Property Market Investor had the pleasure to meet up with Lionel D’Cruze, who has a wealth of experience in the real estate market.
Lionel comes from overseas, and has made himself from the bottom up. “I migrated here with $500 dollars in my wallet and a suitcase full of dreams,” he tells us. “There was no mum and dad, or any inheritance, or someone giving me a hand or advice on how to go about things. So I stumbled and felt my way around.”
From his humble beginnings, Lionel has built up a double digit property portfolio. His story is an interesting one, as he only invests in brand new and off the plan apartments and home and land packages.
Getting started with real estate
Lionel bought his first property back in 1991 for $84,000. It was a 2-bedroom villa in the Western suburbs of Sydney.
He tells us this was a traditional first home purchase, not made with the goal of becoming a property investor. “When I started, it wasn’t with a property journey in mind. It was just one of those things that traditional people do, buy their first home. And that’s what I did, when I bought my first place to live in,” he says.
As he bought his second family home in Minchinbury in 1994, Lionel decided to rent out his first purchase simply because it wasn’t a good market to sell.
His first experience as a landlord, however, was a “nightmare.”
“The tenants that I attracted were people who didn’t care much about another man’s property. You know, when I started out in this journey I had nobody to help me or guide me,” he explains.
Lionel sold this first property for double the initial purchase price 10 years later.
Getting started as a property investor
The turning point in Lionel’s career came in 1996, when he was working as a salesman for Encyclopedia Britannica.
One day, as he was doing a promotion at a boat show at Darling Harbor, ‘The Telegraph’ newspaper took a photo of him and some colleagues. The photo was published the next day under the caption “A Death of a Salesman”.
A property company in Lindfield who had seen this article rang up Encyclopedia Britannica. They asked whether they were dismantling their sales team and had someone to recommend. Lionel’s name was referred and this was the start of his life-changing journey selling (and buying) home and land packages.
Through this company, Lionel bought two investment properties, although at first without a strategy or end-goal. “When I started in the property business, in ’97, that’s when it became an eye-opener,” he tells us.
“I started educating myself, a lot more then. I started learning, and I thought, if I can educate and sell this to people, why can’t I do it for myself?”
Home and land packages in Brisbane
For the first eight years in this company, Lionel was selling home and land packages in Queensland, working in areas such as Crestmead, Marsden Park, and Forest Lakes. Packages in these suburbs, which are in a radius of about 20km from Brisbane, were selling for an average cost of around $190,000 at the time.
“When I got to my fourth property, then I realized there was money to be made in this. And that’s how I started building that portfolio,” he says.
Lional admits that he has built his portfolio at a slower pace than some people, taking a slow steady growth approach to lower risks. “When you have young kids in the family, you don’t want to be hanging out on a limb. I kept the family, as the front thing, focus in mind. And then think, all right, I can do it, but I can do it at the slowest pace,” he explains.
“And that’s always been my mindset, even now. Like, I’ve never been that bullish, going out there and trying to set the world on fire. I did it where I felt comfortable. Even though I work in a company where people have got, you know, seven properties in one year.”
Lionel later joined another property company called ‘Ironfish’. By that stage he had built a portfolio of 6 properties, including some in Brisbane and Ashfield.
Getting the right team
Lionel emphasises the importance of having a good team surrounding you when you are a property investor.
“It was a bitter lesson I learned,” he says, and goes on to tell us a personal story to prove his point.
“I was under the presumption that for my particular property I have in Southport, the property manager was looking after all the utilities for me. I was doing a property launch in Brisbane and my wife called me and she said, ‘I just got a call from the Brisbane waters, and they’ve said that we have an outstanding bill of three and a half thousand dollars.’”
“And I said, ‘what are you talking about?’ Cause I’m one of those sticklers, that I have to make sure I’m on top of my bills. And I said, ‘That’s impossible. Just leave it and when I come back home I’ll have a look.’ So I call him, he says yeah Mr. D’Cruze, it hasn’t been paid for two years.”
A month later he got an email from the bank saying they were going to put a foreclosure on this same property. He was also in arrears for nearly $16,000 with council rates and body corporate not being paid for two years.
Although he was able to pay his debts and clear things out, Lionel says this was a tough lesson to learn. “I took it for granted, it was my mistake. See how naive you can be at times. Even though I’m in this industry, right?,” he reflects.
When real estate goes wrong
In the late 2000s, Lionel bought a two-bedroom unit off the plans for $510,000. It was in a new development in Southport. “I fell in love with that area and that project in particular,” he says.
“It was something out of this world. I had not seen something like this in a while. Like that type of architecture, design, the floor plans and everything that they had going for it,” he remembers.
That weekend Lionel had dinner with a very close family friend, and his wife showed them the DVD of this new development. “This couple is sitting and they are just gobsmacked. And they’re saying, wow, how do we get one? I said that’s easy, talk to me,” he remembers.
“On Valentine’s Day the following year, we had the property inspection. We went and saw the property, they loved it. We went and had some beautiful lunch and came back. Next thing you know, all hell broke loose. Global financial crisis. All the developers have gone belly-up. And Gold Coast got hit the worst,” he says.
This particular developer went up for receivership. The Commonwealth Bank stepped in and the development was finished, but buyers had to put an extra $100,000 in order not to lose the 10% deposit.
As a result, Lionel lost this close friendship, as “they did not feel they were done right,” he explains.
“And they didn’t have that mindset. It was not something that I had control over, and they didn’t even realize that I was in the same boat with them. It was something, you know, it was unavoidable, and it wasn’t only me, but the whole building, everybody got affected.”
Reflecting on this ordeal, Lionel says that letting emotions influence your purchases is one of the worst mistakes an investor can make. “It needs to clinical. Get the emotion out of it.”
Lionel recovered from this bad experience quickly, and bought a property in Hamilton Harbor the following year. “It took me a little while, but you know, by this stage my mindset was no longer frightened. I knew this is the nature of the business,” he says.
Buying in the current market
We asked Lionel to provide us with some advice for those wanting to make a move in the current market, and this is what he had to say:
Buying investment property in Brisbane:
“I would say in another three years, that Brisbane market is gonna turn. And I’m betting on that because seven of my investments are in Brisbane.”
Lionel says that this area is starting to recover and might be under-supplied. “I know that I’ve read a few reports recently looking at the Redland area, and I know that it’s the case in a few of the council areas of Brisbane, that just the under-supply is gonna be a challenge moving forward. Especially with the interstate migration.”
“’Cause there’s three main things that you look at when you’re investing: your population, your infrastructure and your employment. And if one of them is missing, it’s gonna take a lot longer,” he says.
Buying property investment in Melbourne.
Lionel would advise to invest in North Melbourne, with this area being “similar to what it used to be in Surry Hills, 15 years ago. It’s one of those growth corridors where they’re putting in a brand new station coming through,” he says.
Buying investment property in Sydney
Lionel would also suggest making a purchase in the airport area of Sydney. “That is where all the money is being spent. For the 1 in a 100 year infrastructure that they’re putting in place,” he says.
Buying apartments in city locations
Lionel says that buying apartments in city locations in the current market would be more suitable for owner-occupiers. Investors buying off plans in these areas would most likely be purchasing a negatively geared property.
“From an investment point of view, when you buy something you are also gonna look at the rental figures. The cheapest you can get in these areas will be anywhere around about $600 to $700,000. The rental deal will not cover expenses,” he explains.
Buying off plan
Lionel’s advice when it comes to off plan buying is to do your due diligence. This should not only include research on the neighbourhood and nearby amenities, but should also look into the reputation of the developer.
Furthermore, he recommends leaving emotions aside. “So I tell my clients, don’t get emotional, it’s not about the floor plan, that’s not gonna make you more money. It’s not about the aspect of the views, now you’re getting too emotional about it. If it happens to fall that way, and you do get a beautiful view from your apartment, so be it. But I’m not chasing that view, or those aspects, because, at the end of the day, your tenant is gonna live in it and pay rent.”
Present and beyond
Over the past 15 years, Lionel has built a portfolio that is sitting at about 60 to 70% LVR.
When looking back at his property investment career, Lionel says that one of the greatest payoffs has been being able to spend more time with his family. “I work the hours I want. I was able to be more the family man. I enjoy taking my son to school, bringing him home from school. And, you know, being able to be there for all his occasions, and my daughter’s netball practices. And music lessons, I’ll be there,” he says.
“So the work did not ever come in front of that. But I worked hard. When I had to work, I worked hard. So right now I will say I’m in the phase where I do it because I enjoy doing this. I’m not in it to chase a dollar.”
Looking for the ideal investment property? Property Market Investor can help. From home and land packages in Brisbane to your ideal investment property Sydney. Simply enter your details and we will match with properties to suit your needs.