Something about Lizzie
Lizzie is a 39 year old mother of four who fell into property investing when she met her husband.  At the time she owned a small miners cottage in the middle of the Newcastle CBD and he owned two houses on a single title block. When they moved in together they gave Lizzie's cottage a mini makeover in the form of quick renovation and sold it for a tidy profit of $30,000 in 1998. This is the first investment mistake Lizzie cites as that cottage is now worth around $400,000, and she initially purchased it in 1997 for $160,000 – that's the power of equity for you!

After this first successful sale, Lizzie and her husband renovated his older home, subdivided the two houses and sold them all to buy a new family home free and clear without any debt required. Around the same time she received a small redundancy payout and began seeking an outlet to occupy her time and make a bit of money minus the shackles of a nine to five job.

Her best friend was dabbling in property investment, so Lizzie decided to explore the possibilities of real estate. After successfully refurbishing and on-selling a few homes with her husband for a tidy profit, Lizzie was adamant they could make money from any further endeavours and began to research the ins and outs of residential real estate. She tried a number of strategies and learnt some invaluable lessons along the way, not always coming up trumps. In this valuable tell all Lizzie shares the mistakes she made in those first years of her journey in the hope of helping her fellow property investors avoid a few pitfalls.

Live and learn in Lizzie's own words
I had managed to turn $155k equity into nearly $1.5mil equity (and plan to turn it into $10mil over the next 8 years)...but...I could easily have doubled that $1.5mil equity gain if I had known a few fundamentals instead of just falling into property investing and not knowing anything.

So I wanted to share some of my basic mistakes in the hope that other investors might be able to relate, or at least have a laugh and perhaps learn something along the way.

Mistake number one: Not understanding market cycles.
I sold 3,000 BHP shares at $10 each in 2004 to raise the deposit to purchase an investment property at the peak of the cycle...in hindsight that was my worst mistake. There were signs everywhere that the market had overheated and peaked, but I didn't see them. That investment property has remained relatively stagnant in price since then - so I missed out on a $60k of share price increases, plus dividends.

Mistake number two: Not having a clear plan of attack.
I had a finger in every investment property pie imaginable - reno's, rebuilds, buy and holds, subdivisions and wraps. I was flitting around like a kid in a lollie shop. If I had just formulated a plan and stuck to that plan (whichever one it was) I would be miles in front - instead I was selling this to fund that to dabble in the other etc. None of the schemes lost me any money, but I could have made so much more if I had concentrated on buying duplex sites or bought the wrap properties as buy and holds (wraps made me money, but were still a poor investment for us financially).

Mistake number three: Not understanding equity.
I sold the properties I should have kept to free up $$ to buy more property. One in particular that springs to mind is an old freestanding house, two minutes walk to a main train station. It consisted of a 580 square metre block with a solid but "disgusting" house which was a deceased estate. It was vinyl clad with a very 1940's kitchen, boxed in verandah and, well you get the picture! We bought it for $160k, spent $20k on the reno, rented it out for $220/wk and sold it for $260k in 2002. We made a good profit then (we thought) but the house would now be worth another $100k easily, rent would be an extra $100/wk and the block is in a prime development location for 4 townhouses.

Mistake number four: Not doing enough due diligence.
I got lazy and presumptuous. I bought a block of land in a good location, big enough for 3 townhouses. At the time I glanced at the flood zoning on the contract but didn't bother to pay council the $120 fee for a full report – as it turned out, I can't put 3 townhouses on the property because of flood restrictions. I can still put two on but am better off selling (had an offer 2 days ago) and buying a more compatible site. I won't make any profit at all on this block and I won't lose any money either - but it was a complete waste of momentum.

Mistake number five: Not locking in interest rates on my keeper properties when they were really really low.
I guess that comes back to a lack of planning. Until the last 6 months I didn't really know which investments my keepers were and what I would get rid of...now I have a clear plan and am sorting out my portfolio to set myself up for the next wave...but I believe (I might be wrong!) that it's too late to lock in. I think rates will continue to climb for the next 6-12 months and then dip again - and I want to be poised to take advantage of that dip - I might be wrong here too!

Mistake number six: Setting up a family trust instead of a Hybrid Discretionary Trust.
We now have both, but the losses in the family trust are stuck there until such a time as those properties contained within it start making a profit - it would've made more senses to be able to free those losses up from the start so we could take advantage of the improved cashflow from today, in today's dollars, not tomorrow in today's dollars.

I have learnt from every single one of these mistakes - and hope that I won't ever make them again.

I'd be really interested in other blunders any other readers have experienced along their property investment journey. After all, we can all only continue to learn…and why not from each other?

A happy ending
Lizzie is now successfully building a dynamic residential portfolio, building and retaining small developments to capitalize on value growth as well as rental yields. With a total of ten properties under her belt, her property investment persistence has also allowed the couple to upgrade their PPOR to a 5 bedroom, three bathroom property with beach and city views. They recently purchased a four townhouse development site and are looking for another couple of land parcels to continue expanding their investment accomplishments.

If you have an inspirational story to share like Lizzie's we would love to hear from you. Please send your Property Investment Tale to Bronwyn Davis -editor@propertyupdate.com.au for your chance to win two Property Investment books to the value of $60. See our competition corner for more details.   

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