Hi
Are you calculating the return of the rent on the cost of the property or the current market value on the property?
Lets say a house was purchased 10 years ago at 200,00 it now has a market value of 1,000,000 and the rent is 750 per week
Cheers
M*edited* * *: i just worked it out by myself.
Hi Larry,
Indeed, Larry, you would be paying interest on the additional loan of $36K. So hopefully, you would be wise and purchase your next property with a minimum 8% net return.
Let's work on the above scenario you supplied: You now have $36K as a deposit for your next house. For the sake of the exercise let's pretend you want to buy 59 Douglas St., Tenterfield, NSW. This is being advertised on realestate.com.au
Here is what the ad says:
Investment Opportunity
Here is a chance to invest in a rental property with potential.
The property comprises 2 x 1 bedroom units and 3 x 2 bedroom units which rent furnished.
Located on a corner allotment within walking distance to all amenities and set in low maintenance grounds, these units have the potential to earn $470 per week
Long term tenants in place.
Vendor keen to move on.
Let's pretend, for the sake of the exercise, you got the seller to accept $260K. You put in $26K (10%) and the rest was for LMI, bit of reno and other costs.
Your total loan for the property is $234,000 and $36,000 = $270K. Pretend you fixed loan for 3 years and it is 7.5%. You decided to pay interest only. The interest payable per month is $1687.00. You rental income is $2,036.66 ($470 x 52 weeks / 12).
Now, you can see that this property number 2 is also self-supporting.
Repeat the process for investment number 3.I hope this helps.
Angel
thanks angel, i had a think about it and worked it out however your example is really useful, thanks
However at the end of the day I would have 10 homeloans and 10 properties. However it says that the houses will double from 200K to 400K… would they really go up by such a large amount?
Hi Larry,
I wish my own 18 year old would ask these questions.
Will property prices double in value? Yes, eventually. Some will do it in 5 years, others in 15 years and others probably never. Depends on where you buy really.
Historically, according to experts, house prices double every 7 to 10 years. It depends who you believe. But reckon this also depends on when in the economic cycle you buy.
This is the reason research is so important.
Take care.
Angel
Do you think nathans method is the ‘best’ method to use Angel?
Larry,
What's "best" is what works for you "best". Our financial circumstances are all different, we also have different comfort level and risks tolerance.
Your best bet and to find out more from Nathan how he does things. I'm pretty sure he'd be willing to mentor you.
If you live in Sydney, you can catch up with me as I'm a retiree. I can show you how I did it and how I do things. My means and methods may not suit you but will help you find your niche.
Take care.
Angel
I read a book by Jan somers and there was a “rule of 72”. Where you times the growth rate by x amount of years to equal close to 72 (70-74) and that is how many years it takes to double in value. Obviously it’ll change as the growth rate changes. Again I read it from a Jan somers book and it’s my understanding
This is a method similar to what i used starting out. I use same principals today buy larger scale, if i didnt use my strategy i wouldnt be sitting on 24 buy and holds at age 25. Everyone has different circimstances which will differ. I see many ways to build a portfolio. Conducting this method correctly will see one build a solid portfolio relatively risk free.
Hope this helps.
Nath.I’m in QLD
Sorry I meant 34 buy n holds at 25. Damn iphone.
Does anyone have the figures on this ? :
What is the state average annual appreciation rate for houses and units
in NSW over the last 50 year period ?The purpose is to have some average to use to crunch an investment scenario I'm working on.
Any assistance appreciated.
Cheers
thecrestthecrest | Tony Neale - Statewide Motel Brokers
http://www.statewidemotelbrokers.com.au
Email Me | Phone Meselling motels in NSW
Good read.
Congratulations on your success Nathan!
I have turned 21 this year and am starting my road to purchasing my first investment property! Your success is a beacon of hope for younger people looking to get started in controlling their own financial future!
Nathan Birch wrote:Sorry I meant 34 buy n holds at 25. Damn iphone.Hey Nathan, how many do you still have loans for?
Say you fixed an interest only loan for 7 years, what happens when you finish the 7 years.. do you have to pay the loan back?
Hi Larry,
I use to have 5 or 6 titles unencumbered, however recently I took it back to the bank and got loans upon them.
When I left the workforce I did find it hard to obtain finances unemployed, so I pulled out a top up loan (equity) of around $200,000. I used this to buy damaged houses outright and fund their renovations. Cheapest houses were like $8,500 each but required $50,000 renovations.
One day I realised I was sitting on around $400,000 – $500,000 of deposits so I decided to get loans on these so I could use the funds elsewhere.
I always look @ the net worth rather then titles because at the end of the day if proeprties were to be sold how much would one have in the bank is the big question.
As far as IO periods, in 7 years rents go up, and cashflow does. I stack them so they dont all expire at once.
You can negotiate this at that point with the bank to extend it on a new term of this. I personally leave them to pay themselves down.
Hi Nathan,
Again massive congratulations on your accomplishments. I am 22 with 2 properties and a DA that is still with council 14 months after the application process was submitted. I am currently negatively geared but have a decent income. The most frustrating thing for me is that the delay has stopped me from accessing equity to purchase more properties not to say holding costs and sheer frustration!
Where do we find properties that have an 8-10% net ROI? These would have to be regional? I watched your documentary on the fire damaged properties when you first put it up some time ago. Revealing this info is of course your secrets to success but any advice will help…
34 properties under your belt at 25? WOW!!!
Sash.
Want It. Own It. Enjoy It. Achieve It.
How much would you have in your bank if you liquidated all your IP’s and paid off all the loans Nathan? (if you dont mind me asking)
8-10% in Sydney quiet regularly….
As for Nett worth, if I were to sell everything I would have $3.5mill.
This is not a plan of mine, the next goal is 100 buy and hold properties by 2015. These are nothing special, and nothing risky, buy with a 20% deposit in, and cf+ reval and make loan 100% within 3-6 months of initial purchase.
I hold close to $7mill worth of property $6.5mill present but with a few soon settlements will be $7.
I am slightly older than Nathan so he has plenty of time up his sleeve.
I started buying my first property in Oz the year i after i arrived from the UK in 1994 and purchased solely in Brisbane and SE Qld.
We focused on multi unit brick blocks and subdivideable land where we could build multiple dwellings / townhouses on them.
In a lot of cases we sold off the front block which was often a Qlder and kept the 3 new townhouses at the back.
I purchased a waterfront property in Palm Beach for $292K in 1996 which we lived in for 4 years and today it is worth around
$1.4M. Wouldnt sell it though.Now with 40 properties and a market value of around $18.5 M v loans of $1.4 M i must admit i wouldnt do anything different.
Buy & hold strategies are excellent in boom times or if you can pay down the debt but if you are trying to create quick equity you need to add value by doing a subdivision or renovation or something similar.
Anyone can buy a IP and sit on for 20 years and then wonder why they only own the 1.
In my current position i intend to clear the balance of the loans outstanding within the year and then can reflect on what we do with the equity and cash going forward.
To all of you starting out dont think it cant be you in 5 – 10 years time in the same position as Nathan or myself as with the cirrect structure and an income or ability to finance deals on an ongoing basis dreams do happen.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hey guys,
Your stories are both inspirational but, I must admit, feel so foreign!
Coming from a low-medium income household, we never had anything like what you guys are suggesting. It wasn't even considered for a fleeting moment.
Now I want to change that but I think I'm almost too eager? I know realistically I couldn't hope to make any bold moves for another year, perhaps 6 months if, somehow, I got a 90% loan.
How did you manage to be so patient!?
I guess there's nothing that can be done except to try and learn how the market works and the 'theory' behind IP and then, eventually, when I can start, to just dive in.
Thanks (for listening to a ramble!)
Patrick.
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