Electrician’s portfolio secures financial future before age 35
Renovating and picking up some interstate properties along the way has proven a successful formula for a young Geelong tradie with the skills to back up his strategy.
When young Geelong electrician Chris Tran bought the first of the six properties that have now secured his financial future, it was a decision based more on personal instinct than property acumen.
“I knew buying a house was the right move but I couldn’t really pinpoint the reasons why,” he told API Magazine.
With a commerce degree under his belt, he drifted into recruitment but very quickly realised a more hands-on approach was more befitting of his character and skills.
So, at 22, he redirected his energies into an electrical apprenticeship, a decision that has not only led to professional fulfilment but also shaped an approach to property investment that has changed his life and electrified his financial situation.
Renovation has been a central tenet of his property investing strategy, one that in nine years has seen an outlay of $2,817,000 swell into a three-state suburban and regional property portfolio now valued at $4,420,000, a profit of just over $1.6 million.
After spending what seemed an eternity living at home and saving $65,000 for his first house deposit, Mr Tran in 2015 splashed out $205,000 on what would best be described as a “renovator’s delight” in the Geelong suburb of Corio.
| Geelong | Geelong | Geelong | Frenchville | Geelong | Warnbro | |
|---|---|---|---|---|---|---|
| Buy price | $205,000 | $382,000 | $480,000 | $420,000 | $830,000 | $500,000 |
| Valuation 2024 | $560,000 | $570,000 | $780,000 | $530,000 | $1,350,000 | $630,000 |
It proved to be an inspired choice.
“I could afford a $300,000 house in a better suburb that had a great owner-occupier appeal, but I saw an opportunity in buying an original house that I could renovate and improve its value,” Mr Tran said.
“Structurally, the house was perfect but it was dated and neglected
“I spent $27,000 on the reno’ over two months, it was immediately revalued at $290,000.
“That was an epiphany for me — I was able to make a lot of equity in a short timeframe, especially compared to how many years it took me to save up that initial deposit.”
That crucial first property provided many lessons for the future.
“There was a lot of doom and gloom in the media back then.
“My loving family advised me to be cautious about buying a house but shortly after 2016, houses grew at a rapid pace, especially in Geelong.
Confessing that he lucked out by buying in his home patch when it was in a growth cycle, Mr Tran, now aged 33, said he then realised that timing specific property markets was a key component to any property investing.
Branching into interstate property
While some investors are drawn to rental yields, Mr Tran said he and his project manager wife Marija are focused on capital growth.
Unlike his first instinctive property purchase, he said they now deploy a data-driven approach to building and overseeing their portfolio.
The decisions to buy in Perth’s outer coastal suburbs and Queensland’s Rockhampton area were very much aimed at anticipating the property cycles taking off in those areas.
“We bought in markets that were showing early signs of increased demand and limited supply, but also took into account some other variables, such as land tax expenses, whether or not there were major changes to rules and regulations that would affect landlords, and with an awareness that we needed to diversify our risks.”
But the renovation model is what has encouraged them to focus on Geelong.
“I usually stick to my home market because of local trade connections.
“If I was to renovate interstate I would need to budget in accommodation, travel etcetera, and it would be harder to come out on top from a numbers perspective.”
Mortgage cliffhanger
Interest rates have been the big issue lurking in the background throughout their investment journey and the prospect of another rate rise in 2024 has curtailed any plans to add to their portfolio for now.
The couple’s ultimate goal is to hold onto the existing assets and continue to accumulate more over the next decade as serviceability improves.
“We would then sell one house each financial year to fund a subdivision project and copy and paste on repeat until I am satisfied with the cash flow.
“We plan to be very hands on — I will be buying an excavator and truck set up when the time comes, so the skills and knowledge I have gained as a tradesman I am converting into labour and creating my own wealth and equity.”
But those pesky interest rates have seen this plan put on hold for now, as the so-called mortgage cliff pushes their loan servicing commitments significantly higher.
Mr Tran said rate rises are a double-edged sword.
“We are about to be maxed out in borrowing due to serviceability.
“Rate rises are both a hindrance and opportunity, in that yes, it will cost us more to service the portfolio but I will also be able to buy that next house for $50,000 less as it knocks out other buyers/investors, but first and foremost you need to make sure you have a healthy buffer to hold your current portfolio.”
Six steps towards a successful renovation
Mr Tran said he was often asked what the secret to his investment success was and had some renovation advice for those looking to emulate his financial advancement.
- You need to have skills and knowledge about renovations and the process.
- Utilise trades where it doesn’t make sense for you to do the work - whether it’s because of compliance or just that it would be cheaper and quicker for someone who does it day-in day-out.
- You can’t always get extra money from your mortgage to fund the reno’. I worked on a 20 per cent deposit for the initial house buy price, plus the renovation cost. I run a rough estimation of the reno’ cost and prepare a timeline to see if it is feasible to go ahead. I aim to get $3 back for every $1 spent on renovations. I purposely overestimate how much things will cost and the time needed. I also do a feasibility of how much the house would be valued at after the project. The equity created is used to repeat the process.
- Your job: I always take at least four weeks off work to do a renovation. Not all jobs are as flexible as mine but this helps to make the projects feasible.
- Renovating constantly and ‘flipping’, or quickly buying and selling, properties is doable but it’s very hard to make it worth your time after capital gains tax, stamp duty, sales fees and the rest of it. It becomes your job. I prefer to buy, renovate, build equity and let the market do the heavy lifting.
- Enjoy it! If you do not enjoy the process of renovating then it becomes very difficult to get motivated.
