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

A personal assistant to deal with local agents would be more effective and appropriate IMO.

 

Hey @Ace in the Hole,
Great feedback, appreciate the insight.

 

But then you're paying someone to manage the person managing the properties. You'd be up for the standard PM fees plus the PA (40k pa?). Surely you could just give your instructions straight to PM if that was the case?

 

Or just hire your own fulltime PM?

 

Taku

100+ properties heh? The question needs more details...

Well couple of questions.....

What is the average property value?
Income to service this would have to be huge.....$150-$180k will not cut it.
Banks would not care too much about cash or equity. But if you can provide large savings it will help.
If you CF is more than expenses & interest you are reducing debt.
Depends what you are buying..

 

Hey @sash,
Thanks for the feedback.
Yep, realised there was a few bits and bobs missing from this scenario after having asked this.
Each property would be around the $300-$350K mark in todays $ value, with a timeframe of 15 years.

 

Even with that information it would be difficult to achieve that with quality properties. You would probably need an income of $1.1M-1.5m in cash flow to service the loans.

 

Good luck finding one of those on Earth.

And, good luck with the quality of the tenant.

 

You would run out of DSR very very early on in the 100 property challenge with that yield - even at these lowest ever rates.

Unless your income is in the multiple 6 figures and you don't mind throwing many hundreds of out of pocket dollars at the neg cashflow, and/or you can throw a huge wad of folding at each property for deposits to get the cashflow into the pos.

 

Good to see young folks thinking BIG. Love your style @Taku Ekanayake.

With a 10-15 year timeframe, deploying business profits to that end is the most realistic way to get there.

As others have touched on, 100 properties would be a pain to hold (unless you outsourced almost everything to do with them from rates payments and record keeping to decision making).

I'd probably look at starting with bread and butter residential IPs early, then consolidating into a combination of blue chip resi ($1m+), multi-dwellings on single title, commercial and also developments. $30-$35m of those would be a lot more manageable.

 

I can think of nothing worse than having 100 properties (probably in half dodgy areas). I can guarantee at least 5 phone calls a week to fix this and that which would brutally sap your enthusiasm and cashflow.

I reckon the sweet spot is about 20 quality properties spread around metro cities (in Syd, Mel, Bris, Perth) with a portfolio value of $10m or more. Once they're self sustaining, you're well on the way to retiring early.

 

You're kidding, right?! I've got to battle to get anything more than 2%, and even then, the increased workload that comes with that 'raise' doesn't make it anywhere near worth it

 

Using some basic quick numbers:

Say 100 properties, worth $300k each at an 80% LVR, achieving a gross 6% yield. This means $24mill in debt.

Using residential calculators, you'll need to show $2,124m in income. (7.5% P/I, 25 year term)

Net rental income will make up 1.44m (assuming 80% used).

So you're short of around $684k in net income. Add in another $60k for living expenses, and its about $750k.

So Sash's number of around $1.5m is pretty close - after tax, you'll be on around that in disposable income.

Practically, banks will most likely treat you as a professional property investors, and will want to see tax returns. So the gross/net yield difference will matter. The above calcs are based on 80% of the gross yield being used (with the other 20% being used to make up property expenses).

Cheers,
Redom

 

Have you heard of this (not so small) place called Adelaide?

 

Reality check: "No Bank is going to carry that debt on their books.

Honestly, (time to get real here) I would suggest you setup a meeting with a listed property management company like Colliers RE or Ababcus Property Group, get some solid, down to earth investment advice from "the" experts, that may save your butt and your marriage..

Then you'll know, where you stand, legally and financially.

Just my 5 cents..

(P.S. I dont endorse the companies mentioned above, they are for reference only.)

 

That's why you use a mortgage broker to place it with multiple lenders in a strategic order. I can recommend you one if you need?

 

Sorry, but for this sort of deal, you don't use a Mortage Broker.

 

1. Yes like most investors with multiple properties ( 95/100 if i had to take a wild guess...) would reply on equity to buy their 2nd if not their 3rd one on-wards.

So that's why the 1st 2 buys are so important it's your "foundation" your banker your equity holder...

Someone on a $70k income who buys the right foundation property ( ie Area with good CG) would have more equity ie deposit in 5 years time VS someone on a $150k income who buys a property with low CG ( most likely for super higher RY- Im generalizing a bit here).

Cash VS equity growth ( one is taxed VS not taxed)

2. No % in CG to note....Taku dont look at a property as a short term year by year result...instead consider the growth over a 3,5 ,7 years cycle- think long term.

Ie " How am im going to go to property number 2 and 3...what do i need to do? and WHAT does this buy mean for me?"

So buying property number 1, you really want to get enough for another 10-20% deposit on property number 2.

So if your property number 1 is $300,000 purchase, and your planning on buying property 2 at $350,000 purchase...you need property number 1 to go up by $35,000- $70,000 + Stamp duty etc...

So lets take $35,000+ Stamp duty =~$48,000

So that's an 16% increase....are you going to get 8% per year? that's NOT the question...the question is how long will it take to have an 16% increase...it could be 1.5 years it could be 3 years etc...Not every year is the same.

Taku quick reality check.

1. Start off slow first....once you have 2-3 properties and equity starts to grow on all of them you will see your property portfolio shoot off much quicker towards the end.

2. The general problem when you first start off from property 1-3 is ALWAYS deposit/equity ( income rich, equity or deposit poor).

At property number 3-5+ it's normally income/servicing issues ( Equity rich...income poor)

^ so have a think about that, this will effect how you buy and what you buy and "when".

3. Most will NOT have 100x $300 property lol...that's just insane...the amount of time you need to manage this would make it a full time job! and most investors once they get to a sizable 15+ would like to retire lol

As mentioned, once you hit ~15-20 or sooner...most would buy blocks of units.
Ie a Block of 8 in regional NSW maybe or West of QLD/ SA etc.

Anywhere from $600,000- $1,300,000. ( Metro and bigger regional would be $2M+ for block of 8)

That will add 8+ property to your portfolio.
- Each one on average is now only $75,000- $162,000
- RY ~6-7%
- One PM to manage everything with one statement
- One council rate one water rate...etc


^ much easier...buy 3 of these block and your at property 40+ now.

 

Good luck trying to get to 20+ with 1-2 banks...Unless you have some epic income in this NEW APRA environment your def will need 4-6+ banks as a min to achieve a sizable portfolio.

 

But what is the 'deal'? Surely you build it up over a long period, in which case a broker is important.

If you have $30mil and buy 100 resi properties valued at $300k at the same time (rather than another asset class) you are just stupid.