A B.Invested client shared an interesting story recently about a property she had bought for $59,000. The property was one of 16 properties she had managed to buy in 2 years. At first, she said she was scared of buying such an underwhelming property. But she went ahead, made the purchase and rented it out for $200 a week. Over time, she pushed the rent up and it went to $350 a week and eventually to $500 a week today. The value of the property has also increased to more than $200,000. Over 2 years the value has quadrupled. The other interesting thing was that it had sold previously for $500,000.
The property is in a mining area, where it had been part of a boom, then the market had crashed, but the b Invested client picked it up at rock bottom value, so it had upside for growth as the next wave of mining activity began to take off.
It’s about finding value
People have many theories about investing in property. One theory is that there’s no point investing away from capital cities. Well the above story showed that value can be found elsewhere when the timing is right. Even in remote regions.
Not all markets are linear. Some go up at different times than others and if you’re smart, you can find value in most places. In the last couple of years the Gold Coast has roughly tripled in value in a lot of areas after doing nothing for 15 years. Sydney hasn’t achieved that kind of growth, even though growth was strong after Covid.
Growth from a low base
Some people might argue that the Gold Coast was coming off a low base and if you can buy a property for $200,000, it’s much easier to see a tripling in value than if you bought one in Sydney for $1 million.
And one of those people would be b Invested founder Nathan Birch. That low base is the precise reason why there is so much scope for growth. Nathan built his extensive portfolio by buying undervalued properties at the affordable end of the market, while using the strong rental yields to pay off the debt.
Most of his properties made small equity gains soon after purchase. And once he rinsed and repeated the strategy enough times, those small equity gains were multiplied. If you make $50,000 in value on one property it might not be a lot to write home about, but if you had 10, 20 or 30 properties that each made those gains, it begins to add up and suddenly you’ve made more than $1 million.
Of course, Nathan has more than 200 properties these days, so imagine what market growth cycles can mean for his combined portfolio value.