Adrian was just 19 years old when he bought his first investment property. Despite struggling on a meagre apprentice's wage, he managed to purchase a property every year between 2006 and 2011. How did he do it and what problems did he encounter along the way?
“I bought my first property when I was 19 in 2006. It was a townhouse in Frankston, Victoria, and I purchased it with my brother for $235,000.
I was an apprentice carpenter at the time.
My brother was keen to invest, but like me, he was stuck on a low wage and wouldn’t be able to do it by himself.
He sold me on the idea of investing together, targeting positive cash flow properties. The first purchase worked so well that we decided to do it again, and we actually ended up purchasing another five properties together using the joint venture strategy.
We purchased another two properties in Melbourne, in Albion and Maidstone, and three in Queensland – in Beenleigh, Labrador and Leichhardt.
They were all purchased for between $180,000 to $320,000 and all followed the same strategy – focusing on cash flow rather than equity.
However, savvy timing on the Frankston and Maidstone purchase in particular meant there was some decent equity growth as well – but I didn’t realise that until later.
I was happy to invest, but it was really my brother who got the ball rolling. He’d drive the direction of the purchase – I’d help with the research, but my main role, as I saw it, was saving for my half of the deposit.
It wasn’t until I was 23 or 24 that I finally had that moment of realisation of ‘S**t, there’s some equity there already, and these properties are almost taking care of themselves after tax.’
It was around that time that I had also finished up my apprenticeship and moved into a better-paying role.
It was 2011 by this stage, and I decided to go it alone. Joint ventures had worked well up until this point – they allowed me to get a foot on the property ladder and spend years in the market that I wouldn’t otherwise have had.
People criticise joint ventures as a compromise measure, but I tend to focus on the mantra ‘It’s not timing the market, but time in the market that matters’, and without joint ventures I would have spent a lot longer not being in the market.
But the serviceability issues associated with joint ventures were starting to take their toll by 2011, and I could foresee significant issues in the future if my brother and I continued purchasing together. You see, the banks don’t like joint borrowing.
They tend to assess half of the income from the joint properties against each applicant, but they put all the debt against each name. So it throws your figures right out and make it look like you’ve got a lot of debt with very little income to service it.
Since then, I’ve purchased another three properties on my own. I’ve now begun to focus on capital growth more than income, and my most recent purchase in Moonee Ponds and Brunswick are actually negatively geared.
I’m at a different phase of my career and investment journey and the new strategy – targeting unique properties with potential for significant future value growth – reflects that.
I’m now looking to make my next purchase – to add my tenth property to the portfolio. I certainly wouldn’t be at this stage if it weren’t for joint ventures – and my brother’s motivation!”