17 Aug How to build a 170+ property portfolio? – Nathan Birch
Young property investor Nathan Birch became interested in property at 13 and started investing at 18. He can now say he has over 170 properties in his portfolio. Hear his amazing story. Nathan is our guest today.
Kevin: My next guest is Nathan Birch. We spoken to Nathan on the show before. Nathan started his fascination with property at the age of 13. We’re not going to give away your age now. It’s irrelevant, really. Nathan is very skilled at being a property investor.
Property had something to do with your background, do you think, Nathan?
Nathan: Actually, at the age of 13, I got excited by investing in property. Coming from a blue-collar working family, I wanted to be rich and thought property was the way. I got excited at the young age of 13 and wasn’t able to sign a contract until I was 18. Giving away my age, I just turned 30, and my property portfolio is very strong at 170+ properties.
Kevin: That’s an amazing number of properties. I think the latest stats I saw were around about $30 million worth. The thing that amazes me is we hear a lot of people who have a lot of property but in your case, I think, you’ve driven for it to be neutral or positively geared. Is that correct?
Nathan: That is very important to me, yes. Managing the cash flow is something that is close to my heart, because building a sizable property portfolio isn’t really possible if you [1:12 inaudible] cash flow position. It could sink or make you.
Kevin: Some people would say at age 30, you’re more than capable of taking on mortgages because you’ve been working for quite some time, but it’s commendable that you haven’t done that. How hard is it in this environment to find property that is either neutral or positively geared?
Nathan: I think it’s the same problems I’ve experienced for last decade – be it finding the right properties that is going to fit into the portfolio to make you successful, that side of things. A lot of the properties that I bought in the early days weren’t positive cash flow. They were just neutral cash flow. But what happens over time, investing in capital cities and whatnot, the actual rents will rise and turn into a positive state.
The Sydney property market at the moment isn’t really the best market. We can’t find highly cash-flowed properties. However, the two states that I do find it is very possible are Brisbane and the Gold Coast, and Adelaide. Those are the spots that I’m looking at and purchasing in actively in the current market.
Kevin: Talking about cash flow, obviously in this low interest rate environment, it’s very tempting for people to go out and borrow as much as they possibly can. Do you think that’s a bit of a mistake?
Nathan: It’s something that just depends. If we’re looking at the Sydney market, which is at the highest point it’s ever been, if you’re pushing yourself and having a very high LVR, I think that it could be a bit fraught with danger.
However, if you’re looking at markets like Brisbane, southeast Queensland, and Gold Coast, those markets have been depressed since the GFC – so for about seven or eight years, the markets have been very, very depressed. I’m picking up properties there all the time that are still $50,000 less than what they were selling for seven or eight years ago.
Looking at the cash flow positions on them, they are positive cash flow. You can pick up properties for $200, $250 or even for $300, $350, $360 per week. From that perspective, if you built a portfolio of ten of them, the boom is on its way to that region, and obviously, the pricing is going to go up. It’s not like it’s on its way down.
Kevin: Where do you sit on the debate about interest-only and principal-and-interest repayments?
Nathan: Good question, Kevin. From a perspective of interest-only and principal-and-interest, I think a lot of people get caught up in the fact that you want to pay down the property as quick as possible. Paying off the property as quick as possible is one way of looking at it.
I’ve always looked at investing as there are different phases that you go through. One of the phases is obviously educating yourself on what you’re trying to do as a property investor. The next one is accumulation, and the third one is consolidation.
For me, personally, looking at accumulating properties, you need to keep yourself as lean and as thin as possible from a cash flow perspective. In that instance, I think in the early years, it’s best to be interest-only.
The reason being is if you want to have five properties in your portfolio – or ten properties or whatever – if you’re paying an extra $50 per week out of your pocket to pay the property down, that could be $50 per week going toward your next deal. I’d rather be paging through a property cycle, an extra property, an extra ten properties, or an extra 20 properties through a market cycle, not just trying to pay it down and have no debt.
Debt is a part of good investment strategy – but minimizing debt, as well. I’m not a big fan of 90% and 95% loans. I’m a big advocate for 20% deposits. That is something I’ve done in my personal property investing journey but also bearing in mind that paying down the property is just a numbers thing.
The view in the future is you should always be paying down debt. What I mean by that is I look back on my properties that I bought ten or 12 years ago that I might owe $530,000 on and they’re worth $450,000 or $500,000. If I only owe $100,000 on each, that’s only 20% LVR that I have in the current market. I would rather have ten of those sort of results than five of those results if I had being pay down those mortgages.
The reality of it is that five or ten years on, what is the difference between owing $100,000 or $80,000. I’d rather be making that $400,000 spread on the other side.
Kevin: That’s all good leverage. Nathan, we’re out of time, mate, but thank you very much for your time. Nathan Birch has been my guest, and the website is Binvested.com.au.
Nathan, thanks again for your time.
Nathan: My pleasure, Kevin. Thanks for having me on the show.