Acting professor’s dramatic investment story has happy ending

Perth-based freelance educator Dr Andrew Lewis Smith has built a portfolio of five properties across three states, largely thanks to the school of life.

Like any good story, it was a new-found love, in this case a self managed super fund, that changed everything.

Former Western Australian Academy of Performing Arts (WAAPA) Associate Dean of Performance, Dr Lewis Smith, recently purchased an off-the-plan apartment in what he regards as an undervalued Melbourne property market, assured that once it’s built by 2026, the Melbourne market will have come back.

“It sounds counterintuitive because everyone’s racing to Brisbane and Perth right now, and Melbourne’s in a slump but it’s probably a good time to look at Melbourne because while the other places are going off now, in two years’ time Perth will probably have hit its peak,” he told API Magazine.

“You’ve got to have some money of course, the 10 per cent deposit to put down and then when they’re realised in 2026 you put in the other 10 per cent deposit, and you get a loan through your self-managed super fund (SMSF), which is just great.”

Buying property through his SMSF has been a game changer he wishes he’d utilised sooner.

“I’m buying in the Melbourne property and another in Queensland through my SMSF and they’re valued by the bank in a different way, as they look at the contributions you’ve made to super rather than your salary, so you don’t necessarily need a massive salary, you just need to be contributing to your super fund,” Dr Lewis Smith.

“The great thing about that is, if you purchase it through the trust, when it comes time to selling there’s practically no capital gains tax, whereas all the other four properties I’ve got at the moment, if I sell them to get the money out or downsize or whatever, I’m going to be stung for capital gains tax.”

“I wish I’d done it 20 years ago, it’s absolutely brilliant,” he said.

He argues for using a property company for off-the-plan property, which might not realise for 18 months or a couple of years, but the price is locked in.

“So, you’re not having to compete or go to an auction, which is really scary for a lot of people,” he said.

In Western Australia, Dr Lewis Smith currently owns two three-bedroom houses in Yokine and Spearwood, and a two-bedroom townhouse in Cottesloe, with a fourth he’s about to purchase in a new apartment complex in Subiaco.

Dr Lewis Smith understands why investors are wary of buying off-the-plan, under the belief prices are at a premium, but he says the quality of builds are “fantastic” and the benefits of buying new are many.

“I’ve learnt through trial and error, now I’m looking at buying new because if you’re still earning a salary and paying tax, there’s better advantages, for example, with a new property you get depreciation straight away, but it also works against your tax dollars, so you want to be capitalising on the tax,” he said.

Differing views on Queensland, Sydney investments

A second off-the-plan property is currently on the books in Queensland, where he already owns a three-bedroom apartment in Morningside.

“There’ll be at least another 10 years of growth for Brisbane in the lead up to the 2032 Olympic Games.

A city he’s previously invested in but is no longer keen on is Sydney.

“Anything there is going to cost you over a million to start, then the yield might be 2, 3, 4 per cent rent, whereas Perth, Brisbane and other places right now you can get 5 to 6 per cent rental yield, so on a cash flow basis it’s much more positive to do that,” Dr Lewis Smith said.

Sydney is also a reminder of his first foray into property investing that was going gangbusters until it wasn’t, thanks to the global financial crisis (GFC).

“I managed to get a little bit of money early on and I invested in a little bedsit in Perth, sold that and bought a little apartment, sold that, and bought a bigger place in Randwick, in Sydney New South Wales,” he explained.

“I sold that and bought a bigger place in Rozelle, sold that and bought a house in Maroubra but then I had moved too fast and bought another property in Perth and I couldn’t maintain them together.

“Probably too, I got spooked by the GFC at that time and I listened to the media who were just going ‘the sky’s going to fall down’ and do you know what, property survives through everything.

“I got spooked and sold and that was such a great regret, because in actual fact I could have borrowed more money to hang on.”

A move west and sacrifices to invest

Licking his wounds, Dr Lewis Smith moved back to Perth to start over and found himself in a good earning role, which allowed he and wife Michelle to spend the next decade building up a multi-property portfolio.

“We made sacrifices during that time, no international holidays, no new cars, all that kind of stuff because we were willing to do it.

“There’s a period of your life where I think you can dedicate yourself to it then it pays off later on.

“I never saw my salary in that time because it was just going out on repairs, tenants, it was low rent then, all that kind of stuff, and then I got some professional advice saying never sell.

“Now with four to five properties, when you see how they’ve all increased in value in the past couple of years, its compounding growth, so you’re getting 10-20 per cent growth on four or five properties, and that’s money I couldn’t possibly earn,” he said.

Dr Lewis Smith recommends to first time investors, especially young investors, to take heart and just get started.

“There’s a great quote by Warren Buffett, that if you’re sitting under the shade of a tree, it’s because you planted an acorn a long time ago,” he said.

“It’s better to be in the market and also, I’ve seen so many young people who go, we’re just not happy with this place, they don’t think the timing’s right.

“The internet is absolutely flooded with get rich quick people so it’s hard to determine what’s the best thing to do.”

He recommends rentvesting, buying whatever is available with a good rental yield.

“As long as you’ve got people paying your mortgage for you it’s a way to just get going, build some equity and look to move on with that, even if it means you might have to stay at your parents for a bit longer or rent yourself with other people,” he said.

Leaving a property legacy

One young person in Dr Lewis Smith’s life, who motivates him to hold onto their properties, is his son, a university student.

“It’s really about setting him up for the future.

We want to be able to enjoy our retirement, although I’m in my 60s but Michelle’s younger, so I’m still choosing to work but I’m not the kind of guy to just go and sit on the golf course, I’d rather be doing something,” he said.

He strongly recommends not stopping at one or two properties.

“A lot of people get freaked out by having multiple properties but it’s really the only way I can see to have a healthy retirement and I don’t want to be sitting there waiting on the pension.

“I think what happens as well is a lot of people get to one or two properties, and then they see they’re doling out money for plumping, electricity, etcetera and it just becomes a headache, but it’s about staying with it and during those big earning years, being willing to sacrifice, which we did.

“It’s about waiting, if you can, for the property to cycle to turn.

“What’s great too about buying in a variety of states, is when one market pulls back, you’ve got another state going strong,” he said.