How to build a 10 property portfolio in 3 – 5 years realistically on $50,000pa.

[skater]

skater, i completely agree with you!

however, this is just my personal view but I almost see it like as buying in the US.

if you cant see it, or havent been there, or cant regularlaly access it, this could potentially be a recipe for disaster, even at the buying process, you would have to rely on photos and BS'ing agents,

its like buying a 2nd hand car unseen.........thats my take on it

It is completely different than the US. Australia is Australia. While there are some diffences between the States, you do not have the same level of differences to buying overseas and no currency risk. It is only a couple of hundred $$ max to fly interstate and check out an area. You can go and do that in a weekend, or a couple of weekends if you prefer.

Easy to go there, easy to talk to the locals, easy access to the Agents (OK, some don't give you the full run down, but it all adds to the experience). You have phone, fax, internet for data requirements. Council can be accessed by phone.

From where I stand, the only limiting factor is your own insecurites as to whether or not you trust yourself to make a wise choice. This should not change whether you are buying local or not.

FWIW, we have bought interstate and regional several times. OK, some weren't great buys, but some were. It's all a learning process.

 

[vbplease]

From my observation, when a comparable property in the immediate area sells for less than the other ones for sale around it, the valuers look at the cheaper sold property and immediately downgrade the value of the similar properties to match it.

This is the point I was trying to get at before..

I think Nathan mentioned his valuers use RP-data that somehow ignore these under valued anomalies.. or he keeps switching lender until he gets the valuation that he wants? Is this right Nathan?

 

[Nathan]

nathan, just a quick question

with the properties that require a simple reno eg paint, carpet, taps, knobs etc. etc.

do you buy the property, wait to settle and then line up the tradies to do it all pronto, or do you rent it out for a while, as I would say that it would be hard to do it once tenants have moved in and also if its vacant, $200 per week down the drain!

Depends what I have on, how bad the reno is and what i can do.

I dont like to renos if I can get away with not doing I will.

For example a house I bought needing full works rents for $320 but with reno $350pw. Not worth it for me atm, but I will when I have time or tenant moves out.

If it was bought cheap coz trached or very poor condition I will do reno at settlement. I have everything lined up for work to settle the day of settlement and turned around within a week with a tenant in it. Sometimes reno before settlement.

Nathan.

 

[BV]

if you cant see it, or havent been there, or cant regularlaly access it, this could potentially be a recipe for disaster, even at the buying process, you would have to rely on photos and BS'ing agents,

I've bought a property before site unseen but its a very risky thing to do.
If you can't visit the property then you need help from someone who knows that particular area and there are plenty of people here who could offer their opinion for free or you could use a local buyers agent.

 

[Meandering]

Just digressing for a moment Nathan....how's those Centro shares doing?

http://www.somersoft.com/forums/showpost.php?p=468787&postcount=130

cant you read? i said average price of 36.5 cents... i know how to calcualate a basic equation as such.

instead of you all looking at the last post, look at the entire thread, as stated 200k @ 36.5c

Have picked up @ 1.21 highest, lowest 8.6c.

I am happy iwith my decision, and am confident of the future.

That's what?.... an 85% drop?

Reckon they'll recover from here?

Heres a bit more light reading

http://www.google.com.au/search?hl=en&q=+site:somersoft.com+somersoft+Nathan+CNP

 

[Macca]

Hi,

Just read this thread from start to finish as I haven't dropped in for a while. Seems to me that the thing that the naysayers are missing is one vital point that has not been spelled out in capital letters.

Patience is required !! if one house per year comes up in each postcode in Oz that could be called a bargain then there are thousands of them. If you only look in your own postcode then there is one a year, if you monitor 52 postcodes then there is one a week, get it ?

Nathan monitors all of NSW and then some, how many postcodes, Dunno, haven't counted them but I bet it is more than 52 so he is looking at a deal a week and may be buys one a month or even less.

If you stay in the lower rental brackets two things happen, the bad is you may get problem tenants the good is that someone can always afford them even on the dole.

Instead of wiping the whole idea spend some time snooping, how about just looking at suburbs where there is only one auction happening this month. Why is it an auction ? Go and have a look, make the effort to attend rooky school, if it was easy everyone would do it and it would not exist would it.

It may take six months of a few hours once a month but they do exist if you prospect hard enough.

 

[RumpledElf]

It astonishes me how many reasons people will throw away heaps of potential income by an unwillingness to do a bit of work, or put up with a bit of inconvenience.

My parents have a house for sale. It is priced well over market in a buyer's market and is an old house with a rather, shall we say, 'colourful' interior and very dated fittings and fixtures.

They'll take any price, and despite having a tonne of money lying around, they'd rather it just sell for the first offer instead of them painting it and recarpeting it. Quite the opportunity right there, and I've been talking to someone from this forum who I'm sure is quite happy to offer a suitably low amount for a good development site. This sort of house is the hidden bargain, one where the list price has no bearing whatsoever on what the seller actually wants for the place, because some idiot money hungry REA is involved.

FHOs are unlikely to touch it, if you want a cheap 3br house in that town there's plenty FAR cheaper than that one to choose from, just you can't subdivide those ones. Like any FHO cares about development potential ... and they're more likely to take the list price as immovable too.

 

[RumpledElf]

Oh, and speaking of cheaper 3br houses in that town, I spotted one for $115k in the local paper rented for $180pw, which sounds like passably decent yield.

http://www.realestate.com.au/property-house-sa-whyalla-107191084

Someone reading this thread might be interested in this one, you never know.

 

[Edmond Dantes]

Oh, and speaking of cheaper 3br houses in that town, I spotted one for $115k in the local paper rented for $180pw, which sounds like passably decent yield.

http://www.realestate.com.au/property-house-sa-whyalla-107191084

Someone reading this thread might be interested in this one, you never know.

not bad!, house is small but sitting on a nice 700+ sqm!

 

[RumpledElf]

not bad!, house is small but sitting on a nice 700+ sqm!

This is where local knowledge helps. Its a semi on a relatively small block. That town has like a billion semis in it. You need both halves to really do anything with them. Its not a development opportunity - its just a cheap house that happens to already have tenants in it. They look quite nice with fake quoins and a splash of render (the semis, not the tenants).

However, its tenanted so that rules out most buyers because ewww, who'd want *tenants*

 

[Property Meister]

This is where local knowledge helps. Its a semi on a relatively small block. That town has like a billion semis in it. You need both halves to really do anything with them. Its not a development opportunity - its just a cheap house that happens to already have tenants in it. They look quite nice with fake quoins and a splash of render (the semis, not the tenants).

However, its tenanted so that rules out most buyers because ewww, who'd want *tenants*

since its 700sqm
couldnt you simply build 2 townhouses , make it a dual occ and capitalise??? or do the locals not like something like this?

 

[RumpledElf]

since its 700sqm
couldnt you simply build 2 townhouses , make it a dual occ and capitalise??? or do the locals not like something like this?

Sure, but you'd need both sides of the semi first, in which case you'd be working with a 1400sqm block and you'd probably build 3 or 4 units. I've been watching Whyalla develop for 30 odd years, and I've never, ever, seen only one half of a semi demolished. They always flatten both sides at once, even if they leave half of one empty for 10 years waiting for the other side to empty too.

Again, its not a development site. Its just a semi, and 700sqm is nothing special, all the semis are on the same sized blocks. And there's dozens upon dozens of semis for sale. That one is just one of the cheaper ones and has an existing lease.

 

[Mindmaster]

The only point I can't understand is is loan serviceability.

With a 50k annual salary wouldn't banks stop lending to you after around IP 3 or 4 due to serviceability issues?

From what I understand, even positive cashflow properties still need to be back up by a minimum income level unless they have a yield of at least 12%.

What am I missing here?

 

[Mindmaster]

<bump> Anyone know how the issue of serviceability is over come in this scenario?

 

[BV]

<bump> Anyone know how the issue of serviceability is over come in this scenario?

by buying positive geared properties so that they are self supported and they don't impact on your ability to service the loan by much.

Eventually you'll run out of serviceability or will become rent reliant but that's some time down the track.

 

[Mindmaster]

Thanks BV, I expected serviceability to hit a limit at around IP 3 or 4 in this example.

This is a key advantage of high enough positively geared IP's.

 

[BV]

Thanks BV, I expected serviceability to hit a limit at around IP 3 or 4 in this example.

This is a key advantage of high enough positively geared IP's.

Mindmaster

From what I can tell, people who have managed to grow their portfolio beyond the 3-4 IP's either got in early (before the boom) or have been buying undervalued IP's or regional IP's which are +ve geared from day 1, or have taken measures to increase cashflow by doing renovations.

Nathan has done all of the above, he's also very active, is willing to take risk and has a growing income from his business ventures (good on him ).

 

[AlmostBob]

for investing on a lower income
CF+ is king
CG+ if it goes with cash
0 to 40, properties that make Nathans look expensive, in 6 years
first IP
$$ cost $$ reno $$ cash flow $$ in CG
310k buy 30k reno $6850/month rent $470K reval 6months, $769k reval 18months

27000/month rent,
retired LOR, ladylove booked next 8month holiday flight leaving 3 Sep return 2 May

this year she bought 1 more, just to keep her eye in

 

[travelbug]

Mindmaster

From what I can tell, people who have managed to grow their portfolio beyond the 3-4 IP's either got in early (before the boom) or have been buying undervalued IP's or regional IP's which are +ve geared from day 1, or have taken measures to increase cashflow by doing renovations.

Nathan has done all of the above, he's also very active, is willing to take risk and has a growing income from his business ventures (good on him ).

We have used Nathan's model (thanks Nathan) to buy 6 undervalued properties in the last 3 years. We've done reno's (1-4 weeks at $3,500-14,000 cost) and are happy with the increased equity and yields. We borrowed 80% + 20% + costs. We have not revalled yet but will reval and sort loans next year as our PPOR is cross coll and we will pull it out of the mix. We may sell one and will then be CF+ allowing me to go part time at work.

 

[oc1]

Mindmaster

From what I can tell, people who have managed to grow their portfolio beyond the 3-4 IP's either got in early (before the boom) or have been buying undervalued IP's or regional IP's which are +ve geared from day 1, or have taken measures to increase cashflow by doing renovations.

Nathan has done all of the above, he's also very active, is willing to take risk and has a growing income from his business ventures (good on him ).

Don't forget development. Build 4 sell 3 and keep 1. If you do it well that should be debt free. Income and growth without the debt!