Unlock the secrets to early retirement through real estate investment. This article dives into the mindset and strategies needed to build a thriving property portfolio. From renting smartly to borderless investing and assembling your financial 'Avengers' team, learn how to make your money work for you. Don't miss out on these powerful hacks to fast-track your journey to financial freedom.
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This is everything you need to know when it comes to building the right mindset to create a successful real estate portfolio.
Whether it's real estate, investing in general, or Exchange-Traded Fund (ETFs), it all really comes down to your mindset.
In this article, I'm going to share with you how your thought process needs to be structured in order to achieve what most people will never accomplish in their lives.
If you're interested in actually making moves towards your financial freedom, then definitely keep reading.
When it comes to unlocking financial freedom, it really boils down to your mindset over money.
When speaking with my brother in our teenage years and early 20s, we always knew that we wanted to be really dialled in when it came to financial freedom and providing for our future families.
When we talked about our partners, or future partners that would come into the picture, we were always aligned on one major thing:
Why? Because with the right mindset, the money always follows.
Now, I'm going to go through a few different things that might challenge:
Especially during times like now, when some people tell you, “The world is crashing,” while others claim, “You should never invest in real estate; it's a Ponzi scheme,” or try to convince you that their way of investing is the only way.
So, keep an open mind and let's dive in.
Everyone starts at a different point. I'm going to break down an example that I think will really resonate with most of you, based on my analytics, which show that we're looking at individuals between the ages of 24 and 35.
There’s this common belief that you shouldn’t rent, and honestly, it’s misguided.
People often say, "You should go out there and buy something, even if it’s just a unit." But the reality is, you could buy a unit and have your money tied up in that one place. If your lifestyle changes, you’ll need to prioritise that home because it’s now your own.
This is different from simply renting in an area where you actually want to live. When the time comes to move, whether you want to buy your own place or keep investing elsewhere, you’ll have the flexibility to do so.
Life is about choices. It’s about options.
Let’s look at an example:
So let's look at an example here:
If you decide to buy a home for, say, $800,000 (in Sydney, we’re probably talking about a unit, but in other places like Brisbane or Perth, you’re looking at a house), your loan at 6.5% would cost you $52,000 annually in interest only, plus rates and insurance, which brings you to about $57,200 per year.
This is crucial to understand. People think real estate always goes up, but it doesn’t.
If you hold this property and it doesn’t appreciate, you’re actually losing $57,200 a year by holding onto that one property, and since it’s your principal place of residence, you don’t get any tax benefits either.
Now, compare that to just renting for, say, $700 per week. You might be in a different area or even the same one, but the annual cost is about $36,000.
Yes, some might say rent is dead money, but that’s only if you’re renting without a strategy.
However, the truth is:
When you buy with emotions and end up with a dud property, you’re wasting more money than you would be by renting.
Not only that, but you’d also have fewer choices because you probably had to put down a big deposit—maybe 5% or 10%. On an $800,000 property, that’s anywhere between $80,000 and $100,000, and that’s not even including your other purchasing costs like stamp duty.
In this example, by renting, this couple has:
This is important. If you’re reading this blog to determine how to increase your borrowing capacity, it’s time to get uncomfortable if you own your own home.
Why?
If you own your home, it makes it much more difficult to optimise your investment strategy.
I’m not against owning your own home. I just think that you can’t have the best of both worlds if you don’t plan strategically and buy with emotions over logic.
You might enjoy your home because it’s yours, but if you want to maximise your ability to build a portfolio, it’s going to come down to investing with logic over emotions. And this leads me to…
If you have a $650,000 budget in Sydney, you’re probably looking at a one- or two-bedroom home. The rent on that property might be $700 per week, and the capital growth, if you’re lucky, could be around 4%.
If you think investing in Sydney will always pay off, that’s not necessarily the case for every property. This is where people get trapped into buying off-the-plan apartments, thinking they’ll hit it big.
What they don’t realize is that, unlike 30 years ago, when thousands of units weren’t being built right next to each other, today’s planning regulations and marketing make it seem like the best investment.
People are led to believe they need to buy an off-the-plan unit close to a metro station to make a fortune, only to find out 2-3 years later that thousands of others have done the exact same thing.
Now, if you compare that $650,000 with a $450,000 to $500,000 budget, you could look at other areas, perhaps a three- or four-bedroom house, or if you want to be closer to a capital city, you might be looking at a townhouse.
In this case, your rent could yield 5% to 5.5%, and your capital growth could be a minimum of 7% if you’ve bought with the right data metrics at the right time.
Again, I can’t stress this enough: most people have the same data points. You can find a bunch of free tools online, but there’s a reason why some people get outstanding results and others don’t—it’s because the successful ones move with speed, see deals you haven’t, and know with confidence the right price to pay.
If we fast forward 10 years, the value of the property you bought as a unit might give you a return on investment of about 48%.
Compare that to the other scenario, where you’re getting almost 2x the return.
The funds required to get into the first one are about $80,000, and for the second, about $60,000.
This doesn’t account for anything except your deposit, so a 2x return on just one property in 10 years is massive. And when you’re investing in property, you’re looking at a timeline of 20-plus years.
The bonus here is that they still likely have the capacity to buy a townhouse or unit in another area for about $300,000, which means you get the house and the townhouse, and the total value is now about $750,000.
Compare that to the first example, where after 10 years, the value is about $962,000.
However, with the $750,000 worth of assets, you’re looking at closer to $1.34 million.
This is a significant difference in just 10 years’ time, which leads me to think about location, timing, and property cycles.
If you reflect on Q4 of last year or even the last 12 months, there’s been so much FOMO in Perth.
If you had been early to an area like that, you would have made a lot of money. For us, we were buying in 2021 and 2022.
Yes, we still pick up a few deals here and there in Western Australia, but we are very careful with what we pick up now versus what everyone is just rushing out to buy, thinking anything will go up.
So, what’s the key here? Simple.
You can’t simply do this by luck. I've said this time and time again: I’ve met people who say, “Oh, look! I've done really well with my first two properties.”
In response, I say, “Cool! Tell me what your method was so you can scale and repeat this process.”
Then they’re like, “Well, I don’t really have a system. I sort of just bought where I wanted to buy, and it worked out.”
After hearing that, I was like, “Cool, that’s amazing because you’ve had luck on your side, but if you don’t have a system that’s repeatable, how are you supposed to do this for every property you buy?”
If you make a mistake on one of them, it could undo all the hard work you’ve put in over the last 10 years building your portfolio. So, if you need a hand with any of this and want a strategy—as well as someone to handle talking to agents, remove the stress of buying the wrong property, and outsource the entire process to save your time while getting the right deals (because 80% of the deals we do now are off-market)—then definitely book a free discovery call with my Search Property team.
I’m sure at this point, everyone knows what I’m talking about. It’s the Marvel Avengers. That’s what you need to get together—that’s effectively getting the right team together.
You need:
Despite what people might tell you, you can say, “Well, okay, I don’t need a mortgage broker; I can go to the bank.”
Well, great. Yes, you can.
You don’t need an accountant; you can actually lodge your tax returns yourself.
When it comes to a buyer’s agent, you can buy property yourself, do the research, talk to agents, and do it yourself.
When it comes to property managers, you can manage it yourself as well.
However, it’s interesting that some people choose to have certain team members but not others. I would challenge your thought process here, because for the same reasons you’re thinking:
This is how wealthy people actually think.
Do you really think Warren Buffett sits there and says, “I’m going to analyse every stock myself?
Well, no. He outsources it. He gets the right information and then he executes, and that same mentality is what has helped many entrepreneurs build their businesses to the levels they have.
I can talk about my own business as well. I know there are certain people in my team who are so much better than me at specific tasks. So rather than me saying, “I want to save my money and do it myself,” I say, “You do it best. You take over that part of my life. I’ll focus on where I’m really productive. Plus, I love this stuff, so I’m going to do this.”
This means now I get the best of all worlds.
The same lessons can be applied when you’re investing in ETFs, shares, or learning how to grow a business.
You need to think about how you can outsource.
What you’re trying to do is spend your money to save time.
However, what most people do is save money but spend time.
Now, we know for a fact:
Money? We can always make more. This is how wealthy people get even wealthier.
I hope you guys have learned a lot from this article.
If you have, share it with someone who also needs to level up their mentality when it comes to growing a portfolio.
If you want to do it with speed, definitely reach out to my Search Property team by booking a free discovery call.
I hope you guys enjoyed this one.
Catch you in the next one.
Thanks, guys!
Disclaimer: Search Property Pty Ltd (SP) does not provide financial or investment advice and does not hold a financial services license as defined in the Corporations Act 2001 (Cth). Any advice given by SP is general in nature and does not take into account your personal circumstances or objectives, financial situation or needs.
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