Hey this is Ryan from positivecashflowaustarilia.com
and today we’re talking about how to buy more than one investment property, the majority
of Australian property investors never go beyond buying more than just one investment
property if they get to one, most people just purchase their own home and don’t even stretch
to one investment property but if they do decide to invest then most investors stop
at just one property. In this podcast I want to show you some simple
things that you can do to make the leap from one investment property to three or more investment
properties. There is 10 simple things that I’m going to cover in this episode that can
help move you closer towards your goal of owning multiple investment properties.
Firstly what are the benefits of earning more than one investment property, why is it even
worthy, is it even worth it, let’s look at this benefits. There’s many benefits that
come with owning more than one investment property and it’s a real shame that most investors
never get to take advantage of this benefits. The first one is obviously you got greater
capital growth by owning multiple properties you have a much higher capital growth potential.
If you own just one property at $500,000 and that property goes up 10% then you make $50,000
not too bad pretty nice we wouldn’t complain to make 50 grand.
If you own two of those properties then you will actually make a $100,000 if you had the
same growth, two properties at $500,000 both growing 10% makes you a $100,000 you are actually
making more money, the more properties that you own the greater your chance of achieving
good capital gains you can then access this capital gains by selling the properties, or
you can leverage against the growth of the properties by borrowing against it and use
that money to purchase more investment properties or you could use it to find your lifestyle
as well. Reason number two benefit umber two greater
passive income. More properties also means more passive income if the properties are
positive cash flow, by owning multiple properties you get to take advantage of inflation and
increasing rents across many properties meaning your passive income has the potential to grow
and increase every single year Overtime you might be able to use the excess
cash flow that you get from this increasing rents to pay off your mortgage and then you
really see a boost in passive income when your mortgage is fully paid off and eventually
own enough properties pay off enough properties you may have enough passive income to retire
early and be financially free, which for a lot of us is the dream.
Benefit number three more financial security by diverse pryant by diversifying your property
portfolio you can also gain more financial security. If you own just one investment property
and something happens to it or you can rent it out then that’s going to probably put you
under a lot of financial strain. However if you owned more than one investment
property let’s say you own 10 investment properties then having one vacant wouldn’t be the end
of the world because you will still have the income from all the other properties.
If you only own one property and it goes vacant 100% of your portfolio is vacant, if you own
10 and one property is vacant then only 10% of your portfolio is vacant.
Number four benefit number four a chance at financial freedom , it’s going to be very
difficult to achieve financial freedom of a single investment property, it is possible
but is very difficult however when you’ve accumulated the multiple investment properties
financial freedom becomes much more achievable. All right let’s get into the 10 simple things
you can do to buy more than one investment property, buying more than one investment
property isn’t going to happen by itself, it’s a goal that you need to actively work
towards achieving. Here are 10 simple things that you can do
to move you closer towards that goal. Number one leverage your equity if you have
any, every so often especially the markets going world why not consider getting your
existing property or home valued by the bank, if the property’s going up in value then you
will have what’s known as equity. You are then able to borrow against this equity
and use that money to pay for a deposit on a new investment property. This is leveraging
your equity to grow your portfolio. For example let’s say you purchase a property of a half
a mil, $500,000 and you shoed a line of $400,000 will you to have an equity of $100,000 in
that property and if you want to borrow at an 80% over your then you not going to be
able to borrow anything because you are that 80% mark,
Let’s say the property is increasing valued at $650,000 you now have $250,000 in equity
in that property, and if you want to borrow out to that just 80% over your then you are
able to borrow up to $520,000. That means in this scenario you would be able to get
a loan for an extra $120,000 and you could then use that money as a second deposit on
another $500,000 property thus expanding in your portfolio.
As your equity grows as you pull from that equity you can in a lot of cases use that
as your deposit. Number two save a deposit just like you did
for your first property, a lot of investors work hard to save their first home deposit
or their first investment property deposit but as soon as they own their own home or
investment property bam that’s it, they stop saving. Why stop saving why not save towards
a deposit for your second investment property instead?
By continuing to save, it means you are not relying on capital growth to fund your future
investments and so could allow you to purchase your next property faster.
Tip number three save a deposit with excess cash flow, if your first investment is a positive
cash flow property you could begin saving the excess cash flow and use that as a deposit
on your next investment. The same goes if you are renting and let’s say you are paying
$400 a week rent, you’re then buying because your interests rate is so low, you only paying
$300 a week rent, there’s a $100 gap there that you could use that’s kind of excess cash
flow that you could use to be saving in towards another property.
Instead of choosing to pay your loan off faster, you could consider an interest only loan and
use the excess cash flow to save a deposit so you can buy another investment property.
Imaging having a couple $100 per month that you didn’t have to work for because it’s passive
income extra cash flow from the property going towards building your investment portfolio.
Number four consider purchasing a cheaper property instead trying to save saying another
$100,000 to buy a property worth half a million dollars why not set a lower target. There’s
some great investment properties that you can buy out there for as little as $200,000
for a 20% deposit this would lower the deposit requirement from $100,000 to $40,000 which
is much more achievable. Tip number five consider a 95% loan, many
rent lenders are willing to lend up to 95% of the purchase price of a property instead
trying to save a 20% deposit why not opt for a 5% deposit and pay the lenders mortgage
insurance, in a $500,000 property that lowers it from a 100 grand to 25 grand on a $200,000
property it lowers it from 40 grand to 10 grand a deposit much more achievable in 95%
loan. It could potentially allow you to purchase
more than one investment property much faster because you won’t have to save as much money
for the deposit, if you saved a 20% deposit for your first property you could even consider
getting an equity loan up to 95% on the value of that property, you probably going to have
to pay lenders mortgage insurance also it might mean that you going to have enough money
to invest in more property straight away. Number six sell one property to buy two, if
you are single investment property has gone up in value but you don’t want to take an
equity loan to purchase another property why not consider selling your first investment
property to buy two more. Let’s say you sold a property and end up with
200 grand in the bank after selling your investment property, you could then use that money as
the deposit to purchase two or more investment properties, you don’t have to be stuck holding
that first investment property you brought forever. I just watched the samlock kids with
my kids the other day, it’s called the samlock and it goes forever that’s where that’s from
incase you are wondering why I’m been all strange.
All right number seven improve your service ability, loan service ability holds many people
back from purchasing more than one investment property, to the lenders you simply look like
you can’t afford to purchase anymore investment properties, improving your service ability
is all about increasing income, decreasing expenses where possible to make it look like
you can own more property and afford it. Here are something’s that you could do to
increase your service ability, you could increase the rent that you charge on your investment
property, a lot of people don’t increase their rents because they have a stable tenant. I
know there’s lady who lived below my mom, my mom was in a one bedroom unit in Sydney
paying, I think she was paying about $350 a week rent and then there was a lady below
her who lived there for 10 years or whatever and she was paying $210 per week rent.
That person was missing out on a $140 per week rent in an area where vacancy rates were
extremely low, they don’t want to raise it because they don’t want to lose the tenant
but the fact is they are missing out on a lot of money because they wouldn’t raise the
rent even a little bit. You could move from principle and interest
loan to an interest only loan that lowers your payment in a monthly basis could increase
service ability, you could lower your credit card debt and credit card limits, credit card
limit with a credit card with a limit of $10,000 lowers your service ability with approximately
$183 per month even if the card is empty because as a bank they’re just issuing you go $10,000
credit limit you could go out and you could put that on black at the casino tomorrow and
loose it all and end up with a $10,000. You could also you could create a second income
by starting a side business or getting another job that’s another way to improve service
ability or there’s two of you and ones not working one could go back to work all things
to consider, you need to work out what’s best for your situation.
Number eight meet with a highly trained mortgage broker, while your bank might only be willing
to lend you a certain amount based on your finances another lender might be willing to
lend you another 200 grand more or a certain amount more. Different lenders have different
criteria for measuring service ability and borrowing capacity, by meeting with a highly
trained mortgage broker they’re going to be able to tell you which lenders can offer you
the most borrowing payer. I think it’s always important to understand
that mortgage brokers do work off commissions, they maybe bias towards lenders that give
you that give them the best commissions, just make sure you ask lots of questions and know
what loans best for you, don’t just take their advice blindly.
Sometimes simply going with a lender who offers you more borrowing power means that you can
buy that one more investment property where otherwise it would have been impossible.
Number nine make your portfolio positively cash flowed, negative gearing cushy money
every single month affects your service ability slows down your rate of saving by investing
using negative gearing as your strategy you maybe limiting how many properties you can
buy, firstly the market remains stagnant or doesn’t grow as fast as you like but secondly
if you are negative gearing every property you are going to get to a point where you
can’t afford any more properties because you are too busy paying for the negative gearing
on those properties. Instead it’s worth considered making your
first property a positive cash flowed in the first place you can do this by lowering the
expenses increasing your rental income or purchasing a positive cash flow property in
the first place and you can find out more about how to find positive cash flow properties
all over Australia in the academy that’s a positivecashflowacademy.com.
When you have positive cash flow you can then use that excess cash flow to save towards
future properties and you can use that to service equity loans that could act as your
deposit for your next investment properties or could help with service ability as well.
Tip number 10 buy property at a discount, a tool such as real estate investor you can
go through my affiliate link if you want pca.im that’s my short link forward slash free webinar
and it will show you all of that real estate investor, real estate investor allows you
to scan the market for properties, you might be able to queue at a discount and buy purchasing
a property under market value that gives you instant equity to play with.
Most lenders are going to provide you with evaluation above the purchase price when purchasing
a property however you may be able to get a reevaluation done shortly after purchasing
a property as a way of realizing the true equity in the property.
Most lenders restrict evaluations to once per year but there are some lenders who are
going to allow you to do evaluations earlier as a sweet teen mortgage broker about that.
You could also do some renovations to the property and increase its value and thus obtain
a higher evaluation a lot of lenders who restrict that once per year would go outside of that
if you done renovations to the property to increase its value.
Once the higher evaluation is obtained you then have the ability to borrow against the
equity to purchase another investment property. Why just stop at one investment property guys,
why not buy more as you can see its very profitable, it can be very profitable to own more than
one investment property and by using some of the tips provided in this podcast it’s
also a goal that’s achievable if you work towards it.
Don’t give up keep saving, keep working towards your goal and before you know it you might
have built a large property portfolio and achieved financial freedom, I’m Ryan Mclean
I’m from positivecashflowaustralia.com and this has been how to buy more than one investment
property. I hope that this has helped.