Dave Grant's Story
Taking the emotion out of investing – API (Australian Property Investor) October 2009
Dave Grant is unabashed in admitting the key to his most successful property deal was calling in a professional to help with the purchase, rather than choosing an investment on his own.
Dave, an electrical manager at a wastewater treatment plant, and his partner Mataji, a psychologist, engaged the services of the wHeregroup to help them buy a property, after feeling paralysed by the amount of information available on property selection and strategies.
The idea was to treat their investment endeavours as a business rather than letting emotion play a part, a mistake they’ve made in the past.
“We’re both pretty strapped for time with our careers and the kids, so we haven’t got time to trawl around and look at properties,” Dave explains. “It was fun buying our own house that way but as far as the business thing goes, we just don’t think we need to put time into it.”
Dave had read about 30 investment books bought off eBay and from secondhand shops but felt unable to make a decision.
“You end up just spinning around,” he says. “There are so many different criteria on where to choose the next suburb and the next boom.”
Dave and Mataji found a buyers agent they were happy to work with via a personal referral, after attending a number of seminars but deciding the spruikers heading them weren’t worth their trust.
“One guy even claimed to be an ex TV Danoz Direct salesman as his bona fides, not what I look for in someone to hand the reins of my financial future to,” Dave notes.
“We think we’re pretty competent at our professions and spend a lot of time on them (but) we’re also not averse to paying for a service if we think someone can do it better.
“We also thought a good buyers agent has no surprises; they are fee-for-service and would appreciate repeat business – no developer links, no hidden agenda.
“We considered a good buyers agent could add a lot of value to our property investment as they have property selection as their main focus and can spend real time crunching numbers and researching. We have two small children and time is a premium for us.”
For a total fee of $7700, the buyers agent identified a three-bedroom, one-and-a-half-bathroom townhouse near Campbelltown in southwestern Sydney.
“It’s fully renovated, brick-and-tile and bulletproof – near transport, schools and a shopping centre. An investor’s dream.”
Dave and Mataji bought the property for $195,000, with all costs borrowed on a line of credit extending to $212,150. They used their own mortgage broker and solicitor, providing them with an extra level of confidence due to their independent advice.
So what makes this Dave and Mataji’s best deal?
“It was just so easy,” Dave says. “We were given as much or as little involvement as we wanted, it has cost us nothing and has appreciated an estimated $30,000 in a year. This is due to some luck with the timing around first homeowners as the market has moved but also because the tired shops over the road have been bought out for a major redevelopment by Aldi. Both these reasons were foreseen by the buyers agent.”
Dave says he always figured the buyers agent should essentially pay for himself fairly quickly through higher capital growth.
“We thought that for his fee, if we can get two per cent growth better than we can choose in one year then we’ve paid for it.”
The property rents for $270 a week and after depreciation is taken into account was positive cash flow from day one, although only by $15 or $20 a week.
And the only way that cash flow situation will change in the next five years is if the rents rise, as Dave and Mataji locked in their interest rates at 5.79 per cent, deciding that was close enough to the bottom of the interest rates cycle for them, even though their friends said they should hold off.
“We didn’t expect or plan to pick the bottom but were very lucky,” Dave says. We got in by a couple of days on the last property – (fixed rates) went up 0.4 per cent a few days later! It was pure luck – we still feel pretty smug now, but it was pure luck.”
This successful deal has taught Dave a valuable lesson in the importance of investors being surrounded by a great team.
“Become an expert where you can but hire one where you can’t,” he advises. “Treat them like the business partners they are, not employees.”
This isn’t the approach Dave and Mataji have always taken. They bought a block of land on a whim while on holiday at Katoomba in the Blue Mountains west of Sydney. Dave says the Katoomba purchase and the townhouse investment are like “chalk and cheese”.
“(The townhouse) was done with a considered business approach as an investment. (Katoomba) was done when we were just fed up with our lives in Sydney I suppose and thought, let’s just move up here, let’s do a tree change… We thought it was a great idea but we paid $160,000 and we can’t sell it for $100,000 at the moment. It’s been on the market three years. So a massive difference – eyes wide open this time, on the back of that lesson.”
Dave and Mataji have since bought another property through the same buyers agent, and plan to buy one property a year for the next eight years. As they’ve learnt quite a bit from their most recent couple of purchases, they may look to go it alone with some future deals. Besides, they’re also approaching a land tax threshold in New South Wales, so might look to buy interstate.
“We’re investing with a view to reducing our work hours and spending as much time with the kids as possible,” Dave says. “I’m happy to give up sewerage forever. I can’t wait to get out of the wastewater industry!”
Dave is a long time client of the wHeregroup and we appreciate his generosity is allowing us to share his story.