotiate hard on. Found out from the agent that this was a bit of a distressed property with a divorce. One partner was moving up to Cairns. I'm not sure, the other partner I think was just looking to rent locally. So I was able to negotiate a quick process that they were happy with and I was happy with the price. So did you do the deal up there or did you do it when you got back to Colbeck and did it over the phone? Yeah, I did it over the phone from back here. So didn't find it a drama at all. And the agent is always happy to chat. So I went in probably low balling a little bit, but eventually we came up to a price that was fair for both parties. Yeah. Okay. That's good. Now is that you guys tapped out now? You're on one income you mentioned. Is there no buying for the immediate future or what's moving forward? What's the strategy? Yeah. So 12 months after we had our first child. So that's probably slowed things up a little bit, going to my local broker here. We were going to hit hurdles with serviceability. So I've been back a few times. I'm always hassling him to see when we can get back in. But while my wife's not working, we're not going to be able to sort of go again until she's probably back up and running. It's not hurting us to, you know, these properties aren't costing us anything to hold. We're making a steady little positive net income at the end of the year from them. So it's all there just ready to go once she's back in work for probably six months, we can go to the bank and say, you know, we meet your expectations of serviceability. So hopefully, you know, would you please lend us another 300,000 to get into the next property, I guess. So it should all play out eventually once we get to that stage. Therefore, it makes so important that you buy the right properties first. You do sound quite informed though. You've done a lot of work, obviously, preparing yourself to be the best investor that you can be.

You said you listen to some podcasts. How have you gone about sort of developing your strategy? It sounds like it's deviating and getting some help from maybe some professionals, but how would you crystallize your strategy as a property investor? Look, I think just bread and butter properties are going to serve you fairly well. You don't have to go try and recreate things too much. Obviously, if you can find a good value investment that might be slightly distressed, or there's a situation around that you can maybe capitalize on, whether it's a house that you can put another wall up and turn into a four bedroom, all those sort of little things, whether there's some land at the back that could be subdivided or a great flat potential, all these sort of things, I guess, if you've got a few of those strings to your bow within your portfolio, I think you'll set yourself up fairly well. And just following the right data sets to get you into an area maybe before everyone else gets in there. Yeah. And hypothetically, if you were ready to borrow now and you're ready to buy your third property, where would you be looking? Where do you like at the moment? I think Perth is definitely a spot that has definitely started to see some heat. The amount of transactions has really increased. Vacancy rates have plummeted really over the last 6 months. So I think if you're buying in there right now, I think you'd be pretty happy that you're buying almost at the bottom of the market. You're never going to time it perfectly, but if you can get within a few months of it, you'd be pretty happy. And iron ore prices are steady, which a lot of that market relies on. I'm hearing Simon Presley do a few of his podcasts. He suggests that China is a big importer of a lot of their products from Perth. So having them as a big customer, it can be a concern, but I think it's probably the market that I'd be putting my two bob on at the moment. And when do you think you'll be ready to go? Is this a 2021, 2022, 2023? It wasn't too long ago. I was really hoping, I was probably almost pushing my wife back into work early next year was the plan. But the accountant said, hey, look, let's just settle things down here. You're in a really good position. You're still young enough. You don't have to bust things to make this work. When the kids are getting into kindergarten, you'll be fine to then start your accumulation phase again, whether that's acquiring two or three properties in maybe the first 12 months, 18 months after she's back up and after my wife's back up and running, that'd be great. So yeah, I'd say we're still probably two years off that. Okay. Well, that sounds like you've got a pretty smart accountant there. That's a smart counsel and you don't want to fall into the mistake of over leveraging and overextending yourself and compromising. What sounds like you've got a pretty good thing going on there.

So Jacob, I really enjoyed the chat today, mate. Keep it up. Keep at it. When you're ready to buy again, let us know and we'll follow that story. Thanks, Phil. I really appreciate listening to all these great investor stories and great content to consume. It really does help us, give us a bit of confidence and a bit of insight into obviously having some tools behind us to go execute it out there. So appreciate the work that you guys do. Oh, mate, I really appreciate the sentiments. And as I've said many, many times, I've got the best job here. I just get to chat to investors about stuff that I really enjoy, but there are some great people here making me sound good, which is acknowledged and appreciated. But keep it up, mate. Fingers crossed up here in the North that the state sort of comes out of COVID as quickly and as easily as possible. Yeah, look forward to chatting again when you buy. Thanks very much, Phil. Nice one. Remember to check out smartpropertyinvestment.com.au. If you want to come on and have a chat with us, investor stories, it's pretty easy stuff. Contact the team, editor at smartpropertyinvestment.com.au. Remember social media, Smart Property HQ is where you can find us. We'll be back again next time. Until then, bye-bye.

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