Over the last few weeks we have received many letters from our readers wanting to know how they too can enter the property market. Well, it is not as hard as you may think and our Property Princess of the month is a testament to that.
Meet Kathryn Hill, single parent with two children under the age of six. With a keen interest in property, Kathryn has 2 investment properties, both of which she can add value through a renovation and which are subdividable. Though just beginning her investment journey, Kathryn proves that with the right attributes and skills, you too can be a success.
Kathryn in Focus
Kathryn's investment journey began in a town call Merbein, a suburb of Mildura in Victoria's northwest. Lots of research on the internet led me to Mildura, Kathryn tells us. As a single parent, my income is limited so I needed a property with a reasonable yield. I developed a checklist of factors I was looking for around growth potential and yields to narrow my search area down. I liked what I found in Mildura, so I drove over for a weekend for a look. While there, I found the property I eventually purchased. I was only able to look at it from the outside as the owners were away for the weekend, but I was very impressed from both the figures and the look of the property in comparison with the other properties I had seen that weekend. I paid $172,500. It only settled a couple of weeks ago, so it is hard to determine exactly what it is worth now, but I paid under the council valuation. Kathryn then purchased her second property in Port Pirie shortly after and is currently waiting for the property to settle in the New Year.
Kathryn Hill describes her property investing like playing a real life game of Monopoly. It's fun, she says. It's solid and easy to understand. I like the fact that you can control the outcome of your investment more easily than with shares. And control is exactly what Kathryn has. Her thorough research which includes researching areas through the internet and over the phone, talking to property managers, and eventually visiting an area and making herself known to the real estate agents, has resulted in both of her purchases being able to be subdivided and sold off for a profit. If necessary, that is my exit strategy, she explains. That's if I was unable to hold the property for any reason.
But how does a single mother of two purchase property you may well ask. According to Kathryn Hill, both of her properties were purchased by using the equity in her PPOR (Principal Place of Residence) for a deposit. I had to refinance my home with a no doc loan to create a LOC (Line of Credit) after my bank rejected my application at the last minute following the sub prime meltdown in the US.Â I was then able to get an 80% loan after much initial difficulty on the Mildura property, and I have a 60% loan on the Port Pirie property. As a low doc borrower purchasing in a regional area, it is difficult to get a loan greater than 60%.
Many property investors have discovered their own strategy when it comes to property. When looking at Kathryn Hill, she describes herself as unconventional. I found I didn't fit the usual strategies of buy and hold negative gearing. Being on a low taxable income, I receive little or no benefit from tax refunds and depreciation. Also being on a low income I couldn't fund a large shortfall myself. Therefore, I looked for properties with a twist and with an exit strategy if I got into trouble. I still chose areas that I felt had potential for reasonable to good growth as well as a good yield. My overall plan is to buy and hold for the medium to long term.
Kathryn is keen to talk to us about her properties with a twist. The biggest thing is being able to add instant value, she says. What I did to the Mildura property was to add a fence to make it dual tenantable. I also put in ceiling fans and did some minor repairs/upgrading work but it was already in very good condition. I can subdivide it which would increase my equity but would make no difference to the rent at the moment, so I am holding off on that at this stage.
As for the Port Pirie property, it needs a major renovation to make it habitable. Once complete, this will add at least triple the reno cost in value to the property and should provide at a 7.5% yield on total cost. Even though Kathryn's property is yet to settle in the new year, she does have a licence to occupy, with an aim being to complete the reno before settlement. My budget is $15K. The previous owners had gyprocked the walls and ceilings, renovated the bathroom and rewired, then run out of energy having purchased a new property themselves. It needs new doors, windows, architraves, flooring, a kitchen, guttering and painting inside and out. It is a huge learning curve, and still has quite a way to go. The best thing about this project has been finding a highly skilled handyman who works very cheaply and knows the whole town, and he has been more or less project managing the reno from Pirie. This includes chasing tradesman, which is hard work over the Christmas period. Planning a major reno over the holidays was probably not a great idea, but hopefully it will all work out in the end. The licence to occupy has been a great help in being able to get started on the reno with low holding costs.
Like so many other property investors, Kathryn has learnt many lessons along the way. You need a great team, she states. I don't know how I would have even got started on the Pirie project without Tim the handyman. As for finance, this was a huge challenge so I am grateful for my miracle worker finance broker. But most importantly, Kathryn declares that persistence is everything. I have been knocked back at so many points due to my unconventional income types of child support and centrelink payments which supplement my employment income. Also friends and family can question why a single mum would want to go into something as risky as property investment. I have needed to stick to my vision and believe that I would get there in the end and keep going even when it looks and people tell you it's impossible. I've made loads of mistakes, but looking back they have all led to where I am now, so I can't really regret them.
Spoken like a woman with a wealth of experience, Kathryn does not fail to mention that the Property Women workshop has made a major contribution to her journey, helping her to finally take action. It's hard to say exactly why, but the workshop finally had me moving from procrastination to actually finally taking committed steps to purchasing my first property. Within weeks, I bought myself a laptop, got broadband internet and got serious instead of endless reading, and talking about it. Within 3 months of the workshop, I had my first property under contract. I think it was just good practical advice, and hearing a variety of strategies that worked for people in different situations. I particularly valued the opportunity to pin the presenters down in the breaks and ask them questions relevant to my situation ie: a single parent with income types that are difficult to finance against.
Visit http://propertywomen.com.au/events/workshops/one-day/ for more information on the Property Women workshops
Kathryn Hill is an inspiration to say the least. Her property journey has helped her gain a great deal of confidence in her ability to achieve her long term dreams. I am aiming for between 5 and 10 at least in 5 years, and also a business or other means of producing cash flow to assist in gaining more properties. The detail will come along the way, but I have no doubt that this is just the start of my journey.
Kathryn's Advice to us all
- The old standard, feel the fear and do it anyway. Acknowledge to yourself that it is scary, but that doesn't mean you shouldn't do it.
- I choose to see myself as a professional and a property investor rather than a single parent on a pension and I think a person's vision of themselves has a big impact on their future.
- Focus on where you are heading and just put one foot in front of the other in the meantime. I was a real victim of analysis paralysis and tried to plan out every step far into the future, but life doesn't really work that way, so in the end I decided I just needed to do something, if I made a mistake I would just learn from it, and just enjoy the journey.