While many prospective buyers have voiced their concerns about the difficulties of entering the property market, Daniel Walsh recently told The Smart Property Investment Show that getting into the investment game wasn’t nearly as difficult as it sounded.
The young investor shared his strategy with the podcast along with his tips for those prospective buyers hoping to begin their own investment journeys.
1. Looking beyond your own backyard
Mr Walsh said that as a native Sydney-sider, by looking beyond his own backyard at different property markets across the country, he was better able to find property within his price range and grow his portfolio.
“Too many people live in Sydney and they only look at Sydney,” he said.
“But for me, after my second house in Sydney, I had to start looking at other states – Queensland, South Australia, Victoria – just because I couldn't afford to buy that half a million-dollar house anymore.”
Mr Walsh added that in his search for property, he looked for specific market conditions that would enable him growth.
“I started looking for houses that had cash flow and had the upside for potential for growth [and] infrastructure coming to the area. Those were the houses that I wanted to invest in – something that didn't cost me 100 dollars a week to hold, which Sydney does now,” he explained.
2. Getting a team behind you
The young investor noted that naturally, as his portfolio grew larger, it was becoming more difficult to secure funding for future dwellings.
“That's when it comes down to the team you have around you,” Mr Walsh said, adding that in particular, having a good finance broker who knew very well what different banks required, aided him in his quest.
“Pretty much for my whole portfolio, I have a team around me that does everything,” he continued.
“I even have my own property managers pay for my rates, pay for my insurances [and] pay for my water bills – I don't want to touch anything.
“As you grow a large portfolio, having rates and everything like that coming in to you, you're pretty much paying a bill every day, so I outsource all of that to my property managers and they deal with everything – I make sure that they work for their money,” he said.
3. Managing your tax
Mr Walsh also told the podcast that with the help of his accountant, he was able to better balance his cash flow by altering the way he paid tax.
He recognised, however, that while this approach worked for his own portfolio, it was advisable for other investors to seek professional advice on the particulars should they consider the same route.
“I do a variation tax – so I get my tax back fortnightly,” he explained, adding that by getting money back fortnightly he was able to sustain any negativities within his portfolio, which for the most part was $25,000 positive each year.
"Depending on how much maintenance I do throughout that year, it's between $25,000 and $30,000 positive and, if there’s a bit more maintenance, that takes that down a bit – but yes, I get my tax back fortnightly.”
Mr Walsh explained that rather than having his employer withhold all of his tax, dependent on his earnings for the fortnight, he had a percentage of his tax given back.
“Pretty much what they do is, they'll look at all your properties [and] they'll see how much that you will get back,” he said of the process with his accountant.
“At the end of the year, when it comes to tax time, generally I get another $4,000 or $5,000 dollars because [my accountant] creates a bit buffer in there, so that we don't go over and take too much.”