How do people buy dozens of house yet on the same wage

How do people buy dozens of properties yet still have the same job and wage?

I realize of course partly in using equity as the springboard and repeating but. Doesn't the fact that they are still on the same wage as they were when they bought their first one say 2 or 3 yrs earlier and now might be up to no 6-7-12 whatever and depending on rents alone to service all those loans, block buying more and more ?

And should you and can you keep maxing out your borrowing capacity ?


Cheers
 
How do people buy dozens of properties yet still have the same job and wage?
If you have an initial deposit in cash or equity, and you buy a property that once reno'd you can draw that deposit back down out of. And the property is cf neutral or +ve after that equity draw down, then no issues really, repeat over and over.

And should you and can you keep maxing out your borrowing capacity ?
That's up to the individual investor
 
when the IP is rented its now other peoples income that starts to play a major role, eg 10 ips @ 400 pw would bring in another 4k wk bringing in another 208k a year to do the servicing , if they are reno'ed and have Interest Only loans on them the total mortgage payments might be 230k But sayin this if the 10 have a value of 400k each wich would be 4 million and they increase by 10% then there is another 400k equity to be used , this would get you 3 more beinbg able to leverage and value add, including other peoples income to service the debt, and so on , and so on, yada yada yada, :D

Sounds so easy, ????
 
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G'day Blaster,

Everyone is different so there is no easy answer to this. The Gravy train will always need to stop somewhere even if it's to refuel.

As Rolf mentioned, structre can play an important part. Lenders will use varying servicing capacities. One lender may allow for 80% of rental income but another 70/75%. Some will allow for any existing debts to be assessed at the existing repayments wheras another will sensitise your existing repayments at a higher rate at P & I over 30 years.
Contributing 20% + costs is always useful when things are tight with servicing as it takes the mortgage insurers out of the equation.

You'll find that some (NOT all by any means) of those with say 6-12 properties originally didn't borrow anywhere near their limit initially which gioves more room to move, some others decide on the Lo/No-doc route and embelish their figures, others may look at cash bonds to mask income, most people find that their wages rise over the timeframes you have given. then you have some that will leave the buying until times like now so they have applications assessed at lower rates (allowing them to borrow more) and higher rental yeilds. Others may have has dependants originally but now have none (sent 'em off to the mines :)). whilst others may of had some bad debt which has since been paid down.
Your accountant may also be your friend in setting up entity/ies that maximise tax deductions.

As you can see, there are many reasons/ways (not just limited to the above) that may affect what one can borrow.

Regards
Steve
 
you cant overestimate the difference in attitude between
I want a bigflatscreenflashcarholiday[sup]1[/sup]RightNow​
and the delayed gratification
I will work my *** off and then have stuff[sup]1[/sup] all the time​
tenants all have stuff[sup]1[/sup]
We have tenants.
the carparks of Housing commission blocks rental assistance, but never more than 2 year old cars
 
If you have an initial deposit in cash or equity, and you buy a property that once reno'd you can draw that deposit back down out of. And the property is cf neutral or +ve after that equity draw down, then no issues really, repeat over and over.

That's up to the individual investor



Thanks once again Property , always appreciated and I see your point.

Cheers
 
G'day Blaster,

Everyone is different so there is no easy answer to this. The Gravy train will always need to stop somewhere even if it's to refuel.

As Rolf mentioned, structre can play an important part. Lenders will use varying servicing capacities. One lender may allow for 80% of rental income but another 70/75%. Some will allow for any existing debts to be assessed at the existing repayments wheras another will sensitise your existing repayments at a higher rate at P & I over 30 years.
Contributing 20% + costs is always useful when things are tight with servicing as it takes the mortgage insurers out of the equation.

You'll find that some (NOT all by any means) of those with say 6-12 properties originally didn't borrow anywhere near their limit initially which gioves more room to move, some others decide on the Lo/No-doc route and embelish their figures, others may look at cash bonds to mask income, most people find that their wages rise over the timeframes you have given. then you have some that will leave the buying until times like now so they have applications assessed at lower rates (allowing them to borrow more) and higher rental yeilds. Others may have has dependants originally but now have none (sent 'em off to the mines :)). whilst others may of had some bad debt which has since been paid down.
Your accountant may also be your friend in setting up entity/ies that maximise tax deductions.

As you can see, there are many reasons/ways (not just limited to the above) that may affect what one can borrow.

Regards
Steve


Yeah thanks BD and to other replies, very helpfull . I think it's time for a good Vic property interested accountant.
There's allot here I read that have done those numbers but I can never figure how they get past 3 or 4 which is where I'm at .
Not being greedy but there's a 5 , 6 and 7 combined that I've been working on
and some things to way up.
They've offered me V/Terms which I've talked a little about in the club but I'd rather pay for it if I could - new thread I think.

Cheers
 
G'Day blaster

Take on Vendor Terms at your own peril!

I know of no lender which will take over a Vendor Terms Contract, so unless you want to be paying 'vendor terms' for the next 30 years just don't even think about it!

And, unless it has escaped your notice, you don't actually own the property until you have finished paying for it

With a standard Contact of Sale, you pay for the property even though you have borrowed the money to do so from somewhere else.

From Settlement, you are entitled to be Registered as the Proprietor of the Land, you have offered the opportunity to the lender to register a Mortgage over the land to secure the loan of money. Nice and simple. Straightfoward. No catches. Everyone knows where they stand.

If you really want to progress, Keep It Simple. Always.

cheers
Kristine
 
How do people buy dozens of properties yet still have the same job and wage?

Hi Blaster,

This is a very good question. Jan Sommers in her books outlines a simple and realistic plan of accumulating 10 properties (1 PPOR and 9 IP's) over a period of 20 years. Her break down is something along the lines of 5 years to save a deposit, 5 years to pay off the PPOR and 10 years to accumulate a further 9 IP's. In the plan, cash savings play an important role to reduce debt, or to save up for a deposit on another IP.

On the forum, as someone mentioned (can't remember who, but it was a good point) there is often a sense of urgency to turbo charge the wealth building process. Eg, borrowing using very high LVR's, or to dabble in other things along the way. Sometimes it works; and sometimes it doesn't!

I think it is possible to accumulate 9 IP's within a 10 year period on a moderate and steady income. However, cash savings are also an important factor along the way, as are the yields that the IP's are generating.

Sometimes I think the process of paying down loans is over looked or discounted on the forum, but from what I have read, investors who have bought over many decades have significant cash buffers to ride through rough patches.

Sounds like you are doing well Blaster, with 4 IPs.

Regards Jason.
 
How do people buy dozens of properties yet still have the same job and wage?

The critical elements is inflation over time (CPI).

Inflation improves both your asset base and your serviceability given time (which improves borrowing eligibility). This trend is all in one direction, though the rate of improvement will vary greatly. Doing things that increase the rate of improvement speeds the ability to buy more, sooner.

1. Wealth

Each year the value of your asset increases by 3% (on average).

Each year the value of your debt diminishes by 3% (on average).

Each year your equity, the difference between the two, increases by more than 3%, with the increase becoming more exponential with time.

2. Serviceability

Each year your rental income rises by 3% (on average).

Each year the real value of your repayments diminishes by 3% (on average).

Each year the cashflow shortfall declines until the property costs nothing to own and eventually even becomes profitable.

Leveraged property investing works is because our economy and financial system is based on inflation.

If we didn't have inflation then leveraged property investing either wouldn't work or wouldn't work as well.

But neither would thousands of businesses and millions of people.

And so the powers that be (eg governments and central bankers) do all they can to avoid deflation in the economy.

While this might not be their primary intention, in doing so they are effectively guaranteeing that sensible property investing will work for as long as people want to live in houses and units.
 
In Canada we call it the snowball effect.
As others have said, obtaining your first property is usually the hardest. After that, if they are positively geared, you wait and then take equirty for the next. We never save for any deposit.
Country towns are great. They are affordable and people always want a rental.
 
G'Day blaster

Take on Vendor Terms at your own peril!

I know of no lender which will take over a Vendor Terms Contract, so unless you want to be paying 'vendor terms' for the next 30 years just don't even think about it!

And, unless it has escaped your notice, you don't actually own the property until you have finished paying for it

With a standard Contact of Sale, you pay for the property even though you have borrowed the money to do so from somewhere else.

From Settlement, you are entitled to be Registered as the Proprietor of the Land, you have offered the opportunity to the lender to register a Mortgage over the land to secure the loan of money. Nice and simple. Straightfoward. No catches. Everyone knows where they stand.

If you really want to progress, Keep It Simple. Always.

cheers
Kristine
We have two, large properties, 11 unit, 5 unit, on Vendor terms
Vendor financing is nothing if not straight forward
Valuation is accepted as whatever you agree it is
The vendor, as any other credit provider has a registered mortgage.
At your peril, as any other contract is at your peril.
Do the homework, read the contracts.
Vendor terms can be more favourable than any finance institution,
there are no payout fees if you want to pay early, payout fees on a couple of $million is a **expletive**.
We get a lower interest rate than a financial institution (win)​
Our vendor just wants a monthly income for his retirement, a lump sum at purchase would have been a huge tax hit,
paid over years, he keeps more of the money
keeps 85% more of the money (win)​
"Regular lenders", consider it a mortgage, and value it equally to any other mortgage, we have bought six more properties subsequently.
 
The critical elements is inflation over time (CPI).

Inflation improves both your asset base and your serviceability given time (which improves borrowing eligibility). This trend is all in one direction, though the rate of improvement will vary greatly. Doing things that increase the rate of improvement speeds the ability to buy more, sooner.

1. Wealth

Each year the value of your asset increases by 3% (on average).

Each year the value of your debt diminishes by 3% (on average).

Each year your equity, the difference between the two, increases by more than 3%, with the increase becoming more exponential with time.

2. Serviceability

Each year your rental income rises by 3% (on average).

Each year the real value of your repayments diminishes by 3% (on average).

Each year the cashflow shortfall declines until the property costs nothing to own and eventually even becomes profitable.

Leveraged property investing works is because our economy and financial system is based on inflation.

If we didn't have inflation then leveraged property investing either wouldn't work or wouldn't work as well.

But neither would thousands of businesses and millions of people.

And so the powers that be (eg governments and central bankers) do all they can to avoid deflation in the economy.

While this might not be their primary intention, in doing so they are effectively guaranteeing that sensible property investing will work for as long as people want to live in houses and units.

Excellent post! It just proves that you can still get ahead by playing the "waiting game" after you have accumulated a property or two and letting inflation / property growth do the hard work for you.
 
Excellent post! It just proves that you can still get ahead by playing the "waiting game" after you have accumulated a property or two and letting inflation / property growth do the hard work for you.

Not sure that you can manage to buy 9 IP's in 10 yrs on an average income by relying solely on capital growth and rental increases. Has anyone managed to achieve this without using their own cash as deposits or to pay down loans??

Regards Jason.
 
lol maybe you guys should have a chat to Rixter.

when the serviceability runs out - go for a cash bond!!!

remember - you only need to buy 1 a year, every year. after 10 years, the first 5 would be CF+.
 
Not sure that you can manage to buy 9 IP's in 10 yrs on an average income by relying solely on capital growth and rental increases.

It's unlikely with the conservative 3% pa changes mentioned above. Increased equity to effectively double your initial 20% deposit would take several years at 3% growth.

But some of the changes, especially capital growth, are very lumpy. So if you get in at the right time a 25% increase (which would pay deposit + purchasing costs of a second property) may happen in a year or two. So then you have two properties growing rather than one and the effect could compound.

Cashflow might move a bit slower. But if you're only a few dollars off being neutrally geared then the drag the initial property has on serviceability for subsequent purchases is small and falling all the time.
 
It also helps if you get a great deal at some point that gives a cashflow and/or equity bump. This involves the usual suspects buying well, value add reno, boom in your exact spot, massive rent rises, etc...

These things I imagine boost you several years ahead of what your position would be otherwise.

Otherwise it just takes time for compounding to take effect. Remember that the first IPs someone buys may well be highly CF+ after 7-10 years.
 
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