10 IPs by 25 - My Investing Journey

Hi guys,

I'm a very private person which is why I've always been hesitant to share my story - I prefer to fly under the radar - my friends, girlfriend and most of my family don't know what I own. However I always get requests to do this on this forum, so I thought I might as well share some tips from my journey. I don't want to be on any magazines, I don't even want my real name to be known - I just hope my story can inspire younger people to keep working hard to achieve their goals. (also I'm in need of a bit of motivation at the moment so thought this was a good way for me to reflect and get some of my motivation back)

Background
Since I was about 10 years old, I used to buy and sell things for cash. Back then it was pet fish, and then I moved onto mobile phones, computer parts, motorbikes, basically anything I could make some quick cash on!

I started working in family businesses when I was 13 and since then I haven't stopped working. I didn't come from a wealthy family, my parents made me pay for my own expenses when I was a young age. I hated it at the time, but in hindsight it has taught me a lot.

When I finished school, I didn't know what I wanted to do but I've always loved business, so I started a business degree at university. For the first 2 years of uni I was there full time (3 days) and working 4 days. In my 3rd year I decided to get into the property industry as I have always loved property, so I started working in the property industry 3 days, studying 2 days and working elsewhere 2 days.

Property Investing Journey
In late 2012 (age 20) I decided I wanted to invest in property. I started reading books, magazines, researching online and joined the Somersoft forum. I probably spent 3 hours a day researching, for about 12 months before I did anything. In the background I was also saving as much money as I could.

I saw the Sydney property market starting to take off, so my first IPs were 2 units in Western Sydney at the end of 2013, when I was 21. I only just had enough to buy these at 90% LVR. Everyone told me I was stupid, that I should have bought at <80%, but I knew the market was moving up quickly and I'd rather benefit from the growth of 2 properties rather than 1.

I then bought 2 villas in the Logan area in 2014 as the market was taking off, using the equity from my first 2 IPs. I exchanged on these before my 22nd birthday. I bought them off-market, paying about $15k less than they were worth (each).

I didn't buy anything for 2 more years as I didn't have the serviceability or equity/cash to do so. So I was working hard at work, and saving hard.

In 2016 I bought 5 properties using equity in my first 4 IPs, as well as savings. By this time I was earning $200k+ so my serviceability and savings had improved immensely. The 5 IPs were:
+ 3bdr house in Ipswich area on 1,200sqm (bought $30k below market value through a buyer's agent, sub dividable)
+ 3bdr house in Logan area on 700sqm+ (spent $10k on it and reval'd for $70k more within 6 months, can add GF)
+ 3bdr house in Logan on 700sqm (bought $20k BMV, can add GF)
+ 3bdr house in Ipswich area for $230k (through a buyer's agent, cashflow neutral and can build 3 townhouses there in the future)
+ 3bdr house in Logan area on 700sqm+ (bought off-market $20k BMV, can add GF)

This year, I bought another one:
+ 3bdr house in Logan area, corner block of 1,150sqm (was planning on subdividing off 450sqm and building dual key, and then further developing the 700sqm corner block into a dual occ later on, but subdivision costs have blown out so I will sit on it for a year or so)

This last purchase brought me to 10 IPs before my 25th birthday (my goal was 10 before 26).

What Next?
I've more or less hit my serviceability limit due to the recent APRA changes, which has shaken me up a bit because I'm used to just being able to buy whenever I find a good deal!

I met with a few mentors for advice (property guys with huge portfolios, who have been doing this for years) and as a result, I've decided to sell my 2 Sydney properties. I never thought I would sell, but I'm at a point where I need to take a step back in order to take 2 steps forward. I assessed all my properties based on their likelihood of further growth in the short term, costs to hold and ability to add value, and the 2 Sydney properties ended up being the first 2 on the chopping block. I'm in the process of selling them now.

The next 2 on the chopping block are my 2 Logan villas because I can't add value to them, but I think they will have more growth in the short term, and they don't cost me much to hold, so I'll hold onto them unless I have to cull them. The remaining 6 properties have ability to add value, and will continue to have growth in the short and long term, so these will stay in my 'long term core portfolio'.

I'm now looking at opportunities to buy, add value and flip properties. I need to do this in order to make profits to add value to properties in my 'core portfolio', and to add more quality long-term high-performing properties into my 'core portfolio'.

Finding deals at the moment where I can buy well, add value and flip will be incredibly difficult in the markets that I know (Logan, Ipswich, Western Sydney) so I'm going to start getting to know other markets such as Adelaide and Perth. I have come to terms with the fact that I need to be patient (which is hard for me) and that I may have to sit on my hands for months, or even a year+ before the market is conducive of desperate vendors where I can buy below market value.

Tips
- Have a good team around you. Without my mortgage broker (Rolf Latham - absolute genius) and buyer's agent in particular I wouldn't have achieved what I have
- I prefer to buy in the low end of the market. It's easier to buy well (ie buying 10% below market value is easily achievable when you're spending $250k), yields are generally a lot better, they perform well when the market is strong (due to high yields, affordable) and when the market ***** itself they don't get hit as badly as markets with high price points
- Work hard, and don't expect it to come easy. I studied/worked 7 days a week, and researched every night, for over a year before I did anything
- Don't expect to be gifted a silver spoon - I asked a lot of questions, picked a lot of brains for advice, but at the end of the day you need to roll up your sleeves, get your hands dirty and invest a lot of your own time/energy in order to achieve your goals
- There are always challenges, and there are always opportunities. You just need to be creative and keep looking for them

This is all I can think of for now.

I'm certainly not here to brag - I'd prefer that no one knows my story (hence why i use an alias name), but thought I would put this up here so that when people ask for my story I can just send them this link. If you have questions, feel free to ask, but don't expect me to hand you a silver spoon and do it all for you - it's a lot more rewarding when you do it yourself.

Best of luck
John

 

Well done John and good luck for whatever comes next.

 

Amazing stuff John Millar

 

"for privacy's sake, let's call her Lisa S. No, that's too obvious, let's say L. Simpson."

 

Haha by the way, my name isn't John Millar

 

What an outstanding achievement for a 25 year old. Nothing but props to you mate. You've done the hard yards and can now reap the rewards.

Well done.

 

Yep, awesome achievement! At 25, my focus was alcohol and cars (not both at the same time though ). Indeed, well done.

 

Great work - seems the income bump to 200K a year helped a lot - how did you achieve this bump at such a young age?

 

Thanks.

I worked my ass off for it. Since I started I was the first to arrive in the office, last out the door, and the only one to show up on weekends. Again, not easy but it's what I knew I had to do if I was going to achieve my goals

 

Hi John, amazing achievement. Not easy at young age when you have scrape the deposit. I would like to hear more, I will PM you

 

Well done! Love your work ethic, great achievement at such a young age thank you for sharing.

Do you mind sharing the total value of your portfolio and lvr ?
Are you concerned at all by selling your two Sydney properties in the current lending climate that's it's not going to help you purchase any more to replace those properties?

 

First off Congrats. You did a lot at a young age. I thought having 21 properties at age 31 was good. Your at 10 at age 25. At that age I think I had only 5 although all in Sydney. It takes a lot of sacrifice and commitment to achieve what you have.

Secondly why do you want to sell now? Your on $200k p.a - that is very very good coin for a 25 year old. Most 25 year olds have just finished uni and are working as a graduate on $50k per year.

Your Sydney properties would have doubled in price by now and your Logan ones I presume are all positive geared so your holding costs are minimal to none?

You could add value to your existing houses surely? Without the need to flip? Your going to cop CGT and your going to lose all your tax depreciation - which I know you need if your making $200k (I know how much tax you pay because I'm on similar coin on my 9 - 5 job) and its a big tax bill every year on that coin. Don't you want most of it back?

Just a few things to consider.

 

Killing it mate! Good on you..

 

@Jmillar

Well done on your success. You have come a long way since we spoke first via Somersoft just pre-Sydney boom.

Starting your journey and having @Rolf Latham 's guidance is invaluable, and I am sure it has played a key role in you expanding your portfolio.

Excellent tips. I can relate to having spent all spare time available outside of work on property research.

 

Good story - hard work does pay off! Even more admirable considering you did it in an office environment!

Can you share what industry it is?

 

Good work ethic, clear goals, bias for action, great broker. Winning mix.

Well done.

The future looks bright.

 

Well done what a great start. Thanks for sharing.

 

firstly, well done on your achievements

secondly, can you share with us your equity / LVR / net yield

finally, quality > quantity, i dont get the point of having a set number of properties as a goal

 

Thanks

I realise the (huge) costs associated with selling and have weighed it all up. My Sydney properties are just units so I can't add value to them. I'm of the view that they won't have much more growth in the next 5 years, and I think I can make that cash/serviceability work harder for me elsewhere. At the moment I'm limited by serviceability (on paper) so that's what I need to unlock somehow, in order to keep moving forward.

It's about taking a step back and focusing on the big picture, not the small details. Taxes are a cost of doing business. Time for me to pay them and move on.

To put it in perspective, let's consider 2 scenarios for a minute:
Scenario A:
- Keep Sydney properties - currently worth ~$780k
- Sit on my hands for 5 years. Can't add value, have limited control of them due to strata, bugger all depreciation, cash flow on these 2 is $10k negative
- In 5 years time - let's say they're worth $880k = $100k gain (13%). Who knows if it will be more or less than this, but I don't see it being a great deal more

Scenario B:
- Sell Sydney properties for $780k
- Pay $20k selling costs and $60k worth of capital gains tax (don't need to pay CGT for 21 months by the way. In the meantime I'll use that money for other investments, and by the time I have to pay it off I'll have saved it up again)
- Reinvest $780k into a development opportunity which I complete within 12 months (conservative). Let's say the end result is only a $100k profit (conservative)
- Sell off half the development, keep the other half which is a new building with higher cash flow, better tax depreciation and in a rising market. This improves my serviceability and allows me to keep buying
- Repeat steps 3-4 for 5 years, building an asset base in a growing market

Now let's say I conservatively make $400k (profit/equity) doing Scenario B (and in the process create a larger portfolio of cashflow positive properties) in the same period of time. Will I be complaining about paying $20k selling costs and $60k in CGT?

Apply the concept of exponential growth and in 20 years time you can see how I won't think twice about those selling costs.

Obviously this doesn't work for everyone, and I've just made these numbers up (albeit they're quite conservative) but this aside, I just don't like sitting aside and praying that the values of my properties are going to go up. Rather than leave it in the hands of the property gods, I'd rather manufacture my own growth.

Hope this helps
John

 

OK I didnt know this. Thought they were houses with value add potential.

Both units are $780K only? Where are they located? Even my Parramatta 2 bed unit is worth $620k by itself and I bought it for $300k. Even Auburn unit is like $500k now.

I assume you are talking about a duplex yes? I am doing this now with my St Mary's property. Build a duplex sell one of them off and which in turn will pay for the other one outright plus some more. Then I will reuse that extra cash to make more cash. Its a good idea.

Have you run the numbers on this? Post APRA it is getting harder to get money so even if you sell the Sydney places and do the development your serviceability might not improve as much as you think. Your current loans where attained in much easier days.

Good attitude to have. Take the bull by the horns and make stuff happen for yourself. I like your drive and motivation. Goodluck mate. I hope you make a fortune.