 Good evening and welcome to the Private Property Podcast. I'm your host, Zamantunga Kumalu. Today is the 20th episode of the Private Property Podcast and we are on day 43 of the National Lockdown. And it's Friday. I know a lot of us probably thought that this Friday came on way too quickly. And as promised, every second Friday, we're going to be profiling different people about their property journey. And on this evening's episode, I'll be speaking to Tina McOvela, who has done an amazing job in growing her property. She's in the student accommodation space and we'll be finding out some tips and tricks that she's learned along the way and really want to know how she did it. Good evening, Tina. Thank you so much for joining us this evening. Thank you so much. Thank you for having me. And good evening to everyone who's tuned in. I think before we even go to property, because sometimes people think maybe you need to be very rich or come from a really good family to be able to afford property or to get your foot into the property ladder. Maybe if we can tell our viewers at home just a little bit about you, just so we get a sense of where your starting point essentially would have been on your property journey. So I born and bred in Port Elizabeth, raised by three wonderful women who also lives and lives for a living. So I don't come from a rich background and really in terms of wealth building, I started from scratch. So yeah, so I'm born and bred in PE and I'm currently based in Grand Sound. I'm an academic by profession, but also run property business. And I think let's actually then go to that property business. I mean, and I know that that's not the only business that you run and we'll go into the other one just a little bit, but perhaps if you can share with us how you actually got started in property and what made you even go the property route instead of any other business ventures that are out there? So I grew up in a very entrepreneurial family. As I said, my mother, my aunt, my grandmother, all of them sold fruits and veggies and my mom and my aunt still do. So I grew up in an environment that entrepreneurship was the norm. And I grew up being involved in that business. I usually joke to my students that I learned not to use a calculator, quite a lot from just helping around in that business. So entrepreneurship is something that I learned at a very young age. So I'm the kind of person that I think I find it quite easy to think of a business idea and just run with it because of that. So how I got into property, I basically was a new graduate who wanted to buy a home for her family. So that was the first property I bought. It was not to invest in property in the sense of a business, but rather a family home. And then I got through that in role. I enjoyed viewing properties. I enjoyed spending time on property 24, looking at houses I couldn't afford. I think then the first property I bought, then sort of, that's the one that sort of, what's the word? That's when the bug hit. Is that what it is? That's when the bug essentially hit you. Yeah. So yes, yeah. So that's when things started. And yeah, it started with that house and learning from that process. And then further after buying that house, I bought a second property. And that was mainly because I was tired of renting. So that was the second reason why I got into, well, the first reason I got into property as a business was because a young professional was tired of renting and I wanted alternatives to renting. And I mean, let's go perhaps to the first property, which is the family home. I mean, did you, for example, find even that process easy? I think a lot of us, let's say you're young professionals and you have a dream of buying your family, their dream home, or sometimes even upgrading their current home. It's always one of those things that we want to be able to take off because it's quite a big deal, I think, in our community to be able to do that. How was that process? Because I mean, I can imagine how daunting it is. You already start working and instead of looking for your own place, the first thing is, let's actually first make sure that the family home is sorted and ticked off. Then only can you start thinking about your own properties. So that process for me was a learning curve, I think. It was a huge thing because I had just graduated with my master's and I thought I could just go to the bank with my payslip and say, hey, I earned this much. Can you guys give me a bond? And little did I know about things like building a credit school. I always grew up knowing that staying away from dates is the best thing ever. And I didn't know that to date in this case, getting some form of dates to sort of build a credit score wasn't important. So as a result, even though I had proof that I'm fully employed, I've got three months there, what do you call this, payslip, et cetera, the bank trust me as someone they can fund because they don't have any evidence of how I handled it. So that was a stumbling block. So when I was planning to buy property, it was then delayed because they flat out rejected me because I did not have any form of a credit score. So I then had to build my credit score. And how did you do that? So I think too, how did you do that? Because I think a lot of people also come, and a lot of us probably come from, being raised by parents who did have dates and somewhere along the line, you just thought date is a bad thing, is a bad thing, I must not have dates. And if you're fortunate enough to not take on dates when you start working, by the time you're thinking of buying a home, it's good that you haven't been able to have debt, but actually the bank doesn't quite view it like that. And so how did you end up resolving that and building that credit score for yourself? So I was advised by the lady who was sort of my bond originator and also the bank consultants who were busy with my application that I should open up clothing store accounts and credit cards. And I was quite skeptical because for me, I thought, I've always known dates to be a bad thing. So it was quite difficult for them to sort of get me used to the fact that, no, this is to help you. So I then decided to go for it in a very slow paced manner by taking on a credit card that I then managed to make sure that I use and be able to pay within the interest-free period. And then I also found a phone contract. They argued that the way I was going about it was going to build the credit score very slowly, but I prefer to go slow and learn with the process than going fast. And it was actually a blessing in disguise because in that period, I ended up buying the house two years later. In that period, I managed to save about 40% of the deposit of that particular house that I would have bought. I bought with 100% bond. So looking back, it was really an advantage that I was rejected by the banks and was able because what I then did was I knew how much I, how much I was willing to spend. I have the border and put that money aside as savings for deposit and all the other expenses, such as the transfer fees, et cetera. So that was quite helpful. So I built it using a credit card and just a phone contract. Maybe I could have done it faster by taking multiple accounts, et cetera, but I was not comfortable with some of the ways they were suggesting I do it. So I think slow in that case was actually better. And I think one thing that's quite impressive is the fact that you are even able to be disciplined enough to put away the money that you would have been using for the property. I'm sure that many of us probably don't have that kind of discipline. So being able to say, actually, this is still what I want. This is still the property that I want. And perhaps for now, even though I know that it's not there, let me put away this money. And I know that, you know, whether it's a year or two years down the line, I'll still be able to use it towards something that's actually a property. Now you mentioned that the second property that you then obviously bought was because you were tired of renting and you ended up buying it. I actually want to understand what kind of numbers you ran when you're kind of making a case. Because we've covered a few episodes right here on the Private Property Podcast where we look at sort of the pros and cons of renting versus buying. And in different instances, buying isn't always the best option, certainly not in the short run, but in others in the long run, it might be better. So for you, what were some of the considerations when you sat down and kind of ran the numbers to see whether you can make a business case for yourself to buy instead of continue renting? So for me, I think I was coming from the school of thoughts that, you know, you'd rather pay this money of rent towards something that's yours. I'm, you know, I've learned to sort of question that. But back in the day, I think my thinking was around, I am paying, so I live in Gramstown, which is a small university town. So the town, the major aspect of the economy of the town is the university. So as a result, one of the things that, you know, is a disadvantage, but also an advantage is that it ends up being a high, you know, it ends up being, there's a lot of demand in terms of rental spaces because people are coming as young professionals, they don't want to commit to buying property. So they're renting and there's lots of students in town who want, you know, a temporary space. So there's a huge rental market in town. And as a result, and because the town is, I think the property market is still in the hands of a few. So it's, I usually say it's a very, it's a monopoly town, especially in the market. So the prices of renting are quite expensive. So for me, I was, you know, I then questioned myself in terms of how much money I'm paying towards rent and then try to understand if I were to buy what would the implications be and whether the money that I was paying towards renting would it be sufficient to, you know, pay a bond and, you know, work towards an investment for myself? But I didn't realize that because the property price is so expensive, there was no way I would buy a property and be able to take the money that I was spending towards rent. And it will just be purely it in terms of covering all the expenses that are involved in buying a property. So I then had to rethink my strategy because of the way the town is set up. Most of the houses in town. So you'd have a main house, so you'd have a main house in the yard, but there will always be a cottage or apartment that is standalone in the same yard or same earth that is usually used as the, so the main family will stay in the big house and then the back property will then be used by a young professional like myself back in the day or by a student, a post-grant student. So all the houses are sort of set up like that. Most of them in town. And then you also have complexes. I was not interested in buying complexes in an apartment because my thing was if I buy an apartment and I want to, because I was looking basically for a dual property, so a dual purpose property, one that I can live in, but also at the same time be able to generate some income from it. And majority of that income should be able to cover the bond on my behalf. And then I top it up if I have to. So that was sort of the thinking process that I had. So with apartments, I thought because of the way they set up it's a two bedroom or three bedroom, you then have to share space with someone. So I then went standalone because it gave me the ability to have one part of the property to myself and one part of the property to whoever is renting out. And most of the time it's usually families who live in the main house and then they will rent out to supplement their bond or their income. And for me, I actually flipped it around. I wanted the main house to be rented out because that's where the major income would be coming from. And then I would live in, as the person who sort of renting in cases where properties are only in the house. So I lived in the back property and then I wanted to live in the back property and then have the main property as a digs for students. So I was looking for three bedroom, four bedroom. And in this side, three bedroom, four bedroom, you can rent out to students and each student will have their own room and you charge around 3,000 to 4,000 per room. And I wanted that to be where most of the money is coming from. And then I supplement if I have to. So when I was running the numbers, I wanted to ensure that actually the main house should pay all the expenses of the property. That includes bond expenses and have some profits on top and not have to supplement it. So that was sort of my thinking is that I wanted a dual-purpose property and I was not ready to have that property to myself. We wouldn't have made sense to buy such a big property for just for me and not be able to generate money out of it. And I think, I want us to take a quick break. When you come back, Tina, when you mentioned that essentially this is a township digs, I mean, you'll find yourself in Gravesham or now in Makanda and you see that there's a gap in the market. Some of the properties might be maybe closer to the university, this one is more of a township digs. The nice thing about Makanda is that it's not as massive, for example, as Joburg where a township could be substantially further from where the university actually is. So I'd like us to probably look at how you then go out and even look for some of those tenants and really build that student accommodation business because you've now essentially decided going to live in the back cottage, the main house is what the student accommodation business is going to be run from. Then you get another property and you kind of run the same model. And I really wanted to be able to even get a few nuggets around what you learned along the way. Because I think we sometimes look at student accommodation as you need to have a lot of money for a startup cost or you won't be able to maximize your money if you just buy that one house. So perhaps for our viewers at home who want to get into student accommodation, you essentially just give them some tips to help them should they want to get into student accommodation. We'll be back just after this with Tina McAvella. We're going to be looking at, rather we're talking about how to get into student accommodation before 30. She did it, she just recently turned 30. So when she did all of these things that she's talking about, she was already under 30 while managing a job and ensuring that she essentially runs her property like a business. And oftentimes we do talk about the importance of certainly when you're doing rental properties to run it like a business from the get go because you're able to be professional about it. You're able to also get the necessary text benefits if you're doing it like that from scratch. So we'll be back just after this with Tina. Welcome back to the Private Property Podcast. I'm your host, Zamantho Ongakumalo. I'm on the line with Tina McAvella who is a property entrepreneur. She's also an academic. And tonight we're talking to her about her journey into student accommodation. If you've ever been interested in getting your foot into the student accommodation, Nara, don't know how to do it, especially if you're a professional at the end of the age of 30. This is the show for you. Now Tina, before the break, you're sharing with us some of the, how you actually got to getting the first two properties. So the first was for the family. So really the first investment property or the first digs was the one where you end up, I think saying at the back, and you wanted to make sure that the main house can essentially cover all the expenses and you're able to make a profit. From having done that, how did you then go and say, actually, I think I can get another one? And how did you navigate that decision? Because I know you did add others. And I'm sure you've got ambitions of growing that portfolio as aggressively as possible because you've certainly, for you, found a sweet spot within the Makanda region and want to be able to grow on it as much as possible. Maybe even, I think later on, we even talk about diversifying. I mean, I think a lot of us landlords, especially to students right now, going through quite a lot when you look at the effects of COVID, students are not at home. So I think we'll talk a little bit about diversifying your portfolio so that it's not heavily reliant on the student market sector. So how do you then go from having that first, we'll say investment property and then adding the other one? Okay, so just before I go on to adding, I just want to, so the second property, which is the first investment property was not in the township, so it was in town. So with that, obviously, I wanted a place to live in and then also be able to generate income from it. So I moved from looking at it as a digs for students and actually considered running a hostel out of it. So I then sat down and, because I'm very passionate about education, I then sat down and looked at how do I look at my property business model as not just a landlord, tenant kind of scenario, but how do I re-envision what I see as the property business? So what I then did was to look at, the reason I was interested in particular with the hostel business model as a property model was because my sister was in town as a high school learner and she had stayed in one of the hostels in the local schools. And I was realizing how much money I was paying into, her staying in those hostels and maybe some of the gaps that exist in current hostel models and how I can as an educator create a space that is a bit different to what is offered out there. So the second house then ended up being a fully-fledged hostel that houses about eight learners from different high schools instead of it being a digs away, students do as manage the property on their own and do as they please, but rather have learners that need more care in terms of there's in the pricing model, there is electricity, there is, so everything has to be covered in the fees. So it wasn't just a matter of how do I cover the bond, but also how do I cover the running expenses of this bigger business of running a hostel. So that's what it ended up being the second property. And then to go to your question about how I then decided to go into investing more in the latest property, I was noticing that the university student demographics are changing quite drastically. In particular, in terms of class, in terms of where students are coming from. And I was noticing that most students, particularly the NSFAS funded students are not able to afford to stay in town. As I said to you earlier, rentals in town start from 3000 to about 5000 per room or rather per student and they get about 4,500 a month to cover the, you know, living costs, which include rent, but also meals, et cetera. So I was finding that students are struggling in town to get decent accommodation at their budget of 4.5. That's when then I then ventured into township, into a township dig. So the last property was the township digs. And really it was, you know, the decision was mainly because of the challenges I saw students facing in terms of finding decent accommodation in town. And then also on my side, thinking as an investor, if I were to invest in that property, it makes sense for me to invest in the township because number one, I know the township. Number two, the students I'm looking at also know and are comfortable with the township, but what was missing in the market is an environment that is conducive and, you know, it is catered for a student. So most of them were staying in, you know, random back rooms, you know, that weren't suitable for a student, not furnished, not, you know, conducive to them studying. So the township digs then came from a point of view of wanting to create affordable student accommodation, but that also makes sense in terms of on a business point of view. And I think one, I mean, I like what you mentioned around, when you look at township accommodation, especially township student accommodation, even when you look at, you know, Joburg, where we've got University of Johannesburg, that's got a campus in the township, they still quite a bit of room to ensure that the quality of the accommodation that students are able to get in Sowetoing in the areas that are very close to UJ are of the same level if they choose, for example, not to stay in a university residence. And of course, we know they are limited beds. Then the students, for example, who are placed in the APK campus, where they have, you know, the locations that they would essentially have access to, IE Auckland Park, Sawyer Malvels. So we typically find that the quality of some of the student accommodation in certain areas isn't as good as in other areas. And there really is no reason why those students shouldn't also be able to get, you know, fully furnished apartments. And of course, you're able to sort of budget that into the model. And often, I mean, I know I'm in the student accommodation here in Joburg, you sometimes struggle if your place isn't fully furnished. You almost as a standard, it's a given. So it's not even a thing where you'd say, if it's empty, it's going to be 4,000. If it's furnished, it's going to be 5,000. Students expect that you furnish their apartment. Sometimes they even expect that you have unkept, you know, fiber with some of them. Depending which area, of course, that should be. So I think then Tina, because I want to take in a few questions and comments from our views at home. And I see that we've got quite a few coming in. Before I squeeze in a few of my other questions, I'm going to ask some of theirs. The first one is coming in from Bruno. Bruno asks, a student accommodation investment less the same or more lucrative than normal home investment. What happens with payments when students go home for holidays and how different is the lease agreement? Example, an apartment in Stellenbosch, not necessarily a home with a granny flat. So I think let's probably start with the first bit of the question around, you know, is it the less the same or more lucrative than normal home investment? I think this would also touch, sorry, okay, so I mean, I think both each have their advantages and disadvantages. In terms of home, as the viewer is asking or mentioning that you, if you're renting out to Tina, who's a professional, she's most likely needing to be in Gramstown from January up until December, you know, in terms of her work commitment. So you do have that as an advantage, but I think you can work it into your model as for student accommodation, that you price such that the, as much as the leases might run from, let's say January up until November, you price such that that December month is not stranded, rather it's not a month that doesn't have, it won't have actual income, but the income will be affected into the other months. So there's ways around it, but something else I wanted to mention, I think he's asking about holidays. When students are on holiday, that's covered in their rent. So it's their choice to go home or not to go home. So the lease agreement is not giving them a leeway in terms of, you know, not paying rent in those months that they're not in the accommodation. Because remember, students defer, there's undergraduate students, but also post-grad students. Post-grad students are more likely to be staying the entire year, including those holidays because they're working on their research, et cetera. So the lease agreement is standard, whether you're an undergrad or post-grad, but in some cases, other people take advantage of the fact that you've got the holidays. So for example, in Bramstown, we've got many activities during the holiday time that actually could give you extra income if you were to, you know, actually release the students from paying in those months. So for example, my hostel, I can also use it as grad accommodation when there's graduations. And those, you know, short-term accommodation periods, they really bringing a chunk of money. In addition to graduation, we also have the Bramstown Arts Festival, which also brings them, you know, a lot of money. So there's also those months that you can, you know, activities that you can take advantage if you do have an agreement with the students that on holidays, just like with residences, you have to check out if it's holidays. Then you have that ability to bring in extra money through, you know, other avenues such as short-term accommodation during those periods. So yeah, you factor those months, such as December into your calculation of the rentals, I think. But I've also noticed that students have also gotten smart. When I moved to Bramstown, it was quite a norm that leases would run from the end of November up until the end of November the next year, so essentially 12 months. But I think students are actually taking the upper hand now and saying, you know what, these places won't run out. I'll look for a place in January, end of January. So most of the students now don't bother themselves unless they really want a particular place. They don't bother themselves looking for a place in November. So that's something else that one has to then factor into their calculation that I might even get a tenant in January. So sometimes people would lean towards post-grad students more than other undergraduates who start their year, maybe mid-February or so. And obviously this differs from, you know, environment to environment. And this has been my experience in Bramstown that there's been a lot of move from students, you know, wanting to bank the December, January rent and only looking towards the end of January for signing up for lease from February until November. So you as the landlord or rather the property person will have to, you know, in your calculations, if you know, for example, this is you spend extra amount in terms of your expenses for this particular property from January until December, how do you then change that expense to a 10-month expense to factor into those months so that you're not strengthened? We've got another question coming in from Howard Mugatzanec, who asks whether you bought the investment properties in your personal capacity or you bought them under a PTY? So I went for personal and I'm actually in the process of questioning whether I should move them to a company or a trust and what the implications are of that because there's in restructuring, obviously you have to consider the cost of the restructuring and whether it is a move that is, you know, that is making sense for you and the business cost-wise. So I'm actually in the process of thinking through whether I should do that, but because I started investing, you know, using myself as an assurity with banks and everything, I started off investing in my name and that's something that I'm trying to switch over now and have them under the company instead of my personal name. And I think a lot of us, you know, make that, whether we call it an error or one of those mistakes that you essentially need to make and convert them along the way, I think a lot of us when we started off, especially whether it's student accommodation or renting out to young professionals, we often bought the first few properties in our personal capacity and later you try to make a case whether to transfer them or use them. And the thing is once they are quite, once they are a few, you end up deciding, maybe I won't transfer these ones or the other ones I'll buy. I'll just buy them in the company. Yeah, so you have to be careful in terms of which ones. Yeah, because I think sometimes even the cost of the transfer can actually be quite expensive. I mean, when I think about it, you could easily need to budget, let's say 50, 60K, that could be a deposit for another property. You can literally connect another property with that amount. So Tina, before I let you go, I think any lessons that you'd like to share with our viewers at home that you have been shared, like almost the one thing that they should take away from your property journey, which is still relatively in the beginning stages, but already making milestones and finding different ways to tap into the student and not just varsity students, but also high school students in the area that you're in and making sure that you're able to take advantage of not only the sort of relatively long-term lease, so your 10, 11 or 12 month leases, but also the shorter term leases. So already we're seeing that there are different ways you can navigate a property in a student town. And I mean, I actually hadn't thought of the graduation season. I'll probably do that, because I know it's been a December period, December, January, where there might not be tenants. I'll probably put up some of the properties for an overnight or a weekend and do a nice package for students because they're close enough to the universities. So any lessons you'd like to share with our listeners for them to take away, especially when it comes to student accommodation? One of the biggest things for me is take the business as a business seriously at the beginning. So have the proper things in place, have leases in place, get good advice. One of the biggest mistakes I think I've made in my journey and maybe still continue to make is around pricing. I price it with my heart. I always, I think I afford this and I'm talking about Tina as a student, and I forget sometimes that not everyone comes from a background that's similar to mine. There's rich people out there and there's people who can afford. So your mindset in terms of a business and also defining your market quite clearly in terms of who are you serving? So for example, with the hostel, because I serve both public school and also private school, that's like a huge gap between the two markets, between public, what a public school parent might be able to afford and what a private school parent might be able to afford. Just to give you an example, public school hustles in town and normally around 50K per annum. And then when you're looking at the private school market, you're looking at about 120 per annum. So to be able to serve these two people who have a huge 70K gap between them is a very difficult task to make. So for me, I had to divorce my heart from the pricing and I did that by involving other people who are not thinking about it from the point of view of, oh my God, will this person be able to afford this? Oh my God, but what happens to this person? Involving friends who are accountants to help you justify your pricing. So if you don't hit yourself at the end of the day. So yeah, I think about the business quite seriously, quite early. That also might involve, for me, because I do student accommodation, but also accommodate learners, I had to think about what differentiates me from the other properties around town, the other people who do similar things. And for me, the niche or rather the differentiator has been student accommodation, but with the academic excellence at the heart of it. So part of our hostel, for example, offers, we offer in the package of the fees, we offer academic tutoring, and that attracts the parents to our model in terms of, oh, I'm not just sending my child to stay at this place to be safe and to have a holistic environment that is conducive to studying, but they also have a tutor on top of that. So also think about how do you take your own skills into the model and make sure that you differentiate yourself from the next person I think is quite important. Yeah, and then before I'm thinking about expanding, I also think that this is something I learned quite recently from my mentor, how to maximize or rather to maximize or to milk out what each property can do for you as it currently has the ones you actually own. So for example, I've recently, I'm working on converting my basement, which was non-existent into a storage space where I can use the garage as a tutoring space. So now I've got another business that can be up, that can be housed in this still same property and be able to generate more income from rental from that tutoring business instead of going to rent or buy a new property. Even with the township digs, I'm thinking of there's still space to build more instead of going to buy more. So I'm gonna build flats, the bachelor flats there to make sure that the property as it is right now, it can give me more without going to take on a new deal or to venture into a new property deal. And I think that's so important. Tina, thank you so much for sharing those things. So take away a business like a business. So even from the first property, don't make the mistake that so many of us may, you know, buying the first couple of properties in your personal capacity and not being properly able to claim back from SARS, some of the expenses that you're going to incur along the way, then be flexible in your business model and use some of the skills in the business model as you run your property business, especially when you've got student accommodation. So if you've got an additional skill in Tina's case, there's tutoring involved and ensuring that you're able to maximize that property to the best of your ability before you go out there and get additional loans. Tina, thank you so much for joining us this evening. You've been watching the Private Property Podcast. This was episode 20. We are back again next week, Monday, with more topics, more insights and more experts will be helping us navigate our property journey. I hope you're staying at home and staying safe. We'll be back again next week.