WCC 6: What’s it going to cost to buy that next property

Good morning, everybody. Morning, morning, Jason here. Welcome to another coffee and a chat this morning. I thought, my office, my studio was all set up tonight. I dunno if you can see it here, I’ve got my mentoring on tonight where we sit down with our team from Positive Mentoring Program. That’s my studio behind you. All around, anyway I’ll give you a bit of a tour. Morning Ellison. There’s everything set up for this evening. If you can see it anyway, it’s not a very good tour. Oh, the cameras, lights, action for this evening. But great to see everyone jumping on this morning. Good morning. Marvelous Monday it is. I thought we’d go outside this morning anyway, because my studio is all set up for something else. So we’ll sort of pop out. So it’s a beautiful day anyway, but for those who are joining for the first time, Jason Whitton’s my name. Property investing 20 years, coaching property investors over 18 with my business partner, Sam Saggers, my life partner, Shay Whitton. We’ve been running Positive Real Estate for that period of time. There’s my office up there, actually. If you guys can see, I’ve got a little office, which is pretty sweet. I live on an acre, not far from the house. So I get to go to the office every day, work from home, but I still get to work from an office. It’s kind of nice. So then anyway, I love it. So I thought we’d go outside this morning because absolutely gorgeous outside today. But welcome along for those who are joining me for the first time and those who are coming back, fabulous to see you again. Each morning, get together with everybody. Just talk about property investing. Being like I said, been property investing over 20 years myself and share a little bit of wisdom each morning over a coffee and a chat. So great to see everyone here, a few chats coming through, which is awesome. So give us a shout out if you’ve got any questions, but this morning I was going to talk about what’s it going to take to buy that next property? Because we’re all building our property portfolio and often getting started is actually fairly straightforward. You know, you’ve already got some resources in play. You’ve already got some income in play. You’ve already got some deposits or some equity or some cash that you can use, but once they’re used, once they’re invested, once you’ve got your deposits, your initial deposits, let’s say it’s 100, you know, 150 grand. Thanks Carolyn. Let’s say your income is, you know, maximized for the servicing. Well, what next for you? What next? And that’s what I thought we’d talk about this morning. Two parts to this process that we need to understand about what’s it going to take to buy the next property? Number one, actually the easiest one, is where you’re going to get the next deposit from? Okay? Unless you’ve been strewing cash under the mattress for ever and a day, you know, your deposit is going to come most times from two places, okay? Number one, the equity growth in the properties that you already have. Your properties growing in value over and above a certain loan to value ratio. Grow in value and they create the next deposits for you, your own home, your investment properties, or multiple investment properties. Where is that deposit coming from? Now, the challenge sometimes is that growth is a bit slow. Sometimes you need to boost it with your own saving or cash put towards the next deposit. Now this is the tough part. This is the disciplined part of property investing, you need to be disciplined enough to get enough deposits going in a market place so you don’t have to save cash anymore, okay? And in my experience, usually two to three deposits in the market working usually then become self-fulfilling, self-rolling, self-replenishing going forward, okay? Two to three deposits. On average, a $500,000 property right now will take you at a 90% loan to value ratio. Approximately 75 to $80,000 to purchase that property depending on the state that you live in, depending on the state that you live in, depending on their statutory expenses and costs, okay? So the stamp duty and so on. So that’s why it’s like 75 to $80,000, depending on where you’re buying, what you’re buying, and how you’re buying it. If you’re buying an owner-occupier, it’s a little bit less, if you’re buying an investment property, it’s a little bit more, okay? So two to three properties, two to three investment deposits would be 150 to $225,000, okay? So that we need that amount of money in the marketplace. You’re saying, “well gee, Jason, I don’t have that.” Well start where you are, okay? So the deposits are created by two mechanisms, one: capital growth from the properties that you already have, and releasing the equity from those properties and two: you saving more deposits, like Alison saying, here, “saving after-tax dollars is a marathon.” Now there’s a little twist in this, which is something important to understand, when you buy investment properties, if you buy newer properties that give you tax deductions, you get to save your money. You get to create saving for future deposits, from pre-tax cashflow, from dollars before you pay tax, which is good because you get depreciation, okay? So deposits, some people use deposits or create deposits by joint venturing with others, okay? Joint venturing with others, with friends and family or business partners, not my favorite one, but some people do that. One way to create deposits also is to borrow money from family. I quite like that one, especially moms and dads lending money too, when they’ve got lots of equity and they lend money to their kids, that gives their kids a real good boost because often, younger people have got good incomes, older people do not, joint venture up that way or lending some money that way can be beneficial for everyone at the same time. Where are you going to get your deposit from? Number one, that is the thing you’ve got to focus on. Where are my deposits coming from? Now into the future, if we’re able to borrow up to 95%, then we might need less money to get into properties and that’s going to be excellent for us as investors also. Now let’s get to the next one, next part of this conversation, which is the tougher one, all right? Like saving’s pretty tough. Like Alison said, that you know, most of us haven’t got a gazillion dollars hidden under the mattress, use your extra cash flow, Use your tax benefits, tighten the belt a little bit on things that you don’t need to have right now, that you can buy your properties with. One of my clients, Justin, he sold his car and his motorbike and saved his butt off for his first deposit, okay? He didn’t need a car, he didn’t need the motorbike. He sold them, got the money, bought a property, consequently, he’s made a hundred thousand dollars in equity and now he’s going on and he’s getting set up for his next property. Now he did the next thing, which we talked about for a little while as well. So often we get to the point where we might have equity, we might have deposits, we’re ready to roll, but servicing, the ability to service the loan, holds us back. And we’re like, well, what are we going to do about this? And this is the tough talk gang, that maybe some of us need to have. If you want to build that property portfolio, you have to increase your income. End of story. End of story. “Oh, what do you mean by that, Jason?” Well, sometimes all of us are sitting in jobs that number one, let’s talk about this, number one, you’re sitting in a job you don’t like, it’s easy, it’s not that hard, but it doesn’t earn you that much money, okay? You know, it’s not a career, you don’t really care about the job. It’s not something that you love doing. Well here’s my conversation with you gang, come in bit closer, ’cause this is for real. It’s time to get your arse into gear and get a decent job that pays you decent money, more money than you’re making right now, and go and find somewhere that you’d like to be instead of just coasting life in a comfort zone, all right? You need to get out of your comfort zone, income comfort zone, and you need to get into a zone where you’re earning decent money, all right? Now, just because you finish high school or university doesn’t mean you stop learning. There are people in your industry earning more than you. Double, triple, I know there’s every single industry in the whole of Australia where you are right now, I would say 95% certainty, you are earning less than the best people in your industry. Yeah, it’s hard for you in the world of the military, Alison, ’cause you’ve got to sort of stand in line, right, to get there. But look at you, you’re starting a degree as well and I love that, okay? You’re never stuck. There’s no such thing, it’s bullshit, gang. It’s bullshit. You increase your income, 20, 30, $40,000, right? By getting a promotion, you know, Alison studying after-hours, getting a degree, so she could increase her income. Gang, like now’s the time. Now’s the time. I’m telling you right now, stop stuffing around in the comfort zone, right? “Oh, you know, I’m a bit scared.” Well you know what? It’s going to be worse when you’re 50 or 60 and you didn’t do it when you were younger and even if you are 50 or 60, it’s certainly not over when it comes to this stuff. Get your finger out of your butt and get going, all right? Get your thumb out. Because life goes by, the big wheel keeps on turning, whether you’re in there or not. And I’m telling you right now, those who get up each day and go, “yep, I’m going to fix this. I’m going to go for it.” Get up an hour each day, show up to work an hour early, every single day for the rest of the year. Go and do that. Go do one more hour, get noticed by the boss, ask for the pay rise, push for the pay rise. Go for it, all right? Study after hours, do one hour every day of study, like Allison’s doing, right? Look for that extra job. Look for the look for those employers who are paying 50 grand more for that person for your role somewhere else and go and ask why, okay? Because gang, there is more money in the marketplace than ever before. Like, there’s zero return for cash. Businesses, industries are looking for the best people who want to get up and go for it every day. And you guys who want to be property investors, you’re not slackers, right? Like you guys are going for it, you’re pushing for it. You know, many of you guys are in the top 1% of Australians who own real estate. It’s not like you’ve never pushed yourself before, but this one’s the important one. You have to increase your income. The faster you increase your income, the better off you’re going to be for borrowing, the quicker you get your acquisitions done, like the purchasing done, right, the quicker more properties you get to purchase, the better your wealth becomes into the future, which is important. So and Melinda’s into it as well. Good work, Melinda! Well done. Right? Gang, don’t miss this one. Your deposits are important. You can only save so much. You can only reduce your expenses so much. Your income, by and large, is expediential, you can earn any amount of income into the future if you choose. Up-skill, increase your capacity, get you degree after hours. Wow, man, like you can literally study now online with a degree and you can get it without ever having to attend a university. Oh, a physical one anyway, all right? That’s amazing! I love that stuff. Taif, uni, online courses, up-skill, it is never been easier to connect with the ability to increase your income. Up-skill, push for the promotion and if the promotion doesn’t come, find somewhere else that will pay you better, more money. And like I said before, my client, Justin, he was working in the Gold Coast and then he got himself a job in the mines in Western Australia and now we’re getting set for his next property, all right? So there you go. Hopefully today’s conversation landed. You need deposits. Where are your deposits coming from? You need two to three deposits in the market working for you. So you can rotate those deposits at least two or three times over the next 5 to 10 years, that will replenish and land for your deposits and income. Don’t sit around complaining that your servicing is no good, all right? Don’t come and complain to me or your coaches, right? Because I can tell you right now that is 100% your gig to fix. And if you’re sitting there and you know that you could get better income, more income, you could be pushing yourself, you could be getting a degree, you could be earning more, then you need to do it. Get on with it gang. Time to crack on with this stuff because the world’s not going to wait. The big wheel will keep on turning. And in 5, 10, 15 years, you’ll wish you went back and did one our each day. Imagine that, one hour. One hour, every day, get up one hour earlier, put in one hour extra. When? Every day for the next year, two years, five years, the compounding effect of that, where would that put you? Where would that put you, gang? You know, I chatted to Tim Forester the other day. I don’t know if anyone knows Tim Forester, he’s worth about half a billion dollars and nice work, Brendan! And he said, well, you know, “I’ll get up every day. And I work hard and long all day, because I love it, love it!” He said the money’s, you know, and sure he’s got plenty of coins, right? But at the end of the day gang, you know, go and find something you love to do or love what you’re doing. Love what you’re doing. Shay just put it in there, you know, there was one of our clients in Tasmania. She went and got extra work driving a bus. Driving a bus. Driving a bus. Had a great time chatting with people. I’ve got clients who drive Uber. Uber for a couple of hours on the weekends to make extra coin, to get that extra property. Gang, there’s always something you can do. Right now, in this world, it’s never been easier to get access to good education, good information, good opportunities. So hopefully my conversation landed today. A bit of encouragement. Crack on gang! ‘Cause the world’s not going to wait. And I’m so pumped about the next decade of property investing because interest rates are the lowest ever been. Ever, ever been. Servicing is tough. It’s going to get better, but you need to increase the income and away you go. So Julie said, “I’m not sure about understanding the three deposits.” Julie, what I’m saying is the first two to three properties that you have will require some capital, some investment. On average, depending on who you are, that’ll be a 10% deposit plus 5% for your costs, okay? So that’s about 75 to $80,000. Those three deposits in three different properties, once they’re in that property, we want those properties to grow in value and return those deposits to us so we can go again, okay? So it’s called recycling of the deposit. Hopefully that makes sense, Julie. If you need a bit more info, reach out to your coach. If you don’t have a coach, you need one. Yeah, reach out if you need a coach, buddy. If you do have one, cool, give him a call, talk to your coaches have a little chat with him. All good. I think that’s it. I think I might have had a little bit of rant today. Hopefully that was fine, gang. But yeah, listen, don’t wake up in 5 or 10 years time and say, “okay, I could have done, I should have done better.” It’s time to do it. Every day it’s time to do it. Wake up, make it happen. Alison said, “link it to your goals,” which is awesome. Aw, thanks Mel. Okay, I’ll check that. We launched, yeah. I chatted with Trevor Hendy and I don’t know if anyone remembers Trevor Hendy and the podcast launched today, actually. Mel reminded me, thanks for that, I was off on a bit of a rant. I chatted with Trevor Hendy, six times IRONMAN champion, member of Order of Australia, Sporting Hall of Fame. What a cool dude. And it was a pretty cool conversation to sort of see, you know, he had fine fortune, the world at his feet, and it all blew up. Divorce, bankrupt, the lot. And then he made a comeback and amazing stuff now. So yeah, go have a listen to that one. That one’s a really cool. Yeah, he’s a champion all right, Mel. What a cool conversation I had with Trevor Hendy, so. Hey listen, if anyone’s listening in, do us a favor, can you subscribe, leave us a comment, and download an episode? That gets me up the charts! Which is cool. All good. Oh, Julie, you want to invest in the Gold Coast, not a bad place. You’ve got to be careful where you invest in the Gold Coast, ’cause it is a bit of hit and miss. Give us a shout out if you want some help with that, buddy. Anyway, there you go. I think I’ve been on camera for a bit this morning. So hopefully everybody is well, it’s been a great conversation. Looking forward to mentoring tonight. Everyone, mentoring is on tonight. We’re talking about finance, which is why my rant this morning. And we’re talking about actually off the plan tonight. How off the plan is going to be very useful in the next little bit about our strategy. You’ve got to get it right. It can be absolutely disastrous if you get it wrong, but it can be an absolute winner if you get it right. So we’re talking through those strategies tonight at mentoring. That’s why I’ve got my studio up there, all set up for tonight’s mentoring. So make sure you join us tonight, gang. It’s gotta be a Cracker. So download my podcast. I know Sam would have had his podcast launched today. Actually his launch is on Wednesday and join us tonight for mentoring, gang. Other than that, that’s me, done and dusted. Another coffee and a chat. Hope you’re all well. Have an awesome week. Join me again around about the same time tomorrow for another coffee and a chat. Stay well, stay awesome. And if you need some help, that’s what we’re here for. Reach out. All right, gang, take care. Have a great day. Bye-bye.


About the Author
From a small town boy growing up in the remote outback of rural Queensland, to becoming the founder of Australasia’s most powerful property wealth creation engine – Positive Real Estate Group CEO Jason Whitton is on a mission to change the way we look at wealth.