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I long aspired to be a property investor. I, like many Australians, was bitten by the property bug. My journey from deciding to take the plunge, the purchase and property management has been documented for the benefit of those considering taking the plunge themselves.
Our attention has well and truly been focused on the acquisition of property 2, including an onerous and lengthy mortgage application process, finding a property manager and tenants.
The Landlord Experience with Property 1
Meanwhile, property 1 has been ticking along very nicely. Rent is deposited in our account each fortnight, a rental statement is emailed to me every month. A tidy end of financial year statement arrived by email promptly, for me to forward to my accountant.
Property inspections are organised on schedule by our property manager, although due to COVID-19, these have been virtual this year.
As mentioned in a previous article, our 1st tenants built their new home and vacated in August 2020. They left the property in good condition. Our new tenants moved in within a week. Mid COVID-19, the property was tenanted at a slightly lower rent.
We had tenants competing for the property in 2019, pushing the rent above expectations to $500 per week. In 2020, the property was rented for $470pw. These tenants have now been in for a year (time flies!) and have already renewed the contract, increasing rent back up to $490.
Some legal changes required an upgrade in smoke alarms this year, which the property manager alerted me to and organised. A couple of minor repairs required a handyman and the gutters got cleaned. All of this was organised by my property manager after emailing us to approve.
With the purchase of property 2, we took the opportunity to refinance all of our mortgages. Property number 1’s loan was converted to interest-only at a lower rate, freeing up cash flow for ETF investments.
Similar to last year’s article, I will summarise the financial outlay and capital growth so far.
Costs from 2019-2020 include:
Acquisition Costs $36,000
Buyer’s agent fee $14,000
2019-2020 Cash flow out of pocket costs after-tax benefits –$5085
Costs from 2020-2021 include:
Interest on property loan–
Repairs & Maintenance–
Property agent fees–
Advertising for tenants –
|Tax Refunded from PAYG employment||2793|
|Out of pocket costs for 2020-2021||-$3414|
In total we have spent net $58,499 in purchasing and maintaining this property.
I had a formal property valuation in October last year, but have not repeated this.
Our initial purchase price was $587,000. Valuation in October 2020 came in at $630,000. Online value estimates on domain.com.au, realestate.com.au and propertyvalue.com.au currently come in at $668,000, $775,000 and $650-700,000.
I confess these numbers are a bit rubbery! Online valuations are pretty unreliable.
But if I use the lowest estimated value at $668,000 the property has grown $81,000 since purchase in July 2021. This would be around 13.8% growth over just over 2 years.
It also means I am now in theoretical profit.
I will update this article when I have a formal valuation to confirm whether this is a fair assessment.
The Landlord Experience: A Summary.
Again, and frustratingly, there is no real way to know whether this property will perform without waiting many years. This year, property all over the countries has been going crazy. Prices seem to be up all over and there is a full-on buying frenzy going on. We are in a boom time!
I am feeling pretty optimistic that the timing of this purchase was, in retrospect, pretty good. It certainly didn’t feel good, with so much doom and gloom in the media.
Our landlord experience so far has been pretty easy. I suspect a lot of this has to do with having a great property manager.
I have no doubt things will get more challenging at times, and I am aware of many finance bloggers who have sold their properties, regretting the hassle involved. At some point, these properties will need major repairs and renovations.
I am happy to deal with some hassle every few years for leveraged (and untaxed) capital growth. Our plan is to never sell these properties. Only time will tell if we follow this plan.
Aussie Doc Freedom is not a financial adviser and does not offer any advice. Information on this website is purely a description of my experiences and learning. Please check with your independent financial adviser or accountant before making any changes.