Run Into Real Property People . . .
. . . and Joint Venture !

Melbourne property investor Abby Levin, a married 46-year-old mother of three, likes to do things with a twist – and that’s something she learned at a Reno Kings seminar in 2005. Attending that seminar inspired Abby to get involved in property investing, and also indirectly led to her finding a joint venture partner.  And since then, things have really taken off!

      

Casting the net
After the Reno Kings workshop, I decided to get out there and start researching the market with a vengeance! I was initially looking in the Ashburton area, being close to all amenities such as schools, shops, cafes and public transport. This suburb was a bit pricey for my first venture so I decided to cast my net wider to the more affordable adjoining suburbs of Ashwood and Burwood.

I had gone to a few inspections and auctions and had started to get a good idea of what property was worth. I sent my husband along to an auction one Saturday morning to see what a particular house I had seen would go for. As it turned out, there were no bids and my husband rang to tell me what the vendor was prepared to accept. It was about $50,000 less than what I estimated it to be worth, so I told him to go for it.

There was one other couple that was interested but they couldn’t settle in the prescribed period. So we bought the house that we had gone just to look at!

The property was over 700m² and had a falling down weatherboard at the front of the property and a generous back yard – perfect for subdividing, or adding a “twist”, as I had learnt from the Reno Kings. I envisaged building two new townhouses on the block since the existing house was beyond renovating.

Location, location, location
The house was in a street where an old biscuit factory had recently been turned into an A V Jennings development, so I felt confident that the local market would be suitable for this type of property. Furthermore, there were many offices and light industrial warehouses in the main road at the end of the street providing a ready rental market for our project.

We rented out the weatherboard very cheaply while I started to look for a town planner that knew the area. Heeding advice from the Reno Kings, I turned to the agent from whom I had bought the property to advise me on town planners and builders.

Good neighbours
I had also contacted the owner of the neighbouring property whom I had heard was an electrician, since the agent had told me that the wiring in our house needed attention. It turned out that his house was also an investment property being rented out and, as we started chatting about what I was planning, he expressed an interest in developing with me.

We soon realized that if we pooled resources we would be able to create a 4-unit development, subject to council approval, and save a substantial amount on the development costs and associated fees. A joint venture also meant that we would be able to build larger townhouses with a shared central driveway, instead of two separate driveways.

After a delayed start - due to two parties sorting out their finances and making decisions instead of just one - the townhouses were completed within 6 months and rented out at a premium price for the area.

A twisted investment is a profitable investment
This project gave us three ways to twist the property maximise the return:

1) We bought the property at a bargain price
2) We subdivided it adding instant value
3) We developed the property as a JV, enabling us to make considerable savings and sharing the workload.

We were very lucky that our JV partners were easy to work with and had the same vision as we did, especially since we were complete strangers to begin with.

Since then we have also completed another JV on two new holiday rental houses at Paynesville, down on the Gippsland Lakes, Victoria – with our town planner from the above project! But that’s another story… 

  

Plan for problems
If you are entering into a joint venture, Abby warns that you need to choose your JV partners carefully and be realistic in your expectations.

We’ve had two good experiences, so it has been easy for us, but you do feel a greater burden of responsibility when you have brought someone else into a project.

Everything takes a bit longer when more than one party is involved: setting up finance, choosing finishes and fittings, etc. There could be problems if the parties don’t have the same vision or understand the market for the end product.

It would be easy to start a JV with friends or family, but if there is a disagreement you can't walk away at the end of the project as easily as you could from a business relationship.

It is really important to ensure peace of mind by having a JV agreement drawn up. This could avoid any potential problems later on.

Top tips for first time investors
Abby has six tips for keeping your costs under control and maximising your time and returns:
1.   Look for a property no more than 20 minutes away. You will end up spending a lot of time running backwards and forwards, whether you are working on site, or just meeting the agent.
2.   Unless you are handy and have lots of spare time, employ a professional who can do a quality job quickly, and you’ll save in the long run.
3.   Don’t overcapitalise on a rental property; you can always get the right look using inexpensive finishes and fittings of a reasonable quality.
4.   Small changes can make a huge difference such as new cupboard handles, light fittings or front door accessories.
5.   A few well-placed drought-tolerant plants in a front or back yard can do wonders.
6.   Never underestimate the power of a good clean!

Follow your gut instinct
Abby’s successful property investments have given her the flexibility to balance her family life with her work life – and that’s an enviable position to be in.

But she wouldn’t be in that position if, back in 2005, she hadn’t acted on her hunch that she might learn something useful at the Reno Kings workshop. And that’s the biggest lesson she’s learned:

Always go with your gut instincts if you feel strongly about something, whether it is deciding on a feature of your development or deciding which professional to employ.

So what’s Abby’s gut instinct right now?

If you can, source the finance and go out and make the most of the current market conditions – or you could be kicking yourself next year!