How much income do I need to generate for +100 properties?

Your goals would change.

When you do increase your annual income level to 7 figures, you probably would not be wanting to buy 100 cheap resi properties.
There would be so many other options for you.

Unless, your specific goal is to purchase 100 resi properties....for whatever reason that may be.

 

Haha...

Here is one of the reason why I have better things to do in life

 

The year's not even over and I'm already nominated for an award!

 

No general rule....but from my observation.

To get to the first 5 is common these days, most can achieve this on a PAYG income of $50-70k+
The common trend is living at home rent free or renting somewhere on low rent OR not buying a $1m PPOR...

To go past 10 properties the base income bracket is generally 100k+ PAYG or self employed.


Once investors hit 8-20+ properties i start to see the following trend;

- investors Start to buy multiple properties on one title rather than single ( Ie block of units/ Duplex/ Triplex Motel etc...) as managing single properties at 20+ is a real pain....

- Some would start to go to part time work or business ( the business tends to be property related) or stop workings all together.

P.s i have clients on 70K income with 30+ properties and another on $100k income and struggling to get past 10.

End of the day there is no "golden rule" or "golden income". It's HOW YOU INVEST and timing ( the more time you got the easier it becomes, so start early.....to achieve 30+ properties over 5 years = your income needs to be DOUBLE of that if you target 30+ properties over 15 years.)

 

The question I would ask to this is why?

 

30+ properties no matter how much they are worth on 70k PA is an achievement. 70k is struggle street, there must be more to these type of situations surely whether its a substantial inheritance or higher previous income levels etc?

 

Hey @Mick C,
Thanks for the great feedback.
It makes total sense to start buying multiple properties on one title as the portfolio grows - this would be ideal.

This has given me ballpark figures to work towards - cheers!

 

Case study on this person please?

 

Hey @Ace in the Hole,
Very true, goals would dramatically change I'm sure.
It's difficult to know how they would change until one gets closer to this figure…
Maybe you're speaking from experience.??

 

The key is time.

And yes most would gotten some sort of "head start" by the parents helping with the initial
20% deposit but not a substantial amount...on average it's around $60-80k.

But as mentioned time is the key factor, unfortunately we live in a new world where everyone wants to get rich NOW and than and wants to own 20+ properties within 5 years.

Example where time is a major factor:

Income: $60k
1st property ( 8-10 years ago): $400,000
You have $40,000, your parents help with the another $40,000

Buy property 1 @ $400,000
Interest rate: 9% ( We are talking about 8-10 years ago)
RY: 6.5%

2 years later.
Income: Still $60,000

Buy property number 2 and 3 using equity from property 1.
How??
- interest rate drops to 7%....but RY increase to 8% ( ie rent goes up...and initial purchase price is still the same)

1 year late
Income: $70,000

Buy property number 4 using equity from property 1 and 2
Similar theory from above.

1 year late
Income: $70,000

Buy property number 5,6,7,8,9 using equity from property 1-4
Similar theory from above...normally it becomes an addiction by this time and your def more experience "understand" your own financial capability and property strategy
- Note your 1st properties RY is now probably close to 12% and your 2,3,4 is close to 8-10%
- Rate is now at 5-6%

and so on....


=======Key take home note=====

1. Time is very important, invest when you can and and as early as possible

2. Spreading your buy over a 10 years period will lower your risk of market corrections and this will stop you keeping all your "eggs in one basket"

3. Rental goes up when the rate is high ( normally there is a 2% difference)

4. Rental remains flat when the rate is low

5. Your RY can only improve with time

6. It's not how much you make...it's HOW you invest and using time to your advantage.

For what it's worth, any 1st time investors - Your 1st 1-2 purchase will be your foundation purchase, so buy something with good Capital growth ....CAPITAL GROWTH IS KING for your 1st 2 buys. Focus on Rental yield later.

 

Im not going to write a full case study. But instead ill share the "concept and theory" which i think would benefit 1st time investors a lot more.

 

Hey @Mick C
Thanks for the great breakdown.
In this example, this individual got to 9 properties in 4 years.
And he just relied on equity from existing purchases to continue buying more, and didn't use cash savings as a deposit except for the first purchase.
Did I read this correct?
At what capital growth rate (%) have you based this on, to be able to continue to access equity?


Cheers,

Taku

 

You're really asking the wrong questions. 100 properties or 10 properties isn't necessarily a goal other than to have a portfolio of a certain size.

Instead you should be approaching the problem based on what sort of financial result you're looking for.

Say for example you want to have an income of $100k from your investing, you can then determine a path to that actual income. This might be 10 properties that generate $10k each after costs, or it might be 20 properties generating $5k each after costs.

Realistically a good solution is probably only 5 properties, getting $20k/yr rent each, with no debt attached. Now the question becomes how to own 5 properties without any debt.

A solution to this might be to acquire 10 properties and hold them for 10-15 years whilst they at least double in value. From there you could sell 5 to pay off debt and cover costs and taxes.


I can certainly give you case studies of clients who've bought properties in double digits over a period of time. Unfortunately in the current APRA environment, it's not necessarily something that's easily repeated.

 

Thanks for the great feedback @Peter_Tersteeg.
Very true. And I do understand that the property it's self is not a goal, but rather a vehicle to wealth attainment, and then the purpose of wealth attainment, is to have ultimate freedom - whatever 'freedom' may mean to you.
So in saying this, you're right, I should actually work backwards:

1. What's freedom to me?
2. How much wealth/income would it take to get me to 'freedom'?
3. How many properties will I need to generate this amount of income/wealth?

 

Exactly. Define what success is for you, then figure out how to get there.

Incidentally it's possible to own 100 properties (abet unlikely), but is this really what you need to achieve your goals? Most people get to this stage by owning businesses, not by simply investing and earning a salary.

 

Personally I would like to manage less number of properties (e.g. 10-15) rather than 100+. Even if the properties are managed by the property managers, the time it takes to discuss with the PM about the repairs, leases, tenant issues, etc will be huge for 100+ properties. It won't give you the freedom you want.

 

Well I probably don't need the 100 properties to reach my current goals.. But if I 10X my goals now, and use this as a point to achieve, I would have a better shot at reaching my initial goals - make sense?
For instance, if I have a goal to hit $1million in passive income, why not 10X this and devise a strategy to create $10 million in income, therefore by focusing on achieving the $10mil, this would help me surpass my initial goal of $1 million faster.
Sorry if this is a little wordy and hard to understand?

 

Makes sense, but grant cardone probably has a meme to do it for you in a few words with a cool picture

In the mean there's this one to answer OP...

 

Hi Taku,

The 10X Rule is good in principle, but I have my doubts about it.
Sometimes you have to ease into things so they can work out, rather than go super hard super fast, as that can lead to quitting early when things don't happen as fast as you'd like.
There's nothing wrong with reaching high, but I think the 10X rule does not suit every situation.

My current success came naturally in its own time, although when it happened it grew really quick, didn't really have any set goals either.
But after that, I've tried being more aggressive 10X style and that method didn't work for me, as it was trying to force things to happen rather than let them happen, if you know what I mean.
Letting things happen is not to be confused with waiting for things to happen.

Good luck with it.

 

I'm pretty confident that you'd trust your property manager with most day to day decisions (including maintenance, leases, tenants, ect if you owned 100. Heck if they where in all the same state, you'd be tempted to pay a PM full time to manage your portfolio - they you just figure out a renumeration scheme based on their decision making.