In this property investment case study, our Principal, Colin Law, talks about his aspirations and achievements in building a successful property portfolio.

"Firstly, I guess I'm keen to talk about my strategy in property investment to illustrate what a relatively conservative approach can achieve over a ten year period by someone working in a normal, middle-management job. I'm not a 'property guru' with 100's of properties, but through what I believe is a conservative and cautious strategy, I have accumulated sufficient equity in properties to allow me a degree of financial independence and a good standard of living.

"Early in my working life, I came to the conclusion that in order to achieve my goals later in life, I needed to do 'something' in relation to investment - simply saving something each week or relying on super wasn't going to do the job. After reading a number of books, I thought further about the concept of gearing - using the bank's money to allow larger investments, thus increasing equity more quickly. Over a long period of time, I have put this first part of my plan into action - do 'something', anything, but research it, gain as good an understanding as possible and take advantage of the additional gains associated with a conservative approach to borrowing - the key is to take action and actually try a few strategies.

"I have invested in superannuation and have maintained that as part of my investment portfolio. I also borrowed to start a share portfolio but found that I could only borrow relatively small amounts for this purpose, having also made a decision to avoid margin loans. So, whilst maintaining some exposure to superannuation and shares, from early on, I resolved to gain an understanding and get involved in property investment. The equity in the family home we bought near the Brisbane CBD in 1981 helped us to get started and proved extremely useful in our future real estate investments.

"My initial forays into investment property were small strata-titled industrial units. The returns looked good but I didn't really know enough about this market. The two units I bought both suffered from unreliable tenants - one ultimately going into receivership. I did sell both units for a small profit, but was lucky to have achieved this outcome. I resolved to limit any further purchases of industrial properties to much larger buildings with long-term stable tenants. To this point, these $million plus properties have been beyond my reach.

"While I was still doing battle with my industrial tenants, I came to the conclusion that houses were a far more reliable proposition and that detached houses on well located land that would appreciate were the best residential alternative. Buying land and building a new house would also reduce the stamp duty impost and maximise the depreciation deductions.

"At that time I had been working in the property industry for a number of years and resolved to use this experience to help select suitable properties and start to build a modest residential investment portfolio.

"My first investment under the new plan was a small block of land about 30 minutes east of the Brisbane CBD. The location in a street of owner-occupiers was ideal. Six months later, we had a well presented two-story home completed and ready to rent for a total investment of less than $250,000. Over the next ten years, the home remained rented constantly with only four different tenants. We sold the home recently for just under $600,000.

"Within 12 months of the original purchase, we bought another block in a new subdivision about 20 minutes west of the CBD. Again, we built a quality home which has been constantly rented since.

"Each year or so thereafter, over the last decade, as the equity and rents grew for each property, we were able to again look at our borrowing position in relation to equity and approach the bank for further loans to repeat the process. Because the homes were new, good quality tenants were always easy to find. Professional property managers made the process of managing the homes straight forward and stress free.

"For us, the key has been to gain an understanding of each area in which we considered building and then buy as well as possible. All our homes are close to infrastructure like schools, transport, shopping and other facilities. All are maintained to a high standard to preserve our investment. And all are being held for the long term."
Colin Law