2 years - 5 properties, portfolio worth 3.1M

Hey all,
This is an amazing platform which has helped me learn about real estate investing.

Just a bit of my background - Newbie here and to the country. Landed in 2017 with 5K in bank account and family to support.

Bought my PPOR in 2019 when it was bottom of the market. Didn't plan and it just happened to be the time when I was prepared.

During the COVID pandemic, when I got too much idle time at home started understanding the real estate market and got keen in investing. I ended up buying my first residential IP in Brisbane in January 2021. Second IP in July 2021, Third IP in August 2021 and fourth in September 2021(all in Perth) leading my residential portfolio to 3.1M(70% LVR) in the current market(which could be inflated due to covid induced inflation) including my PPOR. Now, when I am about to hit the serviceability limits, learning from the experts in this forum on how to expand it further.

Regards
REAddict

 

What a mammoth effort mate, well done . Sounds like you started from very little and worked hard to build your portfolio? Any advice to folks who say it can't be done?

 

Great story. Where in perth did you buy? How was the process-did you inspect yourself etc

 

There may likely be some legit ways around this issue.

Well done for taking action and hope you get some more growth from your Perth properties as we arent even halfway through the current boom, IMHO.

 

Thanks mate. I may not be as experienced and educated as others but my philosophy has always been "Calculate your potential losses than potential profits when you're at the verge of making a go - no go decision. Even if it may sounds like not too profitable but you can absorb the calculate risk/potential loss, jump in if you got opinions about growth. With right educations and people around, it's much easier than you would think". Thinking about worst case than best case and if ready to absorb that, has changed many of my NOs to YESs and resulted in action.

This has helped me in taking some timely decisions without lingering on for too long on an offer and cracking it by acting fast(esp in a current hot market). I think today is always the right time to buy property, if you're prepared. There are always places in Australia which will grow in next couple of years, so finding the market is crucial. This worked for me, may or may not work for others. Also, I have just bought a few and they haven't been tested by time yet. Would be interesting to see how things pan out. Hope it works out well!!

 

It was in south perth around Thornlie and Huntingdale area. Been a good purchase so far, let's see how it works out in future. Rental yields have been between 5.8-6.4% on gross rent. I never inspected it personally and relied more on location and price. For building condition, had got due diligence clause added in the contract and relied on Building and Pest report. For future purchases, developed some good relationships with property managers so they could be utilised in the future but in the initial ones they were not there.

 

Thanks Collin. Yes, hoping so. Time is the biggest teacher. I'll either gain or learn, beneficial both ways.

 

Thanks for sharing, great story and well done to you, sounds like you're doing really well.
What made you choose three cheaper properties over something more expensive in Perth? Do you think the capital growth of those properties will be as strong as something more expensive or are you not fussed given the good rental yield?

 

Well done mate .. this is absolutely amazing stuff!! Congratulations!

 

Good work mate! Seems like you got some good bargain when the market was at the bottom.
Assumed you are having a significant capital gain on each property which you might be able to cash out some of the capital and purchase a high-yielding investment in order to increase your borrowing capacity
Just my opinion, hope this helps

 

Good work. It just goes to show that hard work pays off. Congratulations.

 

Well done! What a fantastic story.

Two broad options from here as far as I can see:

1) Do nothing - wait. Let the body digest what has been a pretty big meal. Let the LVR drop slowly, and make sure you have some debt on P&I to ramp that equity and give you refi choices in about 2-3 years from now. Then go again in a few years.

2) Flip: Get finance with a second tier lender and start flipping in order to increase your income and serviceability. The problem here is that flipping is hard to do and the failure rate is high.

There is a third option, which is finding cheaper and cheaper areas to invest in, but I would suggest that is a mistake right now.

Option 1 seems best to me.

Cheers,
John

 

There are multiple reasons for it :

• Rental yields generally is better for three smaller properties than one single property worth the same money in any city, if chosen correctly. Yields of 5-6% aren't achievable, had I bought something over 1M in Perth. Cashflow is critical if you're planning to build a portfolio.
• Lower the price point, the lesser your exposure/risk is to a volatile market like Perth. More the price, the more fluctuations you see when markets go south.
• If you buy multiple rather than one, you're diversifying and not just relying on one property to go up/down.
• Multiple smaller properties has taken off burden from my shoulders and they are essentially paying for themselves. Easier to hold longer term than a single 1M property.
• The more expensive the property is, lesser is the number of potential buyers due to affordability reasons. When demand decreases, generally the potential for gain reduces. I feel with cheaper properties if chosen correctly, can yield good capital gains in terms of %age growth.
• And few more.

 

Thanks John. Yes, atm option 1 is what I am looking at. I am on P&I on all loans and would withdraw equity and/or the principal paid in a couple of years(or when needed). I prefer P&I for two main reasons :

• Better serviceability with P&I which is crucial for me.
• It helps protect me during bad time, which may come without warning. Since, my LVR reduces with each repayment, the risk of worst case outcome like bank foreclosures reduces. If things don't go bad, you can always withdraw the paid principal later. This deferring of decision to use principal on basis of how market behaved, seems quite relevant to me as no one can predict future. Not to mention, interest rate is cheaper on P&I, which is an icing on the cake.

 

It's just the beginning and capital gains are not there yet except 1st IP. Not even bottom of market in Perth to be honest, but feel there is still a potential to grow. Timing the market is almost impossible. Also, you may not be prepared at the same time, even if you were aware. So, act when ready by doing due diligence.

 

Congratulations bro.


Regards

 

Wow some nice yields there!
How much are the property management fees? I heard perth has some pretty high % PM fees

 

Yes, yields are nice. I am paying 7.7% all inclusive.

 

You must have a great earning power! Amazing to acquire 4 IPs in such a short time given how much you have got only a few years ago.

 

Hey congrats! So 7.7% management - when you say all inclusive do you mean no need to pay extra costs such as lease sign up/renewal and inspections? Which company do you use? What type of dwelling did you purchase?