How Eddie Overcame Getting Stuck With Finance

Dilleen Property Group 2021

A lot of people may wonder how is it that I achieved 30+ properties in my portfolio by age 29. How did I not get stuck with finance and serviceability?

I’ll let you in on how exactly I overcame this issue and some tips and strategies that you could use to build you property portfolio too.

Around 6 or 7 years ago, when I was around 23 years old, I had 6 properties in my property portfolio. It was at this point that I got stuck with finance and I was having a lot of trouble being able to continue growing my portfolio.

With 6 properties under my belt, it finally came the time for the bank to come back and say that I couldn't borrow any more money. I couldn't buy any more investment properties because my serviceability or borrowing capacity was too low. This basically left me stuck at this point for around 8 to 16 months.

The Six Things I Did to Overcome Getting Stuck

There are 6 different things I can share with you today that I did to increase my serviceability and borrowing capacity which eventually led me to build my portfolio to 30+ properties.

Number #1

The first thing I did was increase my income. My individual income was probably around $50,000 – $60,000 at the time.

It’s easy to say go out and make more money, find a higher paying job, take on more hours etc, but I had to be realistic at the same time. If I wanted to go from 6 properties to 10 to 15 properties, I knew I couldn’t stay on the income I was currently earning. There was just no way around it. Taking this all into consideration, I decided to get a second job. I was already working full-time during the day and I started to work as a bartender at night. I would work 2 or even sometimes 3 jobs at that time to increase my income. I did whatever it took to increase my income from $50,000 to almost double that within that period. After a while of working 2 jobs, I stopped and just worked 1 job. After saving from multiple jobs, I was able to get the income and funds needed to move forward.

At the end of the day, it depends how aggressively you want to build your portfolio, but to overcome getting stuck with finance you must increase your income, and save as much money as possible to build up those deposits.

Number #2

The second thing I did was living very frugal and not spending much money at all during that 3–5-year period. I didn’t buy any fancy clothes, didn’t go on a massive around-the-world holiday and I did not own any fancy cars. I was driving around a car worth $1,000. All my excess cash savings was put into savings to buy the next property. Essentially there was no fanciness, there was no going out for lunch every day, and there was no spending $30.00 on one meal. You may be thinking this doesn’t sound like a very nice way to live, but keep in mind, I only did this for a short period of time until I was able to generate enough income and savings to leverage my portfolio.

I do understand that you must enjoy life at the same time, but at that stage I was very committed to sacrificing small things for the future I wanted.

Number #3

The third thing I did was saved genuine deposits. I was able to move forward with finance because I saved genuine deposits and didn't only rely on equity. I saved up genuine deposits over 3 - 24-month periods and tried to save around 75% of my wage or more during that period.

Number #4

I got rid of all the credit cards that I owned. I sat down with mortgage brokers and different people from banks and learnt what personal debt does against serviceability and your borrowing capacity. As an example, if you had a $10,000 credit card, even if you don’t owe any money on that card, it still takes away from your borrowing capacity as it still counts as a liability.

Number #5

I always bought high yielding rental properties. If I bought a property for as little as $200,000, I made sure that it was renting for $300 - $350 a week, so that there's about a 7.0% rental return or higher. If you own properties with high rental yields of at least 6% - 8%+, it helps a lot when going back to get finance for your next property. The bank will calculate the income from your properties onto your taxable income and that will help a lot when going for your 3rd or 5th property. I also diversified in different locations to spread my risk.

Number #6

I always made sure that whatever property I was buying was below market value, or below comparable sales. If I was buying a property for $200,000, I always made sure that the property next door or in the same street that was of similar quality was selling for $30,000 - $50,000 more than the property I was buying so that I had a safety buffer in place. Not only that, but it also it gave me equity to be able to go back to the bank 3-12 months later and use a bit of equity to help buy the next property if I was struggling with savings.

The overarching theme here is increasing your income and buying property with a strategy. I would also like to point out one of my favourite quotes which I stand by and has been crucial in my journey “sometimes you need to go through short term pain for long term gain”.

Disclaimer: This is not intended as legal, financial, or investment advice and should not be construed or relied on as such. Before making any commitment of a legal or financial nature, you should seek advice from a qualified and registered legal practitioner or financial or investment adviser.