So I bought my first rental property in August 2017 and just recently I bought my second investment property in May 2020. I have always wanted to own a giant real estate portfolio and it has been a goal of mine for a very long time.
You see lots of people talking about creating wealth through real estate and building a giant portfolio that pays you every month for as long as you live. What those people perhaps fail to tell you is this.
In order to build a giant portfolio you need an income to match.
in order to buy your first investment property you're probably going to need at least a 10% deposit plus costs. What i mean by that is 10% of the value of the property you want to buy and you'll also need enough money to pay for all the costs of buying the property on top of that.
Now the average mortgage is 30 years, which means if you are 20 years old, that property wont be paid off until you are 50 years old.
So if the rent only just covers the mortgage or even worse doesn’t cover the mortgage. You are going to be waiting a very long time before you actually see the benefit of that extra income.
The point where the momentum comes from growing your property portfolio, is when you get decent cashflow from the first property, which helps pay off the second property.
In order to get that cashflow from the first property you either need an amazing rental yield where the rent covers the mortgage and there is money still left over or you need to have a very small loan against the property so you receive cashflow which is greater than just the mortgage repayments.
Now if you don’t buy a property that has a great yield then you’re going to have to get the mortgage down as fast as possible so that the first property makes cashflow which helps pay down the second property and the third and so on.
Which leads me to the main thing people neglect to mention, when talking about creating a property portfolio. You need to have a business or job which can help you get equity in the first property or help you save additional deposits to purchase more properties.
Its obvious that we aren't going to be able to retire off just one property, so we need to build a property portfolio in order to generate the kind of income where we could do that.
The reality is that before you can build a giant property portfolio you’ll need an income to assist you in getting the first few properties paid down.
I think we can all agree if we had one property paid off completely it would be much easier to build the portfolio because the portfolio is doing the work itself, rather than you working to save the money to pay off the mortgages.
If you had two properties paid off then all of that rental income can be paid into the mortgage on property number three. This is how a property portfolio is started and becomes a machine that you can retire on.
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Now looking at your current income it may seem impossible to pay off one property completely and that's why we all need to focus on growing our primary source of income, if we want to create a property portfolio we can actually live off.
If you could increase your income and keep your living expenses where they currently are, that would then give you extra money for deposits for additional properties or help you pay down the first property so that it helps save deposits for more properties.
Once you have three properties purchased, I personally would focus on paying down the mortgage on property number one, so that property number one can then help pay off number two and number three. While this is happening you could continue working your primary job to save the deposits for property number four and five.
This is how you could create a giant portfolio. By getting the first few properties to pay down the debt, while your main income from your job or business keeps saving deposits to acquire new properties.
Where I see people make mistake,s is where they keep buying a property every time they have a deposit saved but they don't keep an emergency fund to pay the mortgage if a tenant moves out, you lose your job or something else unforeseen happens.
A good trick for this is to put your emergency fund into an offset account against property number one. That way if you need the cash its there but at the same time you are completing the first goal of paying down the mortgage against property number one. I always suggest aiming for an emergency fund of at least 1 years worth of mortgage repayments on all of your properties.
This means with every property you buy the cash you have saved grows too.
So there you have it guys the truth about building a giant portfolio that they dont tell. I hope this video helped you guys out. If you want to see more videos like this please consider subscribing and ill see you on the next one
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