Taku Ekanayake has gone from renting in Sydney to building a property portfolio of over 6 properties. He truly lives the rentvesting philosophy.
In this episode, Taku goes through how he started investing with not a whole lot of money (middle-income salary) and then implemented the rentvesting strategy.
We'll speak about:
How he went from 1 to 4 properties Buying interstate Some cool ideas and tips on ways that you can renovate a property before you own it and get the previous landlord to pay for your interest and expenses.
For those who haven't heard of Taku, he's actually not a full-time property investor. Tell us about yourself:
I'm 28 years old and live in Sydney by myself renting, hence why I'm a rentvestor. I was born in Japan but moved here as a toddler, now I work as a sales professional for an IT consultancy. Eventually, I want to get into property full time, but right now investing is just humming in the background
I started in October 2015, and I managed to progress pretty rapidly through the strategy I adopted.
When you started, you were on a middle-income salary and renting a share house in Marrickville. How did you get into the market?
Initially, I was looking for somewhere to live in Sydney, and even prices then were around $500-600k, I was priced out of the market and only had a deposit for half of that.
This was a blessing in disguise.
I read Robert Kiyosaki’s - Rich Dad Poor Dad which was a game changer for me, I shifted from that 'Australian dream' to making your money work for you and looking for income producing assets. Once I started researching into that space I got fixated on it and taken into a maze. Through that, I found different markets and went interstate.
What made you look interstate, what was your criteria?
I know I'm not supposed to be investing purely on how much I can afford, but at the time I wanted to get into the property market and only had saved a deposit and just had to look at the market through that. At the time, I was researching what areas were best suited to me, I wanted something that would look after itself, self-funding with rental income covering expenses.
Melbourne was out of the picture for me, so I looked at Brisbane. It was half the price of Sydney with strong yields and good fundamentals. It hadn't seen significant growth and I liked where it was at in the property cycle.
I was still green at the time, just doing research and networking with investors. I was attending seminars - almost two to three a week, online forums and calling agents.
Brisbane is a big market, did you have suburbs you were looking for? Or what was your key way to research?
I did have a high-level criteria, I was looking below $400k and wanted to stick to houses only and I read about the oversupply of apartments.
I was looking at a 15 - 20km radius from the city and various pockets, specifically at which areas were undervalued. Through that, I came across Bracken Ridge, I liked how it was priced, the yields it was presenting and what I could buy for under $400k and still get good land content.
Since then, Bracken Ridge has performed well.
I really like the quote you said:
“There are so many different markets in Australia, and over the long term Sydney isn’t the best performing market,” he said. “Over the last 15 years – Sydney, Brisbane and Adelaide have all performed the same.”
Moving on from there, you bought another property. Where people get stuck is going from one to two properties. Can you tell us about some of the techniques you used to make this happen?
There's no magic pill, but when I bought the first one that was my sole goal, to get one property. I wasn't looking further ahead at the point. So after I bought that, I used up all of my savings and was back to the drawing board. I thought, I need to save again, working as hard as I can then I picked up a second job, Ubering doing 25 - 30 hours a week on the side. That allowed me to accelerate my savings over the next 13 months. I ended up saving about $35k - $40k just over a year. I also revalued the Bracken Ridge property, which I bought it for $375k and it was revalued for about $60k more.
I also gained capital growth increase, pulled out that equity and then used the cash savings to buy the third property.
Property two and three were in a space of about 6 - 8 weeks and that's when I started to adopt the renovation strategy.
I learnt from my mistakes and I knew there had to be a faster way to manufacture that equity. That's how I came about this strategy.
What does renovating a property look like to you?
I aim to invest in the middle to outer ring, so I really don't want to overspend because the return I get on them isn't too much. I only want to spend between 3 - 5% of the purchase price.
If there is an opportunity to add real value, like adding an extra room if the floor plan accommodates, that's a good way to add extra rental income and increase the value.
The renovation strategy:
If a property is untenanted, I will negotiate early access so that I can start the renovations immediately. This is so that there is minimum time between renters, so that it can be filled as soon as possible.
What are your plans from here?
I still want to continue buying bread and butter properties. I want to get into commercial too because the rental agreements are long term. The only thing with commercial is that you need 30% minimum deposit, so you want healthy buffers and good equity in order to invest.
Two or three tips for people getting into the market?
One of the mistakes I pointed out earlier, was that when I started out (only if you want to keep growing), don't just think about the first property. Think, what's the end goal and work back from it. Draw out a strategy and work around it.
Structuring your finance - don't just look for the cheapest interest rates, think about other aspects like does this bank have good finance? Do they allow good top ups? If your strategy is to continue to keep growing, you don't want to go to a lender who's going to hold onto your money.
Cash flow is king! Especially if you're building a property portfolio. Keep a close eye on your rental yields because that will help you sustain your expenses and continue to hold on to your property.
Capital growth is why we play this game but cash flow is what keeps us in this game.
Taku is always keen to network with like-minded people, you can reach out to Taku on LinkedIn, Facebook, Instagram and Twitter @TakuEkanayake.
And remember to check out The Rentvesting Calculator, and other Free Rentvestor Tools to help work out if you should Buy a Home, or Rentvest your way to building a portfolio.