The number of Aussie's who own 6 or more rental properties ...
It’s surprisingly easy to get yourself in the top 1% of all Australian’s, you just have to own 6 rental properties or more.
According to ATO data, in the 2013/14 tax year, of the 12,964,285 individuals who lodged a tax return, a whopping 2,006,519 had an interest in only 1 rental property ... that’s 15.48%. To put it another way, 72% of Aussie’s who own an investment property, own just 1. However, a mere 18,231 own 6 or more rental properties … just 0.9% (less than 1%) of everyone who owns an investment property (see table below).
Bear in mind, this is all people with an interest in a rental property, so a couple who own a rental property jointly would be counted twice in this data, if they both submitted a tax return. It’s also not including those of us who own property in our Self Managed Super Funds, but it’s an interesting statistic none-the-less.
I had a feeling of déjà vu about these stats, so researched further back and found that in Australia these percentages have been almost identical since the 2005/06 tax year, when 72.5% of all individuals with an interest in a rental property owned just 1, while only 0.8% had 6 or more. Interestingly, the population increased by approximately 3 million people during that period, but the percentages remained almost identical (see table below).
Individuals with an interest in a rental property, 2005-06 to 2013-14 income years
Alarmingly, of those 2 million individuals in 2013/14 who owned just 1 property, a vast majority of them will own it for less than 5 years. Why is this alarming? Because they won’t own it long enough to ride out even 1 property cycle and experience substantial growth. In fact, I dare say, many of these people will sell too soon, lose money and become disillusioned by the whole experience.
What can we learn from this data?
1) Buy 6 or more rental properties:
It’s not hard to build a large portfolio over time, and the sooner you buy them, the better. Start with the end in mind and add to your portfolio regularly. Stay on the look out for opportunities to buy well (at or below market value) for inbuilt equity.
2) Hold them for a long time:
You need to have a long-term view of property investing. It’s not a short-term investment. People who 'bet' on the property market for short-term gains rarely come out in front over the long-term. It’s about choosing wisely and holding.
3) Make sure you buy in good growth areas:
Do your research and make sure you buy in areas that are likely to have sustained growth.
4) Get help from people who know what they’re doing (and own a lot of property):
When your Uber driver tells you it’s time to buy property in a particular area, it’s probably time to sell. Nothing against Uber drivers, I’m sure a few of them are excellent property investors … but my point is, when the majority of people start telling you to buy property in a particular area, you’ve already missed the boat. In fact, I buy my properties when everyone is negative about a particular area (like Perth right now).
5) Re-assess your portfolio regularly:
No-one gets it right 100% of the time, so you need to reassess your portfolio regularly and adjust accordingly. Similarly, it can be very wise to sell some of your properties in booming markets and reinvest back into markets that are undervalued. This is exactly what I’m personally doing right now … selling down some properties that have grown substantially in Melbourne and buying properties at massive discounts in Perth.