Building a Property Portfolio Impervious to Market Forces....

Fantastic Post Sash - you deserve every success.

 

Amazing portfolio and a solid plan to ride the cycles of each state. You'd be getting some good depreciation benefits of the house and land packages too.

 

@sash

I believe it would benefit a lot of people if you would share your exit strategy when you finally pull the pin on retirement. Holding 30 resi's is hard work even if they are all positively geared with all the paperwork, maintenance etc

Would you share your plan on what you're going to do?

For example;
are you intending to sell down some pay off debt or reduce debt to a level say 20%?
or are you planning to keep all of the props?
or are you planning to convert to a different asset class e.g. shares that yield 4 or 5% with fully franked dividends that don't attract time overheads like resi's?

 

Well done Sash! your strategy and achievement are inspirational! Do you have a system in place to maintain all those many IPs ? How much time per week/month do you spend reviewing the rental statements and managing all your properties (or their prop managers)?

 

Thanks...just a game of tortoise...slow and steady..nothing fancy!

Yes ...one of the reasons I started to get newer H&L as the older stuff maintenance can be an bugger so trying to more new ones or reno'ing immediately after purchase for less headaches.

Working on the fine details on that one...I have time...but some initial thoughts:

1. Sell 1 a year and every 2 years buy a new one. Particularly the more painful ones...trouble is some of these are getting good growth now!
2. Yes...was thinking of putting part of it into the top 20 companies..and yes you are correct the overhead is significantly less.
3. Looking to buy more in Sydney on correction by divesting out of other states. I live there...

Yes a loose system. I reconcile my statements once a month..about 2-3 hours work a month. The I file. And i have a memory like a steel trap. The real pain is tax time....

 

I have a much more modest sized portfolio and yep, tax time is a bit tedious. My accountant is a gun but its still a fair bit of prep to have the shoebox dumped on her desk!

 

Agree...i file by property religiously every month. Then at least I have a half a chance during tax time!

 

Yes - very, very nice indeed. 100K income for the next 15 years. But here's another thought . Using a $6million , 10 property NRAS portfolio rather than a $10 Million , 20+ property non NRAS portfolio, and assuming the same 5% compounding annual growth , you could produce $945,750 of equity in 3 years. Call it 950K

But the NRAS cash flow across my 10 properties adds an additional 90K or so, tax free per annum - post tax. And that will rise annually in line with rental CPI, which has averaged 5.2% since inception of NRAS. Measured across 3 years, that adds an additional @285K of tax free income, bringing the total to @ 1.235 Million in 5 years. - 12.35 years worth of 100K income

82.33% of the income result, with only 60% of the debt/portfolio size.

Viewed over 10 years and 4% compounding growth, the $10 Million non NRAS portfolio will show @ 4.8 Million in equity - sufficient to fund 48 years at 100K per annum.

The $6 Million non NRAS portfolio would grow to @ 8.9 Million , producing @ 2.9 Million equity, but it would also produce $1,142,628 ( at 5.2% compounding) of after tax cash. Call it 1.1 Million. Moreover, if the $1.1 Million is reinvested towards debt reduction as it is received annually, it just about doubles the value of every dollar, in saved interest. So I think it's reasonable to argue that it's real value might be closer to $2.2 Million. Lets call it $2 Million. Total cumulative value is therefore 4.9 Million.

Pretty much the same result, but done with a much smaller sized portfolio. Point being - you can achieve the same passive income for life with a far smaller portfolio and far less debt and with far less reliance on big growth - which seems sensible to me in this post APRA environment

 

well done Sash, always great to hear the success of people. Well done mate

 

Where would you be buying NRAS at the moment, Sydney or Brisbane OR.........???

 

Appreciate the write up sash, very helpful, are you referring to paying principle into an offset account or are you actually paying P+I on some of these loans?
I have 3 IP's at the moment, x2 Interest only and X1 is principle and interest as I locked it in, set up the finance wrong before I found somersoft.

 

@sash
Great post, brilliant work

You have the income, drive and passion for property why not look at mentoring, I think there would be many seeking your services.

MTR

 

Thanks

I have all my loans set at I/O. Set-up all your income (including rents) to go to an offset. Pay all bills via a credit card. The pay it off at the end of the month. I have set this up direct debit. So I maximise other people the banks money.

Thanks MTR. Will look into it...but also want to ensure that I do this the right way.

 

I think moving forward with APRA etc it's going to get a lot harder to accumulate property.

A mentor who can help strategise will be a massive advantage. Many people buy blindly and lose years In the process

 

I'd be buying any property ( whether NRAS or not) to a budget, planned out BEFORE hand. Dont choose a property first and then see whether you can finance it. Find out your finance capacity and then choose a property that suits your budget.

QLD
Brisbane and regionals - no stock left that I'd touch. Vals are at least 50-60K out on the very small amount of stock still available there

NSW
Sydney - I have a development I am launching in Harris Park - well advanced and due for settlement Feb/March 2016.. I dont expect much growth in Sydney for a few years. Over 10 years though, this project will do very well as Parramatta benefits from massive investment in infrastructure and the APRA changes seem a distant memory. Only 10 apartments available.

Regionals - I have a development in Port Macquarie which is due for settlement Feb/March also. Again, unlikely to be a growth champion in the short term, but is a very very impressive cash cow. One of the best I will be releasing the final tranche of stage 2 in the new year, when the project is 95% complete.

WA
you can still find a good range of NRAS stock and vals are solid on most

VIC
Like Qld , there is almost nothing worth looking at

SA, TAS, NT, ACT
also nothing worth looking at

 

Isn't the NRAS scheme under review at the moment?

 

Great insite mate any particular areas in WA that you see as great value? Do you see these values holding with the WA Market atm

 

Hi @sash any particular finance strategy you are using?

 

Awesome stuff.

With a 8 digit portfolio at 39% LVR returning 4.7% yield... I would expect your cash flow to be greater than $80-100k CF+ ?!

 

Depends whether he's basing the figures on equity or gross holdings I guess.

Lets call it an even 10mil for round calculations - 3.9mil debt is 200k per year at 5%
4.7 yield is 470k a year in rent, or 270k over the interest liability
270k minus rates, insurance, PMs, etc is probably closer to high 1's.

He did say that it wasn't quite 8 figures yet and that some houses were still being built which is probably where the difference is.

I'd rather have this portfolio than nathan birch's, that's for sure.