A Sydney couple who had been struggling to make a decent return on their solitary investment property have revealed the chance advice that turned their financial fortunes around.
Belinda and Adam Robinson now own eight properties, including their home, with the value of their seven rental homes totalling just over $6m.
It’s a remarkable turnaround for the couple considering they had earlier been stuck with just one investment – the most common situation for Australian property investors, ABS data shows.
“We owned a unit in Sydney and didn’t make us much money,” Mr Robinson said, noting that the high repayments required to keep the home limited their ability to buy more investments.
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Belinda (left) and Adam (right) Robinson.
Their dud investment had been around the corner from where they lived.
“We wanted to get back into buying in Sydney but the fact was we couldn’t do it because it was too expensive. We wanted to buy a house but everything was well over $1m,” Mr Robinson said.
Things changed when the couple sought the advice of a property investment expert who gave them insights that made them realise how they could better build wealth.
The couple realised their goal of buying another investment close to where they lived on the northern beaches would be a mistake. “They showed us a comparison of Sydney versus everywhere else. It blew us away,” Ms Robinson said.
“It was a couple of things. The capital growth of these areas, plus how they compounded, it just didn’t make any more sense to buy in Sydney.
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The couple were originally investing near where they lived in Sydney’s northern beaches. Picture: Troy Snook
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“You could make potentially twice as much for less of an investment buying in a cheaper area where values were growing faster.”
The couple then formulated a new plan. They took equity out of their residence and purchased two properties for around the $450,000 mark in Brisbane in 2014.
The value went up quickly and the properties were worth about $650,000 in a few years.
They refinanced these properties and used equity drawn from them for new purchases in Melbourne and, again, in Brisbane. Some of these investments are now worth $1m.
“We’ve been buying in places where there’s new infrastructure. Our strategy is to keep investing out of Sydney.”
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Open Corp director Cam McLellan said the numbers didn’t stack up for investors in Sydney.
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Their investment adviser Cam McLellan of Open Corp said Sydney was the biggest source of investors around the country, but buying in the city itself had huge drawbacks.
“In Sydney, people fall into the trap of thinking it has better capital growth. Of course, it’s a lead market, but it’s cost prohibitive.
“The basic key to building wealth is getting the most amount of wealth with the least amount of wealth spent.
“And that’s the problem with Sydney. You can hold twice as much elsewhere with the same or less out of your back pocket as you’d spend in Sydney.
One of Belinda and Adam Robinson’s houses in Queensland.
Belinda and Adam Robinson.
“Even if Sydney gets more growth, if you hold double the amount of property somewhere else it’s a moot point. In some cases, you can get five properties around the country for the price of one in Sydney.”
Mr McLellan said Melbourne was shaping up to be a good alternative opportunity for current investors, despite some of the doom and gloom media coverage of the Victorian market.
“The beautiful thing about Sydney compared to Melbourne is we have the largest gap between the two since 1987. Sydney has had its growth, Melbourne could soon follow.
“The case against buying in Sydney is a simple maths equation: you can buy there and max out your borrowing capacity or buy in another place where lower holding costs mean it’s easier to find cash flow positive properties.
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Historic data shows houses with a generous land component outperform, but to buy this type of property in Sydney requires nearly $1.6m in most suburbs.
“If you hold property with no money out your back pocket you can go for a second or third property.
“About 70 per cent of our purchases are in Melbourne now because that’s where you can make money.”
