After undergrad, I interned at a media company in Australia and wrote three published articles. Below is the piece that appeared in the February 2008 issue of Your Investment Property magazine. View the pdf here.
When Jenny Thompson set out to buy her own home, she was aiming to get away from the rental market. Six months later, however, she’s still a keen renter – but now she has her own rental property to keep her in the property game. She tells Dixie Clough how she did it
Fed up with renting and keen to get a foot on the proverbial property ladder, school teacher Jenny Thompson* decided that it was time to buy her own home.
The only problem she found, like many other first homebuyers, was that locating her ideal home, within her price range, was almost impossible.
Most properties that she looked at were around or above the $200,000 mark, which meant that an uncomfortably large percentage of her after-tax salary would be eaten up by high mortgage repayments – not a viable option for a single woman on a teacher’s salary.
While discussing her options with her real estate agent, she jokingly commented that it would be “good if I could just rent it out for a while first”. Her agent took comment seriously, and suggested that she consider an investment property rather than a first home.
After a marathon two-hour discussion, Jenny weighed up the pros and cons of owning and living in a house versus owning an investment property, and by the end of the conversation she was almost convinced that investing was the right move. All it took was a seminar, held by buyers advocacy group Advantage Properties, and she was sold.
“I was worried about buying an investment property, because I don’t know how to chose one,” Jenny explains, but says that after the seminar, “it all sort of made sense to me. It was very professionally run, not at all a pushy pyramid-type thing.”
Jenny says she would never have dreamed of investing in property before Advantage Properties challenged her way of thinking.
“I’d always been traditional – I thought you’ve got to buy a house and pay it off and live in it,” Jenny says.
But Jenny is traditional no more. Shortly after the seminar, her house hunt commenced. After a few months of searching, her finance broker, Darryl Simms from Access Loans, located the perfect property.
In a prime location, right on the coast in Elwood, it had recently been renovated and already had a tenant. Even better, it hadn’t officially come on the market yet, and it was priced to sell. Jenny says the property was valued at $250,000; however, with Simms’ help, she secured the one-bedroom apartment for $227,500.
It is a property that Jenny says she probably could not afford to pay off on her own, but having the tenant contribute towards the mortgage has made all the difference.
“The tenant pays for it and I get a tax advantage against all of the expenses, so my actual contribution is not really that great. It might only be about $100 a week after all the taxes, and I can afford that,” she says.
Jenny had budgeted to spend approximately $400 per week on mortgage repayments, so she says she can now use the $300 she saves on repayments to rent a place of her own closer to work – a situation that suits her well, since she may change schools within a few years.
It’s made me realise that debt is not necessarily evil. It can be a positive thing if it’s used properly
Jenny now talks about real estate as though she has been investing in property all her life. “With property investment, you’re after capital growth and not just a rental income. It’s obviously a long-term thing,” she says.
“I’m probably looking at, down the track, using the equity built up on the property to buy something else, maybe to live in or perhaps another rental property.”
But for now, Jenny is happy with owning just one property. Although an investment property was not what she initially set out to buy, she says it turned out to be the right decision for her.
“It’s given me a sense of security, like I’ve got something behind me,” she says of the purchase. “It’s made me realise that debt is not necessarily evil. It can be a positive thing if it’s used properly.”
* Name has been changed