Navigating a hot market

By Your Mortgage

When it comes to property investment, Steve Short believes a sound education is the key to success.

Aseasoned seminar-goer, Steve Short spent many hours – and nearly $2,000 – learning the basics before buying his first home, which he hopes will be the first of many investment properties.

Steve and his wife, Keum-Mi, had been living in a small studio rental in Leichhardt, in Sydney’s inner west, while they saved a deposit.

Initially, the couple had planned to buy a villa or townhouse in a middle suburb to live in themselves, beginning their search in Sutherland Shire (in Sydney’s south). But after some intensive tuition from Property Planning Australia’s (PPA) Property School, Steve, 39, began to see things differently. “I realised I’d get more capital growth by buying much closer to the city,” he explains.

Others obviously had the same idea however, as the couple discovered during open house viewings. “There were first homebuyers everywhere,” says Steve. “We looked at a property at Stanmore (in Sydney’s inner west) and I counted 24 couples lined up outside. It was crazy.”

After an 11-month search, Steve and Keum-Mi settled on a 2-bedroom unit in Enmore (in Sydney’s inner west) for $468,000. Part of a block of 24, the property features an internal laundry and lock-up garage. Achieving strong capital growth was Steve’s main objective, and he admits he would have prioritised other features, such as a backyard, had he been buying as an owner-occupier.

Despite having enough funds for a 33% deposit, the warehouse operations worker borrowed 80% – $374,400 – on the recommendation of his accountant, as well as his mortgage broker, Keanan Wood. “They advised me to make this loan as high as possible relative to my [future] owner-occupied home loan because investment property is tax-deductible,” says Steve, who also qualified for a $10,500 First Home Owner Grant. “Putting down 80% also meant I didn’t have to pay mortgage insurance, which is quite high at the moment.”

Steve opted for a St.George Professional Package with an offset account at the standard variable rate, currently 5.55%. “While I’m living in the unit, the balance of my deposit will go in the offset account so it will act against the mortgage; this money will also be available to become the deposit for my next property.”

Steve credits Property Planning Australia with making his first investment so seamless. Despite an early reluctance to pay for expert help, he eventually used a broker, as well as PPA’s property buyer, Cain Kennedy, who sourced the unit and negotiated the sale on Steve’s behalf. At a cost of $4,300, Cain didn’t come cheap, but Steve believes he was worth every cent.

“Cain did an amazing job,” he says. “It’s a bit of money, but in relation to the amount you can make or lose in property, it’s not that much. Before going to Property School, I wouldn’t have used a mortgage broker or buyer because I thought ‘I’m smart enough to do it myself; it’s a waste of money’. Once I began to realise how much more is involved I came to realise, yes, I probably am smart enough but I don’t have the knowledge right now and I certainly don’t have the experience.”

A good mortgage broker can literally be priceless, Steve says. “It was like having a private banker. Instead of me phoning the bank and waiting in a queue, Keanan would get onto it. It saved me time and stress. Using a good broker is just a no-brainer – especially when the bank pays for it so it doesn’t cost you a thing!”
Steve and Keum-Mi plan to stay in their unit in Enmore for a year or two, before hopefully moving on to their next investment. “I want this property to be the foundation for bigger and better things,” says Steve. “As soon as we can, we’ll buy our next one.”