How to Turn $2,000 Into $3.8 Million in Sydney Property Market
This episode meets Michael Ossitt, who turned his backpacking holiday into a decade in the corporate world, the start of his own business, and a $3.8 million portfolio!
Find out how Ossitt used his passion for construction and design to build his extensive portfolio, started his buyer’s agency after leaving his corporate career of ten years, and learn how you can use leverage to start your own portfolio!
Ossitt is the founder and director of Strand Property Group, a property investment advisory and buyers agency. Focusing on helping busy professionals develop their property investment strategies has helped him stand out from the crowd.
That’s been a focus of the business for the last 12 months is to really focus on who we can help best and who is our sort of target market in Sydney and around Australia. One of the things I’ve learned is that you can’t be everything to everybody. And so really focusing on the people that you can help the most in the vast amount of value to think is important in anything perhaps.
In and out of the office, Ossitt’s day takes him from liaising with clients to inspecting properties all around Sydney.
So every day is different which is something that I love about this industry and the business. So you know any day you could be meeting with current or future clients, you could be sat down discuss in their property goals and creating strategies and long term plans around how they can build wealth for the future by investing in real estate.
And another day we could be out and about in the car inspecting properties for our buyer’s agency clients and generally, we are focusing on the lower North Shore and northern beaches of Sydney. And some days we even cross over the bridge and check out properties in the east like Paddington, Surry Hills, Bondi Junction, those sort of areas. And then other times we could be on the phone liaising with selling agents and discussing properties that are for sale or ones that are off-market or about to hit the market, as well as negotiating on behalf of our clients to try and purchase their next property. And then obviously we’ve got more of the regular stuff in the office answering e-mails, on the phone talking with prospective clients. And we also spend quite a bit of time writing property inspection reports and appraisals and then obviously writing the investment strategy reports for clients. So yes very varied and you know every day is very different.
Wow, it’s exciting doing so many different things and actually getting out there and having a look and seeing what the properties are for new clients actually allows you to be on the forefront of what’s going on.
Absolutely and that’s why we focus on certain areas because I think it’s important to be on the ground in the areas that you’re buying for clients. You know you become an expert specialist in those areas and you build relationships up as well with selling agents. So I think that’s important. It’s very difficult to buy property from a distance and especially when you’re charging a professional fee to clients. You know you want to do the best job possible for them. And I think I think that’s key.
Growing up, Ossitt spent the majority of his life overseas.
So I grew up in a small town just outside of Leeds, which is in Yorkshire in the north of England. And yeah it’s a place where it is generally cold and rains for most of the year. But yeah I moved over to Australia about 12 years ago.
Fantastic. Did you actually do your studies and go to school in England before you actually moved across?
Yes I went to primary and high school in my hometown and then I studied architectural engineering at Leeds University and that was actually a combined architecture and civil engineering degree so it was quite a new course at the time and something that was really interesting and obviously beneficial too.
Born into construction, Ossitt gained a wealth of experience he would put to use after he moved to Australia.
So we moved over to Australia not long after I graduated but yeah I worked for quite a few years in the UK while I was at school. And really I’ve been in property since, well probably since the day I was born. My dad was a building consultant and had a construction business and I used to spend weekends following him around building sites and in the office looking at drawings and all those kind of things. And then when I was old enough probably around 15 or 16 I started working for him in construction and started at the bottom, worked as a labourer during school holidays and that really gave me a good experience in that field.
Not only did he gain experience in the construction industry through his dad, Ossitt was also inspired by his parents investing experiences.
Yeah well I think because my dad had worked in the industry I always had an interest in it and because I’d worked in construction you know it’s always been a part of my life and I think I gained a sort of real appreciation for investing in property after watching my parents buy a property to rent out probably when I was about 10 or 11 and that sort of was a bit of a lightbulb moment in terms of you know opening your eyes to the opportunity of owning property and collecting rents on it. My parents bought a couple of properties but it never really turned into a big portfolio but it certainly gave me sort of the introduction and the inspiration to do it myself later down the track.
When he reached university, he was guided by his experience and growing interests in construction.
I mean I grew up with property and construction and also design and so that led me into studying architecture and engineering at university to sort of give a real grounding to that industry. At the same time, I always thought I was going to go into aviation and be an airline pilot.
I had that interest from quite a young age as well but I think when it came to applying for university you know the heart was in really in property and construction so I ended up following that really.
After university and at the start of his career, Ossitt’s stay in Australia transformed from a working holiday into a decade long life experience.
In my last two years at uni, I worked in an Architects Practice and that really gave me sort of in-office experience in design and then after I graduated I came over to Australia for a working holiday with my girlfriend at the time, Sarah, who is obviously now my wife but we came over for 12 months and said let’s have a holiday and work for a year while we’re in between. I was at university and settling down into a career. And yeah and not long after we were here we were both successful and landed in good jobs in Sydney and ended up taking permanent roles there. So myself I got a job working as a building designer within a global development company and they helped me secure sponsorship and I’m still here 12 years later.
After ten years in the corporate world, Ossitt again followed his passion, this time for the property, to start his own buyer’s agency.
I worked in the corporate world for 12 years. And I’m sorry just over 10 years and then made the move across to start my own business about two years ago now. And really the change for me was you know following a passion. I was always interested in design and construction but property investment really became a personal passion of mine and I started to help friends and family invest in property and you know they could see the value in it and I think that’s when I decided that I could turn this into a business and obviously help more people along the same lines and add value to people on a personal level as opposed to working within a company and working on a business to business sense.
Leaving the corporate world behind, Ossitt took a risk-averse approach to his leap into self-employment.
It was always going to be a big jump to leave the comfort of a corporate career and a regular paycheck but I think if you’re passionate about something enough you can make a success out of it. Now before starting the business, I put a lot of work into setting it up properly and making sure that we had a good cash buffer in place and we had plenty of equity across our portfolio. So we actually held off buying our next investment property to actually start the business and to ensure that we were being risk-averse and comfortable with our cash flow before doing so.
Drawing on his own investing experience has helped catapult him into drawing a full-time income from his business only two years after its inception.
I think having gone down the journey of investing personally and building a successful portfolio has really put me in a position to help other people do the same there’s a lot of people out there who offer services on the basis of theory and watching other people do it. But I think when you’ve trod in the path yourself it’s much easier to help people do the same and obviously add value to their life. And that was a really important step to take to start the business.
Finding income stability to build his business and portfolio, Ossitt attributes his success to his mindset and risk-averse attitude.
The mindset plays a big part and I think if you keep holding back on things that you really want to do you’ll never get started. And I think if you take a cautionary approach and actually put everything in place to protect the downside I think you should seek opportunities and jump at them when you can.
Starting from scratch in Australia, Ossitt was encouraged to save hard and buy his first property.
So yeah we literally came over to Australia with about two thousand dollars to our names and backpacks and you know I think it was the minimum that you needed to get a visa here and the idea was to work and then spend that money on travelling. But we obviously got settled down pretty quickly but we did kind of build our life from scratch really you know renting a tiny studio and you know accumulating things as we went. But I think that you know that experience and that history really gave me the determination to buy our own property and you know all along from day one we were very diligent savers and built up a deposit as fast as we could even while we were renting in Sydney and then after about five years of saving hard, we managed to buy our first owner-occupier property which was a two-bedroom apartment in Manly Vale on the northern beaches and really that was the springboard to getting started.
Wow, that’s very inspiring. Especially in Sydney, it’s quite hard saving up quite a substantial deposit for that. Did you actually put down like a 20 per cent deposit to buy that apartment?
The first property we put 15 per cent down and had a small amount of lenders mortgage insurance. I think we got to the stage where we said right we’ve saved enough to be able to get in comfortably and without waiting to have you know the full 20 per cent. And I think you know the drive and the determination was to buy the property so we wanted to do it as quickly as possible.
After purchasing the first property, and with his firmly established savings habit, Ossitt was able to build his portfolio more rapidly.
So I suppose we settled in then we moved in there and got used to the idea of paying the mortgage every month and you know in a way it’s forced savings. It comes out of the bank account every month and you know you do everything you can to keep up to that. But I think because we’d always been diligent savers we still had the mentality of saving as much of a disposable income as possible. And so yeah after about 12 months or 18 months we then had enough deposit for another property and pushed ahead to buy an investment property and with that, we put down a 5 per cent deposit and obviously borrowed a bit more and had lenders mortgage insurance and managed to get another apartment.
With the help of lenders mortgage insurance, Ossitt applied his saving skills to build his portfolio.
It was purely just hard saving and lenders mortgage insurance for the second one. I mean looking back I’m not sure I would be so risky now in terms of borrowing up to 95 per cent. But at the time the Sydney market was flat and we did buy a cheaper property than our first one. So the first one that we lived in was probably about 15 years old. And the second one we bought was a kind of 1970s yellow brick apartment and we bought that for under 400000 dollars at the time and it was in original condition. So I think we got a good deal at the time and managed to get into a second property after only saving up 12 to 18 months.
So, seven years after buying his first property, how extensive is his portfolio?
So we’ve now got six properties that are spread across Australia. So we’ve got two properties in Sydney and two in Brisbane and two in Adelaide. And the valuation of those is probably just over 3.8 million now. So yeah we’ve gone pretty hard over the last seven or eight years to get to that position.
Reflecting on his journey, Ossitt learnt a valuable lesson when he explored other investment vehicles.
Probably the worst investing moment or decision wasn’t necessarily property related. In 2007 we’d been in Australia about two years and you know I had a real interest in property, finance, and investment and I had a real sort of inkling to put money into the stock market.
And so I’d saved up a small sort of pool of money to be able to do that, about five thousand dollars. And in 2007 I bought four or five blue-chip shares
thinking that they would always do well but little did I know that the GFC was about to hit in 2008. So the shares lost about half their value over the next few years and never really recovered back to their original value.
So yes that was a quite a lesson to learn but I think what I learned from that was that I invested money into something that I didn’t really understand at the time and didn’t do much research into and I think you know the whole stock market suffered losses through 2008 2009.
But I don’t think I knew enough to make an informed decision at the time and really went into it without a plan or a strategy in place, it was just one of those things. So yes there was definitely a hard lesson to learn.
Growing as an investor has been a key element in both his worst and best investing moments.
I think the lightbulb moment for me was probably at the beginning of our property investment journey I think when we were sort of buying the first place or even after we’d bought it, and really understanding the numbers that go behind it and the leverage of borrowing money from the bank and putting down a smaller deposit. I think that’s when I really learned the concept of cash on cash returns and obviously return on investment. I think one of the biggest advantages of property as an investment vehicle is the ability to leverage your cash or equity and purchase a property that’s worth five or even 10 times more than that amount by borrowing money from someone else. Obviously the banks or finance. So I think because you can access the positive return on the investment, the return on investment is based on your initial investment, your deposit not the total asset value. So really that leverage was the lightbulb moment for me.
Wow, that’s great. It’s good to know that because I think it’s really the fundamental principles behind investing to properties.
Yeah absolutely and you know I think you know if your property goes up by 5 per cent in one year it’s 5 per cent the total asset value but if you put a 20 per cent deposit down you know that’s a return on investment of about 25 per cent. And that’s really where property puts itself ahead of any other investment class. You can borrow against shares but not to the same level. And I think it’s that power of leverage that that really was the light bulb moment. But I’ll say a cautionary note with that is that leverage should always be used with caution. Your gains are certainly magnified when the property grows in value but on the flipside, your losses can also be magnified when the property loses value. And I think the important thing to note there is research and prudent investment is key to minimizing your risks in that sense.
Buy, Renovate and Hold: Michael Ossitt on the Best Strategies to Securing Positive Returns in Property Investment
While Ossitt’s previous professional experiences in design and development certainly contributed to his success, the most essential factor leading up to this was his calculated mindset. When buying his first property however, he identifies the risk of investment as something that was holding him back.
I think when you buy that first one whether it’s the place for you to live in yourself or your first investment property, just the thought of losing money or the risk of losing money definitely plays a big part in your mind. You know it’s probably the biggest asset that anybody will ever purchase at least you know the most expensive. I think that that the fear of losing money certainly plays upon it and it did for us. But you know we went through the process of research in areas and by sensibly buying below market value and adding value by renovation and utilising my experience and in design and construction. And I think once we got comfortable with the notion that you know this thing wasn’t going to lose value then we could take steps towards doing it.
In overcoming his fear of risk, Ossitt has also been able to start his own investment advisory and buyer’s agency, transforming his experiences into consulting information for his clients. However, he does credit some of his knowledge to a few authors and their books.
I think one of the only resources that took an interest in was it was really reading and reading books on anything and everything sort of finance, personal investment and property and you know having moved to Australia that passion came with me and I started reading books by Australian authors really from when we were here and you know some of the classics you know, Jan Sommers books and Margaret Lomax books were really a great introduction to property investment in Australia. And I think you know reading those sort of books and being inspired by other people who’ve built big portfolios definitely alleviates any hesitation in the risk that you can and obviously risking your savings.
With due diligence and patience, Ossitt built on his foundations by constantly researching and making sure he understood the numbers before committing to any property investment.
When you’re buying a property you really want to understand what it is that you’re buying before you do commit to it. So doing the research, understanding the numbers and I think you’ve got to put the same level of detail into buying a property as you would an individual share and you can pay consultants to help you do that. Just like you can as a buyer’s agent or strategist for the property.
Ossitt believes that his profits from property investment were worth the mental stress of risk-taking, and the hard work on accumulating background knowledge. However what has been the reason behind his quest to build on his already multi-million portfolio, on top of running a successful advisory business?
I think why it’s important I think that’s the number one thing to get in place first and that’s something I work with my clients now to really ascertain is you’re not buying property for the sake of it or because it’s the cool thing to do or everybody else is doing it. There’s got to be a reason behind it and the big picture. And for us the why was really to get to a position where we had a passive income coming through from the portfolio. That meant we didn’t have to work full time until we were 65 or even 70 or 75 as the case might be as people edge to retirement in Australia. And you know there was a time when I was working in the corporate world and although I enjoyed it, it was something I couldn’t see myself doing for another 30 or 35 years. So really the why is to get to a position to be able to have an income coming through. Whether you get up in the morning and go and do a job or work or a business or whatever it is and have that income there.
Ossitt claims that passive income from modern Australian superannuation is not enough to sustain a comfortable lifestyle after one’s retirement.
So that’s yeah yeah yeah absolutely and I think you know the pension in Australia is not going to be enough for people to rely on. And when I sit down with clients and really ask them how do they see their retirement funds playing out. On the level of superannuation that some people have and really when you look at it now and continue to pay nine and a half or 10 per cent it is probably not going to be enough to give people the lifestyle that they really want and deserve later in life. And I think property offers the opportunity to build equity and build a passive income down the track that you can rely on.
Well, I think if you were looking at having a hundred thousand clear you would you’d probably need in excess of 2 million, I would have said, and super you know even if you’re getting a cash return and 5 per cent from that and you’ve also got a tax of that as well and you know 100000 now be all will be less in the future as well. You’ve got to factor in inflation into that.
As such, Ossitt considers his profits from property investment to be future beneficiaries and continues to invest purely for his own and his family’s future.
Super is one of those things that people forget about until later in life. They see it as a forced element that comes out of their payslip every fortnight or month and people just leave it on the default setting and the government have put things in place to try and increase that compulsory contribution by raising it to nine points five and there was talk of raising it further. But you know who knows what’s going to happen with that. And I think I read a stat somewhere that said you really need to be putting close to 15 per cent of your salary into super from early in your career right through till the day you retire. To really have enough to continue that salary that you used to. You know many people get to retirement age and then the income that comes through is significantly less than what they were on. Many people have to continue to work well into their seventies to offset that.
He believes that the best advice he’s received is the encouragement to take on opportunities when they arise.
I think the best advice I had was kind of on that theme, really was to sort of take the position that good enough is good enough. So you’ve got to do enough research in due diligence to make sure that that investment is going to do what you want it to do. But at the same time, you do need to take action on it. I think if you procrastinate too long and you try and find the perfect investment, something that’s 100 per cent, you’ll never get started. So really yeah good enough is good enough and get going with it and start today.
Combining his background research coming into the industry with his motivation to begin investing, Ossitt’s mindset was key to his success, in both his portfolio and his business.
Following on from what I just said then, I think I’ve always been an extremely diligent person. I think whatever it is, I always seek to do the best job possible. So obviously looking it right into the detail and ensuring that you know thorough research is being carried out. And I think that helps enormously in building a comprehensive strategy around our portfolio and actually carrying it out with care and due diligence. And I think have carried out or carried over that habits into our business to ensure that whatever we do whether it’s servicing clients or communicating, that we do everything in the best possible way and making sure it’s in the client’s best interests. I think that the quality of customer service and a commitment to doing the right thing has been really well received by everybody that we’ve worked with and worked alongside.
Supported by his detailed background research and previous experiences with design and development, Ossitt’s first property was a success.
We got into the first property, the first investment and really stuck to what we knew at the time and it has played well for us but really that was you know a Sydney asset that we could add value to. So as I said, it was an original condition apartment and you know we spent nearly a month renovating that property to add value to it but also increase the rents that the property could achieve from the start and really that was the strategy, to begin with and that is what I call a buy, renovate and then hold strategy. So we did that with the first one and then when we sold our original principal place of residence and bought our second one. We followed the same strategy we bought the house in the northern beaches. Again it was an older house that needed a lot of work into it which meant we could buy it for a good price because a lot of people were put off by it. But you know we can see the potential of the property and we bought that and have been adding value to it ever since. With that particular property as well although we were buying it for ourselves, we had a bit of an investment mentality with it. So the house that we bought was actually a split level house that the previous owner had rented out separately and we saw that as a bit of a golden opportunity to get a bigger place for ourselves but also gain an income from it.
We’ve rented the other half of our house out for five years now and now the rent from that has covered half the mortgage and cash flow wise, we are spending less than we did for our apartment before that.
After buying two properties in Sydney, Ossitt furthered his portfolio by investing in property in Queensland and South Australia.
After we were sort of holding out two Sydney properties and we’re starting to see the growth come through them from the value that we’ve manufactured but also with the market at the beginning of 2012 2013. And we managed to borrow against that equity to further the portfolio. And we took a slightly different strategy in terms of diversifying. So we wanted to buy outside of Sydney outside of NSW. So we bought two houses up in Brisbane but we bought houses that were less than 10 years old so they were kind of a set and forget property. Low maintenance and had a good cash flow coming through from day one and really that was to help balance out the portfolio. We had plans of starting a family in the not too distant future. And for us cash flow was critical. And so getting into that helped to really balance the portfolio.
He was smart about diversification, purposely choosing to invest in property in Brisbane and Adelaide due to their predicted growth and positive cash flow.
We’ve got two houses up in Brisbane in Queensland and then the next two we bought in Adelaide in South Australia. I suppose when we bought into Brisbane that was a case of buying outside of New South Wales at a price point that was accessible to us with the equity that was available. And really doing the research around growth areas and yield at the time to be able to give us a cash flow that really covered itself. So those properties were sort of positive cash flow from day one once the depreciation was taken into account. It really meant that we weren’t forfeiting much of our disposable income to be able to hold them. And yeah I mean the reason Brisbane at the time was I suppose you know it’s going back three or four years and the focus was in Brisbane at the time thinking that Sydney couldn’t go much further. And what’s eventuated is that Sydney continued to grow and more and what we’re starting to see now is that focus reappearing on Brisbane as people are certainly priced out of Sydney and Melbourne and so hopefully we should start to see some good capital growth coming through on those properties.
He looked to make profits by preparing to hold his properties for the long term, rather than selling out unexpectedly.
The strategy was kind of a mix between Brisbane and Adelaide. So the two in Brisbane were low maintenance just purely buy and hold for the long term. But then to balance that out and diversify further we the two houses that we bought in Adelaide were not too dissimilar really to the Sydney strategy in terms of buying older properties on good blocks of land and then the idea is to hold them and then develop them down the track probably in about 8 years now. So the idea was that they’d been partially renovated not too long before we bought them so they had good depreciation benefits on them at the time but it meant that we could depreciate out that value for say 10 years and then look to knocked down and built townhouses on those blocks and really give us you know development opportunities down the track.
So yeah definitely and I think that’s key for anybody building a portfolio is that you’ve really got to set out a plan upfront and work out you know what is your capacity what can you buy and where and ultimately what does the cash flow look like coming through from those properties. Now so many people jump into property investment without understanding the numbers and three or four years down the track realize that you know they’re hemorrhaging money and can’t afford to hold onto that anymore. And even clients that we’ve sat down with have bought property with a win on a whim a few years ago and now you know they’re in negative equity and the cash flow is hurting. For them, they’ve got to look at the option of selling them or reinvesting the fund somewhere else. So I think if you do the research and plan upfront you can avoid those mistakes.
Ossitt also reassures investing beginners by pointing out that more often than not, they underestimate what they can achieve over the long term.
I’m a firm believer in not really having any regrets about things you’ve done in the past that’s all lessons in life. But I think if I met myself 10 years ago and told him where I would be now I probably wouldn’t believe him. I’ll believe myself and I think that that’s a good lesson to sort of taking away is that it’s really easy to underestimate what you can achieve over the long term and everyone sort of tends to overestimate what they can do in six months or 12 months. And I think that passion that I’ve carried forward in terms of building the portfolio is really just compounded over time and you know every year it goes by it just gets bigger and bigger.
I think if I was going to sort of say anything else it would be a really solid strategy that we’ve done is really put thought into upfront and keep pursuing opportunities whether that’s in investment or in a professional career or what it really is. If a door opens then you know jump through it and take the opportunity that presents itself and really follow your passion. I mean that was that sort of changing moment for me into starting the business. But yeah if there was any sort of negative thing that I would change again it would probably be to sort of curb some of the wasted spendings I suppose that we did early on. Although we were diligent savers, I think if I went back, there would be a few purchases along the way that I probably wouldn’t make again. You know things that lose their value or you don’t use after a while and you know if you can be quite strict in that sense it can really compound your savings and then leveraging even further you know in time.
For the future of his portfolio, Ossitt believes that his passion for both his business and property investment will drive him into purchasing more properties, making larger profits and generating a steady cash flow to take his family on holidays.
Personally, with our portfolio, our strategy is to build on that with at least another four properties and the original strategy was with the classic sort of 10 properties and 10 years and although it’s a bit of a cliché strategy it held true with us and we’ve kind of built our portfolio around that. And you know the target is really to get that valuation to at least 9 million in about 10 or 11 years. And really that was the goal for us to secure a good enough passive income to you know do things later on in life and give us the options to travel and do things with the family.
And the other thing I’m really excited about I suppose, professionally, is really building and continuing to build a great property advice and buyers agency business and helping as many people as possible on a one to one level and help them invest into property strategically and also successfully.
For readers both beginning in investment and those already in the field, Ossitt recommends Jan Somer’s books.
I think everybody looking to get into property investment or was already in it I think should definitely read the Jan Somers books. They’re quite a few years old but I think her strategies for wealth creation still hold true today and I think she’s been a guest on you know on a podcast where she said the same that she hasn’t really changed her strategy over the years and kept true to what she set out to do. I think another one that stuck out for me was probably Robert Kiyosaki his book The Rich and poor dad. I think that was a bit of a short classic book that really did a good job of explaining the fundamentals of accumulating appreciating assets as opposed to just accumulating lifestyle assets and depreciating assets like cars and furniture and clothing and things like that.
But that was a great book and I think you know I think everyone should read that one as a bit of an introduction and then more recently probably in the last five years I think books by Pete Wargent are well worth a read by anybody interested in personal finance, property investment and wealth creation.
I think the way that Pete gets over the content and the strategies and in a simple form that anyone can understand, it’s a great book to read.
For more details on Strand Property Group and Michael Ossit, visit their website and download their introduction to property investment guide.
You can head to our website which is strandpropertygroup.com.au and that’s got our number and contact details down the bottom of that page. Yeah if anybody’s interested in property investment in general, we’ve got a great PDF download on there which is a good intro to investing and that includes my seven key elements of successful investing. So someone to go and put details and they can get a free copy of that.