There is a lot of noise being bantered about regarding how much money it takes to be rich in Australia. city family urban suburb

And there’s often fuss made about all those rich greedy property investors.

So just how many Australian households hold an investment property?

The Australian Taxation Office recently released their latest stats on property investment, so let’s see how rich property investors really are.

Quick summary

According to Corelogic:

  • There are 10.5 million dwellings in Australia with a total value of $7.1 trillion
  • There is a total of $1.85 trillion in outstanding mortgage debt.
  • 5% of Australian household wealth is held in housing

The Australian taxation office tells us that in the 2017-8 tax year (the latest statistics available)

  • There are 2,207,905 property investors in Australia
  • This means around 20% of Australian households hold an investment property and 80% don’t.
  • The top investor age groups are:
    • 27.83% are aged 60 or more
    • 31.67% are aged between 50 and 59 years
    • 24.65% are aged between 40 and 49 years
    • 14.22% are aged between 30 and 39 years
    • Just 1.63% are younger than 30
  • Here’s how many properties investors hold
  • 1 investment property – 71% (1.57million) – increased by 2.3% over the last year
  • 2 investment property – 19% (418,000) – increased by 2.7% over the last year
  • 3 investment property – 6% (129,784) – increased by 3 % over the last year
  • 4 investment property – 2% (47,469) – increased by 2.2% over the last year
  • 5 investment property – 1% (19,861) – increased by 1.8% over the last year
  • 6 or more investment property – less than 1% (20,756) – increased by 2% in the last year

How much are these property investors earning?

Nothing much has changed over the years.

The fact that 90% of investors only own one or two investment properties has been the status quo for many years.

But what I find more interesting is digging into the statistics to see you how much rental income these property investors are earning.

Of the 2,207,905 property investors who filed a rental schedule

1. 40% were cash flow neutral or cash flow positive

2. Roughly 60% were in a net rental loss situation (negatively geared)

Here’s a snippet from the ATO data

No of Property Interests Overall net rent loss Overall net rent neutral/profit
2018 59.97% 40.03%
1 interest 60.02% 39.98%
2 interests 60.77% 39.23%
3 interests 58.80% 41.20%
4 interests 57.51% 42.49%
5 interests 56.89% 43.11%
6 or more interests 55.95% 44.05%

Source: A.T.O.

Some thoughts

Property investment may be simple, but it’s not easy, as clearly most property investors failed to build a sufficiently large property portfolio to provide them with a substantial retirement income.

Property Retire

However, growing a property portfolio will supplement your superannuation and other investment assets to help secure your financial future.

Of course, the number of investment properties you own is not nearly as important as the quality of your assets and amount of equity you have in them.

I’ve often said I’d prefer to own one Westfield shopping centre than 50 properties in regional Australia.

However, you can outperform these averages

Examining these tax office statistics made me wonder how our clients at Metropole Property Strategists, who have been given strategic advice to guide their investing, have performed compared to the average property investor.

Currently, Metropole manages close to $2 billion worth of property assets on behalf of our clients and as you can see form the following chart, on the whole, clients of Metropole have significantly outperformed the averages:

  • Only around half of our clients own only one investment property – considerably below the Australian average, but that’s a good thing
  • 21% of our clients own two investment properties, and that’s more than the Australian average
  • Almost 10% of our clients own three investment properties, almost double the Australian average.
  • 6% of our clients own four investment properties, compared to 2% of typical property investors
  • 3% of our clients own five investment properties – three times the Australian average.
  • 7% of our clients own 6 or more investment properties – more than 7 times the number in the general property investment community.

1

We’ve only counted the properties we have bought for clients or that we manage for them. This excludes properties clients purchased prior to coming to us, and naturally skews our figures to the conservative side.

It’s easy to buy the first property, but each additional property added is progressively more difficult.

We’d like to think our strategic approach to investing has contributed to our client’s outperformance.

How to outperform the averages and grow a multi-million dollar property portfolio?

The first thing is to recognise that not all properties are “investment grade.”

House InvestOf course, any property can become an investment – just kick the owner out and put a tenant in, but that doesn’t make it “investment grade” – one that grows at wealth producing rates of return.

The next important factor to recognise is that the location of your property will do 80% of the heavy lifting.

At Metropole we use a Top Down Property Investment Framework – going from the macro to the micro.

The first step it to start with the big picture and find the right locations, ones that will outperform the averages.

With the right location on our radar, we can then begin to drill down and apply the 6 Stranded Strategic Approach to select the right properties within those locations.

This is the property investment system that has helped our clients build a very substantial property portfolio.

Property Location

Over the years we have honed our strategies to find that less than 4% of properties on the market at any one time that we like to call “investment grade” properties.

We define investment grade, as properties that are likely to grow at wealth producing rates of return.

Let’s look at this framework in more detail. We start with

1. The Right Stage of the Economic Cycle

It starts with buying at the right stage of the economic and property cycle.

We look at the big picture – how is the economy performing and where are we in the property cycle?

2. The Right State

Buy Home In AustraliaThen we look for the right state in which to invest – one that is at the right stage of its own property cycle.

While we are not trying to time the cycle, we do not want to buy right at the peak when we will have to wait longer for capital growth.




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