The Million Dollar Question
If you combine the fact that the cost of real estate has grown exponentially with the fact that borrowing is challenging, you can see that it’s just so different to what was available to people who had the means to get into property back in the day.
I’m not trying to say that you can’t build wealth through property. There’s no doubt that as business owners, we need to be investing in real estate.
But, the question is what kind of real estate – especially if you have a limited amount of borrowing capacity and a limited volume of properties that you can buy.
I guess that’s the million-dollar question that every investor is trying to figure out.
If I were starting from scratch today, I would undoubtedly lean into the properties that will give me the greatest ability to achieve capital growth.
And depending on what my earnings and financial situation were, I’d either carry some negative cash flow to achieve that; or if I couldn’t afford that, I’d be looking for properties in regional areas where I could purchase an asset with good growth prospects and where there is at least a neutral cash flow.
I would then be doubling down on trying to acquire as many properties in the shortest space of time.
Even my clients who have impressive incomes are having challenges getting funding from the bank.
So my general feeling is that, if you’re on a more modest income (anywhere between $80,000 and $200,000) or if you’re in a growth phase of your business, the exercise that you want to undertake is continuously checking in with lenders about borrowing capacity and continually speaking to business bankers.
I say this with all due respect – there are some epic brokers out there, but there are also some super crappy ones too.
From a building wealth point of view in the early stages, the broker is one of the key relationships you need to have in your arsenal.
So my suggestion is that you should do your research and find the people who are getting the hard baskets over the line because even though you might not start off in the hard basket, you will potentially eventually become a hard basket case as you start to push the envelope and hit that borrowing limit.