PHOTO: Monica Rouvellas, pictured in Macquarie Park, started investing in property as a music teacher. Picture: Jonathan Ng
A music teacher earning $70,000 a year has revealed how a simple paperwork trick got her a very well-performing property portfolio without much debt.
They said she spent too much and, at $70,000 a year, earned too little to get a loan – but a savvy music teacher has revealed how she conquered several bank hurdles to buy three homes worth $1.2m.
And thanks to some wise purchasing decisions, Monica Rouvellas’s debt owed on those properties is only about $500,000, meaning she holds about $700,000 in equity.
It also costs the 34-year-old nothing to pay down her properties because the rents cover all her mortgage bills.
She’s now planning to use the same strategies that got her to three properties to acquire another five properties this year.
Ms Rouvellas said the secret to her portfolio was buying properties through a special purpose vehicle.
Her first property, pictured before it was renovated.
It’s essentially a company she set up for her property deals and it has meant the banks assessed her risk differently and were able to lend her more than she would have got applying for loans personally.
“One thing I learnt is that banks treat you differently if you take out lending products as a business,” Ms Rouvelllas said.
“The banks’ risk appetite is different. You have the backing of the Corporations Act so the banks have more alternatives if things don’t go well. You also get more asset protection benefits and there’s more ways to minimise your tax.”
She started hunting for her first property in 2016 while working as a violin teacher, setting her sights on a house on the NSW south coast.
Her income was $70,000 a year but because she was self-employed the banks assessed her ability to pay the loan at only 60 per cent of that income, leaving her with little to borrow.
Ms Rouvellas got around this by joining forcing with her brother. They went 50/50 on the loan and upfront costs, buying the unit for $350,000 with a 10 per cent deposit.
She spent $25,000 more of her savings renovating the property. They had the property revalued soon after and it was worth $100,000 more than they paid.
The rent also jumped $100 to $450 per week – enough to cover the mortgage bills and council rates, while cancelling the need for pricey lender’s mortgage insurance, Ms Rouvellas claims.
“We got it for about $30,000 below market value so doing the renovation on top of that gave us a lot of equity quickly,” she said.
Ms Rouvellas, who was also studying business and law at the time, said it was this first deal that made her realise that restructuring the loans through a special purpose vehicle would be more effective.
Monica Rouvellas is now a university lecturer. Picture: Jonathan Ng
“After that first property I tried to get new loans from banks for another property but had a problem. They said I had no serviceability left,” she said.
Drawing on her law background, she eventually restructured her portfolio using business structures, which eliminated many bank hurdles. Her income also increased and she is now a lecturer at Macquarie University and recently launched a teaching software company called Muzikbox.
She has also benefited from rapid equity gains by buying in the right location at the right time – often at bargains.
Her second property, a unit on the south coast bought for $215,000, was worth $300,000 six months later. She got a similar result with her third property bought in southeast Queensland.
The first property was on NSW’s south coast.
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