Buying in Brisbane is one of Loo’s specialties, and this case study is no exception. In this episode he reveals all about his client’s fourth property, where they were looking for passive income— and may have just hit the jackpot. It goes to show that ‘cookie cutter’ isn’t inherently negative, and may even be a positive when it comes to property investment. Plus, he shares where you can find one of Australia’s biggest growth areas, why interest rate dramas aren’t always what they seem, and why one area being $200,000 cheaper than the one next door shouldn’t put anybody off.

Timestamps:
01:25 | Mission Possible
03:50 | Booming Brisbane
07:06 | Redbank Plains: Not So Plain
09:35 | Sentiment and Stigma
11:24 | The Back of Brisbane
13:28 | Organic Growth
14:52 | Rental Potential
19:02 | Being Genuine

Resources and Links:

[00:12:06] A suburb has all the hallmarks of a decent place to live, even though it's quite far away from Brissie. And we turned out to be right. All these Brassells and Redbank, and these sort[s] of suburbs are valuing for, within months, like, 20 [or] 30% more than what we paid.

This is Property Investory where we talk to successful property investors to find out more about their stories, mindset and strategies.

 

I’m Tyrone Shum and in this episode of Invest Like A Pro we’re chatting with founder of House Finder, Simon Loo. He shares the success story of a longtime client who purchased a property in one of Brisbane’s once-undesirable suburbs, and is reaping its rewards. Its impressive valuation in just 8 months goes to show that a standard house doesn’t always yield standard results.

Tyrone Shum:   

Loo’s client purchased this property in February 2022, a time when the market was seeing interest rate rises for many months in a row. The full-time Navy man is used to spending his days at sea, but nothing could prepare him for the wave he was about to ride when it came to this Brisbane property.

Simon Loo:   

[00:01:25] He's on a mission to accumulate a lot of property to get enough, perhaps, to build passive income. And, as with a lot of my clients, and any investor, really, their goal is just to have either an early retirement or a more secure retirement.

Tyrone Shum:   

[00:01:47] So at the moment he's in that accumulation phase to purchase more properties. And you said that he's got some in WA and Brisbane?

Simon Loo:   

[00:01:54] And Brisbane, correct. And we're on our fourth property. So this was his fourth, the one that we're about to talk about. And every property that he's bought up until this point has been a product of pulling equity out of each house. So it wasn't a result of him saving money, or for deposits from his day job. It was simply about buying well, on these fundamentals that we've discussed time and time again. 

  

[00:02:22] And within literally months, pulling out the equity, and having enough equity to purchase another house, another house, another house, and kind of repeating that process as well. 

  

[00:02:34] And then at a certain point, after you've exhausted this equity, just a side note, as well, maybe the focus moving forward will be a house where it's got excessive, or a lot of cash flow, just to balance the portfolio out, so you're neutral, or positive cash flow again. And then you can look at maybe the next four or five deals. 

  

[00:02:55] So yeah, very ambitious guy, wants to achieve passive income. And I think based on the results of the first three houses, where we've pulled out quite a lot of equity from him along the way, he was more than happy to keep rolling with the process, which obviously works for me as well. 

  

[00:03:14] Anyway, so we bought this house, very standard house. And it's in a suburb called Redbank Plains. Redbank Plains is in Ipswich and Brisbane. And anyone who knows Redbank Plains knows that it's full of houses that are somewhat similar. They're 10 to 20 years old, brick, mostly single storey. Three [or] four bedrooms, ranging from land sizes from 300 square metres to 600 square metres.

Tyrone Shum:   

[00:03:47] That's not very big, actually.

Simon Loo:   

[00:03:50] And back 20 years ago, there was a lot of land releases here. And they built a lot of project homes. So a lot of them are all very similar. Yes. Obviously by now, these properties, they're not brand new. But most of them are fine, livable, safe, clean, tidy. Somewhat bulletproof. These are the lowest maintenance type of properties you can buy. 

  

[00:04:27] What's interesting about Redbank Plains is the narrative for 2022. Or not narrative, shall I say, but the reality of what's happened on the ground, especially in southeast Queensland/Brisbane was that growth has been pretty much non-existent. Maybe a few percentage [points] here and there. 

  

[00:04:50] And that's off the back of a couple of things. Number one, during COVID and between 2019 [or] 2018 up until 2021, Brisbane has grown a lot.  

 

[00:05:10] Brisbane, Logan, Moreton Bay, a lot of these areas have, like, close to doubled in value. So that's along with the interest rate rises. A lot of fear in the market has meant that most of Brisbane has remained stable. 

  

[00:05:28] Now why we were still heavily in Brisbane and we were very heavy in areas like Redbank Plains and Goodna and surrounding suburbs is because we noticed that this area was incredibly underpriced compared to all these other suburbs that just went crazy. They went up so much. 

  

[00:05:54] And using this particular example, where this was a standard four bedroom house, brick, the land size wasn't that big. I think it was, like, 470 or 500 square metres. So not like a massive, massive block but a very standard house in Redbank Plains. 

  

[00:06:10] We paid $417,000 for it in February [2022]. 

  

[00:06:16] In October, it revalued for... 

  

[00:06:21] $553,000. 

  

[00:06:27] So that amount of equity was the product of growth.

Tyrone Shum:   

[00:06:35] That is substantial. For just one year, not even.

Simon Loo:   

[00:06:39] Less than one year. I mean, February to October is what?

Tyrone Shum:   

[00:06:42] Six months, seven months?

  

[00:06:49] You can see where the mathematicians are.

Simon Loo:   

[00:06:51] I'm terrible at maths. But if you put $1 sign in front of the number, I'm suddenly very good at it.

Simon Loo:  

[00:07:06] If you look at Redbank Plains, there was an article literally that came out yesterday, I saw about one of the biggest growth areas in all of Australia over the past 12 months has been Redbank Plains specifically. 

 

[00:07:06] Now, I'm not saying this to boast that we picked the right suburb and all that kind of stuff. But I think the writing was on the wall, because when we're buying a house, like a four bed pretty nice house for $417,000 back in February, where surrounding suburbs, even in the areas of Springfield Lakes, which is the next suburb down, a similar product would be selling for $600,000 [to] $700,000.

  

[00:07:47] It was only going to be a matter of time before the flow on effect or before it starts getting hit hard with a lot of owner occupiers and first time buyer activity like I keep talking about. 

  

[00:07:59] And that was a driver for growth, because people got priced out of other suburbs, people realised that it was an incredibly affordable option. And also, there's a lot of stuff happening around Ipswich, Redbank Plains in terms of like, the new town centre at Ripley, which is, like, literally two suburbs away from Redbank Plains. When I say new town centre, that centre is like a completely new commercial precinct.

Tyrone Shum:   

[00:08:29] [The] community's being built.

Simon Loo:   

[00:08:31] Yeah, exactly. New community. And it's just, again, a massive influx over the past several months of people wanting to actually live not only in Ipswich, or in Redbank Plains in particular, because it's a nice suburb. It's not, like, full of burnt out cars and rundown this and that.

Tyrone Shum:   

[00:08:50] [It's] not a low socioeconomical area.

Simon Loo:   

[00:08:54] It doesn't have that feel, no. Especially if you're coming from other parts of Australia. Like, if you're coming from Sydney or Melbourne, you may associate an area like Redbank Plains to be quite low socio. But when you actually go there and drive through— and I have many clients that go to these areas to do a drive by of the house and check out the area— they're always pleasantly surprised. Like, what's wrong with this place? There's nothing wrong with it. Why is it so cheap?

Coming up after the break, we venture out west…

[00:11:46] And then when we were buying in Brassall, I remember, like, a lot of the feedback that we were getting from clients was always 'It's so far away, Simon, why would we buy here?'

He explains why you shouldn’t always aim as high as you can…

[00:16:37] [It's] incredibly risky, super bad cash flow.

We explore his philosophy towards the fine line he walks every day.

[00:19:58] I think like anything in life, like, whether you're buying houses or business or cars or clothes, even groceries, like, everyone wants a sale, everyone wants a bargain. 

And that’s next. I’m Tyrone Shum and you’re listening to Property Investory.

Tyrone Shum:   

With a $140,000 increase over eight months, the valuation came as a pleasant surprise to Loo and his client. However, the question remains: Why was it so cheap to begin with?

Simon Loo:   

[00:09:35] It's all sentiment. It's all sentiment. It's all stigma. Today, if you look online, go on Google, and you Google forums or Facebook groups or whatever, just type in Redbank Plains. Most of the feedback that you're going to receive and read is high crime, high unemployment. 'I wouldn't drive past with the windows down'. Mostly from, like, Brisbane locals who, I guess lived at a time where this area was actually pretty low socio. 

  

[00:10:13] And that's one of the reasons why a lot of these areas, like, back in February was priced quite low is because the sentiment is that people don't want to buy there. So it's like quite simply supply and demand. 

  

[00:10:31] The reason why people don't want to buy there is because they're afraid. They're afraid of the low socio where they look at the fact that let's say houses in a few suburbs away in Brisbane was at $600,000 [to] $700,000. But in Redbank Plains it's, like, $400,000. There's got to be a reason for that. 

  

[00:10:50] People are almost sceptical because an area's too cheap. But they don't see obviously, the positive side of it is because that there is no real reason for that massive price gap. And sooner or later, it's going to play catch up. 

  

[00:11:05] So we picked up so many properties in this Redbank Plains, Bundamba, Goodna, even all the way out to Brassall. Brassall is basically as far away from Brisbane as you can get.

Tyrone Shum:   

[00:11:24] How many [kilometres] are we talking about?

Simon Loo:   

[00:11:27] I'd need to search it again, it's not off the top of my head, but it'd be about, like, 50 kilometres. And then beyond Brassall is desert. And then you get to Toowoomba.

Tyrone Shum:   

[00:11:38] That's quite far, yes.

Simon Loo:   

[00:11:46] And then when we were buying in Brassall, I remember, like, a lot of the feedback that we were getting from clients was always 'It's so far away, Simon, why would we buy here?' And I was saying, like, because houses are, like, $350,000 for four two two. And Brassall is just so unbelievably undervalued and cheap. A suburb has all the hallmarks of a decent place to live, even though it's quite far away from Brissie. 

 

[00:12:12] And we turned out to be right. All these Brassells and Redbank, and these sort[s] of suburbs are valuing for, within months, like, 20 [or] 30% more than what we paid.

Tyrone Shum:   

[00:12:27] And this is really interesting, because I get a lot of valuations done for the sites that I work on, because I'm sort of on the development space. And a lot of the valuers are now coming back with very conservative figures, and I say conservative figures, sometimes at 10% [to] 20%, below what we had anticipated six months ago. 

  

[00:12:43] So if things have valued up, especially in those, then must be something fundamentally right going on in those areas for it to actually be valued at 10% [to] 20% higher than what you purchases it at. But also, too, it sounds like you've also bought in really well, once again, buying into the market really well is so important.

Simon Loo:   

[00:13:03] Everyone knows that, or if they don't know already, my main focus is to get distressed and off market deals so that we can buy them cheaper than what they're currently worth at the time. 

  

[00:13:13] So when we picked up the house in Redbank Plains for $417,000, we anticipated the value at the time to be maybe around about the $470,000 to $480,000 mark. So about 10% [to] 15% below market value. 

  

[00:13:28] But then what's also caused it to revalue at the $550,000 range is just organic growth. So there's markets within markets, absolutely. Don't just think [about what] you hear [on the] news [where they say] 'The property market's completely screwed, because of these interest rates'. Like, it's completely not true. 

  

[00:13:48] There is a certain pocket of area of properties that will definitely take a hit. But on the flip side, there are so many areas that will absorb that hit with a new influx of people needing affordable housing. 

  

[00:14:06] And these are the areas during downturns, during quiet periods, that not only maintain demand and maintain rental demand, and even a little bit of growth, but they actually have the biggest prospects to continue growing, as well, because ultimately, people need houses to live. That's the most important thing. Especially [in] majorly built up areas, when affordability is scarce, and a lot of these low socio areas will change and turn into better areas as well.

Tyrone Shum:   

[00:14:40] That's right. And also there'll be a huge rental increase and so forth. 

  

[00:14:43] So for that particular property that your client purchased, what kind of rental income does he receive on something like that?

Simon Loo:   

[00:14:52] It's currently rented for $530 a week I think. Which is in line with any four two two in Redbank Plains. The rent has actually gone up a lot in this area. Anywhere in Australia, like, the rental market is just insane. 

  

[00:15:13] But [it's] obviously cashflow positive, it's a very perfect and ideal property to leverage off and buy more houses. So you take the equity, you use the equity, but you've still got enough cash flow to service whatever equity you used, especially if we get the next door right as well. 

 

[00:15:34] So I guess for a lot of investors out there listening, like, don't be afraid to look in areas where it's had a little bit of a bad stigma, a little bit of not the right emotionally, not what you would consider, like, a good area.

Tyrone Shum:   

[00:15:54] And that's the thing. That's where the opportunities lie. I mean, obviously, you don't want to go in blindly and not know what the issues and the concerns are within [an] area. But eventually things become better. It's just a time of when you go in. And obviously with Redbank Plains you've gone in at the time when things were just changing. And when that changes, it's [a] huge benefit for the investor.

Simon Loo:   

[00:16:13] [On] so many levels. So many people say, 'Is it a good area or a bad area?' But there's so many, like, in betweens. It's an okay area, it's a decent area, it's a lower socio area. As investors, you never want to get the top. If you buy in the nicest areas, there's actually a glass ceiling as to how much.

Tyrone Shum:   

[00:16:35] And you're paying premium, too.

Simon Loo:   

[00:16:37] [It's] incredibly risky, super bad cash flow. 

  

[00:16:43] Equally as important is you don't buy in the worst areas, because you are going to deal with more crime or damage, worse tenants, the prospects of that area gentrifying is much less. 

  

[00:16:59] But the stuff in between or even erring towards the side of cheaper areas, like, that's often where a lot of the gold is, so focus on these areas. 

  

[00:17:17] Now, equally as important is to ensure that you're getting good deals. They're everywhere now. Like, if you're not fighting an investor who's struggling to meet repayments because they over leveraged or they over borrowed when they bought the property, if you're not finding properties that just need to sell really quickly or urgently, or maybe a property that's been leased to a tenant, to a long term tenant, and they've got a long lease in place, and they can't sell that house conventionally because they've got that tenant in, then you need to be looking for these opportunities for sure. And hopefully getting yourself good bargains.

Tyrone Shum:   

[00:18:09] And as we have mentioned many times on the podcast is you make your money when you buy in. And ultimately, you've got to make sure you look at the fundamentals, making sure that there's some kind of form of opportunity there to make it a win win situation. Because you're not looking to take advantage to someone's situation, but you are trying to help them in some sense of shape or form.

Simon Loo:   

[00:18:36] These guys, most of the people that are selling these houses cheaper than what they are, they fully realise it. It's not like we're tricking them into signing a piece of paper that's way less than what the house is [worth], or the agent's kind of fooled them into it somehow. It's all out there. 

  

[00:18:53] Like, you just look at real estate [websites] and go, 'Hey, how much would my house be worth?' Look at what's sold recently, look at what your neighbour sold their house for. 

Simon Loo:  

[00:19:02] But there are so many genuine, genuine circumstances where not only maybe the seller doesn't care about the highest price, they've got other pressing things to do. Maybe they can't necessarily get the price they want because of certain situations. They can't sell on market for privacy reasons [or] for personal reasons. We've talked about this in the past, like in divorce situations. 

  

[00:19:28] I get so many scenarios where, like, one side of the divorced couple deliberately sells a house cheaper, just to obviously... they're not friends anymore. So they want to spite the partner or maybe how they divide the assets or whatever.

 

[00:19:58] I think like anything in life, like, whether you're buying houses or business or cars or clothes, even groceries, like, everyone wants a sale, everyone wants a bargain. 

  

[00:20:10] And in the world of property, I think in this environment in particular, where growth is not guaranteed. Especially in the near term. Like, making money by buying well, getting a bargain, absorbing that risk. Getting a property where you can literally sell it the next day and not lose any money at the very least, let alone maybe even make some money is super important. That kind of absorbs a lot of the downside. 

Tyrone Shum:   

[00:20:39] It's crucial. And I think that's very, very wise, that we look at it from that point of view as well, especially for investors. Because we're ultimately here, not for the short term, but for long term, and the gains will definitely pay off in the long term.

  

[00:20:55] Well, that's been a fantastic story. And I'm looking forward to hearing how this client goes in the future. If he's up to his fourth one, I'm sure they'll be getting more through sooner than later.

Simon Loo:   

[00:21:05] I think I will say that I think that he is running into serviceability issues at the moment, the biggest problem in my world. But we're working with a very, very good broker that's actually been on the podcast a few times as well, Michael Xia. So I'm sure he'll be able to work some wonders and hopefully keep going.

Thank you to buyer’s agent Simon Loo, our guest on this special episode of Invest Like A Pro presented by House Finder. 

Also, for being a loyal listener of the podcast, I’ve asked Simon to offer a free 1 hour strategy session normally valued at $500 to help you put together an actionable property plan.

To get your free strategy session, simply visit housefinder.com.au and fill out the contact form, or call Simon directly on 0415 626 342 and quote “Property Investory”.