Secrets to building a $12-million portfolio: Lloyd Edge
Investor Lloyd Edge has successfully built an 18-strong property portfolio with assets spread across three states, now v...
Smart Property Investment’s Phil Tarrant has been an avid property investor for the past six years, holding an impressive 12-property portfolio which he hopes to grow continuously with the help of his financial team.
His accountant Munzurul Khan believes that his journey is going well based on the data that they have been religiously tracking and updating since the very beginning. Some of the information they use to gauge the performance of the portfolio are cash flow, tax loss, and overall expenses.
At the moment, Phil’s total tax loss sits at around $190,000, which may seem quite a lot for some, but according to Munzurul: “[This amount] is really not your out-of-pocket because that includes a whole lot of a non-cash expenses such as your depreciation expense, your one-off potential renovation—extraordinary sort of a cost, [so to speak]."
“When we take away those one-off costs… [and] we take [a few of the] tax benefits that we received along the way, as well, [then] we adjust all of those… we reach into a dollar value of about 180 thousand.”
Overall, it cost Phil $180,000 to create $2.4 million in equity over a period of six years, or about $18,000 per year—an incredible feat for most property investors, especially those who are yet to enter the “maturation phase” of their property investment journey.
Munzurul explained: “The reason why it is costing us 18 grand and… why we are comfortable that it is costing us 18 grand is because we still are arguably at the beginning of our investment cycle—it's not a matured investment yet. [You are in] the acquisition stage, where you're buying properties more and more [and] it's the capital growth of the asset that is purchasing as such.”
According to him, they have used the “most conservative of the conservative” approach to make sure that they are making the most out of this journey while also minimizing risk as much as possible.
“What is really the cash deposit that you had? The answer is zero because we've absolutely counted for every single cash. When we cost your portfolio, so to speak, we cost literally 105 per cent—we cost the entire purchase price,” he said.
“We also cost your purchase relative cost, all the incidental cost, all the cost that we included. We're being the most conservative of the conservative, so to speak—those 12 properties that you have in [three] different estates are costing you about… $1500 per property per year, [which is] pretty alright.
To break it down even further, Phil shells out around $346 a week “in real money” to hold his portfolio—an asset base of $6.1 million with more than $2 million worth of equity.
While it is impossible to predict the total value of returns, Munzurul believes that Phil and his financial team are going in the right direction.
“You've got a portfolio which is [a] 6.15-million-dollar asset value… What would be the return in the future? Of course, we don't know [because] it would differ on a year-by-year basis, [but] if you use the most conservative, let's say about 6 per cent... we [could be] making about seven thousand dollars per week with the cost of 300-odd dollars,” Munzurul said.
For people who aspire to invest in properties that grow in value and delivers a positive cash return, Phil believes that it’s vital to surround themselves with reliable property professionals who understand their capabilities and limitations as an investor.
After all, no two property investment journeys are the same, and the path to success varies from one person to another.
“Over time, if you stop aggressively growing your portfolio and just let the properties go up in value and keep the deposition the same, you start creating passive income. For us, we're not yet at that phase because we're in the process of building,” said Phil.
“If you avoid your accountant, you should be seeing them as a trusted ally and confidante who can help support you as you get on this path of wealth-creation through properties. If you haven't spoken to your accountant for a little while, I suggest you get on the telephone and you speak to them.”
Tune in to Phil Tarrant and Munzurul Khan’s episode on The Smart Property Investment Show to know how to measure the success of your portfolio, the best ways to reach your retirement goal, and the many stages of successful property investment.