IT guy owns 15 homes worth $7m thanks to unusual credit card move
A former finance worker has revealed how he used his credit card to build the foundations for a property portfolio that’s worth $7m and earns him nearly $274,000 a year in rents. Rasti Vaibhav’s bold and unusual approach helped him purchase 15 properties in two states over a period of seven years without needing to spend much of his own money upfront.
And it’s not a property portfolio simply comprised of debt: about half of the current value of his properties, $3.5m, is held in equity.
The 46-year-old, who grew up in northern India and moved to Sydney in 2006, said he became determined to start investing in property a few years after arriving in the country. The problem was that he had little money to his name. At the time, he was fresh off of a long stint studying at university to help him change careers from IT to finance, and didn’t have enough for a deposit or stamp duty. His income was low.
He had two options. He could wait a few years to scrape together some money and hope his income improved, while missing out on potential rises in the market, or take a gamble. He opted for the latter and in 2011 drew $80,000 cash out of his family’s credit cards to fund the upfront purchasing costs of a block of land and subsequent building project in Newcastle.
“I was much more of a risk taker at the time … using (the cards) probably wasn’t advisable,” he said, adding that the success of the whole $420,000 project hinged on prices increasing in the area.
“I had read media articles about the (government) plan to build the Hunter Expressway, which would finish in 2014, and I thought the suburb of Fletcher would benefit from it,” Mr Vaibhav said.
And it’s not a property portfolio simply comprised of debt: about half of the current value of his properties, $3.5m, is held in equity.
The 46-year-old, who grew up in northern India and moved to Sydney in 2006, said he became determined to start investing in property a few years after arriving in the country. The problem was that he had little money to his name. At the time, he was fresh off of a long stint studying at university to help him change careers from IT to finance, and didn’t have enough for a deposit or stamp duty. His income was low.
He had two options. He could wait a few years to scrape together some money and hope his income improved, while missing out on potential rises in the market, or take a gamble. He opted for the latter and in 2011 drew $80,000 cash out of his family’s credit cards to fund the upfront purchasing costs of a block of land and subsequent building project in Newcastle.
“I was much more of a risk taker at the time … using (the cards) probably wasn’t advisable,” he said, adding that the success of the whole $420,000 project hinged on prices increasing in the area.
“I had read media articles about the (government) plan to build the Hunter Expressway, which would finish in 2014, and I thought the suburb of Fletcher would benefit from it,” Mr Vaibhav said.
Rasti Vaibhav's First Investment Property In Fletcher, NSW.
His roll of the dice proved a masterstroke. By the time the new house was built in 2012, values had skyrocketed in the area and by 2014 he was able to pay off the credit card debt with equity from the house. There was a long interest-free period on the cards.
Some of the equity that he drew out of the property was also used to fund the purchase of his next property: an off the plan unit in Campbelltown in Sydney’s southwest.
Again, the rents covered most of his mortgage costs. This, along with an improving income and help from mortgage brokers, meant the banks were comfortable issuing him new loans. His next purchases were cheaper houses in the Blacktown region of Western Sydney and Goulburn. Mr Vaibhav said he changed strategy with these purchases and, instead of buying new, bought dated homes in need of a renovation.
He bought them with equity from his other investments at what he surmised was “below market value”, did quick cosmetic renovations, and then had them refinanced. He then repeated the process with other investments: he’d draw out equity for the upfront costs, add value to the house, and pull out equity for his next purchase. Many of his subsequent purchases were in the Logan and Ipswich regions of southeast Queensland, where rental yields were high. This reduced his mortgage holding costs.
By 2017, he had 15 homes worth a combined $5m and decided to stop purchasing additional properties. Part of the reason was that getting financing on new investments was becoming a struggle. He also needed time to let his equity position improve, which it has. Because both southeast Queensland and Sydney have had a once in a generation housing boom over the past year, his portfolio value has jumped to $7m.
The $575 per week rents covered nearly all his mortgage costs, which meant he could rely on the tenant to slowly chip away at his home loan debt.
One of his properties in Caboolture, Queensland.
Mr Vaibhav said that building the property empire and juggling all the financing requirements for getting 15 mortgages would not have been possible without a watertight plan. He added that this was where most other investors failed.
“You need to have a plan before you start,” he said. “Most people only focus on the one property they are buying, they don’t have a strategy.”
Having a plan and a mortgage broker who understood investment loans was vital for getting financing from banks, he said. “You need to know what property to buy next to satisfy the (lender).
“You need to know how the bank will look at you and what the property will need to have for them to give you financing.”
Knowing which markets to buy into was another vital component of successful investing. Most of his investments were made in rising markets where he could benefit from increases in values.
Using refinancing arrangements to leverage into new purchases would have been extremely risky in markets where prices were not increasing, he said.
Mr Vaibhav revealed that, a few years after he stopped buying properties, he left the finance industry to work as a buyer’s agent.
It’s his fourth career change: he trained as an architect in India, moved to IT, then finance, before getting his buyer’s agent license.
He said the appeal of working in the property industry was the chance to help people with their investments. Some of his insights have been shared in a book called Property Wealth Blueprint.
“I think people need be aware of the risks when buying property, but that shouldn’t stop you. What you need to do is mitigate those risks. And then you need to remember that there is a risk in not doing anything too.”
View the article on RealEstate.com.au here.
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