All it took was a sign to give Muirhead a tilt towards the right path. We will hear about how she turned from DJ into a property investor and businesswoman and how property investing is like playing a game of Monopoly.
Normally it would be gym in the morning. I obviously respond to emails and phone calls, then I’m always on realestate.com – probably like everyone else who is listening – I’m on and off realestate.com in the automated search engines. Daily I have lunch with my husband, because we do work together in the property management business. I do spend a great deal of time with my kids. I love watching them play sports, so whenever that’s on. A family meal at night… and it’s a pretty great life really.
It’s a lot different to what it was 10 years ago when we were under lots of pressure and I had this DJ business and no income – it wasn’t a good time. I’m so pleased to be in a different era of my life.
It’s all about having freedom to see the kids to be honest with you, because I made a couple of errors early in life – I gave birth to two beautiful children and went back to work the day I gave birth to them. I felt guilt for that my entire life until I recognised it when they were eight and ten. And thankfully I got into property by then. So I thought this is ridiculous. I’m making more money in capital growth of just two properties, then going to work full time for myself. And so thankfully, I flipped it on itself and sold the business for equipment value only and travelled the country for a couple of years. So yeah, it’s funny but I think life’s for learning and I’ve certainly had a big lesson there.
Starting off with nothing, she dramatically turned her life around. Since then she has accumulated 18 investment properties and began the property management business with her husband.
I’m a part time lecturer for property investing at TAFE SA. Three years ago I started a business called Muirhead Property Management in Adelaide, so that’s pretty much my background.
Most people find me most interesting because I was a disc jockey for 15 years. I had an incredibly low combined income with my husband. We had no super, nothing set up for our future and in 2002 we went to buy our very first investment property and were told by Westpac that we couldn’t even afford our own home. By 2006, we purchased our very first investment property and in 2010 – four years later – I actually won Your Investment Properties Property Investor of the Year, which is a fantastic magazine and of course won that with 14 positive properties.
In 2010-12, traveled Australia, homeschooled the kids in a caravan, then of course in 2014 set up Muirhead Property Management and I currently own 18 positive geared properties. So life’s a lot different to what it was 10 years ago.
When it comes to investing in property, she describes herself as a calculated risk taker.
It’s a bit of a hobby for me. It’s a bit like a game of Monopoly – I certainly take calculated risks. So I don’t know whether you call me a risk taker, I know other people perhaps would find it hard to jump at some of the investments that I’ve bought, but I’ve never really been a normal investor. And I’ve always been chasing the positive geared properties rather than negative gear, because I’ve never had the income to write off the depreciations or any of the expenses that go with deposits. So I’ve had to have some positive gear to put money in my pocket, not take money out. So I’d say I’m a calculated risk property investor.
With a steady interest in music while growing up, she naturally turned to D.J.ing as a primary source of income. However on discovering that the risks outweighed the gains within that industry, she eventually turned to property investing.
So I was born in Pinnaroo, which is virtually on the border of South Australia in Victoria and then moved to Adelaide. I worked for a furniture removalist company for seven years and then I was a disc jockey for 15 years, so I always make my living on my exercise. When I left school I thought, ‘Well I’ll probably I’ll try and get into the police band,’ but I had open heart surgery as a teenager so they said to me at that stage I was at risk, so DJing became something.
So I did that for 15 years and by the time I grew this business to 26 staff, it was a ridiculously expensive business. I mean, to make a living one night of the week, six months of the year when the sun shines on a Saturday – really, really tough industry to be in. Because I was carrying full time staff, road crew as well as all the DJs, you need all the guys working as well as myself in the summer months, then you’re trying to keep them for winter and there’s no work. So it was a really interesting time. So needless to say that now in business I will not have staff again. There are lovely people but the stories are crazy! But it blew me away when I did when Property Investor of the Year 2010, because all I was trying to do is make a better life.
I used to hook up a trailer, I did a lot of wedding and corporate events and typical school formals but I was in my early 20s and decided that teenagers just didn’t expect to see some 20 year old female standing up there so I used to put my guys into those. But when it came to weddings and corporate events, I used to hook up my trailer with all of my speakers, P.A. gear, karaoke machines, whatever the client wanted.
I was in Adelaide so I’d just set up about an hour or two before with the P.A. gear, then when all the guests would arrive – if it was a wedding, I’d introduce the bridal party as I was the MC (Master of Ceremonies) and was in control in all of that as well as all the music. I did enjoy that, it was lots of fun. I guess it goes down the same line as playing the saxophone in a band when I was younger, with my brothers. It was fantastic fun so it was on that same line. But there is a due date and unfortunately I think it should be a second source of income, not your main source of income. That’s what I learnt.
I’d stop the music, play with the guests and I’d get them to do a bit of aerobics, congas, taught them dances, all sorts of crazy things. Then I’d come home by about 2 o’clock in the morning with my trailer on after I’d unpacked all the gear in my black suit and try to go to bed straight away, which is virtually impossible because you’re always hyped up after a function. It was good for the time, but I did do that for 15 years.
We were on a far less than average income. [00:09:32] And thankfully it took our conversation over the Sunday Mail once. I said to Andy, ‘If you like the game what would you track, what would you change?’ and he said ‘We’ve got a trade.’ I said, ‘Honey it’s 37, you guys often get trade.’ I mean it was my business anyway, he joined me halfway through so I just thought, ‘Well this is ridiculous, I’m making more money off [00:09:49] capital growth from just two properties,’ at that time we had, then running this business and working myself to the bone. So thankfully – it took 12 months – but we sold it for equipment value. So it wouldn’t certainly set us up, it just paid off the debts for the business.
When your back is against the wall and you don’t have the income, that you have to think of other ways around this. [00:10:25] You know, ‘What am I going to do, this isn’t working?’ Whereas, I think sometimes people who are in a comfortable world find it too easy to sit on their hands and do nothing – whereas I had to do something.
Muirhead’s parents had an unintentional impact on her while she was young.
I’ve always been a really good saver. I can live frugally and I sort of always have – I don’t know what it is. My parents were real estate agents, so I guess that’s the backbone of it, but it used to drive me crazy. They used to talk about real estate round the dining table and I hated it.
I think somehow that information did sink in. They used to sell real estate, but over in the sidelines they used to buy blocks of units and put them on separate titles. That was back in the 70s when most blocks of units were all on one title, so you could buy a block of units for a lot less. So if you buy a block of four units, if all of them were four units times say $400 000, you’d think it’d be worth $800 000 if they’re on one title you could actually buy them for say $500-600 000. Because of course, less people can afford a $500 000 transaction than $200 000.
In the end they’re both retired at 47. As far as they’re concerned, they probably were a massive influence without me realising it at the time.
If you’ve ever been going through a difficult period in your life, turned on the radio and had a sign that pointed you in the right direction, Muirhead can relate. That was how her property investing journey began.
We were on an incredibly low income, we had no superannuation at all and I recognised something had to change or we’d end up with virtually nothing. In 2002, we went to buy our very first investment property and Westpac said – as I mentioned – that we couldn’t afford our own home, so we had one month to work out what on earth we were going to do.
So we looked at moving into a caravan and renting our home out for $350 a week, which is $18 000 a year. So $18 000 would be a massive amount of money for us to suddenly have a little extra income if we lived in a caravan.
So that was how my property investing journey started. Like magic, there was this radio advert on about a week later and it said, ‘If you’re having trouble loaning money, call us.’ I called them and the rest is pretty much history. Back then it was quite easy to get low documentation loans. We signed a piece of paper to say, ‘Yep I earn $200 000 and I know it’s a bit naughty but I think at the time we were earning probably $20 000 combined, ridiculously low. So they gave us the equity of our own loan because we bought our own home; we’d been in the same house for about 10-15 years that we bought it for about $140 000 at the time and at that stage it was worth about $300-350 000. So they gave us $100-150 000 in a line of credit, with that we were able to pay the loan off itself of the home we were living in, as well as putting a deposit on an investment property.
So the actual line of credit, really all I was doing was trying to keep up the repayment plan. So just like any home repayments because we didn’t have the income coming in, I ultimately was using the lender to pay back the lender.
So I went into debt to pay back the lender to hold the house, knowing that our principal place of residence was going up at a rate of about 7% per year. So each year that house was going to be $15-20 000 more expensive compound. So I knew that if I could just hold on to everything, in the long run it would be OK.
Her first investment property was purchased on her home turf, as many other investors are known to do. Taking a calculated risk, she realised this long term investment would pay off.
The first investment property is an interesting one. I think we all like to buy close to home and I’m no different. So the first one we bought was just the next suburb on from us. It was a little two bedroom house and I remember it was on the market for $220 000 and at the time the median house price in that area was probably about $280 000. Although this is a two bedroom, it was fair enough it should be well under median house price because it was smaller – it was renting for about $220 a week which is pretty standard five percent returns in Adelaide.
I remember if I had the returns of 5% plus the effect it was would go up in capital growth about 7%. So it was 12% per year that I was better off to own that than not. So that’s kind of where life did a bit of a turnaround, because I knew even though it was taking money out of my pocket to buy that investment property, in the long run it was a much better option.
Coming to her worst investing moments, it is clear that adversity has aided Muirhead and helped her learn important lessons.
Still the moment in 2002 when we couldn’t afford our own home. [00:18:41] That was pretty much the worst investing moment. That’s our principal place of residence and we even spent the money from the kids’ piggy bank. I think they both had about $500. They were two and four and over their birthdays and Christmases, grandparents gave some cash every so often. We spent it and bought food, so it was just a horrible time. Thankfully things did change when I heard that advertisement.
But my second worst moment would be going back to work to my full time DJ business – a dagger to my kids. I never forgave myself, hence why we travelled Australia. But I think sadly, those worst moments lead us to where we are today. So I don’t know if things happen for a reason? Maybe they do.
Everything clicked for her while lying awake in bed one night.
So with the DJ business we purchased the bottom end commercial property in Adelaide in the CBD to run the business from. It was an interesting time, I mean I think outside the square and if you knew my portfolio probably nothing is the same in what we own.
But this particular one was a commercial building and the neighbouring company… it was like David and Goliath. Their property was about 45 times bigger than ours [00:20:29] and they wanted us to sign over the right away that we didn’t need. So we could still access the back of our property through one half of the right away. The second half of the right away went through their property and they were bullying us, pretty much. Thankfully they came in one day when Andy was in the office, tried to get him to sign something and thankfully he didn’t. So then we went into negotiation and I said, ‘Well give us money,’ because we didn’t have any obviously.
They wouldn’t give us money. They were a car dealer and so we said, ‘Well, give us a car,’ and they wouldn’t. By this time we’d already set $3 500 on a solicitor and it was just ridiculous – $3 500 to us was a massive amount, because we just didn’t have that sort of cash and we knew that they could keep talking to us and we’d just fold. So we stopped talking to them. They came back about two years later and said, ‘Oh they’re going to build a wall on it and then make us see them,’ and it got really nasty. I remember one night there I went, ‘Oh my god. Land!’ You know, they want us to sign over some land which is right of way because they’re going to build over it. And I thought, ‘Why don’t they give us land? They’re 47 times bigger than we are. They could give us land, they hadn’t built the four storey building yet.’ So we went to a solicitor and said, ‘Look, what do we do here? We don’t want to pay your fee,’ and they said ‘That’s OK, what we’ll do is we’ll go to them and say if you want to talk to them you’re Muirhead, which is my surname, and if you want to talk to them you’ve got to pay my fee.’ So this big company said ‘OK we will pay your fee,’ so we had nothing to lose.
And then of course they said, ‘What do you want now?’ and we asked them if they’ll give us land. And they came back and said yes. So we gained land on our title, our land was 40% larger. Two years later sold as a development site in Adelaide CBD. So it was really, really bizarre. It was just like, ‘Oh my God, you’re not going to give us anything, we’re in a stalemate,’ and it could have been really nasty but they probably gave us $150-200 000 worth of land.
A mother first, a property investor and businesswoman second, Muirhead says that time is her most important asset.
[My children,] they’re 18 and 16. They’re both volleyball players. My daughter played league and she’s played for Australia six times and kept in the country as a junior – she’s really a bit of a gun; and my son played volleyball for the state. I just love my kids. I’m no different to any other mum. Maybe one of the questions may have been, what’s the end goal? There kind of isn’t one for me. Mine has always been to just have time – I just don’t have time with the kids and property just happens to be my hobby. But in saying that, it is on my bucket list to do development. It is quite important to me as much as getting back in a caravan or travelling Australia with Andy. I won’t take the kids as they’re are too old.
I would like to develop something, because everything we’ve done so far has been like buy, renovate and hold or buy, hold, put separate titles, hold. Whereas I’ve never done a development other than built our own home. So we’re on the same block, we’re going to rent out for $350 a week. We still live on that block in a new home, which we moved into 12 months ago. So I’ve never done any developments, where you knock a house down to build two or three.
We start off with finding out what held her back from investing into property in the beginning?
At all times, it’s finance. Because if I can get my hands on money at any time I can buy something that’s positive geared that puts money in my pocket, rather than taking it out. So it actually buys me more time, it gets me out of a job not into one, if that makes sense. So that’s probably been the only thing that held me back along the way and that’s because that income has been so minimal.
It depends where I’m at at the time. There was a time where the boys were travelling Australia and we were lucky enough to be offered to run a resort in Brighton Victoria – beautiful, magnificent country town at the bottom of the ski fields of Hockin and Falls Creek – and so we’re running this resort as the managers. As soon as I got the job I went straight back to our mortgage broker and said, ‘Right, I want money out of everything.’
Then there was another time where I took a job for a week, like I said in the previous time we spoke, I took a job for a week to get a loan over the line as well. Of course before that it was low doc loan, so I could sign a piece of paper. I don’t really like selling anything, so I’d prefer not to sell a property to create cashflow to get money in my pocket to buy something – I prefer not to do that if I can avoid it. I tend to try and use the equity in each property as that little bank to revisit.
Furthermore, I guess that you’ve got your own business here that you can actually use that to leverage and apply for more loans as well.
Interestingly enough, you need about two years of income and we’ve been trading for three. So we’re just at that point to go again, which is exciting for me! So it’s not quite as easy as just getting into a business unfortunately, because you need to use a reason for taxable income. It’s good, but I do always have a line of credit there so there’s a certain amount of things I can do without too much stress.
In Muirhead’s property investing journey, her one mentor had a positive impact in shaping her mindset.
Other than books, my dad. He’s a lifetime of wiseness. I call him a truism in nature. He’s kind of like someone that I bounce things off. You know, half the time he doesn’t know the answer, but what he does give is confidence in what you’re thinking. So Dad’s always been a positive mentor for me, without question.
The difference was back then he used he used to save up X amount of dollars and he used to save up for cash. He was he was doing well in life, which is great – I’m the opposite, I wasn’t and I had to do it a different way. He used to save up a third of the value of the home because he believed a third of the value rent would cover repayment. So he used to save up a third, then buy a block of units and buy another third. He never used to go and revisit properties capital growth to get equity out, he just did it. So we certainly had we had similar end goals, but at the beginning it was very different.
She believes that this difference in housing prices has had an effect on the way people save and draw equity when it comes to investing into property.
In fact even in the 10 or 11 years I’ve been investing, things have changed as well, like land tax change throughout my investment journey too. I had to change the way I did things myself. So it’s been interesting and now I say if the lenders change – because I know there’s a lot of talk about different variations going to happen with lending now – as soon as that happens, I’ll just have to change my tax. So you just have to be on the edge of it I think, you have to sort of be aware of what’s going on around you. And so I certainly have to go in different directions, depending on what is going on at any one time with the government or with our finances.
In little Adelaide, we haven’t got the million dollar product – sure we have, but they’re not investment properties – you can buy a house in Adelaide for under $300 000 and get $300 a week rent for it and that would be 15-20 minutes out of Adelaide CBD. We like the tourists, we go slow and steady. But we’re always there, we’ve always got tenants and the returns are about 5-6% here and so it’s really tough when the federal government bring in all these things, because of course other states in Australia have just been booming ahead and we’re stuck in a median house price. I think it’s 450 or 480 or something in South Australia.
I think the time will come, because obviously history has shown that it has gone up so much as well. I mean as you’ve mentioned, your house doubled over a period of time. So I think it’s just a matter of time.
You’re right and that house now would be worth about $900 000 and we bought it for $447 000. We did put a new house on it, so we have sort of knocked one down and built a new one.
Some of the best advice she has ever received has been drawn from books, such as Kiyosaki’s Cashflow Quadrant.
There was a pivotal moment where I read a book and I don’t remember what the book was called, but it was where you buy one house a year for 10 years. You sit until you’re ready to retire, so say that’s 11 to 20. Then you sell off a portion of your property to pay off the debt of the others and live off the rent of the remaining five, six, four, however many it would be. And when I read that I thought, ‘One house a year for 10 years? I reckon I could do that.’ And that’s really how the whole thing was, so that was that was a light bulb moment.
As well as reading Robert Kiyosaki’s Cashflow Quadrant. That was what a friend of mine happened to be given for their birthday. They left it at the bottom of their bag, it got completely wet and they said, ‘You know, you might be interested in reading this,’ and handed it to me.
Oh that’s very nice of her.
They didn’t realise how much that was going to make a difference, because I certainly hadn’t read that one before I read the one about buying one house a year for 10 years. And it’s quite simple to do, one house a year for 10 years. I know that sounds hard, but like some of the houses we own were $100 000, that’s all it cost us. So it’s not like you have to buy something that’s huge. The other really interesting thing is that because we’re not buying the top end properties, we’re sort of sticking in the lower end, when the market rents drop it’s the top end that drops. It doesn’t really affect us.
Delving more into the nuts and bolts of her strategy, Muirhead treats each property like a bank.
I’ve just used each property as a bank, so I just don’t sell them to not pay capital gains tax. I bought positive geared properties, so that obviously put some money into my pocket not out of it – so it gets me out of a nine to five job rather than ties me to one. Of course I was doing that buy one house a year for 10 years. So I think when it really comes down to it, that’s the basis of everything.
I’m just trying to chase something that’s neutral to positive geared. Even if it’s neutral today, it would be positive geared tomorrow because your payments are still going to continue to be the same, your rents are going to go up over time and generally speaking, the actual value of the property will go up as well.
When considering which properties to add to her portfolio, Muirhead has certain things that she looks for.
Obviously I’m looking for positive geared and looking at them fairly. I want to buy something that’s under the median house price for the area because there is an opportunity for you to add value. Unlike with shares where you can’t, you’re basically buying a share for the price it is today and you can’t add value to that. So I usually buy a house for two reasons. Whether it’ll be that the property needs a bit of a renovation, it’s well in the market, it could be a student accommodation or I could subdivide the block – I need to buy it for two reasons.
Even though I’m going to hold on to it, I know that if one reason doesn’t work out for me, the other one is fine. I once read – I think it was Margaret Lomas who mentioned it and she’s so right – if you go to the country we don’t have many in the country and they’re certainly the ones that are underperforming, compared to the city properties we have. But if you go to country town you really want to make sure that there’s at least 25 000 people living in that town and at least two reasons for that town to survive. [00:11:19] And that makes absolute sense too, it’s just logic. Sometimes you just need to be hit with the logic.
So that’s pretty much what I do. Seriously it is a boring strategy to buy, renovate and hold, I do tend to renovate at least the curtains and carpet for most properties. You get more money. Every property we have we allow pets because I know we’ll get an extra $10-20 a week rent in 70% of the market. The rental market have pets, so it’s free money for us. Some owners will not let pets but no way, not us.
I think there’s a pile of little things that I can’t even put my finger on that I just naturally do. But buying under the median house price is absolute forte. You don’t want to pay too much, you don’t want to overcapitalise in an area you have the opportunity to add value. So that would be number one.
Committed and proactive thinking has led Muirhead to succeed with her investment properties.
I’m not a sheep. I never sort of say to myself, ‘Can I do this?’ it’s more, ‘How can I do this?’ So I’m already committed to the process, I just have to work out how to get to the end goal. There’s a lot of people who talk themselves out of something because it’s too risky or it’s not like everyone else is doing and they listen to families and friends. I stopped listening to family and friends a while ago because it’s not good to listen to someone that hasn’t walked the walk, you know, as you would.
But I do tend to think outside the box. A really good example of that is the one in Adelaide CBD with the ride away. Another good example of that is rather than having the hassle of student accommodation, I just split this house into two. And I didn’t know how I was going to do it, I didn’t know how the power was going to work, I didn’t know how the water was going to work, I didn’t even know I was going to be able to do it – but I knew I was going to do it.
And I do wonder whether those really bad times have led us to where we are today. It really is a lovely life.
So what is her life like now, after accumulating the properties in her portfolio?
It was so cool. Obviously we sold the DJ business in about 2008, bought this house in 2009 that we split into two to make it positive geared. So that’s positive geared by about a couple hundred dollars a week, that’s $10 000 a year we didn’t have. I remember I wanted to give my kids a country life, because I was born in Pinnaroo my older brothers had the opportunity to live a bit of country life because they were older and I didn’t get it. So I wanted to give my kids some country life – so we were hoping to perhaps be able to run one of these resorts around Australia and put the kids into country school and do the whole thing. I remember saying to Andy, ‘If we don’t get offered anything by December 2009, we’ll buy a caravan – because I knew were on a time frame because the kids were getting older – buy a caravan to travel Australia, give them country life that way.
And that’s what we did. We weren’t offered anything by December 2009, so January 2010 we bought a caravan and off we went. Rented a house out. We were getting $500 a week for that, so that pretty much paid for our fuel and we just stopped on the side of roads, we always ate in the caravan so the food bill was pretty much the same as what it would be if we’re home. We certainly didn’t stay in caravan parks because 18 months, two years on the road does not allow you to pay for that sort of cost. A lot of the places we went were wineries, so we’d go to a winery, buy a bottle of wine, take our own cheese and bickies and sit out in the grass and watch the kids play. It’s just it was simple, really simple. So that was amazing.
From there she managed to leapfrog and buy more properties from the equity she created as well. However, she has her reasons for not investing in other states of Australia.
We just sort of came up and bought five more properties since we’ve been back and we’re just trying to find our feet. I never intended to be a property manager but it’s actually perfect, because I can see how people are building a portfolio. We’ve got two or three of our own who are knocking down a house and building four townhouses, we’ve got others that are renovating it to make it better and it’s really exciting. I love watching other people make money too. And it really is a great form because unlike my parents had the cash, so they’ve obviously sold up all their properties and put it into shares. When you’re trying to build wealth, to do it in shares it’s tough because you always need the cash. Whereas you can borrow 80%, in my case it’s 110% because I’m using the 30%, which is 20% deposit and the 10% in cost, stamp duty and stuff is coming out of equity. So each property has to be returning the loan of 110% before it becomes positive for me.
It’s ironic because capital growth has actually been quite slow in the last five years, that we are manufacturing growth by doing things. So whether it be renovating, whether it be spitting houses in two, whether it be blocks of units into four titles. That’s really where the money kicked in – the capital growth has really happened well in our own room, that we’ve had that for 17-18 years. All the others have been a lot slower. We’ve made more money since the GFC than we did before. But it’s really interesting, it is good to work against the sheep, do things that other people aren’t. So right now if things were a bit quiet out there and people go, ‘It’s a bad time to buy,’ that to me, is actually the right time to buy because you’ll get really good bargains.
In Adelaide we are a completely different market. And you know, land tax is a state tax so it’s a great idea to spread your risk. So you start from zero again for land tax. That’s why I don’t own in other parts of Australia because of land tax.
We’ve got a chunk of properties in Victoria and obviously a bulk of them in South Australia and they’re in different names and titles and things as well, so that helps with land tax and it certainly keeps ours to a minimum. We don’t actually pay a great deal of land tax, you’d be quite surprised. So, quite happy there. Thankfully, the land tax rules all changed in about 2008 where you couldn’t have a minority. At that stage we were buying things in 99% our family trust and 1% Andy, 1% Prue and 1% business, or 1% that’s combined.
So we were able to sort of spread it around and suddenly the Australian Government decided, ‘That’s not going to be how it is, anyone with a minority suddenly gets added to the majority.’ So it ended up being that the entities are exactly the same. So thankfully it was at the time where we were building our portfolio, so I suddenly changed my strategy again.
If you would like to learn more from her or get in contact about managing your property portfolio then
Probably the easiest way is just at muirheadpropertymanagement.com.au, our website. My email, my phone number’s on there and my life are all on those pages, because I do interviews with Your Investment Property and Australian Property Investor magazines. And it’s ironic, I’ve been on Today Tonight a couple of times in Adelaide so they’re all on there too. So if people want to see my life it’s pretty much all over the pages of Muirhead Property Management as well as all my contact details.