Building Portfolio on Average Income, Reality or Illusion?

Hi all,

I've been asking myself this question for a while so I thought the investors here may be able to share their experience on this topic.

Is it possible to build a successful investment portfolio on an average income with a good starting base (e.g. healthy bank balance)?

I might find myself in this situation at some point in the future so it would be interesting to know what to expect. I'm just about to make my first purchase in Brisbane, high savings and income, but the income might drop in future.

Many thanks!

 

If a pizza delivery driver can be semi retired by building an empire of 13 properties by 28 years old, you can too!

 

It is definitely possible.

A couple of things to turbo charge and assist with you journey:

1. Put very little deposits down initially..5-10% would be good if possible. LMI is the cost of doing business
2. Look for properties which return 6-7%...they are out there.
3. Be careful of high council and strata costs - especially Brisbane
4. Get educated on how financing works....don't just leave it to brokers. As around across all banks
5. Do not cross collaeralise
7. Avoid the lowest socio economic areas....better to get quality properties as this will allow you to build equity and proceed to acquire more places
8. Think laterally and don't follow the herd blindly.
9. One more thing build the asset base quickly.....the younger you are the more time to build quickly before responsibilities like family set in

 

Lol who's the pizza delivery boy?

I guess he also had to take big risks on the way, be aggressive..

 

Thanks, sounds very encouraging

And good tips, play nice and safe..

 

@Tony Fleming

 

Of course its possible. By the sounds of it, you'll have a better start than some..

 

It is possible to do even from a start point of zero. Save. Read. Learn. Buy.
Your portfolio is determined by your dedication. Not your income (though higher income would help, I imagine).

 

@sash what do you mean by dont collateralize?

by realist, if you're living in Perth, why don't you look around here? I reckon perth is pretty fair priced at the moment and we will start seeing some decent price recovery in 2-3 years

 

Too early, Perth appears to be falling, no turnaround yet, too many vacancies too.

 

By cross collateralise...I mean that some banks will tied all your properties together...though they may have separate loans. It offers less flexibility and if anuything goes wrong your assests at risk

This may not be an issue initially....but when your properties grow in value and want pull equity...this offers less flexibility especially if you need reval or do other things. To undo this can be costly and painful later down the track.

Good point for Perth...but I would wait till the rental market stabilises..it should within 1 year. Of course absolute bargains....snatch up immediately.

Though an awesome time to bluechips like Dalkeith..City Beach...though you will wear some serious holding costs.

 

Fair points above, so if i were to invest with multiple bank, im guessing it would be more effort but this would remove the risk of cross collaterization

 

Thanks all, very encouraging!

I'm on standby for Perth. Just sitting and watching over the next 12 months and then I might pull the trigger. In the meantime I'll monitor the suburbs and try to figure out which suburbs will be worth investing in..

 

Correct....but at cost of efficiency.....so there is a fine balance.

In terms of banks:

1. Limit borrowings initially with any one bank to say 600-700k
2. Do not cross lateralise
3. Set-up offsets and put your pay to ensure that the savings are compounded

 

I think it is much much harder today compared to a year ago, but it is still possible to do, just much slower now after you hit 3 to 4 properties.

 

Might it be easier to earn more money?

 

Agreed.

I know it's always good to learn and devise an effective strategy that will work for you, but l am going to put it out there that l wouldn't even be close to my current holding if l started in today's climate.

 

Great post @sash .... I'd add just one more golden rule:

10. Keep your non-deductible debt under control & expunge ASAP.

 

Even with a very small portfolio I was already with 2 lenders. I got a very good deal with both because I played one off against the other.

 

The answer to this question comes down to one thing - managing your borrowing capacity. Everything else is white noise.

That means using the right lenders in the right order, purchasing to a budget, and reducing debt as you go.

The only exceptions to this are higher income earners or those with very mature portfolios already yielding 10-12% pre tax.