Property - 20 Years Of Life And Investment Reveals Some Valuable Lessons - (Trevor & Ros Wickham, BRISBANE)

Ros and I married on 3/12/1983 and property ownership per say was not our dominant thought. I had just joined the Army as my new career aged 23. Ros was a fully qualified Hair Dresser and this has always given her great employment opportunities.

Our assets were an old 1973 Valiant, about $1,000 in the bank and a few odds and ends of furniture handed down from our parents.

Prior to joining the Army I took a turn at being an Apprentice Auto Electrician for two years. I hated it! I then worked for an Insurance Broker for two years which I really enjoyed. It was then that I got an offer to work in a new business my brother had started selling Trend Windows. Unfortunately the business went broke and I went back to school at the age of 22 to do year 12.

I wanted to be a teacher but changed my mind as I didn’t fancy studying and living on virtually no money for another four years.

I joined the Army for a career and intended to give it at least five years. 20 years later I’m still with the Army but about to start on a new career. This will hopefully be in the Management Rights game or possibly the Queensland Police Service.

What has happened over the past 20 years in regards to property investments! The following is a rough picture of what we have done and where we are at present.

I guess it would have been great if we had a crystal ball to tell us about our future property investment outcomes but that will always be fanciful.

The very next best thing would have been a property investment plan. Further I believe if we had a mentor to bounce ideas off and to guide or encourage us to stick to an investment plan would see us well and truly financially independent by now.

As it is, unfortunately we’ll be working for some time to come.

In 1984 we bought our first decent car and paid $5,000 for it. We thought, ‘what the hell’ we were both working and earning okay money and although shitte accommodation, we were also living in subsidised rental Defense housing, so we borrowed the money.

Because we hated the rental that we were living in, we decided in late 1984 to look at a small two B/Room Unit in Thornbury, Melbourne as a likely property investment. Although we had no idea at what we were doing, we went along to an auction and brought the unit for $44,500. I can’t even remember whether this was a good buy for the price or not.

However we managed to get enough together for the deposit and when finance was approved, we moved in. Those were the days of high interest rates of 19%! However, we were able to secure 13.5% fixed as part of first home owner incentives providing we lived in the house. If it was rented out the interest rates would be put up to 19%.

In 1985, National Mutual demutualised (or something) and went public. This gave current life insurance holders some shares. This was my first introduction to shares and I got several hundred in the issue. I also decided to buy an extra 1,000 or so. I still have about 3,600 shares in AXA.

At the end of 1986, we were posted to Wagga Wagga in NSW. My brother who lives and sells property in Perth WA, said it would be a good idea to invest in a propety in Perth. We ended up buying a solid brick federation style 2 B/Room property with Sleep Out in Rivervale about 5km from the CBD for $53,500.

In the meantime the bank that had the mortgage over the unit in Melbourne discovered we had moved and put our interest rates up to 19%! We thought this was a bit steep and sold the unit for $53,000. The money left over from the Melbourne sale went onto the Perth property and all of a sudden I had a mortgage of about $20,000. (Not bad I thought!)

In Wagga my pay had gone up due to promotions and my wife was now working for herself as a mobile hairdresser which proved to be quite good money. We had very few bills and were saving well. This gave us the ability to pay the house off in Perth by half way through 1988.

We then invested $5,000 with AMP and also bought a new car for $8,000 plus our trade in. We were feeling very happy with ourselves financially at this stage.

We then decided to start a family and requested that the Army post us to Perth so that we could live in our own home. Ros fell pregnant about Sep 1989 and I got my posting to Perth at the end of 1989. Our daughter Kate was born in July 1990. Every one was healthy and happy in Perth.

In the first few months of 1990 we busily painted and brought the Perth property up to scratch. It was a lovely home on a large block and well located.

It had 10 foot ornate ceilings, lead light windows, jarrah floors along with a host of other features. Life really was good.

Ros went back to working part time and although my wage was okay, we were not earning anywhere near the same amount of money as we were in Wagga Wagga. However we lived within our means because I wanted Ros to be home for the baby. It proved to be OK because we owned our home outright and were living quite well.

My brother (the Real Estate agent) advised us to buy an investment property and negative gear it. This sounded good because we had equity and some spare income, so in 1990 we bought a 3 B/Room unit in a complex of four about 6 km from the CBD. I managed it myself and we were fortunate to have good tenants.

In 1992 just before we were due for another move to Sydney, we brought another investment property for $95,000. This it was a 3 B/Room house on a 1000sq m block about 6 km from the CBD. We had no real problems renting it.

In 1993 we spent a full year in Sydney. We were still living on my Army Sergeants wage of $1,295.00 Gross per Fortnight. It wasn’t flash, but it kept the wolves from the door. Nothing happened financially wise in that year but we still had the properties in Perth.

In 1994 I received a promotion and was posted to Brisbane. After settling in we decided we wanted our own property to live in and bought a nice big home in West Chermside in late 1994 for $155,000. It was a great home but in a very poor location being on a busy road.

We needed some money to buy this home so we decided to sell our property in Perth. At $138,000 it sold quickly.

Not long after in early 1995 we sold the 3 B/Room unit in Perth for $85,000. This enabled us to own the West Chermside property outright. We set about making it more comfortable. We put a back patio on for $10,000, double glazed the front windows for $5000 to cut the noise down from the busy road, polished the lovely timber floors, re-laminated the kitchen and the bathrooms. About $20,000 later we had a very nice home on a busy road.

In 1995 our total investments amounted to a property in Perth, about $5000 in AXA shares, another $5,000 in AMP shares and some money in the bank.

In 1997 we had been asked to take a move to Melbourne and subsequently sold our home in West Chermside in March 1997 for $156,500.

We also decided that we needed some direction for our financial future so we re-financed the investment property in Perth and borrowed another $40,000 against it. We had access to $200,000 cash and this was invested into Managed Funds based on a financial plan set up by an investment adviser. We moved to Melbourne Easter 1997.

We settled into Melbourne life very quickly. I decided to buy some Telstra shares in the No 1 float and eventually got about 1,200 shares. We also ended up with about 225 AMP shares because of their float. I cashed in the small lump sum of about $6000 that we had with AMP.

I can’t even remember what I did with the AMP money but I think we started to buy some shares with it. I know that our share investment results were very poor however, as we had no real plan. I just thought I’d buy some share because every body else seemed to be doing okay at it. (Very dumb!)

At the end of 1997 we were asked to move back to Brisbane. We liked Brisbane and thought we’d be able to settle in fairly quickly as it had not been all that long since moving.

We arrived back in Brisbane in 1998 and moved to a new suburb called Eaton Hill on the North side. This was very convenient because there was a new primary school close by for our daughter Kate. The Army house was also nice and new.

Our Managed Funds seemed to be doing well but we had to pay capital gains tax in 1998. This seemed to be unusual to me as we had not sold any of the funds, but still had to pay capital gains. By this time I was also getting a bit concerned that the Share Market may be due for a turn down. I don’t know how I justified these thoughts however, more than likely from listening to the news reader on the 6.00 o’clock news.

At this stage we were looking at another challenge and decided that building our own home would be a good idea. It seemed that Eaton Hill being a new suburb, offered was some very good blocks of land.

My wife picked out an excellent block on a hill (flattest block around) with views to Moreton Bay and Mt Cootha. We put a hold on it and ended up buying it for $72,000 in June 1998.

We decided we might need some money to help buy the land out right. So I decided to go against the Financial Plan that we had put together in early 1997 and sold a parcel of our managed funds. (The parcel that I sold was invested by BT in the US. The $50,000 that I invested in 1997 was worth about $80,000 when I cashed them in mid 1998. Not a bad return!)

We found a builder and built a very nice Queenslander style home and moved into it in October 1998. I borrowed the building costs of about $153,000 directly from the bank. The house including land, building and landscaping cost us about $230,000.

In 1999, I decided I wanted to be debt free and sold the investment property in Perth for $165,000 and sold another two parcels of Managed Funds. The managed Funds had done okay but not great, however with the money left over from the investment and the managed funds I was able to discharge the mortgage I had over my own home.

It felt good to be debt free again. I started to buy some more shares but again I had no real plan. I brought another parcel of 1,100 Telstra Shares for $8.80 (prior to the second float). When the second float came along I was able to purchase about 3,000 which brought my total holdings to 5,500, I thought they were going to be at least a $10.00 share. Wasn’t I wrong! I still have the Telstra shares, about 250 Nat Bank Shares, 3,700 AXA shares, and about 250 AMP shares.

In 2000 my wife and I thought it would be great to live on acreage and get away from the closed in feeling of suburbia. Ros found a really nice home on 3.3 acres not far from where we were living for $315,000. We put an offer in on it and it was accepted.

We then had to sell our Eatons Hill property. We thought a $275,000 reserve would be about right but unfortunately we only managed to get $260,000 for it. Needless to say we were not totally happy with the sale price. However, we thought what the hell, it had been sold and we could move to our next house. (In retrospect it would have been great to hold on until the boom started about 18 mths later and then sell.)

In June 2000 we moved out of our Eatons Hill house into our home on acreage, which was very nice. In the mean time whilst we were waiting for our settlement etc (April to June 2000) I sold the rest of my managed funds because I thought the share market was getting shakier. This allowed me to payout our outstanding mortgage. On settlement of our new property we had enough money to pay cash (still no debt).

It was now late 2000 and we were in limbo as far as investing goes. We had decided that we are not going to move for a long time because we wanted to leave our daughter in her present school. This would give her some stability in life and we also wanted to ground ourselves in an area. I started thinking that if we are going to stay in the one place I’ll have to start planning for another career outside the Army because I know that they are not going to let you stay in the one spot for much longer than three or four years.

So I decide it would be nice to start looking at businesses we can operate from home. We attended a small business expo in October 2000, and discovered small drink vending machines, (not the big ones like Coke). We thought that this would be an easy business to manage, no franchising, operate from home, reasonable hours etc.

We did a bit of research and decided we would buy some machines. Our plan was to build it up over the next 2 ½ years so that when I finished in the Army, we’d have a business that was big enough to replace my income. (About $1,000 per week.)

In the mean time my wife would operate the business. From Nov 2000 to Jan 2001 (a very short period) we had purchased a second hand Hi-Ace van for $16,000 and 20 drink machines at a cost of $1,900 each. The $1,900 included a fee of $90.00 for siteing the machine in a business.

To keep a long story short, we currently have 23 machines and all the machines have been moved at least once, but most twice. Some even up to three and four times since 2001. The business does not turn over much money and has still not paid for itself. Finding suitable sites has proven very difficult.

The set up costs of the business to its current level cost us about $50,000. We had hoped to have recouped this money within two years. This has not happened and it will take at least four years or more.

On the positive side we still have all machines operating in small businesses and it only takes about 6 hours per week to operate the business, which my wife is Managing. In early 2001 I decided I wanted to invest back into the Real Estate market so we set up a revolving line of credit using our home and an investment property. Our credit facility was for $320,000.

During a holiday to Caloundra in March 2003, we decided to utilise some of our revolving line of credit and purchased a small 3 B/Room unit in a resort for $125,000. The unit is rented on a full time basis to a local person but has very high Body Corp fees. It would probably sell for about $155,000 today (Sep 2003).

We then utilised the rest of our line of credit and purchased a small fully renovated 2 B/Room unit in West End for $165,000. The place is easy to rent and would probably sell for about $220,000 today (Sep 2003).

Later in 2001 I wanted to expand our living area on our home. We renovated and by November 2001, we had managed to spend about $50,000 and had an extra 60 sq m and a large barn style shed. The renovations went well and added value to the house.

It is now September 2003 and we have just sold our acreage property for $505,000 and we are renting again. We are looking for a Management Rights Business on the North Side of Brisbane because we are determined to leave our daughter in her current school.

The reason for selling our home was to cash up so that when the right business comes along we will be well placed financially to place realistic offers. Because we have sold our home I also had to re-finance the two investment properties. This lead to a reduction of debt on these investments and they are now not as heavily geared as they were.

In summary: I sometime wonder why my wife and child are still with me! Yes we do have some things to show for the last 20 years together.

We have:

• About $530,000 sitting in an on call cash managed fund (ING) (waiting for the business purchase to come along)

• Two small investment properties valued at about $380,000 together and we owe about $230,000.

• A small vending machine business that would average about $300 per week profit

• About $40,000 worth of shares

My wife can still earn some money from part time hairdressing (even though her shoulders give her problems) and I will have a small pension of about $16,000 per year for the rest of my life once I finish in the Army.

I believe the two most important things in life are your personal health and the well being and love of your family. If these two things are not present the rest is hopeless. I look back and think if only I had have held some of my investments for the long term I would be sitting pretty by now.

As I said, I believe an investment plan would have seen us well and truly financially independent by now but 20/20 hindsight is a wonderful thing.

If I can pass anything on to you the reader, it would be to make an investment plan first and foremost, don’t be afraid of investment debt, learn as much as you can about investment and find a mentor. Did I mention, buy some property and the sooner the better!

And yes, once you have bought a good property hold on to it and let time work for you.

Cheers, work well, be well and live well

Trevor and Ros Wickham

Toms comment

I met Trevor at a Bronze Medallion swim course and it just so happened that I was putting my book together at the time. In conversation between the required life saving units in and out of the pool Trevor mentioned that you have to have some sort of plan for investment and life. He added that he wished that he had kept some of his property.

I immediately asked if he would share his property investment story above.

I am sure Ros and the kids are with Trevor for very good reason and one of them I think would be that Trevor is a doer and not afraid to give it a go.

I mirror Trevor’s thoughts of personal health and the well-being and love of your family as being most important. Financial security just takes a lot of stress off those parts of your life.

Finance is a part of every-bodies life and I have seen some of the amazing things that some people can do when two people put their heads together for a common goal.

Considering his circumstances of Army life and the constant shifting I think he has done remarkably well thus far and now through the marvel of growing older and the wisdom that this brings, the next part of his life I feel sure will be vastly different to the past 20 years of the Army.

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