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ONE in five first-time landlords may have fallen into the property investment game by accident.
New data from a leading quantity surveyor has revealed more than 20 per cent of landlord clients have become property investors unintentionally — joining the nation’s 2.2 million of them.
MCG Quantity Surveyors managing director Mike Mortlock said he had discovered a large number of his clients had become property investors simply because they had chosen not to sell their home when it was time to move on.
“Many of these owners seem to have fallen into their first investment, rather than made a strategic decision to become a landlord,” Mr Mortlock said.
“It’s a fairly stunning result given the broad perception of property investors as a calculated, high-earning cohort set to tactically snap up all the available real estate.”
While preparing tax depreciation schedules, MCG asked his clients whether they had previously occupied the property, and found 23 per cent had lived in their investment property as their principal place of residence (PPR), with owners living in their former home for four years and 11 months on average.
Mr Mortlock said the time frame showed only a fraction of those investors were strategic first homeowners who took advantage of stamp duty concessions or grants by living in their properties for the minimum required period prior to moving out.
“Such a group always planned on being investors, but they would be a very small percentage of those in our research, otherwise the average resided-in period would much be lower than five years,” he said.
“We think it came down to people looking to upsize and realising they were in a position where they could hold on to their old property and upgrade as well.”
Brisbane couple Callum and Prudence Klaer found themselves owning an investment property without even planning to.
They bought their unit in Woolloongabba in 2010 as first homeowners with the intention of living there long term.
Mr Klaer lived there for 12 months with friends before he and Pru headed north for work opportunities and friends of theirs lived there while they were away.
In 2014, they returned and planned to settle down in the unit, until 2016 when Pru fell pregnant.
The couple then decided they wanted a back yard and put the unit on the market, only to find they couldn’t sell it after the normal marketing campaign.
They decided to keep the unit after chatting with a bank and realising they qualified for an Interest Only loan.
“We tried to sell, but the bank had valued it at $340,000 and we had it on the market at that price for about a year, but we had no offers, despite the mean price in the area being $450,000,” Ms Klaer said.
“So, rather than lose money, we thought, we’d just wait for the market to improve, or keep it.”
So, now they find themselves living in a PPR in Moorooka with an investment property in Woolloongabba, which they rent out for about $360 a week.
“We have no trouble renting it out,” Ms Klaer said.
“I like the idea of keeping it because it’s so close to the city and it would be good for our son when he grows up.”
Mr Mortlock said he believed in holding on to property until retirement age if you could comfortably service the mortgage.
“If you can convert your PPR into an investment, the more hotels you own on the Monopoly board, the better you are at the end of the game,” he said.
The rise of the accidental investor could also have broader political implications, according to Mr Mortlock.
“Most of these landlords own just one property and are mum-and-dad style investors looking to get a financial step up before retirement,” he said.
“It’s this group who will be most impacted by any future changes to negative gearing and capital gains tax, or upward movements in interest rates.
“In our experience, those with the largest property portfolios are the least likely to care about negative gearing or tax changes because they tend to be positively geared.”
According to the ATO, fewer than 20,000 Australians have an interest in six or more investment properties.