The
following is a true and inspirational story on how Michael Lezaja from Australia
who had managed to build his property portfolio within 10 years.
10
years ago, when Michael Lezaja was still at his early 20s and working as a
security guard seven days a week, he was looking to rent a place, but due to
the lengthy details required by the rental application compared to a mortgage
application, he had ended up making some enquiries and found out that he was in
a position where he could buy a property. Consequently, Michael had bought his
first house in Ingleburn, southwest
Sydney at the cost of AUS$380,000, where he paid a 5% deposit, plus the First
Home Owner Grant.
About
2 years after buying his first property, Michael became so inspired by the
renovation experiences he had seen in magazines and on TV shows that he decided
that it was the right time to buy an investment property and renovate.
At
this stage, Michael was looking at something in a blue-chip suburb that was
close to the water and within 4km of the Central Business District.
Seeing and seizing the opportunity
When
Michael went to an open house for a unit in the eastern Sydney suburb of Bondi,
what he was presented with was something that would have scared many investors
off - the place had 4 backpackers sleeping on the floor, and in the kitchen
there were cockroaches crawling out of the oven. But he saw something else entirely:
an opportunity.
At
the end of the viewing, Michael decided to call the agent and offer AUS$360,000.
The agent refused, insisting they wouldn’t let the property go for below AUS$380,000.
However,
after the agent realised Michael was not prepared to budge from AUS$360,000,
they agreed to settle on that figure.
As
Michael bought this property before the global financial crisis he was able to
borrow 100% of the finance through Macquarie Bank.
As
soon as Michael purchased the property he got straight into the renovation.
This included installing a new polyurethane kitchen which featured stainless
steel appliances that would be appropriate for the professional demographic
that would target this suburb.
The
unit had tiles in the ceiling so Michael had to remove all of those. He also
put in a brand-new bathroom with Spanish tiles. Additionally, everything was
fully painted and the floors were sanded. The total renovation cost Michael
$30,000. From the process, Michael had learnt many things, including how much
everything costs and how to deal with good trades people and bad trades people.
6
months later, Michael had the property re-valued at AUS$460,000. In other
words, the value had increased by AUS$100,000 in half a year after spending
just AUS$30,000.
The
Bondi property has been nothing short of a dream for Michael. Not only has it
grown by a huge AUS$340,000 in 7 years but it also helped him go on a spending
spree in which he bought more than 10 properties over 12 months.
About
2 years ago Michael was thinking about selling the property, so he gave the
place another good tidy-up. However, in the end he decided to rent the property
for AUS$620 fully furnished and the garage separately for a further AUS$60 (as
the garage was on a separate title). For the moment, Michael has no plans to
sell this unit.
Assessing and taking the risk in response
to a new opportunity
When
a 3-bedroom, 1-bathroom house in the southwestern Sydney suburb of Heckenberg
came up on Michael’s real estate alerts one morning, it immediately caught his
eye. It was AUS$279,000 on the market, and he knew this had all the makings of
an excellent deal, particularly if he could negotiate an even better one.
“I
called the agent straight away and said, ‘How much can I buy this for? What’s
your absolute bottom price? I will come down in 20 minutes and I will sign a
contract’,” says Michael.
The
reply was AUS$260,000. Consequently, Michael came straight in, signed the
contract, and paid a 0.25% deposit. It was only then that Michael took the keys
and went to look at the house.
“I
purchased this and paid the deposit without looking at it, because I knew that
it was a AUS$300,000 house. So I paid the AUS$260,000, even if it needed a full
kitchen, bathroom, paint job, etc. I was willing to take that risk because that
would have cost AUS$20,000 - AUS$30,000 max,” says Michael.
And
if there had been something wrong with the house the worst-case scenario was
that he would lose his 0.25%, a risk he was more than willing to take.
After
Michael had taken care of the contract and financial arrangements, he
immediately started planning the renovations.
Firstly,
he removed all the carpet and cleaned up all the rubbish. He also transformed
it from a 3-bedroom house to a 4-bedroom house, and added a new polyurethane
kitchen and a new bathroom. Then he tidied it up externally and did some
landscaping, with a little help from family and friends.
“My
dad and his mates came out and I put on a barbecue for them, which is a lot
cheaper than having eight landscapers out there,” says Michael.
“I
spent about AUS$26,000, and I think the revaluation came in at only AUS$315,000.
I was very disappointed with that because I knew if I was going to sell it at
the time I could have sold it for AUS$340,000 hands down.”
This
property has been another excellent performer for Michael. In addition to
rising from AUS$260,000 to AUS$450,000 in less than 2 years, the property rents
out for AUS$400 a week. As far as looks and value are concerned, it’s a far cry
from the property that came through on Michael’s alerts.
Investment in Queenland
In
2013 Michael turned his attention to Queensland, as he saw Brisbane as the next
hotspot over the coming years, considering the area had not peaked since
2008/9, and he wanted to buy at the bottom of the market. Initially, Michael’s
plan was to buy one or two properties there.
“It
turned out that the agent had four for sale from the same vendor. So I
negotiated a deal and took three out of the four. And a mate of mine took the
fourth one,” he adds.
The
idea of these purchases was to balance his portfolio with properties that
produced a healthy yield. Indeed, many of his properties in Logan currently produce
a yield in excess of 7%.
Furthermore,
none of his properties in Logan were overly pricey. In fact, all seven of them
were bought for between AUS$147,000 and AUS$284,000.
In
addition to buying seven properties in Logan over a 12-month period, Michael
bought an off-the-plan unit in Moorooka, which is 7km south of the Brisbane Central
Business District.
“I
liked it because of its proximity to the city, and I like having property close
to the city, as Bondi has done very well for me,” says Michael.
He
says he was not put off by the risks of buying off the plan, because he had
considered the decision very carefully.
“I
had 2 solicitors go over the contract, so we weighed up the pros and cons. I
took out the deposit bond and paid the AUS$1,800,” says Michael.
“My
personality is just to go out there and do it. There is no fear. A lot of
people ask what I think about the real estate bubble. What if I lose money?
Well, what if I don’t make money? What if I stay in the same position I am in
right now today?
“I
would rather go out and do something rather than worry about ‘what ifs’. The
conservative people tend to buy one and then say, ‘Well, that did well for me
over the last five years – I should have bought two’.
“Money
does not fall from the sky; you have to go out there and get it.”
2014 and beyond
In
2014 Michael reached the point where he had learnt so much during his journey
that he wanted to pass on his knowledge to other investors. Consequently, he
became a licensed buyer’s agent and founded ML Property Group. He already had
experience running a security company, and during that time he also became
increasingly aware of how to run a growing investment portfolio and implement
highly effective renovation strategies.
| Michael Lezaja's Property Portfolio | ||||||
| Location | Type | Purchased | Purchase Price | Current Value | Weekly Rent | Current Yield |
| Logan, Queenland | 3-bed, 1-bath house | Jan-14 | $284,000 | $340,000 | $350 | 5.30% |
| Logan, Queenland | 3-bed, 1-bath house | Dec-13 | $276,000 | $330,000 | $330 | 5% |
| Moorooka, Queenland | 1-bed, 1-bath unit | Dec-13 | $312,000 | Under construction $325,000 | - | - |
| Logan, Queenland | 2-bed, 1-bath townhouse | Sep-13 | $160,000 | $180,000 | $260 | 7.50% |
| Logan, Queenland | 2-bed, 1-bath townhouse | Sep-13 | $170,000 | $180,000 | $270 | 7.80% |
| Campbelltown, New South Wales | 2-bed, 1-bath villa | Jul-13 | $235,000 | $290,000 | $340 | 6% |
| Logan, Queenland | 2-bed, 1-bath townhouse | Jul-13 | $160,000 | $180,000 | $270 | 7.80% |
| Logan, Queenland | 2-bed, 1-bath townhouse | Jul-13 | $147,000 | $175,000 | $270 | 8% |
| Logan, Queenland | 2-bed, 1-bath townhouse | Jun-13 | $155,000 | $175,000 | $250 | 7.40% |
| Richmond,New South Wales | 3-bed, 1-bath house | Jun-13 | $256,000 | Sold @ $300,000 | - | - |
| Campbelltown, New South Wales | 2-bed, 1-bath unit | Jun-13 | $280,000 | Sold @ $320,000 | - | - |
| Macquarie Fields, New South Wales | 3-bed, 1-bath villa | Apr-13 | $242,000 | $330,000 | $350 | 5.50% |
| Macquarie Fields, New South Wales | 3-bed, 1-bath townhouse | Feb-13 | $230,000 | $350,000 | $350 | 5.20% |
| Heckenberg, New South Wales | 4-bed, 1-bath house | Dec-12 | $260,000 | $450,000 | $400 | 5% |
| Campbelltown, New South Wales | 4-bed, 2-bath house | Aug-10 | $264,000 | $480,000 | $600 | 6.50% |
| Bondi, New South Wales | 2-bed, 1-bath unit | May-07 | $360,000 | $700,000 | $680 | 5% |
| Ingleburn, New South Wales | 4-bed, 2-bath house | Dec-04 | $380,000 | $530,000 | Place of residence | - |
Michael's Tips to Add Value
- Fresh paint and new carpet are great things for an investment property because they are cheap and can really enhance the look of the place.
- A good-looking property is not the same as a good investment. Investors should not be put off by properties that require a lot of work. On the contrary, they can be an opportunity for a very healthy profit.
- Friends and family are a great help. In addition to being great support, they can save you a lot of money on things such as landscaping.
- Watch TV shows on renovation because you can learn a lot from the mistakes the contestants make. However, keep in mind that there are certain costs that may not be factored into the contestants’ budgets, such as architects’ fees and council fees.
- You don’t have to be passionate about renovations to be a successful renovator. Despite completing plenty of renovations, there are other parts of property investing that I enjoy much more than the hands-on side of it. I really like to manage project, negotiate with trades people, and negotiate on deals. But it’s also good that I have been involved in the renovation side because it’s great to know what a tradesman does and how long it takes them to do a job. So when you are buying a property you automatically know what a kitchen is going to cost you, what a bathroom is going to cost you, what a tradesman costs per hour, and how long they are all going to take.
Michael's Advice to New Investors
- The most important thing is to build a good team. For example, you need a really good mortgage broker who understands your financial position and what you want to achieve with your portfolio. The same goes for your accountant: have an accountant who has experience dealing with real estate and who understands what your investment goals are.
- A lot of investors will look at rural properties with high yields. However, the true capital growth is more in those blue-chip suburbs. When you have an upswing in a blue-chip area, it is a decent upswing.
- It’s important to balance your portfolio with some good-quality metro properties. This will help you grow your portfolio.
- Invest in a range of property types, such as houses, townhouses and units. They all have different strengths, and ruling out a particular property type could mean an investor misses out on making a healthy profit.
- Set up alerts on property search sites for the areas you want to target.
- Don’t mess around. If it is on the internet, then everybody is going to see it, and one savvy investor will be sure to snap it up.
