My ethos about building wealth through property was driven by two very important lessons.
First came the success problem.
By 2021, our four properties had grown by a combined $300,000 in just 12 months. For the first time, compound growth wasn’t a concept I understood intellectually; it was something I was actually experiencing.
Unfortunately, that success led to a new constraint. We had enough equity for another deposit, but were running short on borrowing capacity.
That forced my wife and I to make a new decision.
Lesson 1: Two properties beat one, even at a higher rate
We could play it safe; borrow through a major bank, buy one property, stay comfortable. Or we could accept a slightly higher interest rate with a non-bank lender and buy two.
We went with the latter.
Why, I hear you ask?
The numbers: the premium on a non-bank rate is a rounding error compared to the compounding upside of owning two properties instead of one. More properties mean more land, more rental income, more equity growth… and more options later. (The cost of omission is invisible until it isn’t).
Lesson 2: Side-by-side beats diversification
Conventional wisdom says diversify – don’t put your eggs in one basket. I must admit that I’ve never found that argument convincing when it comes to property.
Warren Buffett’s property assets would be less than one per cent of his wealth. Harry Triguboff didn’t build a property empire by dabbling in the share market.
Concentration, applied strategically, is how serious wealth is built.
So instead of buying our next two properties in two different markets, we bought them side by side in the same suburb. The reason being that the right combination of adjoining blocks can be worth considerably more than the sum of their parts.
We landed in the western suburbs of Melbourne.
- 750m² of combined land with three street frontages
- Five minutes from a major motorway
- Across the road from a future railway station and shopping centre
- 15 minutes from a hospital and university
- Long-term optionality: knock down and rebuild with up to 10 tenancies instead of four
That last point is worth noting.
Neither block on its own unlocks that redevelopment potential. Buying them together didn’t just double the holding; it created a future exit that a single purchase in any other market simply couldn’t replicate.
Postscript:
We were tossing up between Adelaide and Melbourne.
In the time since we opted for Melbourne, the Adelaide market has nearly doubled, while Melbourne has barely moved.
I won’t pretend that’s not frustrating. But unlike my earlier mistake, selling the East Brisbane property too soon, I don’t regret this one.
The reason why? Buying a great property on rock solid fundamentals (population growth, employment, infrastructure, amenity) is a strategy that holds regardless of which market runs hottest in the short term.
You can get the timing wrong and still build wealth, provided the asset itself is strong enough.
These two western Melbourne properties still stack up on every measure that matters. They’re among my favourites in our entire portfolio; not because they’ve had huge, short term capital growth, but because the underlying case remains intact.
Sometimes you sacrifice short-term gain for long-term gain. That’s not a mistake. That’s the strategy.
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