Milk Chocolate, co-founder, Richie Ragel was recently interviewed by Aaron Christie-David on the Australian Investment Property Podcast. During the podcast, Richie discussed Milk Chocolate Game Plans, and below are some recent case studies.
Example One
With an initial investment of $120,000 over the first 12 months, our client’s goal and objective was to build a property portfolio that was able to deliver a passive income in retirement (circa ~20 years).
Milk Chocolate advised accumulating five properties across multiple states and territories around Australia to keep our client’s portfolio diverse and to minimise their risk and exposure.
We recommended the first purchase be an apartment in Canberra. The aim here was to have a high rental yield which would increase cash flow to procure the other properties faster. Capital growth was not the main priority. We progressed and purchased the asset in April 2018 in a highly gentrifying area of the inner south for $372,000, now valued at $460,000, with the property achieving a current rental yield of 5.88%.
Using the cash flow from this property, we were then able to progress and purchase the second property in the Game Plan: a house on a decent-sized block of land in a high-growth area in Brisbane. In February 2019, we purchased a traditional Queenslander in the north-western suburbs for $595,000, which was valued at $850,000 in Q1, 2022, a gross return of 12.37% p.a. The property is currently bringing in $575 a week, or a rental yield of 3.52%, for a total return of 15.88% YoY.
Thanks to the strong performance of the first two assets we procured, we were able to move forward and purchase the third property in February 2020: another house in a high-growth area, but this time in Adelaide. After a purchase price of $644,900, this property was recently valued at $780,000 as of Q1, 2022, with a rental yield of 3.07% – not a bad result at all.
To achieve our client's goals, we recommended a further two purchases, the next in 2023 and the final in 2028, in locations to be identified closer to the proposed purchasing date. When it comes time to execute those purchases, we’ll be taking into account the ebbs and flows of the property market and identifying potential new areas that present strong growth prospects.
We also recommended our client sell two of the properties in 2033 in order to start achieving a passive income of circa $70,000 pa, with the funds from the sales sitting across the existing offset accounts.
By 2043, if our client decides to sell down the portfolio, we modelled an assumed cash surplus position just shy of $5 million, equating to roughly 20 years’ worth of living expenses at $245,000 pa.
Example Two
This client came to us to have a passive income of $15,000 after tax per month by 2026, it’s certainly an aggressive target. However, we are on track to deliver.
The client will invest $2,700,000 across five properties; residential, commercial, granny flat, and sub-division, four of which have been purchased/construction is underway. To achieve the monthly income, we included commercial assets with high yields. This first asset was purchased in Canberra on a long-term lease by a prominent commercial real estate agent, currently yielding 7.84%.
The original plan was to purchase one larger commercial asset. However, we procured two smaller assets resulting in the second purchase in the ACT, a cafe that is currently on a long-term lease by a cooking college yielding 9.94%. At the time of purchase, commercial assets in the ACT under $1,000,000 were stamp duty except, which made buying the two assets more attractive.
We then purchased a residential asset in Canberra that has seen 29.01% capital growth in 20 months. The main home is currently rented for $675/month (with a rent review pending), and we are almost complete with the construction of a granny flat to the rear. The granny flat is costing $205,000 and will rent for ~$450/wk. The current tenants are also going to rent the granny flat for intergenerational living, resulting in a total yield of 5.52%. We then purchased a block of land in Adelaide in April this year for $747,000 off-market (via Facebook), which is currently valued at $941,000. We are building 4 villas at a cost of $1,200,000, which will provide a gross rental yield of 6%.
The subsequent purchase is an industrial asset in 2024 at a value of $1,700,000.
Example Three
Our Singapore-based clients were looking to build a Game Plan that included investment properties, a holiday home, and their eventual family home. Unlike many of our other clients, they didn’t have a passive income goal, but instead wanted a well-diversified portfolio that they could grow and pass on to future generations for years to come.
To that end, here are the three properties we have purchased so far to build out their Game Plan.
Canberra Investment Property
We love investing in the ACT given it’s poised for strong growth over the coming years. This home was the first one purchased in our client’s Game Plan, and its purpose was to create a solid investment that would deliver a significant boost to their portfolio.
We purchased the home for $859,600 and leased it for 12 months while we completed the development approvals. We then undertook a $285,000 renovation, which provided significant value to the home: it was later valued at an impressive $1.6 million, resulting in total capital growth of 86.13%.
Now, it’s rented for $775 per week and will only continue to rise in both value and rental yield over the long term.
Adelaide Investment Property
This was the second purchase in the portfolio: a home in Adelaide that presented a myriad of options, including a cosmetic update, a structural extension, or a subdivision that could contain a further two brand-new dwellings.
We decided to go with a structural extension for now, while retaining the option to subdivide further down the track. To ensure we kept this opportunity open, we left the main residence at the front of the block and extended just to the point of the potential subdivision line.
The new wing made the home significantly more liveable. It went from a relatively dysfunctional 4-bed, 1-bath, 1-living dwelling to a practical 4-bed, 2.5-bath, 2-living one with a rear dining and alfresco zone that allows for all weather conditions.
One of the living spaces is now completely closed off, creating an ideal quiet space for families with kids. The laundry has a separate WC, which kids playing in the backyard can conveniently access via the side of the house.
As well, both bathrooms are now located side by side – thus increasing functionality and decreasing plumbing costs – and have frosted doors, obscuring the view between the kitchen and toilets.
What’s more, the updated home boasts a car space that aligns with the butler’s pantry, making the pantry ideal for storing shopping bags and the like.
Adelaide Lifestyle Purchase
The third home was purchased purely as a lifestyle investment, which our clients are currently enjoying. The idea is that they can use it while simultaneously constructing a second dwelling on the same block of land.
If you would like to speak directly with Richie about property investing, purchasing, or construction click here to book a complimentary session.
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