The local economy will always play a part in the success of your investments.
If you can time it right, you can get in before a growth period. And when you manufacture growth on top of that, you stand to make a lot of money.
But if you time it wrong…
Well, Liam and Kelly can show you what happens.
Liam and Kelly told their story at a recent I Love Real Estate (ILRE) seminar.
Before we get to that, we just need to tell you that they rearranged their whole marriage to show up. Originally, they were going to get married on the date of the seminar. But they chose to move the wedding back a week just so they could attend and tell their story.
That’s commitment!
That story begins in North Queensland.
The couple had an interest in investing and they’d bought a couple of properties at the height of the mining boom.
That was in 2010…and we all know what happened in the aftermath of the boom.
For Liam and Kelly, the end of the boom led to their properties losing about 35% of their value. That represented a $200,000 chunk of equity!
They still had about $35,000 in equity left over. However, their loans tied up much of that money.
Unfortunately, the end of the boom also left them with a negative cash flow of $30,000.
In was in this situation that they came to ILRE
The couple quickly realised that the market didn’t want large houses. Instead, it wanted small and furnished spaces.
So, they started to rent out rooms in one of their properties individually. Each commanded a $150 per week rent, which put them back on track towards positive cash flow.
Then, they turned their attention to the other property, which they chose to renovate.
From there, they started looking into how they could help Kelly’s mom. She’d bought a pair of townhouses in Marimba with the intention of selling one and leasing the other. Unfortunately, that strategy didn’t work out and she had a fair amount of debt built into the properties.
Kelly and Liam bought a property for their mom to live in so that she could lease both of the townhouses.
With the family secure and their investments back on track, they started to look for new projects.
The first was a mortgagee-in-possession property that they managed to get for $85,000. The couple spent $20,000 on a renovation.
That raised the value to $140,000 with a positive cash flow of $6000 per year.
From there, they redrew on that property and moved onto the next project.
The renovation strategy worked for them the first time around…so they did it again. The second project ended up with a $64,000 value increase and now generates a positive cash flow of $5,000.
Their third project saw them aiming to buy a deceased estate. While the owner was still alive, it was on the market for $200,000.
That left no room for adding value.
However, once the owner passed away, the new owners chose to send it to auction. Liam and Kelly made a cheeky bid of $92,000, which the owners refused outright.
So, they headed to the auction to see what would happen.
The couple ended up being one of only two bidders on the property. They started with a bid of $85,000 and somebody came back with $86,000.
And that was almost it. The auctioneer begged them to go up to $87,000 and they ended up securing the property for $5,000 less than their original offer.
With the property secured, they carried out the same strategy – renovate, furnish, and rent out.
That property now has a positive cash flow of $7,600.
Liam and Kelly do have plans to diversify their strategy at some stage.
However, buying at the low end of the market to renovate has worked for them so far. And they’re going to stick to that strategy for a while longer.
Today, they’ve taken about $35,000 in equity and turned it into over $250,000.
But more importantly, they’ve transformed a negative cash flow of $30,000 into a positive one of $18,000.
We think there are three very important lessons to learn from Liam and Kelly’s story.
Too many investors go chasing after new strategies once they’ve found a little success.
However, sticking with what worked before is almost always the better option. Each of Liam and Kelly’s deals has involved them buying below market value, renovating, and renting out.
They have a defined strategy and they’re sticking to it.
The couple maintains spreadsheets for each project in which they track their time.
The aim is to ensure they’re making more money from property than they did in their previous jobs.
That’s such a good idea because it helps you to see where the issues are and what you can do to make your process more efficient.
If you’re tracking your time, you decrease the risk of delays affecting your investment.
Liam and Kelly primarily work in downturned markets.
However, they’re able to find opportunities because they know what those markets need. In their case, it’s small and furnished spaces.
The market you work in may have different requirements. It’s crucial that you invest according to demand, rather than buying something that appeals to you.
This couple’s story shows us that opportunities exist even in supposedly bad markets.
You just need to know what the market wants and work accordingly.
With a lot of education, and a little perseverance, you can turn a negative position into a positive one. That’s what Liam and Kelly did. And now, they’re well-positioned to diversify their portfolio and grow their income even more.
DB
