Don’t buy into housing bubble ‘bulls**t’, says property tycoon Nathan Birch
- 6 DAYS AGO JULY 09, 2015 5:56AM
HE’S got a $35 million property portfolio at just 30, makes half a million dollars a year in rental income, and thinks talk of a housing bubble is “bulls**t”. His message for struggling first home buyers is simple: stop whingeing and do something about it.
Nathan Birch has lost count of the number of properties he owns, but says it’s about 170.
His total debts across his portfolio are $11 million, he brings in about $2 million in rental per annum, and takes $500,000 of that after expenses.
The boy from western Sydney didn’t grow up with a silver spoon in his mouth, his parents aren’t millionaires, and
he never worked in Bronwyn Bishop’s office.
For first-home buyers who complain about not being able to get into the housing market, Mr Birch, who is the founder of property investment group
Binvested, says rather than complain, accept the system and use it to your advantage.
“They’re the people that are upset they haven’t got their hands on it,” he said. “Don’t get me wrong, the market is very difficult for first-home buyers to get into. But the question I always ask is, what are they doing about it?”
He said you could complain about it and hope house prices fall — but don’t hold your breath.
He likens it to the Winklevoss twins, who were so concerned about going after Mark Zuckerberg for taking their idea that they weren’t making their own Facebook and doing something better. “Where’s Mark Zuckerberg now?” he points out. “While people are complaining about it, they could be making opportunities happen.”
It doesn’t matter whether it’s stocks or property — the only way to build wealth is to invest with a plan and a strategy, not let your money sit still, Mr Birch argues.
“If you had $500,000, you could buy a Lamborghini or 20 taxis. Buying the taxis would bring you a return that would pay for your Lambo, but most people want to go out and buy the Lamborghini straight away. Then they find they have to pay to keep it running.”
Mr Birch has been
accumulating a portfolio of properties over the past 10 years and has followed the market keenly since he was 13, when he first picked up a copy of Homes Pictorial magazine.
He saved every cent he earned,
working for a real estate agent after leaving school at 17 before taking a job selling ads for a car magazine, with a second job on the side working in a bar.
By researching the market and analysing thousands of deals, he has developed a knack for scoring bargains. He made his first purchase, a three-bedroom home in Mt Druitt for $248,000, at 18, with enough rent to cover his interest-only mortgage and other costs.
After six months and a basic renovation, the house was revalued at $350,000, which he used for equity for deposits on two more properties. In 2009, with 14 properties making $30,000 a year in rent, he decided to quit to focus on his portfolio full-time.
“I didn’t buy my dream house to start with,” he said. “I sacrificed 10 years of my life. I was fortunate enough to leave the workforce at 24, but I pushed myself to improve my portfolio.”
So how does he spot when an area is undervalued?
“If you look online at properties in the Sydney market, you can see that everything’s under contract, ‘offers over ...’, there’s a lot of activity. Agents won’t return your calls — they forget about who you are,” he said.
In Queensland, over the past two or three years, he’s picked up 100 properties a month for himself and his clients. “Dealing with agents for the last two years, it’s very much, ‘OK, I’ll get back to you’, rolling out the red carpet because they’re happy the phones are ringing.
“Now you see a lot of people are getting gazumped (outbid), stock levels are drying up, agents are starting to forget about you.”
Most of his properties are in metro NSW and Queensland, and he’s predicting double-digit price increases in Queensland in the next 12 months.
Mr Birch doesn’t believe in all the bubble speculation. “I’ve heard that s**t for the last decade,” he said.
“This country has seen the GFC (global financial crisis), nearly double-digit interest rates, low rental returns and high unemployment come and go and the property market hasn’t dipped through any of that. Why should it now?”
With low interest rates and a government that was putting infrastructure in place, working to reduce bad debts and keeping unemployment in check, he said he was “not quite sure why everyone thinks we are heading towards a bubble situation when things have been much worse than this”.
He admits that people should exercise caution buying in Sydney and Melbourne, with Sydney in particular a “danger zone” where prices can’t maintain their growth.
“You have to be careful buying in those places,” he said. “But look at other markets such as Brisbane, where those prices are still cheaper than post GFC, so there is still room for growth even if its not right in your own backyard. I would strongly suggest that you adapt with the times and adapt your strategy to help you reach your goals. Yes, prices in some cities might be unaffordable for some but don’t get stuck in a mindset thinking that if you can’t afford to buy property in one place that you shouldn’t buy all together. Sydney is just one market and there are many other markets around Australia where there are many opportunities to be made.”
On interest rates, he says he doesn’t expect a rise for another 12 to 18 months, and his money is where his mouth is with the majority of his properties on floating rates.
“I believe they are still on their way down,” he said.
NATHAN’S INVESTING TIPS:
● Always buy below market value. This means you’re winning from the get go
● Make sure there is potential for growth. Don’t buy something because it’s cheap and has good cashflow if there is no room for it to increase in value (because of location or other reasons)
● Make sure the property is neutral or positively geared (when the rent covers mortgage repayments and costs). This ensures good cash flow
● Don’t get emotional about investment properties in the same way you would with a home you live in. Keeping a logical mindset is key.
● Get advice — talk to people who have done what you want to do. I built my portfolio by only listening to people who had already achieved what I wanted to achieve.
http://www.news.com.au/finance/real...oon-nathan-birch/story-fndban6l-1227433934754
