When it comes to growing a multi digit portfolio, people often think they need much more capital when starting out than they do.
But B.Invested founder Nathan Birch has helped many clients hit double digit portfolios from a relatively small starting cash base.
As a matter of fact, Nathan thinks that even these days, $100k can get you 14 properties.
Say you start out buying two properties worth $200k each. You have a $40k deposit for each, which is 20%. And you have two loans of $160k on the two assets.
First, it’s important to make sure the properties purchased are below market value, have upside for growth and a strong cashflow. This may sound like a tall order, but Nathan has bought these properties over and over again for himself and his clients. It’s the key way to grow your portfolio.
Now let’s assume that the rent on each of these properties is $300 per week and that you are paying 5% interest on your loans.
With interest only loans, that means you are paying about $8k per year per property, which works out to be $160 a week. That means the remaining $150 per week or so can be used to pay holding costs like water and council rates. All up, each property may cost $10k a year.
Where from here?
So you’ve bought two properties with your $100k, how do you get the next two?
You can always come back and re-value those two properties. Assume you come back in 6 or 12 months time and those properties are worth $250k each. You can then pull out useable equity of $40k each on those two properties. You’ve got $80k back already from your initial outlay of $100k.
You may need to save another $20k to get back to your initial starting point and be ready to start all over again. Once you do, it’s rinse and repeat from there. Using growth in the market over time, you can continue to make equity and continue to leverage that into your next investment. Meanwhile, the cashflow you are bringing in from your rental income will increase over time so that after you are done with the acquisition stage of your property portfolio, you can transition into consolidation and begin paying down the principal value on your assets using that rental income.