From Zero to $5.4 Million: My Journey to 6 Properties and key lessons

Very early on I went to quite a few Somersoft catch ups to bounce ideas off others and see why they were investing in the areas they bought in.

Besides doing my own research through reading books and this forum, my broker was probably one of the most helpful as they're a property investor who worked with primarily investors.

So not only did I have finance strategy sorted, I was able to chat to them to see what markets investors were in that fit in my budget and goals.

Welcome to PC! Looking for the 1st IP is definitely exciting - how's that going for you?

You're at the right place, plenty of opportunity to ask questions on this forum.

 

@Justin_Z well done and thanks for sharing. With such a high PPOR debt, isn`t it better to sell one IP, pay a big chunk of it, take equity off and reinvest?

 

Cheers Luca. Good question, something I have considered and I'm sure many other investors have too in regards to their own situation.

Personally, it comes down to the numbers, what I believe the IPs will do, and longer term goals.

For now, the IPs are winners doing anywhere between 15-20%+ YoY growth, so doesn't make sense to sell off and debt recycle – given selling costs, CGT and re-entry costs. I'm sure there are better opportunities out there, but helping property investors find financial prosperity is the focus.

I'm also a firm believer in time in the market, so unless something fundamentally changes property investment or your goals – hold.

For other investors, selling to debt recycle is worth considering if:

• Cashflow is an issue and/or
  
  
• There's poor performing IPs in your portfolio and/or
  
  
• There is no effective means to increase cashflow in the short to medium term and
  
  
• Solid plan on a better investment opportunity after selling
  

 

Having a portfolio that does 15-20%+ YoY is definitely not bad. It all comes down to numbers, however high PPOR debt is something to be killed ASAP from my point of view, and if you can add a big chunk of cash at the start which will reduce the interests paid and could be available for redraw is not a bad thing. I agree it depends on the numbers: interest to be paid (non-deductible) vs future performance of the asset (IP)

 

Hello @Justin_Z really enjoyed reading this thread, definitely find you to be helpful but also genuinely humble…

Loved your view on point 9 delayed gratification vs living in the present and tip 10 balance something I’ve spent lots of time reflecting on personally… probably some of the hardest decisions I have needed to make in my life, keep up the good work!

 

100% for investors looking to maximise portfolio, especially during the acquisition phase of things when you're starting out. Avoid/minimise large PPOR debt, credit cards, car loans, personal loans etc where possible.

Helps a lot with improving borrowing capacity when you have deductible debt.

@SLP07 It's definitely one of those points that most will have a good think about - I've certainly struggled with it and still do every now and then.

Often it comes back to their own life experiences, upbringing, environment and of course goals & values.

Certainly need delayed gratification to build something though. How far you take that is up to you.

Learn from the past, invest for the future, live in the present!

 

Your journey is super inspiring! Thank you for sharing your story and the lessons you've learnt on the way, it is extremely valuable. I hope one day I can build a property portfolio as impressive as yours, I have a lot to learn but I am keen to start.

 

When investors pay down PPOR debt, do they leave the money sitting in the offset account or do they actually extinguish the loan? If the money is in an offset account, how are they able to continue borrowing unless their income keeps growing, as the high PPOR debt still remains?

 

It depends on the personal circumstances: 1) cash in the offset gives you control over the cash, reduces interests but leaves the borrowing capacity the same 2) If you repay the loan you can debt recycle and invest again.

 

Appreciate the kind words. Just like with anything worth going for, it's going to be harder at the start if you're going at it alone. Property investing is a long term game, take the time to get the fundamentals right, an experienced team around you with your best interests - and mostly importantly execute a plan with consistent action taking.

If you hang around PC and absorb the info, ask questions, go to meetups etc you'll be at a massive advantage already. Knowledge pays!

Good question - there's many options depending on your borrowing capacity, level of deposit/equity etc. From paying down PPOR loan and redrawing it as investment (debt recycling), to increasing income, optimising existing structures, and using investment friendly lenders and so on.

If needed, you can always rent out PPOR if there's an option to rentvest or move back in with parents - we did this with our 1st apartment.

Now your whole PPOR debt is an investment debt from a lenders POV which boosts servicing significantly, and long as you move back in 6 years can still claim CGT free status (check with accountant on whether this applies to your situation).

The downside is of course you'd need to move out of PPOR which many people have attachments to - easier on paper than in practice but can be done.