How do you invest $50K to enter the Australian housing market
When b Invested founder Nathan birch began investing two decades ago, the market was very different to today.
The first property he bought was a house in Western Sydney for $248,000. At the time, he was earning $40,000 a year, interest rates were at 8% and on their way to 9% and the house was returning him $190 a week in rental income.
So, bearing in mind that it is his opinion only and not financial advice, what would Nathan do in today’s market if he had $50,000 to invest?
New conditions, same fundamentals
That first property Nathan bought would be worth closer to $1 million today, so even though he has a hypothetical $50,000 that he didn’t have back then as an 18 year old, he still wouldn’t be able to do exactly what he did.
However, the fundamentals of what he did and the parameters that go with it remain the same.
He says he would take that $50,000 and find a metro region somewhere in Australia, where he could purchase something worth $200,000 to $250,000. It may be a house on the outskirts of the region, or a townhouse or unit.
Nathan says those deals are definitely still out there, and he knows of deals even below $200,000, which would likely get you a positive cash flow.
Point of interest
The other thing he would have going for him today is a historically low interest rate, which certainly wasn’t the case 20 years ago.
With today’s low interest rate, paying interest only on a loan at the affordable end of the market, would free up a lot more cashflow than in the past.
This would help him get his next deposit together quickly and pull out any extra equity, which he would use to go again for his second property as soon as he was able.
The first property, being a bread and butter investment, would lay the foundation for the rest of the portfolio, thanks to its good upside for growth, good cashflow and equity.
Things are still simple
Nathan says the average client that comes to him to invest has between $60,000 and $100,000 and even in today’s market he can get them to four or five properties within a year. And he believes someone in that position could get to 10 properties in about three years if they apply themselves, are committed and focused and willing to do whatever it takes to get there.