How To Buy Your Second Property
When buying your first property it’s important to think about how you are going to buy your second property. Today we are looking at some of the decisions Simon made with his first property that will help him buy his second.
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0:00 – Introduction
0:48 – Simon’s goal to expand his portfolio
1:24 – How Simon plans to buy his second property
3:13 – Renovating to manufacture growth + negotiating a discount on the purchase price
5:02 – Purchasing property under market value
5:36 – Buying in an area set for growth
7:48 – Buying in a nicer pocket of a suburb
8:42 – Having a strict criteria limits your search
9:23 – Not buying the right property can limit your growth both short and long term
10:15 – Paying off debt vs saving a second deposit
12:08 – Is Simon accelerating paying off debt or focusing on saving a second deposit
15:11 – What about side hustles to focus on saving a deposit
18:06 – What to do if you want help to find the right property or suburb
Success Story: Simon Bought His First Property!!! – https://www.youtube.com/watch?v=HP376QV3qi4
What’s It Like Buying Your First Property? – https://www.youtube.com/watch?v=EYE3HJQ2AcQ
When buying your first property. It’s actually also important to think about how you’re going to jump into the second property you. So today I have with me Simon Everingham buyer’s agent from pumped on property who’s just purchase purchase this first property. Thanks Nate. And in this episode we’re going to talk about what he’s thinking about and how he’s looking at getting into a second property and some of the decisions that he made on this first property so that he can more easily move in to the second one and grow his portfolio further. So thanks for coming on today. No worries. No Way. Simony is down for a bucks weekend down in Sydney, so we thought we’d catch up in person and I, I think I got to get up back up to the sunny coast hopefully next month to get some filming done up there. All right, so you just purchased your first property, which was a renovator Yup. On the beaches in Brisbane, about 25 kilometers from the CBD. Yep. And we taught in a previous video, which I’ll link up down below there. Your goal is not to build a granny flat initially on it, but to expand your portfolio first because cashflow is not as important to you at the moment. You’ll look at building granny flats down the track. So talk us through some of the decisions that you made when looking for property number one and purchasing property number one in that you were thinking about
property number two down the line. Sure. So I didn’t have a huge um, deposit, essentially like I could only spend up to about $400,000. So I was really at the bottom end of the market, especially in the suburbs that I wanted to target. So I kind of thought of this in a positive way cause I’m like, I know the property that I’m going to buy is going to be a little bit rundown, going to need a little bit of a face lift in order to get some tenants in there because that’s all that I could afford. But what that also allows me to do is to get into the property and do a little bit of a renovation and increase the equity from a small cosmetic renovation so that when it comes time for that next property, well, I can get that one very valued and hopefully I’ve manufactured a little bit of value there and hopefully the market’s going up a little bit as well so that I can release a small amount of equity. Plus you use a small amount of my savings in order to purchase that second property.
Yeah, so it’s the things that we always talk about anyway, which is look for the three things in a property you want to purchase in a suburb that’s going to be growing, so right suburb in the right area that’s on the right market cycle. You want to look for a property that’s going to where you can manufacture growth and create that growth. Some people do that on the way in like Simon did. Some people just get a tenant in there and then white and do it at a later point. You didn’t have that choice that around, you couldn’t really rent it in the sand at that it was in,
yeah, I needed to do some work immediately in order to get some tenants in there and I left a few options there so that like if it comes time for that second property and I need a little bit more equity, it’s not going to be too hard to do a little bit more of a renovation to get a little bit more value there. So like walking into it, I was kind of hoping that if I can spend $1 and make two to $3 that would be an ideal scenario for myself with with that renovation, which can be hard. But luckily I had some good people around me, some friends that were experienced trades people and they were able to actually work for me at a discounted rate, which is going to allow me to get that extra value there hopefully.
Yeah. And as well, something that I think we didn’t talk about in the previous episodes was that you are also able to negotiate a discount on the property because of the issues that it had that came up in the building and pest inspection.
Yeah, exactly. So that building and pest inspection paid for itself so much. I think I paid $400 to get the building and pest inspector around there and do an evaluation of the entire property. And we asked him to be extremely diligent because we knew there was going to be some issues with this property. It was built in 1965 that it had a couple of upgrades but not too much over that period of time. So like it was really run down and there was a bit of a specifier’s around and um, you know, there was rotted guttering and um, the paint was coming off everywhere. The actual, where the board, like the timber, where the board was rotted in some parts and peeling off. So like it was really, really run down and we were like, be super diligent because we can use this to our advantage. And um, we ended up smashing a great result. So it cost me $400 to get the building and pest inspection done. I was able to negotiate a seven and a half thousand dollar reduction of the price of the purchase just from that building. Right.
That’s awesome. So do you think you actually purchased that property on the market value? Definitely. Yeah. Yeah. So that’s another way to think about a property going into your next one. Generally buying under market value can be quite difficult. You need to know the area really well. Generally when it happens. It’s not from a rundown property so much as a property that’s been marketed poorly and listed incorrectly. Um, but obviously that property had been on the market, so you had that opportunity as well. So under market value, you saw some potential upside in terms of a renovation and then talk about the area that you’ve purchased in and how you identified that as an area for growth. Because obviously if it grows in value, that’s going to help you go into property number two.
Yeah, exactly. So I can never guarantee short term value. Like I was never looking for short term gains. It’s not what I’m there for, but it’s obviously going to be a benefit if I’m able to achieve chase some of that. So my identification of this suburb was not for that short term uplift. It was more for the longterm performance. So I want it to be within a certain proximity of the CBD. So ideally I want it to be within 25 kilometers, which I’ve actually been able to execute on. So it doesn’t take people too long to commute to the city. There’s actually a train station in the neighboring suburb as well, which has access to the CBD. Um, it was in walking distance sort of features as well. So it actually, you know, it’s a really nice area. It’s beautiful for sure. And it’s gone through a huge phase of gentrification over the last five years.
So there’s been lots of own occupiers that have started to move into this area. Not Diane Holmes. Bill Beautiful. Mcmansions or renovate amazing houses. There’s lots of restaurants and cafes and bars and things like that in there. There’s like markets and things like that. So the suburb is gone through from being a really sketchy one with lots of housing commission and lots of demographic issues to those people being pushed price gout. So they can no longer afford to rent there. They can no longer afford to live there. So they’re being pushed out. And because it’s a really nice area in a great location, a lot of owner occupiers are starting to move in and add value to the properties there by either building a really nice new house or doing a massive like $200,000 renovation. That’s what you love when you buying a property and peep you buy in an area and then people overspend on their renovation.
Yeah. Cause that’s, it increases the value of the or it increases a median in that particular suburb. So, um, that was kind of my goal. Um, and then you also looked a particular streets that were low in housing commission, home owner occupiers as well. Exactly. So that was one of my goals have been a nicer pocket of the suburb. So when you’re in larger suburb says different areas, like you notice it on the main streets close to the commercial, close to the retail. Sometimes you’ll find that the properties are a little bit run down. You know, you’ve got high percentage of renters there, but then you find the nice straight at it lined with beautiful trees. It’s quiet, there’s kids playing out on the street, there’s no buses bus route. It’s a nice quiet area. Um, that’s what I wanted to focus on. Like it’s a straight way drive into and you’re like, oh, this is beautiful.
Like there’s nice trades, it’s nice families playing in their front yards and um, so that, that was really important to me. So the thing is that I wanted to achieve, like when you have such a strict correct criteria, it really just eliminates so much of the market that it makes it easier to make the decision when the right property does come up because you’ve got such strict keep performance indicators is something doesn’t adhere to that, then it’s just gone. So it means that once that right property does come up, you know that it’s going to be the right one.
So that one was quite an obvious choice for you then to sora once you inspected it, fit all your criteria. Most of them you’re like, Yup, yeah, it ticked all of my property investment goals and um, fortunately I was lucky enough to get it at a great price as well. Yeah. Well I think it’s important to know that as you’re buying your first property, if you’re thinking about buying a really solid investment for the second one, you do have to take all that stuff into account because if you do buy on a main road, that can affect the capital growth at that property, both short term and long term. If you buy on a train line or a bus route or have you buy in a flood zone or all of these little things all can add up to your property, not growing as quickly as possible.
And so having that criteria and taking the time to do that and it took you six months in order to get yours. You had a couple of deals fall through because they didn’t accept your offer. So you were very diligent with that and I think you made it harder for yourself than most people because you want to your particular area and you had a budget limitation. But it was great that you were able to find that. And so obviously so you’ve done all of that sort of stuff, buying the right property, manufacturing growth, buying under market value, cashflow. We’re not looking at at the moment in terms of granny flats. What about for you personally getting into that second property or you’re looking at paying off debt first on the property, saving a second deposit. What’s sort of your thinking around that?
So I’ve just, I’ve got to get used to living with a mortgage. So how is that very new? So I don’t really know. It’s only been like three weeks since the property settled. So I haven’t even had that first did like deduction out of my bank account for the mortgage. But um, I want to get used to that. And then probably within the next month, I really want to get a budget together and figuring out, okay, well how much surplus money am I going to have every single week after that mortgage? Then I can start putting into savings so that I can get into this next property as soon as possible. So based on the calculations that I’ve done already, it will probably take me 18 months to maybe two years to get around probably $30,000 20 to $30,000 in cash, which I’ll use for my next deposit. And then I’m hoping that I can use an additional say 20 to $30,000 in equity and still be at a around that 80 to 85% LVR on my existing home.
Yeah. So hopefully avoid the multiple lenders. Mortgage insurance. Yeah. That occur. Have to do that in an ideal. Well,
yes, but it’s not the end of the world either. If I do have to pay a little bit of math lender’s mortgage insurance, so like I’m happy to cop that small fee knowing that I can get into the perfect property right now.
Yeah. So I want to understand your thinking around saving money for the next deposit versus paying down debt on your existing property. Like where, what are you thinking about that? Are you thinking I’ll just use the offset account to save money to use for deposit or are you actually going to actively try and pay down debt faster? At the same time?
I’m going to pull all of my surplus funds into my mortgage account. Um, so at this point in time I don’t have a offset account set up. My mortgage broker advised me not to because of the fees that I would have had to be charged in the first year. He said wait a year and then get your offset account set up. And I was like, okay.
And so I just want to put a disclaimer out there that this is not mortgage advice for anyone out there. This is what Simon is doing himself. Yeah. That’s what my mortgage broker told me. Yeah. So for your situation, so obviously you see your own mortgage broker if you guys are looking at doing this.
Yeah, definitely. Um, so yeah, that’s what he educated me to do and I was like, okay, I’m going to listen to you. So I’m just going to pour all of that money into my mortgage account. And then I have my everyday spending account which I to just provide myself with around $400 a week just to have fun. Yup. Yeah, just having a bit of fun. Yeah.
So I still don’t understand like I you, so you’re actively paying off the debt and then you’re hoping that you can access that at a later date. What? Did you have a redraw facility?
No, I don’t have any of that.
So what, what happens if in 18 months or in two years time you’ve paid that money off your debt but you no longer able to access those funds? So I’m not physically yes,
paying off the debt on the home. Okay. I’m sitting at in what will become my offset account and all the time pain is the minimum principle and interest are payments that are required. Okay.
My second fee side, so I need to pay a certain amount every single month to pay off my loan. You got your mortgage repayment, which is your interest plus a bit of principle over however long of a term you said.
Yeah. Which is sat in one account. Okay. Now I know I have an additional account where they take money out of for the mortgage.
Oh, okay. So it’s like a separate account that they extract the mortgage from, but you can pull funds in there like a regular basis regular bank. So that essentially my thoughts there was this will be my offset account when I set it up. But for now it’s just a regular every day savings account. Yeah. So, so you’re saving money, you’re not actively putting it on the deck apart from your mortgage repayment, which is a principle and interest like yeah, that’s what I was trying.
We got there in the end. Yeah. Saving up money, saving up money, not paying down the debt because I want to be able to access those funds when I need to.
Yeah. And what about um, side hustles or things like that? Are you looking at any of that sort of stuff to accelerate saving a deposit or you just focused on being a good budget are, which I am not. Yeah. And
La well, well I’ve got 10% ownership in pumped on property so I get dividend payments every quarter from that business, from the profits that we get from that. So, um, fortunately the income that I get from the business that I work in in that I have part ownership in helps me save quiet submission, sufficient amount of money in a shorter period of time. So I don’t have any side hustle was set up at this point in time. I don’t necessarily have any interest in doing that or either because I’m really focused on what I’m doing at the moment. Working with pumped on property. Like that’s what I want to spend my time and energy doing. I don’t want my focus to be drawn to anything else. And I also want to spend some time on myself like traveling and doing things like that over the next 18 months. So, yeah,
I think it’s good for people to see that because I talk about my goal to get out of debt is to expand my business and to expand effectively my side hustles, which is my full time hustle. And so it’s good to see someone who is effectively um, you know, working and earning a wage. Yeah. And doing it that way. So people, cause I know more people will be in your situation not having a side hustle and doing this than in my situation where I run my own business and that’s how I’m going to grow. So it’s really cool to see that. So they have some things to think about on how to buy your second property and how to purchase your first property in such a way that it can set you off for that second property. I know we talked in one of the previous videos that you really feel a light off your shoulders buying this first property because you know that even if you do take that time out for yourself and you’re not as diligent with your budget and savings, that because you’ve bought in a good area, long term it’s going to grow and so long term it will help you get into your second property if you don’t get it in that 18 to 24 month period.
Yeah, exactly. But you know, if it gets to like 12 months time and I haven’t hit that target, that aisle I’m at, it’ll just be like cut. Everything goes into savings back to the Uni Saturdays. Yeah, back then back in with mom, back to Bain and peasant. But like, you know, I, when I set a goal, I want to achieve it. So I’ll, we’ll have that second property within years. Okay,
awesome. So we have this is encouraging to you and to give you some food for thought when you’re out there looking for your first property or if you’re looking for your second property and thinking about how that’s going to help you move into your third property. You should be thinking about this at every property along the stage. If you’re interested in more information about how you can get help to find the right property and find the right suburb than Simon and the team over at pumped on property. There are buyers agency and they are offering free strategy sessions to guy. So that’s a complimentary phone session where you get on the phone, talk about where you’re at, where you want to be, and they can guide you as to what strategy is going to suit you and what are the next steps you need to take in order to achieve your goals.
So go on property.com.eu. You can learn more about that over there. You can book a time that suits you, jump on the phone with Simon or one of the team and start moving towards your goals. And then maybe next time you’ll be sitting here talking about how you purchased your property. Thanks so much for watching while you’re here as well. Go ahead and check out the previous two videos main Simon did, talking about his purchase of that first property and how it went easier than expected. I’ll link those up in the description down below and until next time, stay positive.
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