How a micro-apartment conversion took Daniel’s QLD property from negatively-geared into the black.
Daniel attended one of my live events, and after listening to me speak about what we do in my High Income Real Estate Program (HI-RES), he decided it was the strategy with the greatest potential to turn his property around.
With our education being a significant deviation from the general run-of-the-mill programs usually offered up in the property education arena, understandably, most people don’t grasp the concept of what we do. So even though Daniel was heavily discouraged by his well-meaning and protective family not to go down this track, he just felt that it was the answer he’d been seeking so he could get better returns on his investment.
Initially, just like most investors in the past, Daniel had followed the standard investment advice around negative gearing, and he’d held onto his property for six years. This was even though it didn’t sit too well with him, knowing that the foreseeable future offered nothing different than his $4,000 loss each year.
READ MORE about why I don’t like negative gearing and my personal experience of losing a big chunk of money in my blog, The Real Truth about Negative Gearing.
A wall was removed to make way for Micro-Apartment #1
Once he’d joined the HI-RES program, he wasted no time and set about applying what he’d learned about our strategy. He did his research, thoroughly using the calculators and tools that we have created for our students, and then he was ready to test the idea in the marketplace.
The response from the market confirmed his research, so he moved forward with his designs. As a FIFO worker, he could apply healthy chunks of his time to work on his vision for the property.
Daniel was excited at the prospect of creating a home that could provide a multiple of personal spaces and then offer it to a hungry market.
A marketplace that was looking for accommodation appropriate to their needs also had the benefits of affordability, quality, and privacy.
The original three-bedroom house began to transform as Daniel moved walls, created an additional bedroom, expanded the size of another, and added two new ensuites.
Wanting to make sure he was creating a comfortable and practical home, the air-conditioning was zoned throughout, and the kitchen became the ultimate hassle-free, shared workspace by installing separate cupboard areas for each person.
SCROLL DOWN FOR THE PROJECT FINANCIALS!
Wall framing in place to create an ensuite bathroom adjacent to the kitchen in Micro-Apartment #1
Within four months, Daniel was ready to open up the rooms to residents. Once the ads went live, potential tenants inundated Daniel with inquiries.
His original motivation to turn his negatively geared property to positive cash flow was quickly realised. Having all four rooms filled with the right mix of tenants only took three weeks.
On the standard rental market, the home had a rental return of $560 per week. With the conversion creating 4 x affordable micro-apartments, the property now returns $975 per week!
By offering these affordable housing options to the market, Daniel is grossing an additional $415 each week.
Not only was the uplift significant, but the residents in the house also proved to be very different from the type of tenants he had been warned would move in.
 FINANCIALS |
|---|
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PURCHASE PRICE: $540,000 (2004) |
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RENOVATION COST: $60K |
| BEFORE | AFTER | RESULT | |
|---|---|---|---|
|
RENTAL RETURN WEEKLY |
$560 per week |
$975 per week |
$415 per week uplift |
|
CASH-FLOW ANNUALLY |
$24,120 per year gross |
$50,700 per year gross |
$21,580 per year uplift |
Our own experience (and those within the HI-RES community) shows an overwhelming demand from young single professionals who can’t or don’t want to pay full market rent on a home too big for their needs.
Not only are complete houses too big, but with the amount of maintenance they require, it eats into a person’s valuable private time, so having only one personal area to look after is a much more attractive option.
Daniel has also witnessed the blossoming of good friendships within the house shared over a glass of wine and dinners, expanding into other social outings.
In his own words, Daniel is ‘super happy’ with the outcome he has achieved using the HI RES strategy and on the hunt for his next property to ‘rinse and repeat.’
The ethos we hold that our projects should make ‘sense’ before they make ‘dollars’ continues to provide ‘win-win’ outcome for the community and the investor and fulfill our company mission to make housing affordable again.
LEARN HOW to generate Positive Cash Flow through property and turn around a negatively-geared portfolio by registering for my free masterclass, HERE.
