The difference between a $5m and a $10m property portfolio

There are many individuals out there with portfolios worth under or around $5 million. However, you very rarely hear about people with portfolios worth $10 million and over. There’s a reason for this, and I’ll explain why.

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Investors with less than $5 million in property

Previously, lending standards have been pretty lenient. This has resulted in APRA and a banking royal commission cracking down on and exposing risky lending practices.

The by-product of the loose lending of the past is a huge amount of PAYG investors who used their salaries to ‘debt-up’ into large portfolios and in short periods of time.

Building up a $5 million portfolio in a few years means the investor funding the portfolio hasn’t had time to build equity. Instead, they are relying on a salary to continually debt-up.

These types of investors are not classed as professional investors, as they are really just lending up as far as their salary allows them.

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Now that lending standards are tightening, this common theme will dry up unless you become a sophisticated investor.

Investors with more than $10 million in property

Building a portfolio this large takes both time and continual good investment decisions.

There is very little chance that a portfolio this size could be built solely off the back of a PAYG income.

To get to a portfolio in this range, you need to invest in commercial properties for cash flow, buy at the perfect time in a property cycle every time, buy under market value for equity through distressed sales, consider developing for equity and avoid the trap of buying negatively geared assets.

To get a portfolio worth over $10 million, you must treat your portfolio like a business. It can take a lot of time and luck but it’s not impossible to reach this level.

I was able to build an $20 million portfolio by the age of 31. At the start of my journey, I, like all the other sub-$5 million investors, used the pay from my job to fund my portfolio.

In order to break into a much larger portfolio, I developed a clear strategy which involved creating equity, buying very high cash flow assets, and picking the right market at the right time, without any exceptions.

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