Waching daily Sep 5 2017

- Would you like to find out how to build

a successful property portfolio?

Well, stay tuned because I'm about to show you

how we do it with my daughter's building blocks.

Hi everyone.

Today I wanna talk to you about

how we build a successful property portfolio,

and if you look at buying your first investment property,

often the most work goes into getting that first deposit,

and there's so much work involved in that

when it comes to buying a second

and a third and even a fourth,

a lot of people put it in the too hard basket

and most of the time, you'll end up just owning

that single investment and quite frankly,

one property won't make you rich,

so if you're really looking to build your wealth,

this is going to be super valuable for you,

and it's really done in 3 easy steps,

and the first step that I explain

is with this little green block here.

Now, as a code, what we're going to use today

is we're going to use the green blocks,

this means it belongs to us.

This is our money, and the red blocks,

this is the bank's money, that's debt,

so I'm going to introduce those in a minute in step two.

So step one is to get the first deposit in place.

Now, this is the hardest step that you will find

in building a property portfolio.

It's the first step that's always the hardest,

and this is the blood, sweat, and tears

that we work nights for, waiting tables or whatever you do

to get that money in place in order to start,

and you might want to start with a property purchase

as low as 300,000 or up from there,

but this money can come either from you working,

it can come from borrowing money from parents,

or it could come from inheritance or even going in

with your friends or a group of people

to collect that first deposit,

so this is step one, always the hardest step.

Now, step two is once we have this deposit,

we want to go to the bank, and provided

that we can service the debt,

they're going to give us a loan,

and this loan is going to look like this.

All right, these three blocks on top,

and so this is the debt component,

so this is how much our property is worth - up to this level

and this is our deposit down below.

So, what do we do now?

Well, actually one of the fundamental principles

to building a property portfolio is growth,

and a lot of time for most people,

this will happen in a way that I'll call organically,

so it means that the property's in a great spot,

it's got good infrastructure,

there's a lot of demand for that property over time,

and that property grows in value.

Now, as that property grows in value,

what happens is that property value goes from here

and it goes up to a higher level.

Now, you notice I've put a green block on top

and it looks like a little bit

of the Leaning Tower of Pizza right now,

Pisa I should say, not pizza!

This block on top, it's very important.

This is a green block, and it's a green block

because this is effectively our money.

If we were to sell this property today,

we would take this deposit back,

we would pay off our loan, and the remaining,

less of course tax and costs, would be our profit.

Now, in actual fact, this amount here is what we call equity

and this is really important for the next step,

the third step, because once we have this equity in place,

rather than going out and saving again for a deposit,

we're going to take this equity

and we're going to take it to the bank

and we're going to do a refinance,

and that means tapping into the equity here

to use as a deposit for the next property,

and this is the essential step that a lot of people

don't get when they're building a property portfolio.

This property actually does all the hard lifting for us

for the second property, and we take this equity

and we move it into this facility here.

We could call it a line of credit

or an offset account, whatever you like,

but this - provided you can service the loan of course

on the second loan - you will then go to the bank

and you'll ask for a deposit for a second property

or a loan for the second property I should say,

and these bricks are purple because I've run out of red.

My daughter's only got so many building blocks,

and now we have two properties.

Now, let me recap this.

The first deposit was blood, sweat, and tears.

This is super hard work, but the second deposit

for the second property was done from the first property,

from the growth in the first property.

That was where all the heavy lifting was done.

Now you can see over time what will happen

is that we'll have growth in both these properties

and then we'll refinance again

provided we can service that loan,

and this is the key to building

a successful property portfolio.

So, if you've got any questions around this,

I'd love to hear from you.

Drop them in the comments below or like the video

if you like what you've heard,

and this is me, Josh Masters, signing off for On The Ladder.