Dazzling, Ms Jade, Blue Card!, Jaycee
Let me clarify...I was all for a larger portfolio as the extrapolation is that over time with natural growth this will grow bigger than a smaller portfolio. But over time I have adjusted my thinking. Over the years I have come to the realisation the yield now and potential, CG now and potential, and risk mitigation in hard times is just as important. Otherwise, the chances of you losing the lot or the portfolio not performing is high.
A couple of recent examples:
1. I know a guy with over $8m property portfolio but he has just $1.8m in equity and the growth of hi portfolio has been dismal. Most of his portfolio dates back before 2006. His yield is about 5%.....thus he is struggling and in asset disposal mode before the banks move in.
2. In the recent API mamagzine article had Dave Dorian how has $13m with about maybe $3m in equity. The growth again has not fantastic.
My philosophy is not to concentrate soley on size but couple of factors, for convenience sake I will call it the Sash Philosophy of property investing:
1. Buy only older property as most new property has a premium on it in most instances.
2. Ensure when you buy the location allows a healthy yield now and potential of at least a 10% increase yearly.
3. The numbers on the property need to nearly neutrally geared - no more than $20pw loss (the pizza princple!).
4. Over time (within 5 years) your property needs to return a positive cashflow of 2.5% of the value of the property. So if you have a $4m portfolio you should ideally be getting $100k pa in cashflow depending on where your properties are in the 5 year cycle.
5. Don't get to caught up on the inner suburb is better than the outer suburbs argument....there are properties in all locations in Australia that will perform.
6. Mitigate risk, the better you do this the better your future sanity!
In another wards keep LVR under 50%, spread properties around Australia,
do not buy one property for $1m instead buy 3-4.
7. The properties you buy should ideally return a minimum of 7-10% growth.
8. Shoot your dogs if they have not performed to expectations within say 5-7 years.
I have lived by these principles. My portfolio is a fraction of some on this site but my plan is to head to the $80-90k positive cashflow mark in the next year....this will be done via a combination of interest rises and smart acquistions. Any CG will be the icing on the cake.
Who needs LOE when you can do this....
Bye the way...I am also modifying my strategy slightly to suit the current conditions of the market. Will post when I have made the relevant acquisitions based on this strategy.
1. A larger portfolio will leverage the return. If I own $1 mill worth of property and it goes up 10%, I'm $100k richer.
I think I would draw the line at at least 10%
but 20% of a sh it load is better than 60% of fk all....
agreed...
the now I never do anything perfectly... but I usually dont always scrape the total bottom of the barrell each time either.... is there not a middle ground where one could borrow a reasonably high amount & not have to buy dogs which are losers 100% of the time ?