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What’s up guys!
So recently I was asked this question on social media and I liked it so much, I decided to blog about it.
It got me into a really reflective and solemn mood, remembering the journey.
I think the year was 2010? Maybe 2011 and a bespectacled, balding and distinctly average looking man was trying hard to figure out a way to escape the rat race.
After having stumbled and failing his way through shares, our intrepid hero stumbled and found his way into property.
Through dumb luck however, he had found a winner – as in the early 2010s, interest rates were being cut, which created a conducive environment for investing – not just in real estate, but for most asset classes.
This cycle of rate cutting fuelled growth for the Sydney market – a market which I was looking to get into.
Like most people, I bought my first property as somewhere to live – a humble 2 bedroom unit in the Inner West for the princely sum of $435,000.
Back then, the lending environment was much more relaxed as well.
I can still remember 95% LVR loans were being offered by the big 4 banks – heck there were even 105% LVR loans being offered by other lenders at this time (imagine buying a property with no money down (!!!) – sigh those were the days).
I was also fortunate to being employed with the big 4 banks throughout most of my working career.
This enabled me access to special staff lending policies – primarily 90% LVR loans with no LMI attached (usually if LVR >80% lenders mortgage insurance or LMI is charged at a cost to the borrower to protect the lender in case of default).
And as my subsequent investment strategy involved deliberately targeting cheapish properties in the sub $250k mark of our capital cities, whilst earning a decent salary with a thrifty savings ratio to boot – coming up with the necessary $20k/$30k per property wasn’t particularly difficult for this miser.
Oh and positive gearing played a crucial role as well. The combination of rate cuts and rising rental yields meant that my rental income was exceeding my mortgage repayments. This not only covered my expenses but also provided me with additional cash flow that I could reinvest.
Over the next few years, I just kept on buying – usually about 1 or 2 properties each year… and when I met MrsFrugalSamurai, I roped her into a couple of purchases as well (I just needed her servicing capacity but shh).
I bought all sorts of random shit – houses, units, townhouses, villas, you name it we got it.
And to minimize land tax, I tried to spread it across various states – NSW, ACT, VIC, SA and WA.
That’s pretty much the strategy in a nutshell, it wasn’t anything fancy or difficult to do.
Just a combination of sheer luck, rising capital values and a more relaxed lending environment.
Now, I’m not going to say that it was easy dear reader, no I won’t say that.
Of course, there were challenges aplenty along the way – the market is never predictable, I’ve bought duds that have not performed, I’ve bought OK ones that’ve done…OK and I’ve bought a couple of decent ones that went… decent, but I think the ability to adapt and to chip away at a goal (financial independence) was key.
All up it probably took about 6 or so years of grinding away and being patient to build that first million in equity.
Unfortunately though, I probably wouldn’t recommend what I did to anyone starting out these days – as property values have changed vastly since then, the lending environment has evolved significantly and interest rates probably won’t be cut to record low levels again (never say never of course).
No, I’d be looking at something different to get ahead like starting your own online business or heck, even investing in cryptocurrencies (which is what my attention has been on these last 12 months or so).
I’m going to get back on the property wagon of course, but for the moment it’s about building out the mortgage business, consolidating what we have and patiently waiting.
There’s a lot to be said about being patient.
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P.S. Every post is the personal opinion of yours truly, please seek your own personal financial advice regarding your own personal circumstances.
