Teacher with 16 homes’ surprise tip
A former music teacher who started a $12 million real estate empire while working as a low-paid freelancer claims home seekers could be missing a rare opportunity during the COVID-19 crisis.
Sydneysider Lloyd Edge, 45, currently owns 16 properties, bought using a mix of cunning tactics, and said most would-be real estate purchasers fell into the same trap during downturns.
"Buyers worry too much about picking the bottom of the market, but it's impossible to do. Most of the time you only know when it's bottomed out after the fact and by then it's too late," Mr Edge said.
He added that property prices had a history of coming back after periods of weaker market activity - often at a much faster pace than expected.
The music teacher bought his first property in 2004 when the Sydney market was coming down from a post-Olympics high and he has bought subsequent properties in other property downturns.
"In the long-term, prices go up. If you sit there waiting for more falls you can miss the boat," he said.
Would-be home seekers who no longer felt safe in their employment were right to hold off their buying plans for now, but those feeling secure would be taking a risk delaying too long, Mr Edge said.
"The best time to buy is when you're ready and when you have the money. If you focus too much on timing you can end up paying more."
The prospect of getting a discount by delaying a few months also needed to be weighed against the long-term value of the property. "Think where it will be in 10 or 13 years' time," he said.
Mr Edge said acquiring the skills necessary to build a portfolio of 16 properties required a significant amount of learning and anyone could replicate his strategies if they were prepared to invest the time to educate themselves.
When he first started his investment journey his goal was not to build a large portfolio but simply to get a foot in the market.
His first property was a newly built one-bedroom apartment in the St George suburb of Rockdale, which he bought for $270,000.
"Looking back people always say it was cheaper back then, but it didn't feel like it at the time," Mr Edge said.
He used a 20 per cent deposit from savings and the First Home Owners Grant, and used a low-doc loan because he was not a permanent employee.
His next property was purchased in 2009 for $262,000 using a 10 per cent deposit built up from savings. The property was a three-bedroom villa in Ingleburn in Sydney's southwest.
Subsequent properties were often purchased without needing to put money down upfront - often because the rents were high and covered the majority of his mortgage costs. This made it easier for banks to approve new mortgages.
Other properties were purchased using equity gained from his existing properties as they grew in value.
Mr Edge then began to branch out to regional areas and other states as his portfolio grew and he started manufacturing equity by doing renovations, subdivisions and developments.
This gave him even more equity to draw to purchase additional properties. Other times he used the profits made from flipping or developing houses to pay down his existing debts.
He estimated roughly 45 per cent of the value of his $12 million portfolio was owed in debt, and his net equity position was at 55 per cent.
"It's interesting to me because most of my purchasers were with (little money down) … it was a bit easier to get loans than it is now," Mr Edge said.
His portfolio also reached a point where the rental income from his properties was enough for him to quit his work as a teacher and become a full-time investor.
Mr Edge now owns a buyer's agency and uses his experience buying and selling property to help other investors. He has also written a book about his experiences titled Positively Geared.
"I've changed my philosophy a bit from when I first started," he said.
"In the beginning I was trying to purchase in cheap areas that might grow but now I aim for slightly higher socio-economic areas where the rents are better.
"When I select a property I usually want a balance of good cash flow (high rents) and capital growth potential.
"I mix a few approaches. I've learned lots of different strategies from other investors and buyers. There are a lot of good ideas and there is not any single way to do it.
"But you do have to have savvy and understand what your goals are and what the risks are. I think you just need to talk to lots of people, investors, agents, buyer's agents."
Some of the areas where Mr Edge owns property include Lilli Pilli in the Sutherland Shire, Alexandria and Dee Why.
He also recently sold a home he shared with wife Renee in the inner west suburb of Lewisham. "It had nearly doubled in value by the time we sold it," Mr Edge said.
"People often say to me, 'well, it was all easier back then' but it's always going to seem like that when you look back … you've got to buy when you're ready and when you can."