Original article by Jamie McIntyre published in 21st Century News.
I have been bullish on property as an investment strategy for as long as I can remember. Most average Australians believe they need to win Lotto and pocket say $2 million to retire.
This is based on the premise of that $2 million sitting in the bank and hopefully earning 5 per cent per annum ($100,000) to provide a decent retirement income.
However, by becoming financially educated and taking action with effective strategies, like investing correctly into the property market safely, far superior income and returns can be generated.
One of the secrets of successful investors is the ability to think outside the box. Successful investors also have the ability to run their investments as a real business, not just a “she’ll be right hobby.”
I first started acquiring properties in the 1990’s after my millionaire mentor taught me a simple plan.
That plan initially involved buying just two investment properties to hold forever. He said within ten years, done correctly, you could effectively retire from them and be a self-made millionaire.
He also said if I was willing to think big, that after buying two properties, it would become realistically achievable to acquire as many as ten properties within ten years and accumulate $10 million net-worth with 20 years.
At the time I didn’t believe the latter was realistic but I went on faith and started by acquiring my first property, then the second and so on. Today inside that 20-year time frame I have acquired well beyond the 10 properties and achieved a net worth well above his plan.
I don’t say that to impress you, but to impress upon you that by using this plan I learnt to acquire initially just two investment properties to set up my retirement. That then turned into my mentor’s ‘acquire ten properties in ten years plan and make $10 million .It actually worked back then and it is still working just as well today.
Even if ten properties in ten years seems too big of a goal for you, then by focusing on just two properties in the next few years you will be well on your way to a million dollar retirement one day.
A 10-20 Year Plan
• Assume income of $75,000 (average wage) with annual CPI rises
• All properties purchased with a deposit of 10%.
• Assume extra equity from re-valuations can be used as deposit
• Assume annual property value increases of 7.2%.
• Compound annual increases of 7.2% will see properties double in value over a 10-year period.
• Assume rental income covers loan repayments.
• If rental costs do not cover your outgoings you should be able to negative gear your properties.
• There will be costs associated with this concept that are not shown here such as Stamp Duty, bank costs, council rates, maintenance and property management.
Buy a $400,000 property, using a 10% deposit ($40,000)
Have year 1 property revalued to $428,800. Buy another $400,000 property, using equity from revaluation ($28,800) and $11,200 of your savings as a deposit ($40,000)
Have year 1 property revalued to $459,600, and have year 2 property revalued to $428,800.
Buy another $400,000 property, using equity from re-valuations ($59,600 +
$28,800 = $88,400) as a deposit, with no need to stump any cash for the deposit.
Have year 1 property revalued to $492,700, have year 2 property revalued to $459,600 and have year 3 property revalued to $428,800.
Buy another $400,000 property, using equity from re-valuations ($92,700 +
$59,600 + $28,800 = $181,800) as a deposit, with no need to stump any cash for the deposit. At this stage after deducting your deposit money from the equity you have created you have a surplus equity of $61,800.
Have year 1 property revalued to $528,000, have year 2 property revalued to $492,700, have year 3 property revalued to $459,600 and have year 4 property revalued to $428,800.
At this stage we can afford to step up the purchase of a $600,000 property, using equity from re-valuations ($128,000 + $92,700 + $59,600 + $28,800 = $309,800) as a deposit, with no need to stump any cash for the deposit. At this stage after deducting your deposit money from the equity youhave created you have a surplus equity of $129,800.
By repeating this cycle every year for 10-years, the property we purchased in year 1 will have doubled in value to $800,000. By year 11 the property we purchased in year 2 will have doubled in value to $800,000.
And so the cycle will continue.
By year 20 the property we purchased in year 1 will have doubled in value twice to $1,600,000, with the cycle continuing to all our other properties. Of course by year 20 we are seriously wealthy and could have amassed a major property portfolio that is self-funding.
In fact in 20 years time you could have created $10-$15 million net worth from this strategy.
Has it been done before?
Yes, many times!
However, bear in mind that if this is too big to contemplate right now, just focus on acquiring one property as soon as you can and then a second one within 2-3 years.
If you need help, ask for a free property coaching session at 21st Century Education 1800 999270.
If you don’t think you can get enough finance to buy a property then best to find out when by asking for a Finance Review when you have a coaching session.
In many cases you can acquire property with only a 5% deposit; or perhaps as mentioned with zero deposit.
The second and beyond properties you can use as your equity towards the deposits, thus it’s really only the first investment property you need a deposit for.
However if you have a house then you may have equity in this you can use as a deposit. If you don’t have a house revert to the 8-steps to getting started covered in my book, “What I Didn’t Learn At School But Wish I Had”, available for free at www.21stcenturyeducation.com.au
At the commencement of the property purchasing cycle we may have found the going a little tough – any business is like that – but once we have established some serious equity in our properties the going is much easier.
A strong advantage of being a property investor is once you have established yourself as a serous property investor; real estate agents will seek you out with attractive offers as well as brokers and other suppliers involved in the cycle.
Jamie McIntyre is the Founder of 21st Century Australia Party and the CEO of the 21st Century Education Group of Companies. He is also a major shareholder in 21st Century Media, a Publicly Unlisted Company that owns assets including 21st Century News. www.jamiemcintyre.com
Article source: http://www.appraisalarticles.com/Real-Estate/4399-How-to-Own-10-Properties-in-10-Years-and-Make-10-Million.html