Many Australian investors plan to make millions through property investment, while Nicole and Brett Reynolds have a simple goal: to fund their dream home.

People get into property investment for different reasons.

For some, it is to secure a future for their children; for others, investing in property is the key to an early retirement, while for others still, property is simply their driving passion – their challenge is to build the biggest portfolio they can.

Nicole and Brett Reynolds began investing with one goal in sight: to be able to purchase their dream home in Sydney’s Eastern Suburbs without having to deal with a huge mortgage.

But their path to property investment began much earlier, says Nicole, and they have both shared a strong interest in property for years.

“We honestly drive each other insane with how much we look at the Domain section of The Sydney Morning Herald and real estate websites,” Nicole says.

“I think it is a general interest we have had for a while. We are both fascinated by property and the property market.”

First property

After spending much of their twenties travelling the world enjoying themselves, it was in the late 1990s that Nicole and Brett began thinking about purchasing a home.

Investing in property as a means to create wealth had not yet become a priority, but they were keen to find somewhere to live close to the city.

“We bought a one bedroom unit in Alexandria, just south of the Sydney CBD, at a time when there were a lot of new developments going on around that area,” Nicole says.

“There were offers that would allow you to put $1,000 down for an off-the-plan property. We didn’t have a deposit and thought that putting down the initial $1,000 would force us to save for a deposit while the property was built.

In 1998, the couple secured the one bedroom unit for $245,000, giving them two years to come up with the $30,000 deposit.

Being able to get an inner city pad for $1,000 was a big attraction, but Nicole admits she was also drawn to the financial commitment that comes with owning property.

“My husband and I don’t like to have a lot of money in the bank,” she says. “We prefer to spend it and do more – even now. When we have got money in the bank, we tend to spend more if that bank balance is looking good.”

With this approach, Nicole looked to property as a way to ensure her money was being put to good use. Having to save for a deposit and to make loan repayments meant the Alexandria purchase would be a way of “locking in” her money and putting it towards a worthwhile investment.

“With property you are more ‘locked in’ than you are with shares because it’s a bigger investment,” Nicole says. “My husband and I have been together for 15 years now. When we first started a joint account and began putting our money together we considered shares but were not impressed by the fact that you can pull out at any time.

“We were attracted to the financial commitment that comes with owning property, because otherwise we would be off spending our money on holidays and going out to dinner too often.”

The couple lived in the Alexandria unit for a couple of years and had their first child during that time.

They soon began looking for a larger property that would have space for their growing family.

“In 2000, we were walking around the area and saw another off-the-plan in Waterloo,” Nicole recalls. “I cheekily asked one of the agents to show me a two bedroom north facing unit and he said, ‘I’ll go you one better; I’ll show you a rooftop terrace to match that’ – and we were sold.”

“We didn’t have the money in the bank, but we put down another $1,000 and then had to come up with the deposit. That put us under a bit of pressure, but we work well that way.

The Waterloo property was secured in 2002 for $490,000 and finished in 2004.

At around the time the Waterloo unit was reaching completion, the couple sold their one bedder in Alexandria for $325,000, netting them a cool $80,000 in profit.

Having had another child, Nicole and Brett then settled into their Waterloo unit for the next two years.

It wasn’t until 2006 that they started to consider using the property as an investment and renting elsewhere.

“We went and saw a financial adviser at the time who was aligned with our accountant,” Nicole says. “He did all the sums and it turned out we would save $2,000 a year by letting out the Waterloo property and renting ourselves.”

“It was a great place to live, especially having the rooftop terrace, but with two young kids it was not very family-friendly.

“It was after buying and moving into that second property that we came to a fork in the road and decided we needed a strategy.”

Setting a goal

Up to this point, Nicole and Brett had had no goal or strategy in place for what they wanted to achieve through their property.

It wasn’t until they moved to the beachside Sydney suburb of Maroubra in 2006 and began renting that the idea of a dream home was established.

“As soon as we moved to Maroubra, I completely fell in love with the place,” Nicole says. “After that, our aim became to own a four bedroom house with a pool.

“Everyone who knows me knows that it is all about that four bedroom house with a pool in Maroubra.”

The pair wanted to achieve their dream with a minimal mortgage and much lower LVR, however, which meant finding a way to generate wealth in addition to their combined salaries.

“One day, a girl from my work and I were talking about property and she told me she had bought her investments through Todd Hunter, a buyer’s agent and director of wHeregroup,” Nicole says.

“She told me how it worked, that she hardly had to lift a finger and they go off and do everything for you.

“I trusted this girl so I got Todd’s number and we went to one of his seminars.”

Hearing an expert speak about the property market and learning about the role of a buyer’s agent was enlightening for the couple.

“I have a busy life. I’m a working mum with two kids, so what appealed to me firstly was that this is a person that actually goes and investigates the market for you,” Nicole says.

“When we moved out of the Waterloo property and started renting, our first thought was to buy another unit in Chippendale, right by the CBD.

“I knew people who had bought off-the-plan units in Chippendale with very little deposit, just like we had in Alexandria and Waterloo.

“But once we found out that Todd bought land with houses rather than units, Brett in particular was more interested in going with Todd because of the fact that we would be investing in land.”

First investment property

Sitting down with their new buyer’s agent, Nicole and Brett were clear on what they wanted to achieve and weren’t afraid of sharing their dream house desires.

Having a goal and knowing that they wanted a low LVR for the Maroubra home meant the couple were able to start mapping out an investment strategy.

This involved buying properties that fitted the strict research criteria of their buyer’s agent, who insisted on investing in houses for under $300,000 in areas with high population growth.

The lower purchase price would minimise risk and areas with a growing population would allow Nicole and Brett to increase rents and have a positively geared portfolio.

Buying in areas that were in a property cycle trough also meant their buyer’s agent could negotiate deals well under market value.

“In 2009, we purchased our first investment, in Rosemeadow, for $284,000 and financially that was no problem at all,” Nicole says. “We still have the same tenants in there now.

“In fact, because we’ve got money in the bank offsetting against our mortgage for the Rosemeadow property, we are getting $1,600 a month in rent and our mortgage repayments are only $500 a month, so we are making over $1,000 a month on that property.”

The benefits of a positively geared portfolio were obvious to the couple from day one.

Being able to use property to generate cash flow was a new concept for Nicole, who says she viewed it as a far more practical alternative to negative gearing.

“I grew up in a generation that was hooked on negative gearing, but what changed my mind was learning from my accountant that I’m better off having a dollar in my pocket and paying 40 cents tax than spending a dollar to save 70 cents,” she says.

“I’d rather have more money in my pocket.”

Nicole and Brett’s investment strategy now revolved around a 12-month cycle, with the couple buying at least one property a year.

At first, they were keen to purchase more than one at a time, but were advised not to on account of the stress involved and the settlement periods this would entail.

“Each property we have purchased has taken about four months to settle in financially,” Nicole says. “The first month you are sorting out the agent’s fees, and the next month the tenant starts asking for things, so for the first month or two you find you are laying out a little bit of money before things settle down.

“After that you don’t really need to lift a finger, but it does take about three months to smooth out the incoming rent and outgoing mortgage payments.”

Financing strategy

In October 2010, with two investments under their belt and the Waterloo property still being rented out, Nicole and Brett bought their first Brisbane property, a three bedroom house that cost them $293,000.

Unlike their previous investments, which had been secured without any trouble, there was a slight snag with this one when it came to obtaining finance.

“I had just started my own recruitment business and the bank wasn’t prepared to lend us the 80 per cent,” Nicole says. “Lenders are really strict when you have your own business and they go through everything with a fine tooth comb.

“Having your own business – especially when you have just started – equates to no income from a banking point of view. It takes about two years before they loosen up on their lending criteria.”

Luckily, the Sydney property cycle was at its booming stage at the time and Nicole and Brett were able to sell their Waterloo unit for $650,000 and use the $170,000 profit for the Brisbane investment.

After that, it wasn’t until February 2012 that they purchased their fourth property, also in Brisbane, for $285,000.

The four bedroom house is currently rented for $350 a week and is cash flow positive, achieving a gross rental yield of 6.4 per cent.

“We don’t plan on purchasing any more investment properties for the time being,” Nicole says. “We want to achieve our goal and purchase the Maroubra property in December 2014, so we need three more years.

“Maroubra is very expensive, but after crunching the numbers, if our properties go up in value to what we are expecting – by about $50,000 to $100,000 over the next three years – plus with all our offsets, I think it is achievable.”

For simplicity, the couple have an offset aligned with each of their mortgages.

“I think four properties is a good number and instead of buying more we are considering offsetting against all of them,” Nicole says.

“We have given ourselves three years to achieve our goal so it is time to start tightening the reins.”

Looking to the future

Nicole and Brett have managed to build a portfolio of four high yielding investment properties without much trouble and with very little sacrifice.

Their strategy did not involve any renovations, while investing in properties for $300,000 or under reduced the risk of mortgage stress.

Their next big decision will come at the end of 2014, when they will have to choose whether to sell or hold their portfolio.

“Our options will be determined by the borrowing amount for the Maroubra property, which will have a price tag of about $1.3 million,” Nicole says.

“If there is not enough equity in our portfolio to put towards the Maroubra property in order to achieve an LVR lower than 50 per cent, then there will be no point in selling them.

“My business will be a factor in this as well and it will depend how I’m going financially.”

Whether or not Brett and Nicole achieve their goal in three years time and are settled into their dream home, property investment will remain a big part of their lives.

“We will definitely continue investing in the future because after we purchase the Maroubra property we will then be onto our next goal,” Nicole says.

Which is?

“An early retirement,” she says with a smile.