Renovate To Recession-Proof

Melissa Xiang has, with her husband, Richard, invested in eight properties – not bad for a 26-yr-old. While Richard keeps track of the portfolio, Melissa is more hands-on – researching, choosing and renovating their investments. The Sydney-based couple are not only investing in property, but in their future too.

“The medium term goal is to start a family in a few years and have enough income not to have to work full time and also to have the home and lifestyle that we want,” says Melissa.

Melissa bought her first property, a tiny studio, when she was just eighteen. “I was amazed that there were properties so close to the Sydney CBD that I could afford, so I really bought it based on instinct instead of research.” Since then she’s improved her research skills and expanded her portfolio.

Portfolio Strategy

“I have purchased a few properties in the Sydney’s Inner East (Elizabeth Bay, Potts Point, Darlinghurst) as they’re always popular with tenants; the area has great amenities and is very close to the CBD. Other properties my husband and I own are in Queensland (Spring Hill, Camira and Eagleby), Richmond in Melbourne and Morphett Vale in Adelaide.

“I have developed and tweaked my strategy over time and I think it’s important to do that as personal circumstances change. My portfolio has a combination of properties with high returns (cash flow positive), those that have good land content in growth areas (buy and hold) and the occasional renovation project to generate growth, particularly in a flat market. In an uncertain market, it’s a good idea to be able to add value to properties and choose properties that will be easy to rent out, in stable areas with large populations.

“This combination of strategies has allowed me to continue to borrow and fund more properties. I’m quite risk averse so I have grown my portfolio relatively slowly by waiting for growth as well as adding value. With the exception of one property, all other loans are 80% LVR or less which keeps gearing under control. I also make sure that I can sustain interest rate rises and tenant vacancies if required.”

Property Expansion

Melissa has renovated six properties. Her favourite example is of a studio she bought in Elizabeth Bay, Sydney, partly for it’s investment potential, but also for more practical reasons.

“We could see the potential in being able to turn it into a one-bedroom, and it was in a great location. We actually had to offer more than asking price as there was so much interest and purchased it for $240,510. However we calculated that it was worth a lot more as a one-bedroom and we needed somewhere to live at the time!

Unrenovated Studio - Before

Renovated and converted to 1 Bedroom Unit - After

“I set a budget of $10,000 for the renovation and got started with quotes before settlement. Although the agent should be present prior to settlement, sometimes they will let you pick up the keys from their office and drop them back when you are finished. Make the most of this time to order items, get measurements and quotes, line up tradies and obtain owners corporation approval if you are in a unit. “

Keeping the Peace

“Keep your neighbours on side by dropping off a note to introduce yourself and let them know what times and when the renovation will take place. I had some very annoyed neighbours in one of my first renovations as one of them worked nights and another had a baby, so it really helps to keep them informed so they can make alternate arrangements. Give them your contact number in case they want to discuss with you.”

Budget Boosting Tricks

When the renovation started, Melissa boosted her budget by selling rather than spending.

“I sold some items I didn’t need (existing carpet, kitchen stove, cabinets) on eBay – not only will someone come and remove it for you, they’ll even pay you for it!

Kitchen - Before

Kitchen - After

“I was able to knock down a small wall, create the bedroom wall, update the bathroom, put in a new kitchen, paint, new floors and lights for the $10k budget. Once you know your choices in paint, flooring etc look good together, then you can use it again for the next renovation.

“We enjoyed living in the apartment but needed more space so we recently sold it for $326,000.”

Melissa’s success has bred further ambitions.

“In five years I hope to have a property portfolio that comprises of more substantial property, I want a well diversified portfolio, but don’t want the administration that goes with owning too many properties. I want to be undertaking larger development projects by then and I want to be working in my own business.”

Styling for Profit

With her eye firmly on the future, Melissa is also setting up a property styling business.

“I think presentation and styling is extremely important when you sell so buyers can visualise where the furniture belongs and encourages them to desire to own the property,” says Melissa.  “Particularly in smaller properties that I’m very familiar with, I see so many that are for sale on the market that can be improved and get higher prices. I also think that some stylists over-charge for the service they provide.”

Looking to the Future

After a lot of hard work, Melissa now feels she’s managed to put down some solid foundations.

“It has given my husband and I a lot more confidence in our future. When I have a tough day at work, I know that at least I won’t have to keep working for the next 40 years; when I see a nice house, I know that we have a means of achieving that one day if we want it.”

Melissa has learnt so much and been so successful that she is now considered to be property-investing expert; it’s a role that she puts to good use.  “We give lots of advice and assistance to our friends who are looking to purchase their first home or an investment. It is rewarding to be able to help those around us and use the experience I have gained to benefit others.”

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