Property Club Book of Tips and Traps

Property Tip #22

Do be engaged with the body corporate where appropriate, to be involved and direct maintenance and improvements as required.

Ric Finlay

Ric Finlay

We have a two-bed unit on the third (top) floor of a nice development on the Sunshine Coast, bought through the Club in 2010. The initial rent at that time was $400, which didn't move much in the first five years. The last year's rent has been $470, showing a better increase over the latter period.

Last month, with my tenant's lease up for renewal, my onsite manager told me that since Covid, there had been a strong demand for vacancies that came up in the development, so much so that apartments similar to mine were attracting $580 a week. There was no way to expect my tenant of four years to start paying $100+ more a week, but the problem of not getting market value was solved when they accepted a job in NSW and gave notice. My manager had a list of people who wished to be contacted when a vacancy arose (no advertising needed!) – we agreed that we would ask for $595 since there was still upward pressure on rents and see if we could get any interest.

The same day, on being advised there was a vacancy, a single person offered $600 a week, and furthermore, wanted to pay for twelve months in advance! They got the apartment! So I have gone from $470 a week to $600 in one enormous leap, an unparalleled rise in my 23-year history of property investing, and have a boost of nearly $30,000 in our coffers. It makes a pleasant contrast to the often-required strategy of dropping the rent to secure a tenant to meet the market.

Though not quite in the same league as this one example, I am finding that rents are experiencing significant upward pressure in the other components of our SEQ portfolio of ten properties (eight acquired through Property Club). We had collected this group of properties mainly by accident, not intending to have so much when we started in 1998 but adding more when we found something we couldn't resist! Each month now, we bank between $15,000 and $18,000 in rent, and thanks to this cash windfall, we have now commenced paying rates, water and body corporate fees in advance for a year, as well as some loan interest. By doing this in June, we received an enormous tax benefit in the first year, and by continuing to do it (you have to; otherwise, there is a corresponding tax problem!), we have significantly reduced the amount of time spent paying quarterly bills, attracting the early payment discount, avoiding late payment penalties if a bill is somehow overlooked, and benefiting from the psychological boost of receiving significant rent monies without having to pay it all out again in costs.

The flip side of current low-interest rates is that term deposits are now useless vehicles for parking spare cash. We have decided instead to use any surplus cash to pay off capital debt, so we now own three of the properties outright. Doing this has accelerated our savings plan by reducing costs and paying off more debt quicker. We can spend more on keeping our apartments fresh and our rents high by investing in small renovations, like new carpet and paint.

If all the above is not a great advertisement for acquiring multiple properties, I don't know what is! I haven't touched on the capital growth that is bubbling away in the background, but that, of course, is an extra benefit. It hasn't come to this overnight, of course – it has taken many years of patience and frustrations to get to this point. And therefore, our gratitude to Kevin Young and his ideals that we would never have discovered on our own is profound – it has changed our lives. And the great thing is that this is a repeatable process – you can do it too!

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