Australians are making copious amounts of cash through investing in property and as such I’ve decided to do a series of short pieces on investors I have met along the way who have started from nothing and built a property portfolio most of us would be envious of.
My first contributor is Darryl; he’s a 33 year old full time investor who started out delivering pizza, earning an income of approx. $20k per annum. He first became interested in investing after reading Steve McKnight’s “0-130 Properties in 3.5 Years.” Most budding investors will be familiar with Steve McKnight, but for those of you who aren’t, he is an extremely well-known figure in property investing circles for having amassed a huge portfolio based on cash flow positive properties.
Darryl currently owns 13 properties (another 2 are presently under contract) throughout NSW and QLD. He has accumulated this tidy property portfolio over the last 12 months with his first property purchase in Broken Hill costing him a whopping $44,000. It is currently rented out for $180k (yield of approx. 19% before costs) and valued at $89,000, doubling the purchase price.
The best performer in his portfolio to date is another property in Broken Hill which is achieving an incredible yield of 36%! It would seem that whilst regional areas can get a bad reputation in terms of offering poor capital growth, yields like this can certainly make it worthwhile. Darryl certainly seems to have an affinity with regional properties but is not averse to purchasing closer to the city if there is the opportunity to make quick capital gains on a property with renovation potential. However, like many other investors, cash flow is high on the priority list and for many reasons, the main one being that it provides income to support his lifestyle. Purchasing multiple cash flow positive properties has afforded this young man a life of freedom, something most of us can only dream of. In fact an average week for Darryl involves “a few hours a week looking for new properties; the existing ones don’t need any additional work and if a new property needs renovating it will take about 2-3 weeks if you’re doing it yourself.”
So, how does one become a full time investor? When given the opportunity to ask Darryl just that he replied “(you’ll need) 20%+ of your current income. Don’t touch your normal pay for 6 months, and then you know you’re full time.”
For Darryl, property investing is one of the best investments going around because “there is no glass ceiling on how much you can earn and it’s a royalty based income” and his number one rule? Always buy below market cost, highlighting the fact that “money is made in the purchase not in what you do with it. Don’t listen to friends and family with no investing experience on where to invest.”
There you have it: Pizza delivery boy to investor extraordinaire in as little as 12 months. It just goes to show that it doesn’t matter how much you earn, it’s what you do with it that counts.
Emma
Great effort Darryl, and I can only dream of becoming a full time property investor. I though concentrate on capital cities or very large regional cities. I know the old adage has been you have to sacrifice yield for capital growth in cities but not necessarily if you look hard enough. My investing approach is very different to Darryl’s but I’m confident I’m on the right track. Well done to Darryl to achieving what most of us can only dream of.
Hi Michael, thank you for your comments. If you don’t mind me asking, what kind of strategy are you using currently?
Emma
Emma, I’m curious: did you make any attempt to verify this man’s claims before publishing them on your blog? Having worked in loan approvals myself, I can tell you that a pizza boy making $20k p.a. would now have trouble getting a $2,000 credit card, much less what must be over a million dollars of mortgage debt. From nothing to 13-property baron in a year – that’s an extraordinary claim that should require extraordinary evidence to substantiate. It’s one thing for a man to stand up at a seminar and whip a lot of gullible people into a frenzy with rags-to-riches tales and “you can do it too” excitement. It’s quite another for the same man to provide loan approval documents, bank statments, tax returns and all of the other documentary evidence that proves he’s not a liar, a braggart and a conman.
A bit of healthy scepticism would do you well on your property journey.
your comment is completley valid however I happen to know this person and the story to be true. the properties he has acquired are all cash flow positive and acquired for extremley low prices i.e. around the $30-$50k mark. there’s not a lot of growth in these properties obviously without the help of forced equity i.e. renovating etc but the yield is good.
Is there really such a thing as a cash flow positive property once things such as stamp duty, transaction fees, potential interest earned on deposit funds, etc are taken into account???
The mere fact that the rent earned is greater than mortgage payments isn’t an indication – you may have put down a 90% deposit, and that would be true…
Is there really such a thing as a cash flow positive property when stamp duty, transaction fees, rates, potential interest earned on deposit funds, etc are taken into account???
I don’t think Wolf/Missionkontrol’s definition of positive cashflow is helpful (unless 105% mortgages are available).
I think positive cashflow means that (disregarding whatever amount of your own money it takes to buy, refurb and support the property before you get your first tenant) from the time you start renting it out, you get recurring rental income that exceeds your average recurring expenditure. I think this is important (and I’ve got positive cashflow, from about Month 2, on all my properties.
However, I can see that there might be a good reason for investing in a negative-cashflow property, in special circumstances.
OK, well from an investment perspective, why would you totally disregard whatever amount of capital that you’ve put into an investment, when calculating your return? That sounds absurd.
I get the part about income exceeding expenditure, but if you have to sink a large amount of capital into the property for that to happen, it’s kind of self defeating isn’t it. There is an opportunity cost for that capital.
Does someone have a definitive explanation of what a cashflow positive property is?