I Cracked the Code to Building a Real Estate Portfolio Early!

By the end of this video, you're really going to wish that school taught real estate investing earlier when we were in school.

‍

I'm going to share with you my whiteboard, and if you're in your 20s and 30s, this is the article that you really need to read.

‍

Now, if you're older and in your 50s or 60s and thinking about retirement, you can still do this stuff. It's just that the numbers will be a little different.

‍

If you're interested in my whole mindset around money and how we can crack the code when it comes to real estate investing, then definitely keep reading.

‍

Unlocking Financial Freedom

‍

Now, I will go on to say that mindset is more important than money.

‍

‍

I remember when I was thinking about:

‍

• My partner in life;
• Who's going to come into my life; and
• What they need to bring to the table,

‍

All I said was: I don't care if they have no money next to their name. They just have to have the mindset.

‍

It's the same thing with my future kids. It's not so much that they've got unbelievable talents, and they're going to earn so much money. It's just, give me the right mindset and I can teach you the rest of it.

‍

Having the right mindset is going to take you so much further than a couple of dollars in the bank.

‍

A perfect example is in 2020, when people should have been making moves and had so much money sitting in their bank account, enough to feed their family for the next 12 to 13 months, without any extra income, and they were in secure jobs, they still didn't go out there and buy property.

‍

In fact, some of them 3 years later still haven't done that.

‍

I'm not saying property is everything and real estate investing is God's game. What I am saying is that mindset is very key.

‍

I know people that make a lot of money, like $300,000, but don't have any assets next to their name. I also know others that have gone out there with an $80,000 income, bought multiple properties, built their asset portfolio, and more so their mindset.

‍

So mindset always wins over money.

‍

Now everyone starts at a different point. So I'm going to use the most common client that approaches our services as the buyer agency, and from there you can go and say: okay these are the things that apply to me. These don't. Let me adapt those numbers for myself.

‍

The most common clients that come to us are:

‍

• Singles or couples aged between 25 and 35;
• They usually have no kids;
• The household income is about $150,000, if not more; and
• They're usually rentvesting or renting at the time;
• If they're not renting, they're living with parents and they've got a capacity of about $850,000.

‍

Now again, plus or minus, some people don't have that. Some people have more, while some people have less.

‍

There are three things that I want to cover off in this article that I think helps in understanding my perspective when it comes to real estate investing and the hacks that you need to think about where 99% of people will not think about and never execute on, and it's the 1% on the road less travelled that will actually make financial freedom—a dream that becomes a reality.

‍

Real Estate Investing Hacks

‍

Hack number one: Renting can supercharge your growth 

‍

Now, I'm going to show you how this works.

‍

Let’s say for instance, you go ahead and buy a house or a unit for $800,000.

‍

Let's assume 100% is your debt. So you go out and you have a 6.5% interest rate on your loan.

‍

In that case, you go out there and your annual cost is $52,000 on an interest-only loan.

‍

You then have rates and insurance, which will mean that you pay an extra $5,000.

‍

Your total outlay is $57,200 every year.

‍

‍

On the other hand, we've got someone that's renting.

‍

So if you're renting, you're paying 700 bucks a week. Again, some people pay less, some people pay more but this is pretty much all you're paying for. So your annual cost is about $36,400.

‍

‍

Straight away, you can see the difference is about $20,000.

‍

Now that disposable income, when it goes onto the balance sheet for when the mortgage broker or your bank manager is doing their numbers, is going to make a huge difference as to:

• What you can borrow; and
• What you can't.

‍

So by renting, you will have a higher borrowing capacity, and will be able to live where you want and invest anywhere.

‍

This is so important and I want to take this moment to just make a point of it. 

‍

So many people will go and invest in their backyard. They'll say:

“I can see that property.”

“I used to go to school somewhere. I know that area very well. So I think it's a good area.”

‍

Now if you're saying that: I've had cucumbers before in a salad. I want to go, have cucumbers in my salad tonight, yeah you go and buy the cucumber because you think it's a good idea. That's going to cost you like $3.

‍

When you're talking about going out taking out $700,000 worth of debt, you don't want to just go:

• I went to school there. It felt like a good idea; or
• My uncle told me it's a good area to invest in; or
• I watched Channel 7 News and they suggested that it's a good hotspot area to buy.

‍

It's not the right way to do it. So this way, if you take out all of the emotions, go and live wherever you like.

‍

Go and live in the heart of the city if you like.

‍

Go and live on a farm somewhere if you like that or near a beach and then you invest with logic.

‍

So the main thing is: logic outweighs emotions and it will outperform emotions when it comes to this game of real estate investing.

‍

Hack two: Borderless investing

‍

Let’s say for instance, this couple is based in Sydney and they could spend about $650,000.

‍

They could buy the one to two-bedroom unit that they were actually renting.

‍

If they bought it as an investment, they could go out and rent it out to a tenant for $700 per week.

‍

The capital growth (if lucky, now I'm really being positive here), you might get 4%.

‍

However, if they go and become a borderless investor, and they say look regionally, or they look at other capital cities, and metro markets, for about $450,000 (so $200,000 less than the previous example), you can go out and get a three to four-bedroom house.

‍

In this case, it would rent for $520, so again, your yield is much higher and your capital growth conservatively is about 7%.

‍

‍

Now at some point, people are going to go:

• Well 7% isn't sustainable.
• 4% isn't sustainable, where are you getting these numbers from?

‍

Well, these are just the numbers that I do as part of our buyers agency so I will always go in with a conservative 7%, but every single year we've been operating, it's more in the range of 10 to 15% annually.

‍

I know these numbers sound absurd, but when you:

• Do the right thing;
• Have the right research; and
• Spend a lot of money doing that research,

‍

Then, you do get the results.

‍

Now, after 10 years, that property that you purchased as the unit growing at 4%, still gets you a pretty good result being: $962,000.

‍

That would be a 48% return on the initial purchase price, so it's grown by 48%, and your funds required to purchase this is about $80,000.

‍

‍

Now based on that, that's a pretty good result.

‍

On the other hand, you’ll see the value of the four-bedroom house has grown by 7% at $885,000 as the new value. This means a 96% increase, which is again a 2X multiplier on the first property.

‍

Additionally, the funds required here are less than what would be required in the previous example I showed you, although it's very similar—$60,000 to $80,000.

‍

‍

Now, although this number sounds so small being $20,000, you have to ask yourself: how long does it take you to save $20,000?

‍

You might find that you only save $2,000 or $5,000 a month, and equally, that might mean that you're out of the market for an extra 6 to 12 months. So you're getting 2x the growth.

‍

However, here's where it gets really fancy. Here's the bonus stuff.

‍

The couple that goes out and buys the three or four-bedroom house still has the capacity to buy a townhouse for about $300,000.

‍

So they've got the house for $450,000.

‍

They go ahead and now buy the townhouse for $300,000.

‍

Now their total value is sitting at $750,000.

‍

‍

If you were to compare that first example, the $650,000 unit is now worth $962,000 10 years later.

I

‍

However, in this case, we're suggesting the townhouse grows at 5%.

‍

The house will grow at 7%. So it averages out to be 6%, and that total value of $750,000 is now worth $1.34 million.

‍

‍

Just from this alone, you can understand why some people do really well with real estate investing. They are able to compound their growth and make so much more from their purchases.

‍

Meanwhile, some people just don't do that well, despite buying a good property.

‍

I would go on to say that: if you've grown by 48% over 10 years, you've done really well. But it's the opportunity cost of what you're missing.

‍

So the key takeaway is that location is important, but when you can multiply that with timing and understanding cycles and research, you will outperform most people in investing.

‍

Now, for example, if you look at 2023 Q4, there is so much FOMO in the Perth market.

‍

You could go online, and you'll see numerous videos coming out about Perth and how it's the best place to buy. You'll see articles come out, and you'll see hot spots at the end of the year, saying these were the best performing markets.

‍

However, for us as a buyers agency, we need to be ahead of that. So for us, a large portion of our purchases in Perth were done in 2021 and 2022. So in 2023, those clients are realising all the gains, and we've already exited those markets to a large extent, unless there is an absolute banger deal.

‍

Now what we're doing is prepping for the next part of the cycle. Most people aren't aware of where those are, and we just rinse and repeat. That's how we can still continue to outperform the market.

‍

When you have the understanding of:

• What assets to buy in the right locations; and
• Knowing the right time of the cycle is in play,

‍

This is how you can multiply to go from one property to six properties over a couple of years.

‍

Hack three: Building your Avengers

‍

Essentially, we're building the right team.

‍

Now this is something that I learned with experience. So if I were to start right now, and I saw myself 10 years earlier, and I said: hey look, the most important thing you're going to do is build the people around you. The team that's going to be with you is going to guide you.

‍

Why? Because now, if each person in that team has like 10 to 15 years' worth of experience, you can now take all of that experience and hack it.

‍

You can expedite the process by using their experience and grow your wealth even faster.

‍

Therefore, property managers are important.

‍

‍

I've heard people literally say: I want to have that property near me, so I can manage it myself, and that way, I can fix things if they break. I don't want to pay the 5%. I don't want to pay the 7% to a property manager. I can do it myself.

‍

Okay, cool. But what happens when you need to find a tenant?

‍

What happens if something goes wrong in the middle of the night? Who are they going to call?

‍

Well, they're going to call you.

‍

If you've got three properties, can you manage well? Imagine, you have a full-time job, and now you've got to manage this. On top of that, you've got other commitments such as family and social life.

‍

Now you've got five properties, can you manage it?

‍

Well, no. Something's going to break and so you've given a poor experience to your tenants.

‍

As a result, they don't want to tenant your property. They're going to trash your property. It's not maintained well, and you definitely don't want to do something illegally, because then, you've got a whole other headache.

‍

So to pay that extra amount, you now can build a scalable portfolio.

‍

I speak about this stuff all the time where I don't want to just go: I've got one or two properties, and it takes all my time. I can't do anything with it.

‍

I want to scale that and the only way you can scale that is by leveraging the right people and their expertise.

‍

The next one is a mortgage broker.

‍

If you don't have a mortgage broker and you're buying property, you're doing it wrong.

‍

Why? The main reason is because they go out there and they're effectively working for you, and shopping around finding the right deal for you.

‍

So think about it like having a shopping assistant, and instead of buying clothes, you're buying the best loan product for yourself. So you definitely need to go and get yourself a mortgage broker because they're going to make your life so much easier.

‍

Equally, one of the most undervalued professions is the accountant.

‍

If you get a solid accountant and they do their job well, and they can help you, your game is completely changed, especially if you're self-employed. There are so many little things that I just did not know about until I got the right accountant.

‍

These people can help you not just save money when it comes to taxes, but they can also assist you when it comes to talking to your mortgage broker and getting things right.

‍

Now, one thing I'm going to say about accountants and mortgage brokers is if they start suggesting to you to buy off-the-plan properties or house and land, do not do that!

‍

Why? Because what they're experts in is getting the loan and pretty much getting your taxes optimised.

‍

They are not professionals when it comes to:

• Buying in the right locations; and
• Buying the right properties.

‍

Most of them will get it wrong and that's mainly because they're incentivised, as they get a large payout from the developer.

‍

Finally, you have the buyer's agent.

‍

Now this one is questionable.

‍

Do you need a buyer's agent? Do you not need a buyer's agent?

‍

Well, you could go on realestate.com right now and you could buy a property, right? It's fairly easy. You could talk to a few agents, and you can make it happen.

‍

Now, most buyer's agents pretty much will only do that.

‍

However, a good buyer's agent, which is what I like to think we've got in our team, is we go out there not just to find the right properties often off-market, we're trying to secure it well, so you want to be buying well in the right markets at the right time.

‍

Not only that, but you're going through this probably for the first time, so you want to:

• Have that assistance when it comes to pest and building reports; and
• Know which property managers to go with.

‍

It can be a really tough experience if you have the wrong people in your team. So again, you're leveraging that expertise.

‍

If you can find a buyer's agent that:

• Can help you from end to end;
• Walk you through that process;
• Give you the support that you really need,

‍

Then you're always going to be able to execute on those actual plans.

‍

I find it very interesting when we talk about road maps.

‍

You know Ravi in 2020, road map this, road map that.

‍

I see it online all the time, but the reality is:

• You have no idea where rates will be; and
• You have no idea what sort of investment you're actually going to buy as your third investment or your sixth investment.

‍

So this needs to be quite adaptive. You need a team that's going to actually assist you when you're changing up the strategy, strategising, and getting new tactics around what you need to do to optimise your own lifestyle as well, and this is something that I'm proud that we offer at Search Property.

‍

So when you've found the right buyer's agent, you'll definitely know.

‍

The main takeaway from hack 3 is: leveraging the expertise of others around you.

‍

Some of those who have been in the same position as you, now you can go ahead and avoid some of the mistakes they've made.

‍

I've made plenty of mistakes and I've documented that in my videos on my YouTube channel. That's why I try so passionately to share as much as I can here, but I share so much more when it comes to our clients to be able to help them buy the right property:

• At the right time; and
• At the right price.

‍

So if you want to start your journey to financial freedom, then definitely book a free call with my Search Property team.

‍

Obviously, this only really applies to the Australian market. So if you're overseas, try and find the equivalent of these things that apply in your market.

‍

However, the main takeaway is that: you need to be executing and you can do that the hard way or you can do it the easy way, and contrary to what everyone told you, the hard way is not always the best way, especially when money is involved.

‍

So I hope you guys have enjoyed this article and share this with someone who is also considering real estate investing.

‍

I'll catch you guys in the next one!

‍

Thanks, guys!

‍