Investing as a full-time job

Julia Legian has done what many property investors dream of doing – she quit her job to concentrate on investing full time. And the risk has more than paid off.

BY MICHAELA RYAN

Reprinted with permission from Australian Property Investor, January 2005. www.apimagazine.com.au

Julia Legian tends to get out of bed at about 10am. She does some exercise and has a leisurely breakfast. Then it’s down to business. She sits in front of the internet for the rest of the day, searching for her next investment property.

Now aged 32, Julia has been doing this for the last two years. She's managed to make a new acquisition once every two or three months, and her portfolio is now worth around $2.4 million.

It was a seminar which originally inspired her to invest full-time.

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“I was looking at all these people buying property and having a lot of capital growth while here I am selling all this property and making very little commission out of it. And working so hard for it also!”

So when a seminar presenter suggested that the best time to be investing in property was when everyone else was busy at work, Julia decided she would quit her job.

She couldn’t have done it without the support of her partner though.

“I lived with my boyfriend then. After I went to this seminar I went home and spoke with him and I said, ‘I’m going to do something very silly.’ So I said to him, ‘Would you be able to support me for the next five to six months?’ And if it didn’t work out I would go and get my job back. And he said, ‘No problems at all. You can do whatever you want.’”

JULIA’S STRATEGY

Locating properties

Julia looks at thousands of properties on the web.

When she finds an area with good rental returns, which also looks like it’s due for some capital growth, she hones in on it. She does research online to get a feel for house and land prices in the area, and she considers the performance of surrounding towns and suburbs.

“I’m constantly looking for a bargain. Only when I come across a really good deal, then I will get on the phone and ask for a contract.”

She gets in touch with local real estate agents and picks their brains. If they prove to be helpful, she builds a relationship with them so that she is the first person they call when a good deal comes up.

Julia’s long distance real estate contacts have proven to be very useful. On several occasions agents have offered her properties within an hour of listing it. And as a result she has been able to buy properties for $30,000 below market value.

“The best thing is to have a good relationship with a real estate agent you can trust. And basically they just work for you.”

Julia’s real estate contacts have been one source of her properties, but the internet is her major source. She’s bought most of her properties after seeing them advertised on real estate websites.

If the price is right, she asks for a contract to be faxed through, and she makes the purchase from her home in Sydney.

Minimise the hard work

Julia generally tries to buy relatively new houses, so that the maintenance is minimised.

“I don’t like buying old fibro homes and having a lot of maintenance. So for me, anything that’s brick or even a new fibro home, I would be happy. Because I’m very lazy. I wouldn’t want to do any maintenance or repairs. I just want to buy the house and just sit on it and have nothing to do with it.”

Julia also makes an effort to attract reliable tenants who will pay their rent on time, look after the property, and hopefully stay for as long as possible. To achieve this, Julia offers below market rental on all of her properties, and works closely with her property managers to seek out tenants with a good rental record.

She also gives good tenants the occasional bonus, such as a rent-free week, as a token of her appreciation.

Interest only loans

All of the loans on Julia’s investments are interest only. Julia finds this to be tax effective. It’s also a way of keeping repayments to a minimum, to help her cash flow.

Trusts

At first Julia acquired properties in her own name, but after getting legal and financial advice she realised it would be more tax effective, and provide better asset protection, if she purchased through a trust.

A hybrid discretionary trust has proved to be the most flexible arrangement for her needs.

Once a trust has acquired $500,000 in assets, she sets up a new trust, as additional protection.

BREAKING INTO THE MARKET

Julia’s first purchase was the most difficult. Back in 1998 she was working as a secretary, and was a single mum on a very low income. In these circumstances it was hard to get the finance for a family home.

A family member was able to lend Julia the money for a deposit. So she was able to purchase a house in an outer suburb of Sydney called Macquarie Fields.

It wasn’t until 2002 that Julia entered the investing game. But once she got started, boy did she make up for lost time. In 2002 alone she purchased four properties in Queensland, and helped her partner (now her husband) to locate an investment in New Zealand.

PROFITS IN QUEENSLAND

Julia got into the southeast Queensland market at a very good time. Back in 2002 there was still plenty of steam left in this booming market.

The first investment was a very profitable one. She purchased a house in Deception Bay, a coastal area in the outer-reaches of Brisbane, on the way to the Sunshine Coast.

Julia gave herself a spending limit of $105,000, and she ended up finding a property on the internet for $103,500. It was an old house on two lots, located 200 metres from the bay. Having done her research on the net, and by speaking to local agents, Julia felt sure that this was a good buy. So she bought the property without seeing it in real life.

It turned out to be a success. She had a wonderful tenant and was able to rent the place for $145 per week, reflecting a 7 per cent yield.

The rental return was quite good, but the capital gain was even better. Julia ended up selling this property in 2004 for $320,000 – which is more than triple the purchase price. (Her strategy has generally been to ‘buy and hold’, but the sale of this Deception Bay property helped her to upgrade her family home in Sydney).

Soon after buying the house in Deception Bay, Julia already had enough equity to finance a purchase in the outer Brisbane suburb of Crestmead.

Originally Julia had spotted a townhouse on the internet in the neighbouring suburb of Waterford, and she had flown up for the weekend to inspect it. But while she was in Brisbane, she spotted the Crestmead house in the window of a real estate agency for $85,000, renting for $160 per week.

“To build a new three-bedroom home would cost more than $85,000. So it made perfect sense to buy a home for $85,000 and rent it for $160. I was just amazed that hardly anyone wanted to invest in Queensland. All my family and friends were investing in Sydney and paying $300,000 or $400,000 for a house.”

The Crestmead house is now worth $220,000. Julia has increased the rent to $165 per week. She could probably get a bit more than this, but she really likes the tenant and is happy to keep the rent low to encourage a longer tenancy.

A few months after passed and Julia was be able to refinance again, getting the funds for her next investment. This time she bought in Burnett Heads, on the coast near Bundaberg. It was an $87,000 house renting for $135 per week.

This property also ended up being sold in 2004 because Julia was finding the property managers were too slack in finding new tenants, and the periods of vacancy were too much of a headache. So 13 months after the original purchase she sold this house for $144,000 – realising a tidy $57,000 gain.

Julia’s investing then took her to the Harvey Bay area, to a town called Torquay. She purchased a property she found on the internet for $105,500 which was rented for $165 per week. It was a three-bedroom brick house located within walking distance of shops and only five minutes from the bay.

These days the place is worth $240,000 and the rental has increased by $5 per week. Julia says the area is really popular and it’s been very easy to find tenants.

The final Queensland acquisition for 2002 was a house on 16.5 ha of land with river frontage. It was located in Wilkesdale (near Kingaroy, about 200 km inland from the Sunshine Coast). This was a mortgagee sale, and Julia thought she was getting a bargain when she acquired the land for $65,000.

Since Julia was acquiring a huge amount of land, she had to provide a 40 per cent deposit. She funded this by refinancing the Torquay and Crestmead properties, which had already gone up in value.

The property in Wilkesdale is now worth about $150,000. The old house rents for $100 per week.

NEW ZEALAND

When prices in Queensland started to soar, Julia thought it was time to research the market in New Zealand.

She was able to locate a three-bedroom house in Tokoroa for NZ$32,000 which was being rented for NZ$110 per week.  The rent was dropped to NZ$100 a sweetener to attract and keep a good tenant.

The property is now worth NZ$59,000. This house Was appealing because it was a five- minute walk to a lake, and by now Julia had discovered that properties near water were great investments.

The problem with buying in NZ was that Australian banks wouldn’t finance the venture. So the only way to make the purchase was to pay cash. Julia’s partner (now her husband) was on a high income and was able to get together the money for the purchase.

WA

Julia likes to move ahead of the market in her property acquisitions, and in her first year of investing she did that quite well.

When 2003 rolled around, Queensland had been ‘discovered’. So it was time to hit the shores of Western Australia, where Julia believed she could find rental returns as well as capital growth. And once more, her instincts proved to be correct.

Surfing the web, Julia came across properties in the Geraldton area. Within a few weeks, she had purchased two properties there.

The first was a four-bedroom home opposite the beach. It was an older home in Tarcoola Beach worth $165,000, with the potential to rent for $195 per week.

The place needed to be fixed up a bit before being tenanted, so Julia spent $8000 on new carpet, paint and blinds.

The place ended up being rented for 195 per week, and it is now worth $270,000.

A few weeks later Julia bought another four-bedroom home in nearby Sunset Beach for $150,000. This house was only seven years old, so nothing needed to be done to it. It was located about 150 m from the beach.

The place has been rented for $205 per week and is now worth $220,000.

TIME TO UPGRADE

By late-2003, things were going well for Julia. She had amassed a property portfolio that was showing solid capital gains and positive cash flow. So it was time for her to look after her family, by upgrading to a new home closer to Sydney’s CBD.

She purchased a two-bedroom townhouse in Lidcombe, and she loved that it was only a 20-minute train ride to the city.

She took out a loan for this new home, but she was able to pay it out in three months by selling her previous home in Macquarie Fields as well as her investment properties in Burnett Heads and Deception Bay.

For a brief moment in time she owned her own home outright. But of course that didn’t last long. Soon enough, she created a redraw facility so that she could get the funds for her next five property acquisitions. 

BACK TO QLD

In 2004, while the media was busy talking about soft landings, Julia was busy acquiring three properties in regional inland areas of Queensland, where there were still plenty of bargains around.

She kept in regular contact with some helpful real estate agents in the areas she was interested in. This strategy paid off. An agent let her know of two properties which came up for sale in Wondai (near Kingaroy). They have yields of 6.2 and 7.7 per cent, and they've already risen in value.

She also bought a 21.9 ha of land in an area called Ballogie, which is near Wondai. She picked up all that land for $20,000, and thinks it's now worth $35,000. The area already has electricity and telephone connections. The land was extremely cheap compared to land in neighbouring areas, so Julia wanted to take advantage of that.

By this time, Julia had enough equity and cash flow to fund the purchase of some properties in the middle suburbs of Brisbane.

She thought it would be good to get into this market because one day she might move to Brisbane, and she would like to have a foot in the door.

The first Brisbane purchase was in Ferny Grove, a suburb northwest of the CBD. It was a three-bedroom house with double garage for $290,000. Julia liked it because it was three minutes from the train station and it had an in-ground pool.

Julia believes that the Ferny Grove house came with built-in equity. At the time of purchase she believed the place was actually worth about $320,000.

So how did Julia find it at such a low price? Through the help of a local real estate agent.

The vendor in this case was elderly, and was being moved into a retirement village, so there was a need for a quick sale. The property hadn’t even been advertised when Julia agreed to buy it.

Soon after the Ferny grove purchase, Julia did it again! She purchased a house on 1.5 acres in Jimboomba, just south of Brisbane, for $258,750, which she believed was worth closer to $295,000.

JULIA’S MOTIVATION

In five years time, Julia aims to own 100 properties.

So what is it that drives this 30 year old woman to aim so high?

“The decision I made on property investment was because I wanted to have something for my son if something happened to me, or once we grow old. I want him to have something instead of struggling like I did.

“Because I grew up in a very big family and my parents always struggled for finance. And I didn’t want to go through the same thing. I didn’t want my son to go through what I went through.”

Julia Legian’s current portfolio

POSTSCRIPT

Soon after being interviewed for this story, Julia bought 5.23 acres in Capalaba, Brisbane, in joint venture with a close friend. The purchase price was $599,000. But shortly after, they received an offer of $1.56 million from a developer, since the area is soon to be rezoned from rural to residential.