Mike and Lesley owned a principal place of residence as well as an investment property.Â Â The investment was only returning a yield of approximately 2% pa.
They had bought the investment home at the peak of a cycle and the property was starting to need lots more extra money and was in need of upcoming repairs.
Michael Knights was approached to audit Mike and Lesleyâ€™s current property position and come up with some ideas and examples of what might help them achieve a better return on their investments.Â Mike and Lesley wanted to invest in property to create passive income streams.
Michael created a solid property investment plan for the couple, which was the start of a long-term friendship and wealth creation journey between them.
Mike and Lesley had equity assets between both properties. The decision was made to sell the investment property â€“ this would only make a small profit in the short term but would enable them to re-invest in a cheaper, cash flow positive property and pay down some debt on their existing principle place of residence as well as taking a small holiday as a reward.
Michael was able to offer Mike and Lesley an off-the-market extra large townhouse from a developer who needed pre-sales to obtain finance.Â The townhouse was offered at $350,000, a $50,000 discount.Â On completion, the new valuation was $420,000 to $430,000 and the property was rented for $440 per week. This is a positively geared investment on the borrowed funds which they still owe.
Moving on to a Mike & Lesleyâ€™s second investment strategy, Mike wanted to buy a splitter block and try their hand at a small development. Michael found a property and the numbers worked well; this was a property overlooked by the listing agent who could not see the upside potential. Michael spotted the opportunity for Mike and Lesley and they were able to add value to this block by keeping the home at the front and building a townhouse at the back.
Mike and Lesley had the equity and finance to buy the site, however needed to sell their principal home to fund the development.
The next step was to sell their home, which they did by auction.Â Michael was able to sell their home for a good profit, allowing Mike and Lesley to move into the development.
Michael, Mike and Lesley worked together with a great team of advisors to achieve a very feasible Development Approval.Â Mike and Lesley moved into the small home with a plan to live in and renovate the front house and develop and build a townhouse at the rear.
Mike and Lesley started to renovate the front home while the approval process was underway along with the construction over a 12-month time frame.
Everything went to plan. Michael provided advice along the way to ensure Mike and Lesley did not overspend on the renovations, although emotions took over slightly and Michael and Lesley spent a little more than planned. This is a common issue when doing renovations. Michael kept in contact throughout this period ensuring Mike and Lesley did not continue to overspend (thankfully they didnâ€™t).
On completion of the construction phase, Mike and Lesley decided to move into the new townhouse at the rear of the block and rent out the older small home at the front.
An opportunity came to mind and Mike and Lesley were able to achieve a much higher return on their investment by renting the front house via a holiday letting website.Â This gave Mike and Lesley some really good cash flow and new entrepreneurial ideas for their next investment opportunity.
The valuations and equity position on the small development realised approx. $230,000 and $240,000 gross equity.Â This took about 16 months from start to completion.
Because they were able to live in the development, they had some very good advice provided from their Accountant and Financial Planner.
Mike and Lesley purchased another investment to be used as a holiday rental, liking the returns they discovered from their previous venture, whilst still owning their duplex and using the equity in it for the new venture.
Mike and Lesley have since sold the development and have purchased another investment ready to do it againâ€¦.
Michael Knights has been working as a Property Agent and Investment Advisor with Mike and Lesley helping them create a very good living and a very healthy Property Investment Portfolio Strategy for eight years now. Michael has helped many investors like Mike and Lesley create wealth through property investing and is always available to chat over a coffee and to offer free advice about property and development opportunities.