‘Lessons I learned from real estate investing’

On the surface property investing seems like an exercise in making money, but many experts will say some of their best deals came with life lessons thrown into the bargain.

On the surface property investing seems like an exercise in making money, but many experts will say some of their best deals came with life lessons thrown into the bargain.

Learning to look outside the box, trusting your gut (after plenty of research) and even leaving emotion at the door can result in real estate deals offering more value than just dollars and cents. We asked a panel of property gurus to reveal the key takeaways from some of their best deals.

THE INVESTOR

Lloyd Edge, longtime investor and buyer’s agent, said his most enlightening deal was a development opportunity in Newcastle that bucked the trend.

“I created equity and made a profit, as opposed to just buying another property to hold and hope for the best,” he explained.

“I didn’t have a huge budget. My options were; buy another property and wait for capital growth – which is what most people do – or go out on a limb. I decided to buy land, subdivide and build so I could move my investment portfolio along faster than I’d otherwise have been able to do.”

Look to create equity. Photographer: Liam Kidston.

Mr Lloyd bought a 1000sq m corner block for $290,000 in 2016, despite naysayers suggesting it could be riskier than buying an existing “set and forget” property.

“I’d had experience with duplexes, so I did all the due diligence ensuring there were no issues to build on the site; checked easements, sewerage, stormwater and chatted with architects, town planners and builders. Then I built strata-titled duplexes with separate street entrances so they looked like stand-alone houses.”

Fortunately the local market was in an upward swing, which Mr Lloyd said was also came down to research.

“I ended up making a $360,000 profit in little under 15 months including the time to get council approval. If I’d bought a standard property and went for growth I wouldn’t have made anywhere near that in the same time frame,” he said.

“For me if there’s no risk, there’s no reward. What I learnt was to not go with the flow. Go with your gut and what you feel is the right approach as long as you mitigate the risk and do the appropriate research.”

THE BUYER’S AGENT

Nicole Jacobs has built a career out of buying homes, some for herself and plenty for her clients. The buyer’s agent, who is a frequent bidder at The Block auctions, said one stand out result came after leaving a deal on the table.

“What I’ve learnt over 20 years is to be prepared to walk away, which requires being unemotional. There have been many times I’ve walked away when the deal wasn’t in our favour, only to be called back in by the agent with more favourable terms,” she said.

On one such occasion five years ago, Ms Jacobs said she was negotiating on behalf of a client when the agent said there were competing buyers for the same multimillion dollar Melbourne property.

Take a tactical approach.

“I knew there was no one else. I’d understood that from their dialogue and body language. I called my client and said ‘I’m going to walk, but I’ll walk in a way I can still come back.’ So I told the agent ‘we’re not out, but we’re done for tonight’,” she said.

“By the time I got to my car, I had a phone call asking me to come back and get the deal done. We ended up getting it for much less than my client was prepared to pay.”

The tactic requires a lot of confidence, said Ms Jacobs, which comes down to knowing the market well enough to make bold moves.

“You need to be prepared to lose the property though, and that’s difficult when you’ve already decided where the furniture is going! It’s about knowing whether you’re prepared to go into the emotional zone. If it’s your dream home you need to be prepared to go into the emotional zone to get it. If not, then walk away and go to the next one.”

THE RENOVATOR

TV personality and founder of Renovating For Profit courses, Cherie Barber, said one past project taught her to not let budget get in the way of a great deal.

“Early on in my property journey, when I had almost no money, I went to an open for inspection for a $2.5 million property. I never thought I’d be buying a home that expensive in my whole life, but I saw so much potential,” she explained.

“Instead of walking away thinking I couldn’t afford it, I approached someone to buy with me.”

By finding a trusted financial partner, and setting the fine print in stone, Ms Barber said she solved the money conundrum by going into a joint mortgage on a property in Balmain in the early 2000s.

Consider taking on a business partner like renovation queen Cherie Barber did.

“I knew I couldn’t have serviced the loan alone because I’d just thrown in my job to renovate full time. He came on board as a debt partner only, while I took care of the subdivision and renovation works. Once the property was complete we sold and all the money he put in, plus any I contributed, got paid back then we split the leftover 50/50.”

She said after 14 months of renovating the heritage home on site and carving off the back of the block each of them walked away with $350,000.

“I put in hardly any of my own money, but was able to do a multimillion dollar deal by using someone else’s financial means and my property knowledge. All it takes is a watertight contract with the roles and responsibilities of each party clearly spelt out,” she said.

“If you have the passion to do something in property, but haven’t got the money to start, don’t let that stop you. I always tell my students you don’t need lots of money to start in property; if you’ve got the will, you’ll find a way.”

THE COMMENTATOR

In 2010 Sarah Megginson, personal finance expert at Finder, spent $500,000 on a four-bedroom Gold Coast house and although she sold it nine years later for a six-figure profit, she still considers it “the one that got away”.

“The plan had been to buy and hold for a very long time so one day the rental income would help fund our retirement. But there was a plumbing issue underground which meant disrupting tenants, sending in experts to dig, spending a couple of grand only to discover six months later the problem would crop up somewhere else,” she said.

“I thought the problem wasn’t going away and would end up costing potentially $20,000 to fix. It all seemed too hard. So I got out, selling for $635,000.”

After expenses and capital gains tax, Ms Megginson admitted it was a solid return but in hindsight sees how she could have handled the situation differently.

“It wasn’t the best profit I’ve ever made, I was hoping for more, but it was a decision based on emotion, rather than numbers. Selling it in 2019 felt like the right decision, especially when the pandemic hit. Fast forward a couple of years and that same property is now worth $1.2 million!”

Instead of lamenting over the “life changing” sum of money never made, she said the deal taught her a great lesson.

“I now know not to make investing decisions based on emotion. What I’d really needed was a fantastic property manager or advocate to take the problem off my hands and reduce some stress because it hadn’t really been a financial burden,” she added.

“Always make look ahead when making investment decisions. History shows the longer you stay in the market, the more property is going to go up – it just always does.”

Originally published as ‘Lessons I learned from real estate investing’