Eddie Dilleen has finally reached a thousand-year dream of buying his first home. For this he needed only 14 investment properties.
The 27-year real estate mogul bought his first lease – a unit of 138,000 USD on the central NSW – at the age of 19, while he still earned only $ 500 per week when he worked at McDonald's since he saved all time to high school for $ 20,000. .
Over the next eight years, when housing prices in Sydney and Melbourne rose due to cheap tsunami tsunami and recorded population growth, many young people outside the home ownership closed two economic markets.
Instead, he bought a portfolio of rental properties in cheaper markets, such as Adelaide, Gold Coast and outside Brisbane, using equity capital for each new property to finance the next – a popular but risky strategy that some have criticized as "mortgage Ponzi finance. "
Today, Mr Dilleen's portfolio is worth about $ 4 million and brings annual rental revenues of approximately $ 230,000. His total mortgage loans have received just over $ 2 million, with annual payments of around $ 90,000. Rates, repairs and other costs cost him around $ 60,000 a year.
"I probably could have come to the market much sooner if I really wanted to," he said.
"In fact, I just hired when I was building my portfolio, trying to create my equity capital with small properties at the initial level around the metro, so that one day I could actually afford a nicer place in Sydney.
"You do not have to buy 14 small properties in other major cities (buy your first home), that's what I decided because I always loved investing in real estate and developed a strategy to do this over time. "
Housing prices in NSW and Victorian capitals have now fallen by 12.3 percent and 8.7 percent compared to their highest values in July and November 2017, the worst decline since at least the 1980s.
For Mr Dilleen, the price in collision is an opportunity. This week, in the Parramatta area, for $ 750,000, he sold a "distressed sale" with six bedrooms.
A year ago, a comparable house in the area sold for less than a million dollars. "Many people can not get financial means. The owners were desperate to sell it, long (in the market) and they had to get rid of it, "he said.
"They were ready to hit the price. The market was not too hot in the past year, now prices have dropped slightly. She needs little work, little color and landscape. This is not my dream house, but it's better than renting. "
He was considering the sale of "five or six" of his real estate in order to buy the Parramatta house, but instead he went to the bank for a loan of $ 580,000. "I was thinking about cutting some fat and selling some properties, but that's not my ultimate goal," he said.
"The biggest thing is that eventually I build my passive income."
Mr Dilleen said that his portfolio was "not" really affected by the accident because real estate prices in Sydney and Melbourne have mostly fallen. "In fact, I could buy in Sydney for next year's investments or the market will reach the bottom."
But he noticed the effect of the Australian banking crisis. "It is more difficult to obtain financial resources for real estate, which is much longer. Instead of two weeks, it will take three or four weeks for approval.
His strategy for buying real estate, some of which "doubled and doubled", has always been the search for high rent revenues. "Most" is positively oriented, which means that the rent covers repayment of mortgages.
Mr Dilleen said that because of this, the interest rate buffer would have to reach "about 8-9 percent" before his loans became inaccessible. The average standard variable interest rate for the investor who pays principal and interest is currently 4.85 percent.
The reserve bank this week stunned the markets by opening the door to a further reduction in interest rates, with the recognition that the economy could be weaker than expected. It came after a 30-year RBA reached a record low level of cash, 1.5 percent.
CHRONICLES AND CONTINUED
Despite rising fears of a complete fall in housing, RiskWise says that there are still many opportunities for experiments. This week, the real estate research firm named its first 10 "hazardous areas" as well as areas that were prone to solid capital growth.
Eight of the top 10 suburbs you buy are in Queensland, the other two in Victoria, north of Geelong. The most dangerous suburbs were urban areas where there is an excessive supply of unsold housing.
"The key message is that people must be very, very selective where they buy," said RiskWise director Doron Peleg. "The number of opportunities is limited and, as a general rule, it should focus on houses rather than on units."
Mr Peleg said that the best suburbs were generally 100 kilometers from the capital city and that they had good public transport and road infrastructure, which means that the drive to work was not too great.
These suburbs will continue to experience "strong demand", even with restrictions on loans and lower borrowing capacity, predicting further capital growth, even if Laborers win the next election and change negative taxation and capital gains tax.
His two choices in Geelong are Norlane and Lovely Banks, where the average house price is 370, 931 and $ 455,868. In the last twelve months, both suburbs have achieved 26% capital growth, which accelerates the trend.
The coast along the coast of Gold Coast in Hollywell, 67 kilometers from the CBD in Brisbane, had a 13% capital growth, just like the banks of the Mount Ommaney and Sinnamon Park, just 14 km from Brisbane.
Gaven's area in Gold Coast has reached a 12% capital increase and is close to the M1 station and the railway stations. Also on the list were the northern suburbs of Brisbane, Gordon Park and Stafford Heights.
Further to the north along the Sunshine Coast, RiskWise says that the suburbs of Doonana and Twin Waters are good purchases. Despite the fact that the area is even farther away from Brisbane, the area is flourishing and has become the preferred destination for interstate migrants from Sydney and Melbourne.
Mr Peleg said that the largest risk areas are those labeled as "very risky" on the "black list" of lenders, which means that there would be a "very large barrier to entry to the market, at least a 30% deposit".
"Do independent research and check if there is an excess supply of units," he said. "If you are a non-professional investor, do not plan purchases in hazardous areas. If you have $ 500,000 and want to reduce your risk, you will focus much better on existing houses in one of these (favorable) areas. "