Eight years to get on property ladder, eight more to acquire eight properties

There were myriad obstacles that could've ended the property dreams of Lakhwinder Singh before they started, but his journey towards eight properties in less than a decade is a story every aspiring real estate investor should read.

Lakhwinder Singh and family
Lakhwinder Singh has secured his young family's financial future through a combination of hard work and astute property investing.

Housing crisis. Rental crisis. Soaring property prices. First home buyer obstacles. Long working hours, flat wages and pay packets eaten up by inflation and cost of living pressures.

If you rent, live with parents, flat share or struggle to put a roof over your head it can be difficult to imagine buying one property, let alone build a $5 million property portfolio that spans four states and comprises eight properties.

The challenges were even greater – but not insurmountable – for Lakhwinder Singh (38), who had to also contend with migration to a new country and hold down multiple jobs to pay his way through a study program.

Digging deep into his reserves of energy and determination after arriving in Australia in 2007, Mr Singh charted his path out of financial penury.

The majority of people wait too long to enter the market in the hope of timing the market or saving a big enough deposit for their dream home.

- Lakhwinder Singh

Working in low-paying retail jobs and working long hours, he came to the realisation that getting a foot on the property ladder was obligatory if he was to change his life.

Through gradual savings accrued with a disciplined lifestyle, by 2013 he’d started to seriously analyse property markets and two years later had purchased his first home, in Elderslie, Sydney.

“Property is one of the few asset classes that can be tracked back up to 100 years and history shows that Australian real estate has continued to beat other asset class,” Mr Singh said.

“The initial years were a real slog but I dedicated two years continues learning, including through books, property seminars and by meeting other investors, to have enough confidence and knowledge to put first property under contract.”

Lakhwinder’s four-state property portfolio

  Suburb State Purchased Purchase price Current value Rent ($ p/w)
1 Elderslie NSW 2015 $500,000 $980,000 $550
2 Loganlea Qld 2016 $380,000 $720,000 $600
3 Loganlea Qld 2016 $400,000 $730,000 $590
4 Croydon Park SA 2019 $440,000 $750,000 $640
5 Eagleby Qld 2020 (renovation) $180,000 $550,000 $500
6 Elizabeth Vale SA 2020 $249,000 Sold $395,000 -
7 Port Kennedy WA 2023 $430,000 $570,000 $600
8 Warnbro WA 2023 $460,000 $620,000 $600

But knowledge was one thing, money another thing altogether.

“When I first approached a broker for a loan my income was low and I was hardly qualifying, so I started working a second job to boost my servicing capability.

“There were many sleepless nights before I could secure my first property.

“I don’t know how I felt after buying first property because I was too busy working two jobs, but these sacrifices paid off when my broker told me I had enough borrowing power to buy a second property and I had enough cash saved up to pay the deposit.

“The deposit for third property came from equity from first two properties.”

The property portfolio strategy

The pathway from one to eight properties, one of which has been sold, was as quick as the journey to the first one after arriving in Australia.

Between 2015 and 2023, Mr Singh has acquired a diverse range of properties priced from just $180,000 to his priciest one – the first – for $500,000.

They stretch from Brisbane to Perth and have each delivered substantial capital growth and had borrowing costs offset by rental returns.

The investment strategy has varied as the portfolio has developed.

“The initial strategy was simple and revolved around the properties’ land to asset ratio high rental yields as close to 6 per cent as I could get.

“The downside of high land to asset ratio is majority of your money is going towards buying land, so building may not be in great condition which can bring net yield down after paying maintenance expenses.

“So I evolved my strategy as I bought more properties.

“If buying for cash flow, be sure to work out net cash flow after all expenses and if looking to buy a property for future subdivision, check the current zoning and lot requirements or easements etcetera.”

Mr Singh the selection process revolved around two other main criteria, namely family friendly appeal with good presentation and locations where it was unlikely there would be an influx of supply that might suppress prices.

“I am a big believer in diversifying my investments to take advantage of different property market cycles.

“You need to treat your property investments like a business and identify what is lacking in your portfolio so, for example, if it is lacking cash flow then look for a positive cash flow property, if short on equity perhaps do a small renovation project or small subdivision to lift that equity level.”

Utilising self-managed superannuation funds

Self-managed superannuation funds (SMSFs) have also played a part in bolstering his wealth and averting some of the tax burden associated with capital gains on investment properties.

Mr Singh said that one his portfolio had reached four properties, serviceability was at its limit and the banks were refusing to lend more.

“To overcome this, one needs the right structures in place and one such structure is an SMSF.

“When banks are lending to your SMSF they don’t necessarily look at your loans outside that structure, so as long as your SMSF is receiving contributions it will have its own borrowing power that can be used to buy property.

“One of my best performing properties was bought using an SMSF and I took advantage of this tax friendly environment and sold it after holding for two years, as it had grown close to 60 per cent.

“The SMSF only attracts 10 per cent capital gains tax after the first year of ownership.”

His current five-year plan is to double the value of this $5 million portfolio through organic market growth and the addition of three more properties to the collection.

“My target LVR (loan to value ratio) is 50 per cent after five years, which will give me $5 million of equity to start focusing on cash flow generation through small developments, strategic renovations and adding second dwellings, such as granny flats, to some of the properties.”

Advice for aspiring property investors

Mr Singh said the majority of people wait too long to enter the market in the hope of timing the market or saving a big enough deposit for their dream home.

As a buyers agent who has transformed his life and career through property, he said young buyers should focus on finding markets where the entry cost is low.

“We have some great healthy markets across Australia where house prices start at $400,000 or even lower, so you need about $60,000 to buy a mortgaged property.

After two or three successful purchases you should be in better position to accelerate the journey to your dream home.

He recommended rentvesting as one of the solutions to owning properties without affecting lifestyle or desired suburb to live in.

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