Investing in Property – The best way to build a property portfolio

bjbj Hey guys, Brette Alegre-Wood here, author
of The 3+1 Plan, and chairman of YPC group, where we help you to build a thriving property
portfolio so you can live the lifestyle you ve always dreamed of, but in such a way that
you re not creating a 2nd job, or actually working yourself into an early grave. So what
I wanted to today, was just, we ve been running the webinars for a while and we ve compiled
hundreds of questions that you guys been asking, so I want to take those, and what I ve done
is I ve broken them down into a number of really key questions that most of you guys
are repeatedly asking and what I ve done is I want to present them to you so you get that
level of education. I ve always been a massive, massive supporter of free education, so that
s what I want to do for you guys today, is really give you what most people out there
are concerned about in the market now about property investment, about strategies, about
structures, about all sorts of things, the questions that you guys have been asking.
It s not now me telling you what you should be thinking, it s you guys actually feeding
back and I love that about the social media and I love that about webinars. So sit back,
relax, and let s get started. One of my favorite subjects is building people s portfolios.
You find as an estate agent, and when I first started out I was an estate agent, and you
re selling one home to one person and then you probably didn t see them again. Maybe
they would come back and buy another one if they were going to move or something, but
realistically, you put a lot of energy and a lot of emotion into helping get their perfect
property. But the thing I love about what I do now is that actually don t really get
emotional about the property, and I don t actually have much emotion about the properties
that we re selling, but what we do is we actually build people s portfolios. This question is
probably one of the ones that I most enjoy dealing with and I most enjoy seeing the evolution
over time happen. We have some of our clients, our biggest client has 17 properties right
now and they ve been working with us for about 6 years now. We ve got fairly sizable portfolios
across there and we ve got people with one property as well. The building of the portfolio
is really the thing that I m most passionate about because over those 17 properties, I
ve seen that husband and wife change as people and change their fortune, change the way that
they view their pension. So one property is never enough anymore, you ve got to build
a portfolio. So how do you do that? The question is, How do I build my portfolio safely? m
going to deal with building the portfolio first and then I ll add the Safet , Safely
on the end because I think it s one of these things where it s actually very easy to build
a portfolio. If you, and I ve seen people build up portfolios of 20, 30, 50 properties,
but then they ve lost them. They haven t been able to hold them. So the question is not
about, necessary, how to build up the portfolio. That s a pretty easy thing to do. It s about
how to build it up safely. And we ll deal with the safely bit first so I want to show
you how to build, then we ll come back and we ll talk about how to actually build it
up. s a really simple process and with property there s not too much complexity about it.
There is a lot of people involved and a lot of emotions and a lot of various stake-holders,
if you like, and because of that you ve got to have really clear lines of communication,
otherwise things fall over and things happen. For the most part, one of the reasons why
we work with teams of people that we ve worked with for ages is because we know them, we
communicate well with them, we know the jobs they do, and that s really essential. If you
re going to build a portfolio, a large portfolio, you want to have a solicitor you use, you
want to have a broker you use, you want to have a sourcing company. You want to have
all these people that you know and you trust rather than just trying to find people every
time fresh and that s one of the key things to building a portfolio. That s probably talking
about the Safely bit of it. So how do you build it? Pretty simple. Depending on how
much capital you ve got, income you ve got, let s say to start off you build one you can
buy, enough money to buy one property. I always say if you look at the property here, you
see these little things drawn out. Each one of these is a 2-year period because what I
do, I break my portfolio building and my portfolio management down into 2-year blocks. Two years
is key because, for me, 2 years is far enough out that I can t just grab it and reach it,
but it s also not so far out that s what s going to happen is I don t even think about
it, because there s a danger in putting something so far out that you just go on with something
else. So 2 years, I find, is a really good measure, and especially when you think about
mortgages, 2-year fixed mortgages and things like that, it s a really good time-frame to
build your property portfolio too. It also means that if you re looking at it and coming
back and reviewing every 2 years, then actually, you re not going to miss too much opportunity.
The property cycle moves in very slow and pre-determined cycles and because of that,
you can take advantage of those cycles. So, let s have a look here. So we ve bought our
first property. Not only have we bought it, we ve cash flowed it for 2 years. Now let
s just say that, for this particular property, that we ve spend all our money. We haven t
got any other spare equity. We ve put aside the cash flow in a provision account so we
re safely doing it but the important thing is that we ve got that first property. Now
how are we going to make it? Either we re going to make money off the rent, so off the
yield, that gives us if we ve got a high-yield, that gives us money back in our pocket that
we can put back in the property once it builds up. Or we ve got income, we ve got a high
income, disposable income. We put that disposable income. Or the other way is, what we need
to do, is we need to wait for the property to go up in value. Now there is another way
and the other way is we sell this property, take the profit, and put it into the next
one. The problem I see with that is property is a relatively illiquid asset. And because
of that it actually cost 5% approximately, and this a rule of thumb, 5% to get into a
property, 5% to get out. So if you re going to buy and sell, buy and sell, buy and sell,
every single time you re going to lose 5% which really you don t have to because what
you can do it buy and remortgage so as this property goes up in value, what we want to
do is go back to the mortgage company, whether it be the one we re with at the moment, or
a new one, whoever s got the best deal obviously, and you use a mortgage broker to find that
out, and take that money out. Now that we ve got this equity from this one, we can then,
and we ve still kept this property, and this is the important thing, because we want to
build a portfolio. If we sell that, then we re back at square one and all we re doing
is where now that prices have gone up, we re buying into a market that is higher, and
we re, it s costing us 5% to get out and 5% to get back in, so it s a 10% net cost, if
you like, and we re still with one property. So we use the equity from this one and we
roll that equity through a remortgage into this one. So we ve now got 2 properties, but
the important thing is we need to cash flow this property for the next 2 years, as well
as this one. So now what we re doing, and assuming we ve got no other money and there
s not money from the rent coming in so we can t buy any, so we wait around, look, it
may not be 2 years. It may be 18 months, it may be, whenever you can get that equity and
through using that portfolio manager you re going to find pretty quickly that actually
you ve got that equity, you can access it, let s go for it. So here you ve got the 2
properties. Let s say they both go up in value. In actual fact, this one s gone up. Let s
say this time, this 2-year cycle, this one just sat around and did nothing. But this
one went up. We take the money from that one and then we roll it into another one here.
And let s say this one did nothing again, the area is a bit shady or whatever, or it
s getting regenerated. This one goes up again, this one does nothing. Then we take the equity
from this one and we basically roll this into the next one. And let s say now all these
properties go up, this one we buy goes down, roll it in that one. So the whole idea behind
this is quite simply that we take the equity from this one and roll into this one. The
equity from both those and roll in that one. The equity from those ones to roll into that
one and it s like, what do they call it, a snowball rolling down the mountain. Now the
interesting this is as this goes it gets quicker. So you ll find you get one, and then it may
be 2 years, or even 3 years before you can get another one, Safely. Then it might be
2 years this time, Safely. Then it might be 18 months, Safely. Then it might be 6 months.
If the market takes off, you can find that every 6 months you can go back to your finance
company and give them a further advance. And as much as some of you might be saying there,
banks aren t lending and they re going to subdue them, they won t. The first chance
they get to go free-lending again, they ll do it. I remember being in a conversation
with, and I was about, it was in the 80 s, the early 80 s, and I was probably 14 or 15.
I remember having a conversation with, and I don t even know the guy, I can t remember
who it was, but I knew he was a multi-millionaire. I was looking at this guy going, Wow, that
s a multi-millionaire and back then that was a lot of money, multi-millionares, and I remember
him saying to me, he remember back into the previous boom and we were right in the middle
of a recession at that stage and he said, lending had subdued, and he said basically
he remembers when lending was crap, come bad, and then it come good again, then it went
bad, and that s what lending does, it subdues and goes out, so don t worry about the lending
and that side right now. So in principle that s all we re doing. And working with a portfolio
manager and as you build your emotional intelligence, and as you get better at this and understand
strategy, you re going to know which properties you can remortgage, when you can remortgage
them, how much you can take out safely , and you re just rolling. And eventually, now that
s how you build the portfolio up. Now let s come to the safely bit because I ve sort
of already alluded a lot to it. If you re going to build this safely, you ve got to
make sure you ve got make sure you ve got these 2-year cash flow periods. So even if
you re going to buy these 3 properties, the fact is you ve got to make sure you ve got
enough to cash flow these. And we use things called mortgage cost, calculations called
mortgage cost averaging. It s basically, I stole it from dollar costs averaging and turned
it around, so it s a term I made up, and effectively what that is I assume that in the UK, every
time I do a mortgage, it s going to cost me 6%. Now if I do that across my whole portfolio,
then I can see and I don t need to worry about fluctuations in the market because the interest
rates are going to fluctuate up and down around that 6%. Now right now we re very low which
is great because what I should be doing is thinking that 6% mortgage cost averaging,
3.5%, let s say, pay-rate, so this extra bit I can be putting aside, so when interest rates
do rise and they go above that 6%, I can then draw on that money. What it means is I can
safely grow my portfolio and it tells me a good speed to grow at. The problem with most
people, and look, there s 5 gurus that are no longer out there. All of them had 15 million,
80 properties, this and that and all the hype and BS and all of them had build up their
portfolios over a very short period of time and what they had effectively done is that
hadn t cash flowed this whole thing. They literally just bought and bought and bought
and bought and they figured that prices would continue to go up forever. They don t. They
work in a cycle. That continues today. And that s where you ve got to be very careful
about people saying they ve got 15 million worth of property because half the time they
haven t and the other half the time is they ve done it very quickly and that s a scary
situation. And certainly as interest rates rise, you ll find that a lot of those people
go very silent including their companies may fall over and they may disappear to Cypress
of Dubai or any number of countries that I ve heard these guys have to move to. Back
to Australia, in fact, one of them. In fact two of them have gone back to Australia, that
s quite embarrassing, isn t it? At this point I hold up my British passport. So guys, the
whole thing with this is how to build this safely is all about cash flow. A lack of capital
to buy more property is just frustrating. A lack of cash flow to hold your portfolio,
that s just plain dangerous. That will send you off into a world of bankruptcy, repossession,
all these sort of things, very quickly; a lot quicker than any frustration about not
having enough capital to buy this deal or that. So guys, I think that s a really important
lesson there. It s very easy to look at this and do this and certainly right now the market
is pretty flat, but as the market picks up, you ll see how quickly this can come about
and if you understand this, you can use it to your advantage because these periods here,
may not end up being 2 years at some point, they may be 6 months, 3 months, because if
you ve got 10 properties, you ll be remortgaging one this month, that one next month, that
one next month, and 10 months has gone by before you get back to that one and go, well,
it s gone up again. So it steamrolls and it happens very quickly when it does happen,
so that s why all of my investors right now are saying, Get in, get prepared, get ready
for it. Even if you re just starting out, even if you ve got no properties right now,
get the first property. Because what that s going to do is deal with a lot of the emotions,
so when the market does take off, you re sitting in the driver s seat. m sure you found that
information really valuable. The first step really now is you need to get a plan. You
need to actually work out exactly how you re going to put this in place. So what I encourage
you to do is come in and sit down with us, talk to us, grab a coffee with us, and what
we can do is we can start mapping out what your plan is. But more importantly, not just
give you a written bit of paper that says, Go a buy a property, or Do this. We can talk
about structure, strategy, processes, procedures. We can talk about all the things you need
to put into that plan. We can talk about why you want to achieve this, what you re actually
looking to do about this. We can talk about where you re starting from. What sort of limitations,
what sort of emotional barriers you re going to face. But more importantly, we can talk
about how you re going to get there. And with those 3 elements, you ve got yourself a really
powerful plan. Then the next thing is the motivation and the action. Nothing happens
without actions, and this is where the team can help you do this. In fact we can do it
for you if that s what you want. So I encourage you to come in and meet with us, grab a coffee
or tea if you drink it, and really just sit down and get that out. One of the things you
re going to find about the way we approach this is that most companies in this industry,
what they ll do is they will try and just sell you into a property. The first phone
call you make to them, guaranteed, you re going to get sold a property. You re going
to find we don t do that. What we want to make sure is you get that plan in place, you
get all the emotional things sorted out and you re aware of those. And you really get
a feel for who you re going to be working with. Relationship is what it s all about.
It s not just flog lots of property because I m going to tell you it takes about 3 months
to buy a property, but you re going to own that property for 5, 10 years, maybe, so it
s really important that you put a structure, a strategy in place, a plan, and follow that
plan. Because otherwise what s going to happen is you can grow your portfolio very quickly
but then if you re not aware of market cycles and all these sort of things, interest rates
rising, inflation and all those, what s going to happen is you re going to be put at risk
down the track. It may look good now, but the market changes and then all the sudden,
all of your weaknesses in the portfolio you ve built are going to be displayed. So getting
a plan is going to enable you to get rid of that totally. Guys, I m looking forward to
meeting you real soon at either one of our webinars or perhaps a seminar, or if you come
to one of our office around the world. Have a great day and remember, live with passion.
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56 comments on “Investing in Property – The best way to build a property portfolio”

  1. Bretts Property Rants says:

    Thanks gOneFeralinc

  2. DontTestTheX says:

    It's called a snowball…

    The safest way to profit is to buy 100% cash.

    Good video. Nice t-shirt, is that Ralph Lauren or Lacoste?

  3. Jane Queen says:


  4. dislexic landlord says:

    you can not depend on capital growth

    this model works with riseing prices but fails if you have no capital growth

    IM a very experinced Landlord and I save deposits at present 30% deposit works now and gives positve cashflow

    You can not do this overnight you need to take your time build strong over a very long time

  5. Bretts Property Rants says:

    Agreed that the safest way is to buy with cash but realistically by far the majority of people need leverage to buy a property. You'll see that I am not a big advocate of over-leveraging your portfolio.

    However on your point, I believe that you can build a portfolio safely with mortgages and without huge stress and worry. You can shouldn't be doing it like many guru's tell you. When the sales come before fundamentals you need to run the other way.

    Oh its a polo shirt πŸ™‚

  6. Bretts Property Rants says:

    Couldn't not agree more, in the current market you need to put 30% into most properties. My point around this is that the property market runs through cycles. So at certain points in the cycle you can buy a lot quicker with less money than others. However that does not mean that you should always leverage to the maximum.

    I have another video about how much leverage you should safely use.

    Your point about overnight is 100% correct, people trying to do it quickly normally lose it within years.

  7. v patel says:

    Thanks…liked the video πŸ™‚

  8. TheChatos89 says:

    Im 23 years old and have a fair bit saved up and this is really helpful info, i like it because there is no sales pitch its just a mechanism and accumulated experience being displayed

  9. andy orell says:

    I am in USA, banks dont lend you again when you have a morgage already unless you show that you can pay it with your own income. I am currently paying my first morgage that I bought 5 months ago. I am planning to pay it in 3 years ( 235k). I want to start buying lin the lower end market since is the best one to make money by ratio compared to higher ones. around 65k homes produce that money back in 6 years. I could pay for the $65k cash, but if I wanted to follow your model how would I do it?

  10. andy orell says:

    maybe in UK which I have no idea.. but if I wanted to buy 3 houses on the lower end I need to show that I can afford it with my salary.. ?

  11. elgranroberto says:

    "Dennis the menace" called , he wants his shirt back dude.

  12. Bill Gramling65 says:

    I currently have 6 rental properties. Three of these are paid for, in full. I chose not to have the added risk associated with refinancing and pulling equity out of a property. When you refinance for a larger amount, your payment and insurance increases, thus increasing risk. You actually have little or no 'actual' gain to your bottom line, since you have re-financed your equity. What do you do when the HVAC goes out, or other catastrophic issue. Pay off everything ASAP avoid the bank!

  13. dislexic landlord says:

    what I need Now is a lender who will lend me money on a personal Loan basis
    Banks are just a pain at present

  14. dislexic landlord says:

    depends on how big your investment bussiness is

  15. NZPropertyInvestors says:

    Personal loans can be expensive from banks and it is usually sort term. if you have some equity in a home or investment property you can use asset lander, solicitor nominee lending or what they call in the US hard money. this money is usually around 9%-12%. still expansive and not suitable long term or if one doesn't have secured income. it could be good for trading property short term.

  16. NZPropertyInvestors says:

    This strategy is bast applied at raising market, it could be done in ANY market provided one can buy well and add value to a purchase and re finance after 6 month. then one can create equity and increase cash-flow and move on to the next deal. I have 100% borrowing on all properties but the Loan to Value Ratio is lowered by adding value of minimum 25%.

  17. dislexic landlord says:

    Personal Loans are great for deposits as long as you pay them back quick I try to do it in one year

    The Plus point of personal loans is no arrangement fees no valuation fees and there fixed

    I know most investors can not afford them but if you can afford it its a very good way of moveing forward at present

  18. NZPropertyInvestors says:

    Yes agreed, im just using one for 30 days until a sale is settled / closed on.
    its expansive money boot also fast to be approved by my banker without going to credit with full application.

  19. Sang3ETA says:

    Does nobody remember interest rates hitting 19% in the 1980s? If you don't believe it Wikipedia "Fed Funds Rate". Beware taking on debt at low interest rates!

  20. gaffer91 says:

    i don't buy into that – the global economy is going to stagnate for the next 5 yrs and this will be reflected in low rates – my advice is buy real estate now esp in europe

  21. Sang3ETA says:

    "Bank of England calls for assessment of interest rate rises on borrowers" – 26th June 2013. I wonder why they would do that? o_O

  22. gaffer91 says:

    yeah i saw that – if you're worried about that then just get locked into fixed asap, although i think the boe are being way too premature here given the hardly improving unemployment, manufacturing figures and massive lag in europe; i envisage that if they go this way, they'll just have to reverse their policy further down the line

  23. algeo1100 says:

    This is excellent information.
    I have never met Brett but I have read his book (The 3+1 plan) and he is truly underrated. He is the only property "guru" with no BS.
    There are lot's of property "experts" out there but Brett is clearly level headed and if you follow his teaching you won't go far wrong.
    Brett should be regarded as the best property portfolio building expert in the UK.

  24. Will Singh says:

    I'm using this strategy but on a 5 year system and then if properties start to rise I will start remortgaging every 2 years until I have 10 properties in my portfolio

  25. bambino bambini says:

    So many assumptions in this video. The banks are not stupid.

  26. EriCo Academy says:

    Such an old method… equity loan after equity loan….

  27. Stijn Roeles says:

    read the book death on inflation. Interesting that its not so comon as we think.

  28. Mark mywords says:

    people… believe me that not having debt is foolish, however too much debt is also foolish. Its about HOW you can service the loan repayments. History is littered with "multi-millionaires"who actually had no net-worth and spent all their time fobbing of one bank by using credit from another. The GFC was caused by too many bank/finance/broker salesmen chasing commission and allowing people who could NOT service (pay back) their loans. Banks pay absurdly high commissions to their salespeople who will sell you the "sizzle"not the sausage. Rents and tax only pay part of the loan repayments. After approx 5 years the next property cost a great deal more. So the "snowball" is actually coming towards you.

  29. Yousef Reda says:

    This isnt exlpained easily for people who are beginners.

  30. Greiguci Wootchie says:

    Starts at 5 mins

  31. Sanjok Gurung says:

    I am confused at buying the first property, So on the chart when you said about buying the first property, is it bought in full or is it bought in mortgage?? If it is mortgage its not technically owned by the buyer isn't it??

  32. xman ### says:

    What if the first and second properties go down in value?

  33. nick ladeeda says:

    from the uk yet he has an aussie accent πŸ˜› very informative.

  34. Buddy Bud-Bud says:

    Get a better quality camera or upload higher res videos!

  35. CHOE CHEE FOONG says:

    Does equity increase monthly payment?
    Let's say
    Property with a loan 300,000 – monthly payment 1000
    Equity loan 100,000 – monthly payment 800
    Total monthly payment = 1800
    Is my calculation correct?

  36. Matt says:

    How do you read the market? Where is the information?

  37. olivenson bauvil says:

    I laugh at your video. It makes it sounds easy which is not true. First you have have said nothing about income. You need to have enough DTI to hold first, second or add the previous debt that you had. Otherwise, stated loans or no docs loans will not only kill you with high interest rate, but also low short term payment.
    Second: You barely can get a loan or refinance your second home. The ltv is not that high. You may barely get 80% of LT which may not be enough to cover your previous debt, get money out to buy your second home. Also, refinance has a cost. No need to tell you about inetrest rate that may go higher.
    Third: You have not said anything about credit. For your first home, you may get good program with low credit score, even below 600, but when it comes to investment, you are talking about good credit or perfect credit. You need at least 680+.
    Most banks will not account your previous rental income if it is less than 3 years. It also has to be in your tax return which require higher tax payments.
    People always make it sound easy like they have so many by doing that. It is possible, but many factors must play into your favor.
    Income, credit, rate, equity, and luck to find good tenants.My skype is bauvil2003

  38. Bridge Finance Direct says:

    good job nice explanation

  39. Endless Odyssey Official says:

    what do you conisder buying safely? 20% deposit?

  40. wahh Taoo says:

    how much property do u have?

  41. A. H. says:

    An investor who specifically talks about moderate growth. Refreshing. Usually everyone is racing to 50 homes at the speed of light.

  42. PseudoSarcasm says:

    I have 1 investment property, I can probably get 1or2 more before the bank won't give me any more money.
    Rent coming in is about $10k/year, but mortgage is similar.
    Sounds like I'd have to bank on properties going up in value, though I still don't get how I'm to service the loan if I have 5 properties and all tenants decide to move out.

  43. Private Anonymous says:

    great advice on how to get into debt and make banks a ton of money…

  44. Indi Singh says:

    Do u ever change your shirt mate?

  45. MPCpropertydevelopments says:

    safe and sustained way is key…. interest rates are on the rise, lets be careful out there!

  46. Euan Phipps says:

    This is one of the best and real videos I've seen – Too many of the videos on YouTube are trying to "Sell the dream"

  47. Nolan Gray says:

    Wow im just now seeing this in 2018 . Im an usa investor

  48. Twis7ed soul says:

    Get to the point

  49. George Austers says:

    I think you’re better off paying your personal home and then buying homes with cash and having no debt

  50. spitzndtruth 1 says:

    Your actually losing 10% in and out

  51. Trenton Johnson says:

    Can Americans buy in your market

  52. Chris D says:

    And when they go down ????

  53. USMLEmotivation says:

    5:05 start

  54. Dylan Gleeson says:

    Whats wrong with Australia MATE!

  55. Chris Hamill says:

    Good content. Well worth a watch! Keep up the great work

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