What this couple learned after being away from the investment game for over a decade

Tell us about your first investment property.

Vanessa Refalo: We bought in Perth. It was on an increase, on the rise at the time, but hadn't peaked. The funny story is when we bought that property ... we didn't go over and see it at the time. We couldn't afford to do that—at least, that was our perception then. Different now.

We bought the property ... That was a great experience … Then we discovered we could not cope with the heavily negatively geared aspect of it. We were quite low-income earners at the time and it was just a real struggle every single week to try to come up with that money. I think it was negatively geared by about $200 [or] $250 a week the way it worked out … That was a lot for us.

When did you decide to sell it?

Vanessa Refalo: [We] came to the realisation [that when] the market's grown a little bit, we might make a little bit back on it. We can't sustain this, so let's get rid of it.

Was it an easy experience to sell the property?

Vanessa Refalo: We put it on the market and then, as bad luck would have it, the couple had to move back to the UK … That meant we had the property on the market and no one in the property. That was a real struggle. I think it took us about two months to sell the place … We struggled at the time.

Simon Refalo: [It was hard to] carry the mortgage with no tenant.

How did you deal with the struggle?

Simon Refalo: We were around Christmas. It was quite stressful.

Vanessa Refalo: I guess we thought we will make a little bit on it so we just held on, held our breath, and waited for it … We bought it for $295,000 or something like that and sold it for $350,000 … In real terms, that was about $12,000 [to $13,000] ... after the mortgage and all the expenses.

Was $13,000 a good enough compensation for all the stress you went through?

Vanessa Refalo: Not for those two months.

Phil: A lot of people sometimes, they always think about dollars, but you got to think about your happiness as well … It's so important.

Vanessa Refalo: Well, we're people of faith and I guess, at that time, it helped us to rely on that and trust it's going to be okay. We're gonna be fine. We'll get through it … [and] we did.

What’s an important lesson about negative gearing that property investors must know?

Phil: It's okay to have negatively geared properties if you know why you're holding negatively geared properties … and you've got to be comfortable with the negative gearing on it.Trying to find a thousand bucks a month is a lot … so you've got to find the right properties that fit within your portfolio to do what you want to do.

Do you have a target amount of passive income?

Simon Refalo: I think that $100,000 is one of the figures … So, what do we need in property for that to happen?

Vanessa Refalo: I think that's something like $2.2 [million] unencumbered.

Will you encourage others to begin investing in properties despite the risks?

Phil: The good thing is that 90 per cent of winning is beginning ... You've started now. Your goals today probably won't be the same goals you're gonna have in 5 or 10 years time as your experience grows ... and you get more confidence and you actually get what's going on. You know you might become more ambitious and you might change those goals and work out what you can do to actually realise them.

After being out of the market for a while, how did you restart your journey?

Vanessa Refalo: I think we've got the right advice this time around and we're very comfortable with the purchase in ... [Brisbane, Waterford West] … We're comfortable with that and we're able to maintain it and stay in the market whereas, previously, we weren't able to maintain it.

Should property investors avoid selling?

Phil: One of the reasons that I've been good at investing in property [is] because, often, the properties that I secure, people need to sell it for a reason and, therefore, you get [it] under market value. You don't want to be that person that's selling under market value because you're under financial stress or there's some other situation.

Work within your own parameters and know what they are and be comfortable and confident with it.

What’s your final advice for property investors?

Phil: [You need to have the] right people on your side to help give you some counsel as you go and do it, but … the decision is [still] yours. You can't outsource responsibility for your investing to other people. Good advice will equip you with the knowledge you need to have ... in order to make decisions you need to make.

Tune in to Simon and Vanessa Refalo’s episode on The Smart Property Investment Show to know more about what happened after they decided to sell each of their living properties and the challenges they faced with negative gearing before succeeding in the property game.

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