Good day! My name is Ben Everingham and today we’re gonna talk about eleven tips to grow a multimillion-dollar property portfolio.
Hey there! My name’s Ben Everingham and I’m the director here at Pumped On Property and today we’re going to talk about eleven tips that I’ve got for how to build a multimillion-dollar property portfolio which is something myself and my wife have been able to do over the last seven years. So there’s a huge amount of content that I’m gonna jam down your throats today. This is something that I’m really passionate about. So when I started to think about this video and about how to break down these eleven pieces, I didn’t sort of just jump online and think about the things that everybody else was saying. These are some things that really make sense to me. I’m a buyers agent, and I run a business called Pumped On Property and we help buy anywhere between forty and seventy million dollars worth of property per year for our clients. So it’s some of the stuff that I’ve learnt myself and applied myself, and some of the stuff that I talk to clients about and have used to build multimillion dollar properties for them. So persevere with us, there’s some really, really good stuff in it, particularly between point seven and eleven. So let’s get started!
So the first tip in terms of how to grow a multimillion-dollar property portfolio is to actually start with the strategy or to develop a property investment strategy. So often, every single day I talk to investors that have basically jumped on realestate.com in a local market, or somewhere that they feel comfortable with, and you know, if you live in Sydney, you’ll basically wanna buy in Sydney or the Central Coast or Wollongong. If you live in Melbourne, you’re gonna buy in Melbourne. If you live in Brisbane, you’re gonna buy in Brisbane, or the Gold Coast or the Sunshine Coast. For some reason, people make decisions based on what’s easy and what’s locally relevant and close to them, as opposed to what’s really in their best interest. Because at the end of the day, the property market follows a cycle and there’s plenty of different people talking about that out there, but the reality is you’re an investor, it’s not an emotional decision, you’re chasing the best possible return on your money. Because property investing is a rock solid thing that you can feel and touch, but it’s also liquid. So holding under performing property portfolios or properties in your portfolio just doesn’t serve you long term to get from A to B.
So in terms of developing this property investment strategy, it’s really about thinking about where you are right now and where you’d like to be in the future and then bridging that gap. So let’s say that you want to replace your current income of fifty, one hundred, two hundred thousand dollars per year, then it’s about ‘how many properties do I need to own, or own outright, giving me how much income per week before I even get started’. And a really simple rule of thumb is that if you want to create a hundred thousand dollars worth of passive income per year, you basically need to own two million dollars worth of property completely outright, giving you a five percent rental return. And so you might be sitting here watching this video like I would have been when I was getting started and going ‘Oh my god, how the hell am I gonna own two million bucks worth of property outright?’ but the reality is to earn two million dollars worth of property outright, it’s about, probably, buying two million dollars worth of property over a period of time. That period of time might be five, ten, fifteen years, and then holding on to that until it’s doubled or doubled and a half in value for you. So what you end up with is, let’s say you want two million dollars owned outright, you might own four and a half million dollars worth of property in the total, and then, sell half of it, pay five hundred thousand dollars in capital gains tax. Yeah, they absolutely sting. And then pay the rest of the portfolio with the profit that you’ve made. So there’s so many different ways to do this, but the reality is it comes back to a core strategy around where it is you are, where you want to go, and then whats important to you with the property, and we’ll get into that in a moment.
The second thing I wanted to talk about is knowing your next step. So in terms of knowing your next step, it’s always important to know what’s coming around the corner so that you can anticipate it, you can prepare for it, you can budget for it, and you can plan for it.
And that kind of leads me into the third point which is thinking about the multiple steps in advance. And this is something that I’ve just always done because it’s my nature. I’m never thinking about this property. I remember buying my first investment property which was a unit in the Sutherland Shire in Sydney back in 2010/2011 and I bought this property and the second that I bought it, I went out for a beer at night with a few mates to celebrate as you do when you’re a bit younger. And we were talking about like we were the gods of the world because we’d bought our first property and not a lot of other people we knew at the time were doing stuff. So we thought we were the kings of the world, and looking back, I feel like such an egotistical little asshole. But the reality is, I bought this property and I was already thinking about the next purchase. And so literally the next weekend, I was out and about again, I was identifying where I’m gonna buy, I was researching that market, I would physically drive around inspecting property. And so i always thinking about that next step, this is important because it’s gonna change the decisions that you make now. And so what I mean about thinking about your next step is, you know, let’s say you want to own two million dollars worth of property outright, and you currently own your own home which has good equity in it, or you currently own your own home and one average investment property, and you need to go to the next step. Well, you’ve got to think about how does the next property that I buy fit into the big picture, you know? Is there gonna be equity in that property within a couple of years that I can use to leverage into the next one? Is the cashflow good enough on the property to help me continue to move forward as opposed to getting stuck? And I think I’ve got stuck about eleven times in the last seven years. No matter how much money you’re making, no matter what you do, you’re gonna hit your serviceability limit. Unless, you’re know, you’re Donald Trump and you’ve got a billion bucks in the bank. But seriously, who’s got that if you’re watching this video?
So the fourth thing I wanted to talk about, which again feeds in from point three, is to buy the right type of property. So the right type of property means different things to different people. There’s professional developers out there that just give themselves another job, which is to basically go out, create good chunks of cash and then sell those to make money and they continue to reinvest that in more and more projects, and then maybe over time they’ll start holding some of the things that they have developed outright. there’s people that chase passive cash flow, there’s people that just chase capital growth, there’s people that renovate, there’s people that own granny flats, there’s people that do little subdivision, etc. So there’s so many different strategies and ways to buy the right property. And so before you can actually buy the right property for you based on where it is your going, it’s really important to take a step back and a breath and go, as per point one, ‘what is my investment strategy? And what type of property actually fits into that strategy?’ because at the end of the day, as much as we may love property, and I love property, like i’m obsessed with it, the reality is that it’s still an asset class or a vehicle to get from where you are to where you want to be. So it’s really important to remember that and to always keep conscious of the smartest way to get from A to B as quickly as possible.
Obviously the fifth point is a no brainer, which is buying under market value. If you’re paying market value, you’re just lazy. Like, unless it’s a rising marketplace like Sydney a couple of years ago that was extremely hot, or Melbourne, and everyone’s paying market value because they know the market’s in a hot phase and it’s going up, you know, why would you be paying market value? You’ve got the upper hand because you don’t have to buy a property but the person selling it has to sell the property. So it’s important to remember that. That you’re not the desperate one chasing properties and trying to find the right one. You’re the person that’s got time, you can be strategic, find exactly what you want and wait for that motivated seller, or talk to the public trustee, or talk to the state government, or talk to a bank who’s selling mortgage and possession, or talk to an agent and get them to find you a really distressed property, or door knock the streets and, you know, find somebody that’s in a financially hard position that needs to sell to you. But the reality is buying under market value is absolutely everything. And the only way that you can do that is to really understand the suburb. Not every single suburb in Australia, not suburbs in this state, or that state, not suburbs close to home, but really understand the sales history data in the suburb, really understand how the market is moving, the DSR scores, the average days on market, you know, and begin to piece together a picture so that when that amazing opportunity comes up, you can jump straight on it and move forward with confidence that you have bought very well, and again, you’ve made some money back straight away and you’ve also reduced your risk because your LVR has gone down, as well.
The sixth step is buying property in a rising marketplace. So as Warren Buffett said best “A rising market lifts all boats”. And so as long as you’re one of the boats thats being lifted at the right time, and you’re not the person that’s over leveraging and getting stuck when the tide goes back out, buying in a rising market is one of the simplest things that you can do. Anybody that made money in Perth ten years ago, Darwin five or six years ago, Sydney and Melbourne over the last four years, absolutely knows that the power of a rising market is gonna get you gains far quicker that you could ever get through almost any other strategy. And I don’t know many developers that are getting less than twenty, or more than, a twenty, twenty five percent return in a twelve month, maybe two year, period. If the market’s rising by fourteen, fifteen percent per annum, sometimes it’s better to just buy a whole lot of very high quality property and ride that wave out, and then like a developer, maybe sell off at the top of the market and reinvest in another rising market, I don’t know. That all comes back to your strategy.
Obviously buying for capital growth is super important. So again, I talk to investors all the time that right off the power and the effective capital growth over time. But you don’t have to be a mathematician to work out that if I buy a five hundred thousand dollar property today, and that property consistently, incrementally goes up by four or five percent per year for the next twenty years, compounded year on year, which means, let’s say it’s five hundred thousand dollars in year one and it goes up by five percent, so now in year two, it’s five percent of five hundred and twenty five grand, and it just compounds because those gains get bigger and bigger and bigger. Again, Warren Buffett said, when asked what would he do differently, he said “I would have started investing when I was thirteen instead of fourteen.” because with the effective compounding interest over his career, he’d actually be worth twice as much as he is now. So you don’t see the effect of compounding interest for time, it takes a long time, and then all of a sudden it starts hitting a threshold and spiking dramatically. And we’ve seen that with certain property prices in certain parts of the world over the last five years.
Buying a property you can add value to is equally important, which is my eighth point. So the reason adding value to a property is so important is because somebody who’s looking to build a multi-million dollar property portfolio is not gonna be able to save their way there unless they’re earning two, three, four, five hundred thousand dollars per year. You’re just not gonna be able to save a deposit quick enough to get you back into the market if you really want to do this over a five, ten, fifteen year period. So the way around that is to buy under market value, in a rising market with capital growth, but then on top of that, find a way to add value to the property and adding value comes in so many forms. You can do townhouses, you could do a subdivision, you could add a granny flat. You could manufacture some value through adding some bedrooms and bathrooms, or a cosmetic renovation, or any one of the other fifty thousand things that you could do. You could lift the property up and put some bedrooms underneath it. You could just tighten the property up and tidy it up a little bit. But adding value is important one, so that you can keep moving forward. Two, again it reduces your overall risk and LVR. It puts you in a better financial position from the banks eyes and financiers eyes, and it also just enables you to leverage forward quicker and quicker and quicker. So that’s an absolute must if you’re looking to do this over a shorter period of time.
The ninth thing, again something that a lot of investors that I talk to don’t take into account. Because the returns in Australian property are gonna be less and less over time, because property prices are higher and wages are lower than they’ve ever been in comparison to each other, you don’t need a property to double every seven to ten years like it did in the past because when it did that, prices were only four or five times the average wage. Where now prices are between seven and eleven times the average wage. So from a dollar for dollar perspective, you’re still getting the same return on your money in terms of cash in your account. So a five percent today with a ten times incremental jump, versus a ten percent return with a five times your wage value ratio to a property is just gonna ultimately give you the same return. So you don’t need these crazy returns. And we’re not getting these crazy returns, or we are coming into a period of whatever it is, and cash flow is extremely important so I personally only buy property that has a six percent plus rental return. I love cash flow, like I love properties that pay for themselves and give me some surplus income. I love properties that as interest rates rise again actually, you know, pay for themselves as opposed to these properties that you’re hedging or hoping for capital growth in the future. So make sure you’re thinking about cash flow, make sure you’re not losing hundreds of dollars a week on your portfolio or on a certain property unless you’re a hundred percent confident that it’s worth losing that money because the capital gains, or the manufacture growth that you’re gonna add to the value of the property is gonna be there.
The last two steps are not so much property related, but just more, I suppose, mindset related. This is stuff that I’ve personally had to work through and deal with. Obviously, it takes a lot to get comfortable with big debt, it takes a lot to commit to doing things past what other people are doing, because the average Australian owns between one and three properties, and if you really want to push it harder, then it becomes a little bit lonely. There’s not gonna be as many people for you to talk to you, not as many people that can relate, people start thinking you’re lucky when it’s got nothing to do with luck, it’s got everything to do with ridiculously hard work and consistent work over time. But the tenth thing that I wanted to talk about is just bloody committing. Like commit. If you want to achieve something, there’s no other way around it expect to go ‘this is where I am, this is where I wanna be, this is what I’m gonna do, and I’m not gonna have all the answers right now, but I know that I’m confident that over the journey I’ll learn what I need to know at each step of the journey to achieve what it is that I’m looking to achieve’. So just commit. Like there’s so many people out there dealing with fear. Like I talk to, probably between twenty and thirty or forty investors every single week, and the number one thing stopping them moving forward isn’t the bullshit stories they tell themselves, it isn’t the market, it isn’t the politicians, it isn’t the fact that Donald Trump got voted in overnight, it isn’t Britain leaving the euros. It’s got nothing to do with these stuff. At the end of the day, if you’re looking at a long term plan, a ten, twenty year plan, which you should be, things are gonna happen in waves. It’s gonna be good sometimes, it gonna be bad sometimes. You don’t want to buy at the very top of the market or when it’s sliding down. And you need to educate yourself on that stuff, but you just need to commit. Sometimes you need to jump in, or sometimes you might need the support of someone else that charges a fee for that support. But at the end of the day, it gives you the confidence, the skills and the education, as well as the mentorship to actually hold your hand through that fear stage so that you can think clearly and not let yourself self-destruct throughout that process.
The eleventh thing what I’ve already touched on, this is the last thing I’ll finish on today’s video, but it’s just to persist and to not give up. I’ve been watching a lot of videos of very highly successful artists. I love music, I love movies, so artists, musicians, business people, investors, and the number one thing that I’ve seen is this ability to persist when things are tough. And the only way that you’re gonna do that is to, you know, use all the things that you’ve done over your life when times get tough to get through it. The only way that you’re gonna get through stuff and persist is to actually enjoy what you’re doing. So if you’re not enjoying the property process, if you don’t have some sort of interest or passion in it in one way or another, then it’s probably not right for you, you know? There’s so many other things you can do. You can go buy businesses, you can start businesses, you can starts franchises, you can work in a franchise, you can get a high paying job and invest that money in gold, or commodity, or stocks. But at the end of the day, it’s about focusing on something you enjoy and then doing that thing well past the point where it’s sane or normal to do that. So what I mean is that, I’m obsessed with property. I have a couple of days like over the weekend where I don’t do it, and then by Monday, I’m just like jumping to see what properties came up over the weekend and to begin talking about it with people again. And that insane passion, or that insane desire to continue to do it when it becomes more than a hobby and more of a lifestyle choice for you. To do what it takes to get where you want to be is really what you need to do or to have to achieve something great. I’m not talking about everyone being as excited about this as I am, because I know I’m a bit insane. But you know, just some level of interest there which is gonna help you persist. And the way that I think about it, because I come from a competitive sports background and I used to play a lot of sport growing up, still love being active now, is when you’re a kid and you love a sport and you fall in love with a sport, you’re happy to go to training two, three times a week and play a game on the weekend. And you do that for years, but it’s not for years and years and years that, you know, the compounding effect of the little activities that you do at training or the game every single week actually result in you being where it is you want to be. Property is a bit the same. You’re gonna learn so much over this journey, it’s okay to not have every answer right now and it’s okay to ask for support, and it’s okay to reach out to people like myself and have a one on one strategy session which is complimentary, where I’m not gonna try and sell you some stuff, I’m just gonna go ‘Hey, here’s some things that I think. Take it with a grain of salt. Here’s some things that you think, you know, let’s create a bit of a strategy and a plan for your future together. And then you can go and execute that or you can go find someone to help you execute it, or we can help you execute it. But at the end of the day, there’s people out there that genuinely care and give a shit about this stuff like myself, and not everybody out there is just trying to make money.
So at the end of the day, I’ve gone through eleven things there, I know I’ve rambled a bit. That was a bit of rant at the end, I’m sorry for that! But I get excited about this stuff, and I think you should to. So they’re my 11 tips to growing a multi-million dollar property portfolio. A lot of people come to me and they go ‘I want to do it in the next couple of years!’. That’s cool, you’re earning two hundred thousand dollars? No. Well, it’s probably gonna take you five to ten years, but in five to ten years you’re gonna be the top one percent of investors Australia wide. And you’re gonna be in a much stronger and financially stable position then you are now, which means you can do the things that you love. And at the end of the day, it’s all about doing the things that you love and enjoy, and spending your life on your own terms.
Until next time, thank you very much and stay hungry!