How To Buy Your Second Property

When buying your first property. It’s actually also important to think about how you’re going to jump into the second.

When buying your first property. It’s actually also important to think about
how you’re going to jump into the second property you. So today I have with me Simon Everingham buyer’s
agent from pumped on property who’s just purchase purchase this first property. Thanks Nate. And in this episode we’re going to talk about
what he’s thinking about and how he’s looking at getting into a second property and some
of the decisions that he made on this first property so that he can more easily move in
to the second one and grow his portfolio further. So thanks for coming on today. No worries. No Way. Simony is down for a bucks weekend down in
Sydney, so we thought we’d catch up in person and I, I think I got to get up back up to
the sunny coast hopefully next month to get some filming done up there. All right, so you just purchased your first
property, which was a renovator Yup. On the beaches in Brisbane, about 25 kilometers
from the CBD. Yep. And we taught in a previous video, which I’ll
link up down below there. Your goal is not to build a granny flat initially
on it, but to expand your portfolio first because cashflow is not as important to you
at the moment. You’ll look at building granny flats down
the track. So talk us through some of the decisions that
you made when looking for property number one and purchasing property number one in
that you were thinking about property number two down the line. Sure. So I didn’t have a huge um, deposit, essentially
like I could only spend up to about $400,000. So I was really at the bottom end of the market,
especially in the suburbs that I wanted to target. So I kind of thought of this in a positive
way cause I’m like, I know the property that I’m going to buy is going to be a little bit
rundown, going to need a little bit of a face lift in order to get some tenants in there
because that’s all that I could afford. But what that also allows me to do is to get
into the property and do a little bit of a renovation and increase the equity from a
small cosmetic renovation so that when it comes time for that next property, well, I
can get that one very valued and hopefully I’ve manufactured a little bit of value there
and hopefully the market’s going up a little bit as well so that I can release a small
amount of equity. Plus you use a small amount of my savings
in order to purchase that second property. Yeah, so it’s the things that we always talk
about anyway, which is look for the three things in a property you want to purchase
in a suburb that’s going to be growing, so right suburb in the right area that’s on the
right market cycle. You want to look for a property that’s going
to where you can manufacture growth and create that growth. Some people do that on the way in like Simon
did. Some people just get a tenant in there and
then white and do it at a later point. You didn’t have that choice that around, you
couldn’t really rent it in the sand at that it was in, yeah, I needed to do some work immediately
in order to get some tenants in there and I left a few options there so that like if
it comes time for that second property and I need a little bit more equity, it’s not
going to be too hard to do a little bit more of a renovation to get a little bit more value
there. So like walking into it, I was kind of hoping
that if I can spend $1 and make two to $3 that would be an ideal scenario for myself
with with that renovation, which can be hard. But luckily I had some good people around
me, some friends that were experienced trades people and they were able to actually work
for me at a discounted rate, which is going to allow me to get that extra value there
hopefully. Yeah. And as well, something that I think we didn’t
talk about in the previous episodes was that you are also able to negotiate a discount
on the property because of the issues that it had that came up in the building and pest
inspection. Yeah, exactly. So that building and pest inspection paid
for itself so much. I think I paid $400 to get the building and
pest inspector around there and do an evaluation of the entire property. And we asked him to be extremely diligent
because we knew there was going to be some issues with this property. It was built in 1965 that it had a couple
of upgrades but not too much over that period of time. So like it was really run down and there was
a bit of a specifier’s around and um, you know, there was rotted guttering and um, the
paint was coming off everywhere. The actual, where the board, like the timber,
where the board was rotted in some parts and peeling off. So like it was really, really run down and
we were like, be super diligent because we can use this to our advantage. And um, we ended up smashing a great result. So it cost me $400 to get the building and
pest inspection done. I was able to negotiate a seven and a half
thousand dollar reduction of the price of the purchase just from that building. Right. That’s awesome. So do you think you actually purchased that
property on the market value? Definitely. Yeah. Yeah. So that’s another way to think about a property
going into your next one. Generally buying under market value can be
quite difficult. You need to know the area really well. Generally when it happens. It’s not from a rundown property so much as
a property that’s been marketed poorly and listed incorrectly. Um, but obviously that property had been on
the market, so you had that opportunity as well. So under market value, you saw some potential
upside in terms of a renovation and then talk about the area that you’ve purchased in and
how you identified that as an area for growth. Because obviously if it grows in value, that’s
going to help you go into property number two. Yeah, exactly. So I can never guarantee short term value. Like I was never looking for short term gains. It’s not what I’m there for, but it’s obviously
going to be a benefit if I’m able to achieve chase some of that. So my identification of this suburb was not
for that short term uplift. It was more for the longterm performance. So I want it to be within a certain proximity
of the CBD. So ideally I want it to be within 25 kilometers,
which I’ve actually been able to execute on. So it doesn’t take people too long to commute
to the city. There’s actually a train station in the neighboring
suburb as well, which has access to the CBD. Um, it was in walking distance sort of features
as well. So it actually, you know, it’s a really nice
area. It’s beautiful for sure. And it’s gone through a huge phase of gentrification
over the last five years. So there’s been lots of own occupiers that
have started to move into this area. Not Diane Holmes. Bill Beautiful. Mcmansions or renovate amazing houses. There’s lots of restaurants and cafes and
bars and things like that in there. There’s like markets and things like that. So the suburb is gone through from being a
really sketchy one with lots of housing commission and lots of demographic issues to those people
being pushed price gout. So they can no longer afford to rent there. They can no longer afford to live there. So they’re being pushed out. And because it’s a really nice area in a great
location, a lot of owner occupiers are starting to move in and add value to the properties
there by either building a really nice new house or doing a massive like $200,000 renovation. That’s what you love when you buying a property
and peep you buy in an area and then people overspend on their renovation. Yeah. Cause that’s, it increases the value of the
or it increases a median in that particular suburb. So, um, that was kind of my goal. Um, and then you also looked a particular
streets that were low in housing commission, home owner occupiers as well. Exactly. So that was one of my goals have been a nicer
pocket of the suburb. So when you’re in larger suburb says different
areas, like you notice it on the main streets close to the commercial, close to the retail. Sometimes you’ll find that the properties
are a little bit run down. You know, you’ve got high percentage of renters
there, but then you find the nice straight at it lined with beautiful trees. It’s quiet, there’s kids playing out on the
street, there’s no buses bus route. It’s a nice quiet area. Um, that’s what I wanted to focus on. Like it’s a straight way drive into and you’re
like, oh, this is beautiful. Like there’s nice trades, it’s nice families
playing in their front yards and um, so that, that was really important to me. So the thing is that I wanted to achieve,
like when you have such a strict correct criteria, it really just eliminates so much of the market
that it makes it easier to make the decision when the right property does come up because
you’ve got such strict keep performance indicators is something doesn’t adhere to that, then
it’s just gone. So it means that once that right property
does come up, you know that it’s going to be the right one. So that one was quite an obvious choice for
you then to sora once you inspected it, fit all your criteria. Most of them you’re like, Yup, yeah, it ticked
all of my property investment goals and um, fortunately I was lucky enough to get it at
a great price as well. Yeah. Well I think it’s important to know that as
you’re buying your first property, if you’re thinking about buying a really solid investment
for the second one, you do have to take all that stuff into account because if you do
buy on a main road, that can affect the capital growth at that property, both short term and
long term. If you buy on a train line or a bus route
or have you buy in a flood zone or all of these little things all can add up to your
property, not growing as quickly as possible. And so having that criteria and taking the
time to do that and it took you six months in order to get yours. You had a couple of deals fall through because
they didn’t accept your offer. So you were very diligent with that and I
think you made it harder for yourself than most people because you want to your particular
area and you had a budget limitation. But it was great that you were able to find
that. And so obviously so you’ve done all of that
sort of stuff, buying the right property, manufacturing growth, buying under market
value, cashflow. We’re not looking at at the moment in terms
of granny flats. What about for you personally getting into
that second property or you’re looking at paying off debt first on the property, saving
a second deposit. What’s sort of your thinking around that? So I’ve just, I’ve got to get used to living
with a mortgage. So how is that very new? So I don’t really know. It’s only been like three weeks since the
property settled. So I haven’t even had that first did like
deduction out of my bank account for the mortgage. But um, I want to get used to that. And then probably within the next month, I
really want to get a budget together and figuring out, okay, well how much surplus money am
I going to have every single week after that mortgage? Then I can start putting into savings so that
I can get into this next property as soon as possible. So based on the calculations that I’ve done
already, it will probably take me 18 months to maybe two years to get around probably
$30,000 20 to $30,000 in cash, which I’ll use for my next deposit. And then I’m hoping that I can use an additional
say 20 to $30,000 in equity and still be at a around that 80 to 85% LVR on my existing
home. Yeah. So hopefully avoid the multiple lenders. Mortgage insurance. Yeah. That occur. Have to do that in an ideal. Well, yes, but it’s not the end of the world either. If I do have to pay a little bit of math lender’s
mortgage insurance, so like I’m happy to cop that small fee knowing that I can get into
the perfect property right now. Yeah. So I want to understand your thinking around
saving money for the next deposit versus paying down debt on your existing property. Like where, what are you thinking about that? Are you thinking I’ll just use the offset
account to save money to use for deposit or are you actually going to actively try and
pay down debt faster? At the same time? I’m going to pull all of my surplus funds
into my mortgage account. Um, so at this point in time I don’t have
a offset account set up. My mortgage broker advised me not to because
of the fees that I would have had to be charged in the first year. He said wait a year and then get your offset
account set up. And I was like, okay. And so I just want to put a disclaimer out
there that this is not mortgage advice for anyone out there. This is what Simon is doing himself. Yeah. That’s what my mortgage broker told me. Yeah. So for your situation, so obviously you see
your own mortgage broker if you guys are looking at doing this. Yeah, definitely. Um, so yeah, that’s what he educated me to
do and I was like, okay, I’m going to listen to you. So I’m just going to pour all of that money
into my mortgage account. And then I have my everyday spending account
which I to just provide myself with around $400 a week just to have fun. Yup. Yeah, just having a bit of fun. Yeah. So I still don’t understand like I you, so
you’re actively paying off the debt and then you’re hoping that you can access that at
a later date. What? Did you have a redraw facility? No, I don’t have any of that. So what, what happens if in 18 months or in
two years time you’ve paid that money off your debt but you no longer able to access
those funds? So I’m not physically yes, paying off the debt on the home. Okay. I’m sitting at in what will become my offset
account and all the time pain is the minimum principle and interest are payments that are
required. Okay. My second fee side, so I need to pay a certain
amount every single month to pay off my loan. You got your mortgage repayment, which is
your interest plus a bit of principle over however long of a term you said. Yeah. Which is sat in one account. Okay. Now I know I have an additional account where
they take money out of for the mortgage. Oh, okay. So it’s like a separate account that they
extract the mortgage from, but you can pull funds in there like a regular basis regular
bank. So that essentially my thoughts there was
this will be my offset account when I set it up. But for now it’s just a regular every day
savings account. Yeah. So, so you’re saving money, you’re not actively
putting it on the deck apart from your mortgage repayment, which is a principle and interest
like yeah, that’s what I was trying. We got there in the end. Yeah. Saving up money, saving up money, not paying
down the debt because I want to be able to access those funds when I need to. Yeah. And what about um, side hustles or things
like that? Are you looking at any of that sort of stuff
to accelerate saving a deposit or you just focused on being a good budget are, which
I am not. Yeah. And La well, well I’ve got 10% ownership in pumped
on property so I get dividend payments every quarter from that business, from the profits
that we get from that. So, um, fortunately the income that I get
from the business that I work in in that I have part ownership in helps me save quiet
submission, sufficient amount of money in a shorter period of time. So I don’t have any side hustle was set up
at this point in time. I don’t necessarily have any interest in doing
that or either because I’m really focused on what I’m doing at the moment. Working with pumped on property. Like that’s what I want to spend my time and
energy doing. I don’t want my focus to be drawn to anything
else. And I also want to spend some time on myself
like traveling and doing things like that over the next 18 months. So, yeah, I think it’s good for people to see that because
I talk about my goal to get out of debt is to expand my business and to expand effectively
my side hustles, which is my full time hustle. And so it’s good to see someone who is effectively
um, you know, working and earning a wage. Yeah. And doing it that way. So people, cause I know more people will be
in your situation not having a side hustle and doing this than in my situation where
I run my own business and that’s how I’m going to grow. So it’s really cool to see that. So they have some things to think about on
how to buy your second property and how to purchase your first property in such a way
that it can set you off for that second property. I know we talked in one of the previous videos
that you really feel a light off your shoulders buying this first property because you know
that even if you do take that time out for yourself and you’re not as diligent with your
budget and savings, that because you’ve bought in a good area, long term it’s going to grow
and so long term it will help you get into your second property if you don’t get it in
that 18 to 24 month period. Yeah, exactly. But you know, if it gets to like 12 months
time and I haven’t hit that target, that aisle I’m at, it’ll just be like cut. Everything goes into savings back to the Uni
Saturdays. Yeah, back then back in with mom, back to
Bain and peasant. But like, you know, I, when I set a goal,
I want to achieve it. So I’ll, we’ll have that second property within
years. Okay, awesome. So we have this is encouraging to you and
to give you some food for thought when you’re out there looking for your first property
or if you’re looking for your second property and thinking about how that’s going to help
you move into your third property. You should be thinking about this at every
property along the stage. If you’re interested in more information about
how you can get help to find the right property and find the right suburb than Simon and the
team over at pumped on property. There are buyers agency and they are offering
free strategy sessions to guy. So that’s a complimentary phone session where
you get on the phone, talk about where you’re at, where you want to be, and they can guide
you as to what strategy is going to suit you and what are the next steps you need to take
in order to achieve your goals. So go on You can learn more about that over there. You can book a time that suits you, jump on
the phone with Simon or one of the team and start moving towards your goals. And then maybe next time you’ll be sitting
here talking about how you purchased your property. Thanks so much for watching while you’re here
as well. Go ahead and check out the previous two videos
main Simon did, talking about his purchase of that first property and how it went easier
than expected. I’ll link those up in the description down
below and until next time, stay positive.

4 thoughts on “How To Buy Your Second Property”

  1. Good work Simon. Some would argue that since he didn't purchase it off market, he was the market and he did the normal b&P then negotiate, so whatever price it came to was the market value.

  2. your bank account explanation makes no sense. do you not have a loan with a redraw? you put your extra into a regular savings account? and treat that as your redraw? – why not save the interest with an offset account. If you can please explain why you do this

  3. Shouldn't be advocating buying property at the moment. Too many factors pushing the market downward. Your mate's recently bought property is likely already in negative equity. Hopefully he can renovate and sell fast.

  4. I have an offset account, no fees only a slightly higher interest, the numbers work out better than having a savings account. Money devalues in a savings account.

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