Given all the recent APRA and ASIC changes and credit tightening by banks, the burning question is, is it still possible to buy ten properties in ten years?
Well, I have to be straight with you and say, the answer is No… but not a resounding No.
Let me explain…
If you think back ten years:
- You could have borrowed 95% easily which means you only needed a 5% deposit.
- There were easily obtained “No Doc” loans.
- Some lenders allowed you to capitalise Lenders Mortgage Insurance.
- There was serious competition between 1st & 2nd tier lenders, and
- APRA was a relatively unheard of organisation which exercised minimal influence over lending practices, which meant that lenders had more control.
- Interest Only (IO) loans were readily available for up to 5-year terms and were readily able to be extended after that.
- Interest rates were around 7%.
- Documentation required for loan approval was relatively simple to provide.
- Lending rates were not heavily stressed by lenders when assessing loan applications.
Fast forward to today… July 2017…
- It is now difficult to borrow 95%.
- Some lenders are requiring larger deposits and lower LVR’s.
- Lenders no longer allow you to capitalise mortgage insurance for investment properties
- Big banks bought out smaller non-banking lenders, which has dried up mortgage competition, and
- APRA have put their stamp on the industry, threatening additional regulation unless banks comply with their new lending guidelines.
- Interest Rates are at historical lows… good news!
- IO loans are being limited by banks.
- Growth in loans to investors has been limited.
- Documentation requirements have significantly increased.
- Lending rates have been stressed.
- And now, the federal budget is tweaking our ability to claim deductions on depreciation.
- Record capital growth in Melbourne and Sydney and steady capital growth in most other areas except Perth and Darwin.
- Given the above changes in the lending environment, you’d be right in thinking that it is getting harder to invest in one property let alone ten.
For most Aussies on average incomes who are not prepared to improve their money management skills and who don’t have the right buying strategy to suit their own personal circumstances, the answer is no.
I believe that the APRA, ASIC and bank changes are making it harder to obtain finance but not impossible to achieve 10 properties in 10 years. Interest rates are at an all time low and I believe they will stay low for some time because of our struggling economy.
You see, the days of not being a good money manager and still be able to borrow are quickly drying up.
Banks these days want to see a steady income, good money management, and control.
Being a good money manager is a vital ingredient to getting ahead. If you spend all your income and have to have the latest and greatest gadgets, chances are you will struggle to purchase one property, let alone ten.
Some good news…
Now let me be very clear… this is my opinion…
If you are prepared to make some changes to your money habits and delay your gratification, then buying multiple properties is still very much a possibility.
Besides… who cares if you don’t buy ten properties in ten years! What if you bought only 3 or 4 instead, what positive impact would that have on your retirement? I reckon you’d be much better off than living on just a government pension in retirement!
I have many students who have purchased 2-4 properties during our mentoring programs and beyond and I feel they are ahead of most Aussies who really live from paycheck to paycheck.
So here’s my big statement…
Ten properties in ten years is dead… done and finished until the economy recovers and APRA, ASIC, and the banks are able to relax their current guidelines.
It’s a big call considering I am a property investor/educator, teaching people strategies on how to build wealth over the long term.
But I am prepared to make such a big statement because I believe that many Aussies are not equipped to manage their money well. And I don’t have a crystal ball to say what the future holds as far as regulatory changes that could impact the industry. It’s a moving target, so I’d prefer to say that investing in a property needs to be a strategic approach that is disciplined and low risk.
And the good news is that many of my students are following my wealth blueprint to investing and are buying multiple properties. Some examples are:
Nick Jones and Gerard Nethercott have purchased 6 properties on the program.
Ashley Ng and Carina Tomietto have purchased 5 properties on the program.
Mark Kevin has gone on to purchase 3 properties since starting his program.
Stephen Ryan has bought 2 properties and is looking for his 3rd.
Nuttakitt is one of 11 students who have bought 4 properties recently, and he has done this in under 2 years!
Fullar Mamm is onto her 4th property purchase.
So unless you are prepared to make some changes to the way you operate and adopt a strategic, disciplined and low risk approach to your investing then you will struggle to achieve “10 in 10”.
As a result, I will continue to offer the best mentoring programs in Australia, however I will be changing the name of my programs to align with the impact of the current lending climate.
Until next time…