Here's how to build a property portfolio which will fund the lifestyle you've always dreamed of.
Blogger: Chris Gray, CEO, Your Empire
I have numerous properties in my portfolio, which I keep adding to every year, which I never sell and which fund the lifestyle I had always dreamed of. Anyone can do the same if they stick to a few key decisions and stay focussed.
Be driven. I aspired to be financially free. I wanted enjoy a wonderful lifestyle – not only on weekends but every day. I knew this could only happen if I were making a passive income. Drive enables you to take risks that very few others would make. At age 31, for instance, I gave up my full-time job as an accountant at Deloittes to focus on my investments. My work colleagues laughed, thought I’d fail and re-enter the job market within weeks. With attitudes like these surrounding me, I had to fight hard to ignore them and quietly follow my dreams.
Be passionate about what you’re investing in. Passion stems from a belief in your investments, feeds your drive and helps you stay focussed. I decided from an early age that property would be my investment vehicle, as it leverages my time and money, it’s solid bricks and mortar, relatively risk free and grows 24/7. It is also passive to look after, making property investments one of the best ways of being able to afford a better lifestyle without having to work too hard. I believe it’s the most stable investment that provides a decent passive income. I believed this when I began in my early twenties, and I believe this now.
Work out how you can afford it, even when you can’t. If you’re motivated enough, you’ll always find a way to start investing. I bought my first property at age 22, while on a salary of just $25,000. The property was a three-bedroom house, not a tiny studio unit. Most people would think an investment of this size was well beyond my reach. I wanted this property badly, so I sat down and did the numbers to see how I could make this work. I knew the seller was very motivated and might offer me the property at below its value. I also worked out that if I leased the remaining two bedrooms, the rent could cover the mortgage payments. In fact, by doing this, I discovered it was cheaper to own a three-bedroom house than a one-bedroom unit!
It turns out, the seller was extremely motivated and sold me the house for $50,000 less than it was worth. That was my first win in the property market – I made $50,000 on the day. I leased the remaining two bedrooms to two professionals who were reliable with their rental repayments.
Take risks and keep investing. At lot of what differentiates me financially from other people is that I then used the spare $50,000 equity in the house to buy more property. This took my assets and borrowings to another level, and I got used to having a lot of debt at a young age. In my seminars and workshops I’ve met thousands of home buyers, and I know that very few of them would have done the same. But I structured my finances in such a way that my tenants were paying off my rapidly appreciating properties.
From then on, the more I got into property investing, and borrowing money, the more I learned it was an investment that could bring me other advantages. I learned about refinancing, and worked out how I could buy more properties – and a few luxury cars along the way – simply by tapping into the excess equity in my existing properties.
Lastly – and most importantly – learn to delegate. When I bought my first property, I did what nearly every amateur investor does: I moved in and renovated it with my own hands, using friends and relatives as cheap labourers to help me do it. I can now see that this was the most difficult, cumbersome and financially unviable way of preparing a property for investment. Instead of buying another property or a car with the remaining equity, I could have invested some of the equity in outsourcing the renovations and the search for another property.
Investors should also do the following:
Outsource the buying. If the buyers agent is a professional continuously working in the market and networking and negotiating with real estate agents, they’re probably also going to produce a better outcome than you would. They can often secure a property for you at 10 per cent cheaper than you could yourself, and they might have access to better properties that aren’t even listed on the market and that are likely to grow faster in the future. In that case, you’d be silly not spending $10,000-15,000 to make $40,000-50,000 instantly. And the best part is, you don’t need to do anything yourself.
Outsource the renovating. This part is often easier for investors to understand, especially they’re new at renovating and don’t like getting their hands dirty. After buying my first couple of investments, I discovered what’s most important is not how much you can save on your renovation, but how much you can make and how quickly you can finish the work. Time spent improving the property is time lost on tenanting that property and bringing in a rental income. I also found that after I had stuffed up a part of the job, I would have to employ a professional after me anyway! Also, a great advantage in using a project manager is that they will also guarantee if they haven’t finished the renovation within the agreed four weeks, they’ll pay the rent until it is completed.
About the Blogger
Chris Gray is CEO of Your Empire, a buyers agency which builds property portfolios for time-poor people – searching, negotiating, renovating and managing property on their behalf.
Chris’s team buys 1-2 properties a week and often spends $5m+ a year renovating on other behalf, providing a unique insight into market conditions and buyer and seller sentiment. Chris hosts “Your Property Empire’ each Monday on Sky News Business channel, where he interviews various heads of property research companies and major industry figures. Chris is a qualified accountant, buyers’ agent and mortgage broker.