When entering the world of investments, many individuals aim to accumulate some experience and build their portfolio. The aspiration to join the top 1% of investors often doesn’t cross their minds initially. However, understanding the advantages of being in the top 1% can significantly impact your investment journey in Australia.
Primarily, being in the top 1% opens doors to better opportunities, superior stocks, exponential value growth in property deals, and the ability to establish a robust cash flow.
How average property investors can become a part of the top 1%
A common mistake among investors is neglecting to build a solid team. Relying solely on advice from parents, friends, or co-workers, even if successful, may not be enough. Many accountants, financial planners, and online property advisors lack a substantial property portfolio, especially in commercial real estate.
Becoming part of the top 1% involves following a proven system, backed by a reliable team, including legal, due diligence, financing, and strategic professionals. Active involvement in selling, buying, and recycling properties is crucial to staying ahead in the investment game.
What is the benefit of being the 1%?
The top 1% gets the best opportunities, and positioning yourself to benefit from them is crucial.
To join this exclusive group, you need a solid understanding of the basics. It’s essential to diversify your portfolio by including a mix of residential and commercial properties, as well as shares and crypto. Striking a balance between commercial and residential investments is vital. Initially, focus on the growth of residential properties before transitioning to commercial ones.
Don’t expect instant cash flow, especially if you start with a property in a regional area. For instance, investing AUD 50,000 may not generate AUD 50,000 in positive cash flow. Instead, consider refurbishing the property to increase its value to AUD 250,000 or more, enabling you to make further investments.
Stay active in your residential field. Whether it’s knocking down and building a duplex in a metro area, continuous involvement helps you extract more deposits.
As market conditions change and residential investments become challenging due to rising land values, building costs, and wages, consider switching to commercial properties where you can find better opportunities.
During this transition, focus on residential projects that create uplift. Take the profits and invest them in set-and-forget commercial properties until the residential market loses steam. When that happens, shift to commercial properties and engage in commercial property uplifts.
Know your cash flow base
Be strategic: when the commercial market is thriving, focus on commercial investments; when the residential market is booming, concentrate on residential projects.
Accumulate wisely by uplifting equity from residential properties and redirecting it into commercial real estate. This approach builds a stable cash flow base, a key focus for the initial 3 to 5 years. By channelling funds into commercial properties, you set the stage for future success. When ready to make the shift, having a solid cash flow base allows you to refinance against your commercial investments, potentially generating a 20% to 40% growth or return on investment.
How do you then get to the 1%?
In Australia, 80% of the population owns one to two investment properties. If you exceed this, you’re already in the top 5%, but your emphasis should be on cash flow. Earning over AUD 250,000 a year places you near the top 1%, while AUD 400,000 a year already puts you there.
For sustainable growth, focus on commercial properties, as residential alone won’t propel you to the top. Aim for a 10% cash-on-cash return, equivalent to having AUD 4 million unencumbered in commercial property, generating AUD 400,000 in passive income.
Achieving a 10% cash-on-cash return won’t happen overnight, but gradual growth over time is the key. With AUD 4 million, you can leverage yourself into an AUD 10 million commercial property portfolio within 12 to 24 months. If starting with less equity, the journey extends to 5 to 7 years, requiring careful planning.
Combining residential and commercial investments is crucial to reaching the top 1%. As you transition to commercial properties and engage in commercial uplifts, you truly become a professional in the industry.
Imagine starting with AUD 200,000 or 300,000 in your first property, turning it into AUD 450,000, and syphoning away AUD 150,000 for set-and-forget commercial properties. Now, with AUD 650,000, you can multiply it into a property worth AUD 1.6 or 1.7 million.
Consistent effort leads to a million-dollar base, unlocking opportunities in both residential and commercial sectors.
Start investing like the top 1% today!
If you’re looking for a pathway to a high net worth, then getting the help you need from a seasoned professional can help make the journey to the 1% much smoother.
Work with a leading buyer’s agency in Australia and get the expertise you need to make the right investments at the right time to reach that 1% much faster.