There's nothing like your first problem-child investment

By 2006, I was really starting to get into the whole property investing thing. I was constantly on the internet looking, looking, looking and slowly but surely, the addiction was starting to surge through my veins.

I researched Mount Isa for about three months, watching the market to really see how it performed. I’d started to educate myself through reading property magazines, and I began to really look at investing differently, but I still had a long way to go in terms of my knowledge and understanding what it all meant.

I started to call agents to chat to them about the area and get an idea of where prices were heading. One day, I spied a lovely duplex on a real-estate website: it was fully furnished with renovated bathrooms and kitchens, and both sides of the duplex were tenanted. It was on a large 920-square-metre block, and it was relatively affordable at $240,000.

I spoke with the agent at length, and we chatted about the price.  After our conversation, I sent an email to the agent with my offer –which was slightly less than what we discussed on the phone – at $233,500, and it was accepted straight away. I couldn’t believe it. I threw my hands over my face and had an “OMG!” moment.

So, what was the drama about this purchase? Well, it also happened to be the case that I had quit my job that morning after a disastrous five-month temp job and my husband, John, was away on business. He wasn’t too happy and needless to say, I’m now banned from putting in offers without him being in the room.

I really didn’t have to move forward with this purchase, as no money had actually changed hands and no contracts had been signed, but I convinced John that the dual-income property was a good buy, as it had a rental yield of just over 9%. We needed a balance for our negative cash flow position, so this was perfect.

Once a building inspection was completed, we found a few things that needed to be fixed, so we negotiated another $3,000 off the price.

I recall the agent that I dealt with said just before my offer “'I think you’ve missed the boom, love,” and I said: 'Oh, I don’t think so!"  I could see that Mount Isa would continue to boom for some time, and so far, the increase in growth in a relatively short time and the rental return has been this property’s biggest asset.

The Facts

On our way to a holiday in Cairns, just one week before settlement, John took a side trip flight to Mount Isa to check out the duplex. Luckily, he was happy with what he saw.

However, this is our problem-child property, and we have experienced the full gamut of issues, including residents not paying rent and skipping off in the middle of the night; storm damage to the property that required extensive repairs of approximately $10,000; tenants that we suspect have had “special dealings” in the backyard of maybe an organic nature; and both air-conditioning units blowing up within a week of each other, which required complete replacement of a new system to the tune of $18,500.

Also, the initial real estate agent’s dodgy pest inspection report failed to reveal that there were termites! Slugged with a repair bill of $3,500 one month after settlement, this was an expensive mistake to make, as we could have uncovered the damage if we had done our own inspection.

This is where I can absolutely recommend that landlord’s insurance comes into play, because we’ve made five claims already. Our property manager, Tracey Lowe at RealWay Property in Mount Isa, has been invaluable in helping us manage this dear property and its many incidents – we love her. To show her that we do appreciate her work, I’ve sent her flowers and a bottle of champers. She takes good care of us.

We’ve also had a few offers to purchase the property from us. Once, the real-estate agent went down to give me a market appraisal and she came back saying she actually couldn’t give me a fair appraisal because she wanted to buy it off me for about $300,000. We declined.

The second offer came from the two tenants that were renting one side of the duplex, who asked if we were interested in purchasing, but we also declined. We know that the rental return will continue to grow and help our portfolio balance out and our investing strategy is definitely geared for the long term.

This is an exerpt from  Journeys Along the Property Path: 12 real life stories of 12 property investors, published by Inspirational People in Property. Two of the authors are fighting against breast cancer, and IPIP has aligned with the McGrath Foundation to raise money to fund McGrath breast care nurses in communities across Australia and raise awareness of breast cancer, particulary among young women. The initiative aims to sell 9,000 books in nine days to raise $90,000 to support the McGrath Foundation.