Savvy young investor Daniel Walsh built a $3m portfolio, netting over $1m equity by the age of 26 and now helps others do the same.
Start young, avoid cross-collateralised finances and get a team behind you that invests in property, says Sydney-based Daniel Walsh. As a 16-year-old apprentice auto-electrician earning $254 per week, he soon realised he’d have to invest if he wanted to get ahead. He’d seen the money to be made in property through his parents (who’d always flipped houses) and wanted financial freedom for himself.
It took three years to save for that first deposit - a challenge on such a low wage.
“I bought land and built my first house,” Daniel says. “I was so broke that I had to sell $5000 worth of sky-diving gear just to put the driveway in, but I knew that first property would get me in to the second.”
When Daniel bought that next investment, the loans were cross-collateralised by his bank - the ramifications of which he was unaware of until he went looking for his third, a house in Sydney. Having already reached his serviceability threshold, his bank wouldn’t lend him any more funds. Daniel belatedly realised it was a major financing error, but couldn’t do anything about it and missed out on the proposed property.
“I call it my $400k mistake,” he says, with reference to how much that property has grown in value since the time.
Forced to wait almost two years until he borrowed again, Daniel sought out a mortgage broker who was an investor himself.
“He had 20 properties of his own and a portfolio to the value of $7 million,” Daniel says. His broker helped him to uncross his loans and then he was able to keep buying. Nowadays, Daniel has his loans spread across five banks, enabling him to meet various lenders’ criteria, then release equity from one bank to another.
“It’s spread my risk over multiple banks and they’re happier if you do that,” he says.
After Daniel set himself up more effectively, he was able to grow his portfolio from two to seven properties and a block of land in just two years. His major aha moment was when he realised most people would buy a house then pay the debt off over 30 years.
“I knew that property doubled in price every 7 to 10 years, so I figured that if you bought two houses, you could eventually sell one to pay for the other house,” he says. Daniel’s thinking then grew a lot bigger, realising that if he could use that strategy for two houses, he could do the same with 10. “I could sell five of them and pay off the rest in a 7 to 10 year period.”
Applying this strategy, Daniel’s portfolio is now valued at over $3 million, netting him close to $1.2m in under 6 years. While he’s planning to make another couple of purchases in the next few months, Daniel has now built his baseline portfolio which will take care of his future. He says it was worth living off baked beans and putting up with the $2000 car that he blew up twice, which he couldn’t afford to replace at the time.
“I knew if I did it hard in those early days, I’d be able to live the lifestyle I wanted now,” he says.
Daniel’s investment philosophy is to buy and hold, using five key elements for his success. He assesses cashflow across his entire portfolio, rather than each individual property, buying cashflow positive properties and slightly negative geared properties depending on what the portfolio needs at the time. This helps him to purchase investments that may yield slightly less but have higher capital growth prospects.
“I bought a property yielding 5% last year, but it was something my portfolio could sustain,” Daniel says. The property in question was in Melbourne’s Carrum Downs and made $150k in 12 months - something he says a new investor may not necessarily be able to accomplish if they required higher cashflow.
Daniel’s other investment criteria include diversifying to spread risk across different states, holding a buffer to maintain a stress-free portfolio, undertaking extensive research into proposed investment areas and leveraging the benefits from compound interest through a buy and hold strategy.
In recent years Daniel has become a buyers agent to help other people achieve financial freedom.
“If I’d had a mentor in my early days, I could have doubled my portfolio,” he says. “I’ve now set up a team that helps other people avoid the mistakes I made.”
Original article: http://www.apimagazine.com.au/property-investment/investor-in-focus-daniel-walsh