In January over 100 entrepreneurs are heading to Antarctica for one of the coldest brainstorming session on the planet. There’s more on the trip here.
Organising the event is Brazilian-born Australian resident and entrepreneur Julio De Laffitte.
Laffitte, 46, made his money using a traditional strategy – investing in property. He bought his first house in his early 20s and has built a portfolio of over 70 properties which he estimates is worth over $40 million and pays for itself.
“I didn’t buy my house, my houses bought my house,” he said.
Laffitte’s properties are scattered around Brisbane, Perth, Melbourne, Sydney’s outskirts, Northern NSW and the Gold Coast.
“I have decided to be less speculative in the more traditional sense because it works,” he said. “I have followed the growth of the major cities.”
He hasn’t always been lucky. In the past Laffitte chased the mining boom, buying up properties around mines but he was burnt when operations shut.
“In years past I chased the mining boom and bought houses where the mines were going to be and were the mining towns were going to flourish,” he said, adding when the mines go property values and populations fall.
So now he only buys property in areas where he won’t have to sell to make a return.
“I want to keep it for life,” he said, adding Australia was one of the best places to build a property portfolio.
“You pay no tax on your own home,” he said. “When you invest here the tax regime gives you so many concessions.”
Here are his top tips for building a smart property portfolio.
1. Don’t Chase A Pay Rise
It all starts with how you think about your income, Laffitte said. Many people have been “indoctrinated to get a job and once they get a job they need to get a pay rise so they can up their lifestyle,” he said.
“The moment you get a pay rise you pay more tax. You match your expenses to that pay rise,” Laffitte said.
“All you get is a little improvement on your lifestyle but not on your wealth.”
But it doesn’t have to work like that.
He said you should go to work to build on an asset base so that you can go to work to “do what you want to do not what you have to do”.
An income can help you set up a “chain-reaction” of assets where houses buy houses and then they buy everything else.
“Don’t just buy your house, buy an investment property first and drive the debt down,” he said, adding “as soon as you can, buy another one”.
“The moment those houses go cash flow positive, buy shares in managed funds,” he recommended.
2. Never Sell Property
You never pay capital gains if you never sell.
“People think they have to sell to cash out,” he said.
But if you set up your property investments as “an enormous credit card” using a well structured financial facility you can fund your lifestyle and your next purchases with your previous ones.
3. Don’t Look At Your Tax Refund As Income
Those who are lucky enough to receive a tax refund shouldn’t look at it as income, Laffitte said.
Instead that cheque should be put into the mortgage to drive the debt down each year.
It’s not a risky investment strategy, it’s very traditional.
4. Location Matters
While Laffitte now employs three people to tell him where to buy property he has learnt a few things about picking suburbs that will grow in both value and population.
“What you’re chasing is infrastructure,” he said, adding big upgrades in infrastructure suggests the suburb is going to expand.
For long term growth, Laffitte said you also need to consider where the everyday person wants to live.
“I do own some high end properties and they all got hit, some of them dropped 20-25% but none of my four bedroom double lock-up garage houses got impacted. The maximum they went down was 2%,” he said.
“What you’re looking for is where the cop, the teacher, the everyday person will live.”
While there are some high-end suburbs around the country where Laffitte said you “can’t go wrong”, – including Mosman in Sydney, around the river in Brisbane and South Yarra in Melbourne – the entry point into those markets is much higher.
He said you could buy one apartment in the CBD or you could purchase two houses in the outer suburbs where infrastructure is being developed.
“I’ll buy the two houses,” he said. “It’s nothing to do with the house or the apartment it’s to do with the numbers in the background.”