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A property investor who moved to Australia with just $4,500 to his name (and now owns more than 100 rentals) has given his advice on how to get into the market amid the national housing crisis.
Victor Kumar and his wife Reshmi moved to Australia from Fiji in February 1997. Mr Kumar, a qualified sonographer and radiographer, taught at the Faculty of Medicine while his wife was a junior radiologist in a hospital.
The couple lived in Victor’s sister’s garage for three months before renting a unit and buying their first home a year later.
Kumar told Daily Mail Australia that they both soon realized that working in the medical industry was preventing them from achieving their long-term financial goals.
Kumar bought his first investment property in 1999 and in three short years his portfolio has expanded to 11 properties.
In 2001, Mr. Kumar and his wife left their jobs in the medical industry and founded their own investment company, Right Property Group.
The couple now have a multi-million-dollar portfolio with more than 100 properties in New South Wales, Queensland, South Australia and Western Australia.
The Right Property Group director emigrated to Australia from Fiji and turned $4,500 into a multi-million-dollar property portfolio with more than 100 properties across the country.
Kumar is often criticized for his extensive property portfolio, with many accusing him of contributing to Australia’s housing crisis.
“Investors like me are not to blame for the housing crisis,” Mr Kumar said.
‘I’m actually increasing the supply of housing, not removing it, because none of my properties are empty and offer accommodation.
‘With the properties I buy, I also build granny flats, in which I build several homes. In fact, I’m increasing the offer, rather than removing it.’
Kumar added that he and his property managers also make a conscious effort to help people who don’t have a rental history.
—Before we were also tenants. “So we know how it works and we know the problems we had when we were renting,” he said.
“If a person doesn’t have a rental history, we give them an opportunity to actually get a rental property.”
negative gear
Trolls also sent Kumar a barrage of messages claiming he was taking Australian taxpayers’ money through negative leverage.
However, Kumar said those who think like this don’t know how negative gearing actually works.
“It’s no different than a regular gambler who does his tax return and claims his uniforms or his work tools for a tax deduction,” Mr. Kumar said.
‘I’m not collecting any taxes from anyone else. I claim tax losses on my own property that I have personally paid.’
Kumar said negative gearing is an incentive by the government to encourage people to invest so that there is more real estate supply in the market.
He added that investors who feared that negative leverage would be eliminated were using the wrong methodology and were investing only for “tax reasons” and not for “wealth or cash flow.”
“If you are holding on to your property only because of the tax deductions you get, and that is the only way to hold on to it, then I dare suggest you have taken the wrong approach,” Mr Kumar said. .
‘The best approach is to find and add value so that you always have a margin of safety in every purchase.
“It’s best to make sure you’re not relying on government incentives, so that if those rules change, and they can change, you’re not stuck.”
Kumar also fears that the real estate crisis will worsen if negative gearing is removed from investment property owners.
Kumar said investors like him were not to blame for the housing crisis as their properties increased rental supply.
In September it was reported that the Albanian government wanted to review existing negative gearing and capital gains discounting policies.
The Labor Party is believed to have commissioned the Treasury to model possible changes to housing policy.
Negative gearing was removed during the Paul Keating era in an attempt to help renters and first-home buyers enter the market.
Kumar said the move “was phenomenally counterproductive” and rents increased by around 20 percent.
When negative gearing was repealed, the 20 percent increase in rents did not drop to previous prices.
“Ultimately, they impacted the very people they were trying to help,” Mr. Kumar said.
Advice for young Australians
Kumar said while he was able to realize the Great Australian Dream, it was possible with a lot of hard work and sacrifice.
Kumar explained that he and his wife made a conscious decision to postpone starting a family, which was against their culture.
The couple did not take any major vacations and lived “very frugally” for the first few years so they could funnel their spare money into the property.
Kumar added that they had considerable debt from attending real estate investment seminars and courses, but he made sure to implement the tips they learned to achieve their goals.
However, Kumar admitted it was much harder for Australia’s younger generation to enter the property or investment market than when they bought their first home.
Kumar explained that he bought his first house for $137,000, which if he bought it today it would cost him $850,000.
“With a 10 per cent deposit, you only needed $13,000, but today you would need $85,000 for the same property. So therein lies the problem,” Mr Kumar said.
“I am aware that there is a disparity between then and now and that is due to current inflation and the situation with house prices.”
He advised younger Australians trying to buy their first home to purchase a property “within their means” that is further away from where they would prefer to live.
He added that prospective first-home buyers should have a strategic plan and should also think about smart renovations that increase the value of the property.
“You don’t want to limit your borrowing capacity, nor do you want to eat two-minute noodles just because you bought some properties,” Mr. Kumar said.
‘It has to be within the means. Therefore, it must be a well-thought-out strategic plan, so that it is not solely dependent on the market moving the needle.
‘You have to move the needle yourself through some smart renovations that don’t require a huge skill set and force an increase in value.
“You need a target and when you hit that price, regardless of what’s happening in the market, you offload yourself to be able to purchase investment properties or your forever home.”
Kumar said the solution to Australia’s housing crisis was for federal and state governments to “cut red tape” and make granny flats cheaper to build for homeowners.
The solution to Australia’s housing crisis
Kumar believes one way to alleviate Australia’s housing crisis was for federal and state governments, along with local councils, to reduce bureaucracy.
“Government, from federal to city councils, must cut through bureaucracy and empower ordinary homeowners,” Mr. Kumar said.
“Cut the red tape with compliant developments and allow granny flats so landlords can increase supply.”
He explained that eliminating council contributions for the construction of a granny flat would make construction cheaper, reduce overall debt and, in turn, lower the rental price.
He also suggested that the government give a rebate or incentive to investors who charge 10 to 20 percent less rent than the relevant area average for the first three years.
“It’s one of the thought bubbles I have… it could open up the offering and attract people who are struggling to meet the rental requirements,” Mr Kumar said.
“Suddenly you’ve helped the investor because they have two sources of rental income and you’ve also helped the tenant.”
Kumar said the only real way to permanently solve the housing crisis was to take a step back and implement structural change backed by all political parties.
“For structural change to occur, there has to be a step back and that is never a popular decision, it is rather political suicide,” Kumar said.
But if all the parties got together and said, ‘Hey, let’s get together and solve this problem,’ the problem can be solved.”