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the Perth suburb of Morley, which he
paid $215,000 for back in 2008. He built
a house on it at a cost of $160,000 and
moved in to make it his home for a while.
These days it rents for a very attractive
$480 per week and is worth $500,000.
But his strategy with new builds is
a little outside the square, he admits.
Stephen’s goal is to save as much money
as possible, so he takes on some of the
tasks that a builder would normally do.
“Take that first one in Morley – dad and
I went in towards the end of the build
and did the painting and landscaping
ourselves and got someone in to do the
floors to save some money,” he explains.
“It’s a bit unusual but if you think
about it, most people doing a renovation
get stuck in and do bits and pieces
themselves. The way I see it, if you can
save some money, why not?”
That first investment proved to be a
very good one and as the equity grew, he
discharged his parents’ guarantee and
bankrolled subsequent purchases.
Just three years after taking that
first step, he took another with the
purchase of a three-bedroom house in
the southeastern suburb of Thornlie.
While this one has been a straight rental
investment ever since, Stephen could see
it had potential.
“It’s on a decent-sized corner block and
not far from a train station so I had a gut
feeling council might look to rezone in
the future. Given it’s on a corner, there’s
access to the rear. I’ll sit on it until the
zoning is changed and then I’ll consider a
Not long after buying that second house,
he bought a third in the neighbouring
suburb of Kenwick. Again, it’s sitting on a
big block and Stephen knew it had some
“There are a few options to build equity
in your portfolio – sitting around and
waiting for the market to move, paying off
your loan quicker, doing a renovation or
doing a development.
“I like the idea of building something
so that sort of evolved as my property
He read books, enlisted a team of
experts and, when he felt confident
enough, got cracking in late 2012 on plans
to develop his Kenwick property. He’s in
the midst of building a three-bedroom
house at a cost of around $200,000.
Once again, Stephen will go on towards
the end of construction to paint it and do
“The rent from the house at the front is
pretty low at the moment – it’s only $300
per week. The tenants lost their backyard
and have had to put up with lots of noise
so I’m subsidising it for a bit to keep the
tenants on side.
“When the new fence is up and the
noise has wound down, I’ll be able to
When all is said and done, he expects
the house at the front to be worth around
$320,000 – only marginally more than
what he paid, reflecting the now-smaller
backyard. But the house at the back will
be worth around $380,000.
With costs, that’s a gross equity gain of
about $171,000. Better still, it’ll add $380
per week to his cash flow.
In early 2013 just as the Kenwick build
kicked off, Stephen bought another
property in the southern Perth suburb of
Maddington – a three-bedroom house
that set him back $300,000 and rents for
$345 per week.
“That’s another very good one. There’s
subdivision potential there too and if I
wanted to build, which I reckon I will
in the future, I’d make a good profit. It’s
already zoned properly and there’s a
driveway down the side.”
However his priorities have changed
a little bit recently, so that development
project is on the backburner. In fact, when
the Kenwick project wraps up, he’ll be
focusing his time and money elsewhere.
“I just got engaged so we’re saving for
the wedding and a house for us to live
in. That takes priority for a while, as you
Stephen’s key to success so far has been
buying well. As is often said, you make
your money on the way in more often than
on the way out.
“It’s about picking the right ones, isn’t
it? The first one was a great buy and
allowed me to continue. Bankrolling
each new investment hasn’t been a big
issue thanks to the equity growth in
my portfolio and now development is
accelerating that. It’s win-win.”
Knowing what you’re buying is also
important. As a frequent visitor to
realestate.com.au, he has seen countless
properties advertised as having
‘development potential’. On closer look,
he’s found they don’t have much profit
prospect at all.
“The two I bought in Kenwick and
Maddington weren’t advertised as having
development potential so I didn’t have
to pay a premium, but my own research
showed they were.”
The final lesson he’s learnt? How to save
money. It turns out the answer was much
simpler than he could’ve ever imagined.
“Stop spending money! It’s easier
to spend less than it is to earn more
and that’s the quickest way to save,
THE NUMBERS | STEPHEN TAI
*Cost of planning and construction. Value and rented are projected figures on completion
The Thornlie house
The Maddington house
Inside the Morley build
COVER STORY // TOMORROW’S TYCOONS
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