Maximum Borrowing Capacity

Do it or did it?

 

As mentioned earlier, many of these portfolios were built before the current level of tightening influenced by APRA. If you look at the dates of those two you links will see that one was mid last year, the other was in 2016. The current HEMS would not have been in force at that stage. Especially not the 2016 one.

Secondly, don't look at the number of properties. That's not as relevant as the value of the portfolio which isn't shown for the first example. But based on the rental income you can calculate a rough portfolio figure based on yield. In the second example they tell us the portfolio value and rental income which is fine, but also we are relying on their 'word' for it when it comes to their portfolio value. Based on my knowledge of where that BA company is focusing their efforts at present & the yields in those areas, I would say the portfolio figure is generous.

Thirdly, another important element to this equation is their incomes. We don't see them shown anywhere. If a couple is on a combined gross income of $500,000, then they are not considered the norm for the purpose of this discussion and of course, would not run out of steam like the majority of people would. But as we know, most couples are not on $500,000 and thus would fall short of the 6 properties per year for the next 2 years as targeted by one of the couples based on average incomes. By all means, it is possible depending on a few factors - but not likely for the majority of investors.

Of course, there is much more to one's ability to grow a portfolio beyond what has been mentioned here. But don't believe everything you read on websites. A few very well respected brokers have commented above and it is well agreed that it is much more difficult to build a portfolio today than is was 24 months ago.

 

And forthly...

 

A couple of things...

* One of those videos is now over 2 years old. The other one is 12 months old. Lending restrictions started about 3 years ago, but it was still fairly straight forward up until 12 months ago.

* They used BInvested who are well known for two things...

1. Buying really cheap properties, often around $150k in value, with little regard to the quality of these properties as investments or their alignment with the needs and plans of the purchaser. Buying 4 properties sounds more impressive than buying one $600k property. (I didn't actually bother watching the videos).

2. They do some extremely dodgy things to get finance. I would avoid doing any sort of business with them or their affiliates. If you go looking, you'll find numerous posts about them.

 

These are not typical investors.

These stats might surprise you.

If I was to summarise the latest taxation statistics in a simple form – say, as 100 people, then:

• 16 own an investment property
• 84 don’t

Of the 16 that own a property investment, again, using the 100 people as the base, then:

• 71 owned just one investment property
• 19 owned two properties
• 6 owned three properties
• 2 owned four properties
• 1 owned five properties
• 1 owned six or more investment digs

​

https://propertyupdate.com.au/how-many-properties-does-the-average-investor-own/

Breaking this down further, in 2014–15, approximately 15.53% of taxpayers owned an investment property.

In terms of number of properties:

11.12% of taxpayers own 1 investment property
2.9% of taxpayers own 2 investment properties
0.9% of taxpayers own 3 investment properties
0.33% of taxpayers own 4 investment properties
0.14% of taxpayers own 5 investment properties
0.15% of taxpayers own 6 or more investment properties

Taxation statistics 2014-15

Looking at your examples of 4 and 8 IPs, you are looking at 0.33% of taxpayers and less than 0.15% of taxpayers which that number of properties. i.e. hardly any.

Like I said, A lot of people do have their borrowing capacity capped after 2-3 properties.

That said, if you buy cheap properties you will be able to get to 6 more easily than if you buy more expensive properties. But then, would you want 6 of these?

22 Charlson Street, Davoren Park, SA 5113 - Property Details

 

$95k in 2015
Probably $250k in 2018!

 

Domain thinks $155k
Property Report for 22 Charlson Street, Davoren Park SA 5113

Still a 50% capital growth return in 3 years. Pretty good I think.

 

Yep this has been my experience..halted at 2 Investment Properties due to recent APRA lending restrictions..

Its not all bad though as by stats above 85% of tax payer's don't own any IPs at all!!

 

Not in Davoren Park. It is one of Adelaide's worst suburbs.

I did some research into the area. It's not pretty. Examples:

Sold August 2008: $187,500
Sold February 2017: $167,500

https://www.realestate.com.au/property/32-longbridge-rd-davoren-park-sa-5113

Sold November 2008: $172,000
Sold June 2017: $145,000

https://www.realestate.com.au/property/13-brimsdown-rd-davoren-park-sa-5113

Looks like a good way to lose money to me.

 

2 properties puts you in the top 4.42% of taxpayers