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The Ultimate Strategy To Grow Your Property Portfolio In Australia, in 2026 · The Follio Property Podcast

• 0:00
  Do you need to grow from two properties to be a successful investor or have that financial freedom? You can comfortably buy three properties within six months if you're strategic with how you manipulate the bank. Can you fix a property portfolio if you've received bad investment advice? Get debt, recycle debt, get debt, recycle debt, debt it up to their eyeballs and certainly not something I encourage. Do you see there being a restriction in investment lending? 2026 is going to be a year of massive speculation.
• 0:28
  What about an equity play? Is there any sort of tricks or tips? You've got this generation of people that really find it difficult to buy property. Everyone's at the party and it's free alcohol. That's probably not a bad analogy. I said it's... Why do 90% of investors get stuck at just two investment properties? There's a number of factors, Rhys, and today we'll unpack it.
• 0:50
  You're listening to the Folio Property Podcast. I'm Rhys Beddle and I'm here each week with my co-host, Lachlan Delahunty. Lachlan, our marketing team has told me I have to mention this today. We've hit over 1 million views across all platforms. Massive. It is very massive. So special shout out to everyone who's been following the journey over the last seven months. We really appreciate the support. And on that note, I've mentioned this on previous podcasts, 85% of our audience are non-subscribers.
• 1:17
  So please, everyone, hit subscribe, help us grow this channel, leave a five-star review so we can do some big things in 2026. Yeah, it's exciting. And thanks for, hopefully, we've added some values to those listening. It's been a big year of real estate. It's been a lot of movement. There's a lot of noise. So if we've helped you in some way make a better decision, then yeah, please follow us for the journey into 2026. Lachlan, why do 90% of investors get stuck at just two investment properties?
• 1:47
  There's a number of factors, Rhys, and today we'll unpack it. It's a fascinating stat and we hear this quite a lot in our space where it can range from 80% to 90% where they just get stuck at two. But do you need to grow from two properties to be a successful investor or have that financial freedom?
• 2:03
  I think it's 50 or 60% get stuck at the first property, right? 80% sounds like a bigger figure for the second, but you'll find a lot of investors fall over the stumbling blocks at the first property because they're not prepared. They fail to understand the fundamentals of actually building out a portfolio. And I don't want to preach it, and we'll cover a lot of them today, but cash flow and managing debt are typically the two first things that people run into a huge brick wall. Cash flow...
• 2:32
  is super important. And we've spoken on previous podcasts about first time investors or people starting to enter their journey.
• 2:39
  And at some points there's been different views where cash flow is the most important or capital growth is the most important. Why would the cash flow stunt their growth so quickly? Are they growing at too quick of a pace? There's two reasons. It's cash flow and understanding getting control of their expenses so the bank doesn't look at their serviceability with kind eyes and that's typically bad debt. We talk about good debt and bad debt. But anything that's, you know, credit cards, car loans,
• 3:07
  All the university debt, albeit some of it gets subsidized through certain banks, all the fun things are typically going to work against you when it comes to serviceability. So that's a huge part. And then understanding how banks view your situation. And what I mean by that is…
• 3:24
  the only way to get ahead is typically to borrow more money. The bank analyse your debt to income very harshly and are very conservative on certain things. So when I say that, they're conservative on the amount of rental income. So if you get...
• 3:41
  $1,000 a week from a property there and they're going to assess that rentable income at $800. So they put a 20%, sometimes 30% cap or buffer on what your actual income is. And then things like bonuses and all this discretionary income that you may earn doesn't carry the same amount of weight. And I think people forget that. So they'll go out there and say, oh, I'm on $200,000 a year and I'll go out there and I'll buy a home. I've listened to the Folio podcast. They said kept debt to income at three times.
• 4:07
  And they've gone out there, bought the home, and they come back to try to buy investment property banks. There's no chance because 50, 60, 70K is bonuses. What do you mean? I still get paid that every year. I've hit bonuses two or three years in a row. Right. They're not factoring in that as guaranteed income. All right. And now I've bought a prime place of residence. Doesn't generate any income. Okay. That works against me. So it's just understanding those things. I think preparation and education, and that's the benefit of people listening to podcasts like this is they can –
• 4:31
  learn from our mistakes and get a front of the curb. So it stops them from hitting those roadblocks when they get to that first, second, or sometimes third property. Yeah, rewinding the clock back to a potential first-time investor, not a first-time investor,
• 4:46
  home purchaser, so they've got their principal place of residence. What would be a comfortable LVR, so loan to valuation ratio? So how much equity should they have in their property before they look to then start leveraging that into their first investment property?
• 5:02
  It depends on how aggressive they want to be with the strategy. And there's a lot of content out there at the moment. It's just get debt, recycle debt, get debt, recycle debt, get debt, recycle debt. And people who are at the moment are debted up to their eyeballs and certainly not something I encourage.
• 5:20
  Everything's circumstantial and depends on stage of life, what strategy they're on and what their end goals are. If you are going with a very aggressive strategy, then yeah, the best time to do it is as soon as you can get equity. And there's so many different ways you can do that. You can be really creative with using equity to get that second and third. You can comfortably buy three properties within six months if you're strategic with how you manipulate the banks.
• 5:45
  And is that, when you mentioned this, is this personal name or are you talking, there's a lot of news in the press at the moment with trust lending and especially- Yeah, Macquarie's removed themselves, right? Correct. And that was off the back of a PICCA investment letter to kind of call out some of these spruikers or giving unsolicited advice. And I think some of the stats that came out is we're at a 40% investor lending activity in the market at the moment. And now APRA is going to get involved. Do you see that tightening up now in terms of,
• 6:14
  some of the borrowing capacity that people can potentially start doing? Absolutely. And when the major banks start pulling out of that space, and trust lending is interesting, right? And for those who understand it, essentially you can borrow within a trust and then get a letter from the account to say that that trust is taking care of itself. So the repayments, it's meeting its obligations within that trust. So
• 6:38
  The big wave of this is really in those regionals, often speculative areas where yields are extremely high and the rental returns cover the mortgage repayments. Therefore, a letter from the account that's deemed that that particular trust is filling its obligations and needs means that in your personal name or in another trust,
• 6:57
  the banks won't factor in that debt that you've taken on. So it's a vehicle that I've used personally and that now investors have used, but shouldn't be flaunted or shouldn't be used for the wrong reasons just to try to manipulate your situation because what the bank is trying to do is actually...
• 7:14
  responsible, right? They don't want to give out debt for those that are probably not in a position or shouldn't be taking on debt. So you've got to look at that from their side. There's regulation for a reason. And they're our safety net. And if you look back on previous cycles, inevitably, there's going to be a time where the markets turn and those that have manipulated and those that have
• 7:38
  push the boundaries and often gone well and truly outside the boundaries to take on debt, could be heavily exposed. Yeah. And I think that was the big noise amongst the market was these people that were giving unsolicited advice on some of this trust or unlimited borrowing capacity, they were the ones pushing the speculative assets that we talk quite proudly about being wary of in your portfolio.
• 8:02
  Yeah, and that's the problem. It's typically those are the most vulnerable that can't get dead in their personal name. So, you know, that's a warning sign from the get-go. Going into very speculative, volatile markets, there's another warning sign. So, yeah, you've got the most vulnerable part of the market getting exposed to arguably the most speculative assets. So it's a bad combination and it's a fortunate thing that,
• 8:27
  You know, you've got PICAR and APRA and some of these larger bodies that have the best intentions for consumers, right? That's you clients. That's people listening. They've got their best interests at heart. Yep. So you mentioned obviously the reason we've gone down this route was talking from a servicing standpoint to start to increase that borrowing capacity.
• 8:48
  What about an equity play? Is there any sort of tricks or tips out there that investors can use to maximize that equity? I don't know, something to do with valuations or? Yeah, like I said before, you can get three properties in six months if you manipulate the banks. What I mean by that, you speak to any broker, they can get five or six desktop valuations on any one of your properties.
• 9:10
  And they'll go out to five or six different banks and get five or six very different valuations. And I'm talking extremes. On a $700,000 property, you'll see everything from $680,000 to probably $850,000. So what does that mean? I just bought a property. I've settled on it yesterday. And this is the problem. I see some buyer's agents flaunting some of their results. And they're using desktop bank valuations as the thesis behind the valuation.
• 9:37
  Our beautiful friend Jack Anderson does it all the time. The problem is those valuations, particularly if we say CBA, let's call it out, are often 10% to 15% overinflated. And the reasons they do that, right, banks want you to take on more debt, although there's some regulation, right?
• 9:52
  They want you to take on more debt, right? So if you can get a favorable valuation on a $700,000 property, the day it settles, it's worth $850,000. We know it's not. We know we probably bought well and it's worth $750,000. But that $850,000, you can use that $150,000 as equity, albeit you could argue it's fake equity. You can refinance that. You can loan against that. And that gives you access to be able to buy that second property. Because the hardest thing we know for investors is,
• 10:19
  is saving for the deposit. And that's why this first home buyer scheme has been so powerful for the market because you've got this generation of people that really find it difficult to buy a property and save 20%. Now they only need to save five. Well, that same goes for that second property purchase. If you can inflate your valuation figure by testing other banks and get a false desktop valuation, well, there's your 150K deposit for the next. And then by the time that settles, let's get another falsified desktop valuation. It's not falsified, falsified.
• 10:47
  auto valves they call them but you go to five banks you're gonna get five different valuations and i promise you one of them is going to work in your favor
• 10:54
  We had a mortgage broker on a previous podcast, and I think it could be Westpac, but don't quote me on this. I think they were just using whatever the desktop was and adding 50K on top of it as well. So that's the nth degree some of these banks are going to in a hot market as well. Can you not see the problem with that? Desktop valuations are typically favorable and quite aggressive, and then adding another $50,000. So that $700,000 example could likely give someone $200,000 of equity, which is scary because if they pull that out,
• 11:25
  and recycle that into a speculative asset or go buy a boat or get a bad debt. And they're living a life through their portfolio on falsified equity. That's where mistakes start to make. That's where I get a little bit concerned. Yeah. I mean, you mentioned the, you know, buyers agents out there showing their results. I see that all the time on socials where the screenshots of WhatsApp messages, just got these back. And a lot of them are, you know, within three, four, five months, you know, that quick, quick capital growth.
• 11:52
  When you're starting to scale that portfolio, so obviously the stat here is 90% are stopped at two properties. Wasn't it 80%? Either 80% or 90% stop at two properties. What's the sort of – should you be having that strategy and conversation with either an advisor or even just a plan with yourself about, all right –
• 12:11
  what pace am I going to be running out here? Because it does seem in these rising markets all across Australia, there's big uplifts in valuations really quickly and people leveraging that straight away. Are they at risk of going too fast in case the market does ever cool? Yeah, massively. Because the thing is,
• 12:28
  You know, we talk about LVR, it's so important to track your LVR because you typically want to, so 80% has been the blanket rule for many years and there's a reason for that because the markets are forecasting that values are not going to dip lower than 20%, which in history they haven't. But when you start to get these falsified valuations or very inflated valuations,
• 12:49
  you start to play with false LVR. So you're pulling out equity, replacing it, and going off these desk valuations. You probably think you're running an LVR of 80%, 85%. But in reality, you're probably at 100%, 110%, 120%. So people just really need to understand and pinch themselves and don't get caught up in the noise, don't get caught up in the inflation, don't get excited by these bank valuations. Realize that that's not reality.
• 13:13
  And be really conservative on your own personal stuff. So when you are doing your debt to income ratios, when you are doing your LVR tests, when you're testing your cash buffers, be conservative on your VALs. And yes, if it's worth more, fantastic. But you know the bank valuation at 850 is not right. Let's peg it back to what I think is realistic. I think it's probably worth 750 to 770. Well, let's go with a conservative number of 740. And if I'm comfortable at that, I've created my own buffer. Yeah.
• 13:38
  that if there is an international event and things change and sentiments change, I know I'm protected because the worst thing you can do is get yourself a musician when you have to sell stock. And at the moment, it's not a problem. It's all tailwinds and everyone's at the party and it's free alcohol. That's probably not a bad analogy. I said it's all tailwinds and everyone's making money.
• 14:02
  always set your portfolio up with risk mitigation. Always keep your eye on that. And I don't want to sound like this pessimistic investor that a grumpy old man that's saying, shouldn't be out there buying properties and expanding the rate of everyone else. But the reality is I'd much prefer to be on the side of caution and make sure we've always got one eye on the risk mitigation and on the downside.
• 14:24
  And if you're comfortable, that's when we go to that next phase and expand. Once we've consolidated a little bit, we know our LVR is at a level where I'm comfortable. We know our cash buffer is there. Okay, I've got myself. I've earned the right to be able to buy another investment property. Why are first-time investors always falling for off-the-plan purchases or those outer suburb house and land package areas?
• 14:45
  They're our most vulnerable demographic. Hopefully we're reaching them through our podcast race, but they are our most vulnerable market in terms of they get targeted. They get targeted by, you know, buyers, agent, investment advisors. Social media is prevalent, right? This demographic is typically first-owned buyers. The demographic of age is somewhere between 25 and 35. And they're uneducated in the sense that they haven't invested previously. They haven't seen multiple cycles.
• 15:14
  Some of these investors have never seen a downturn. It's been nothing but tailwinds since 2018, right? So I think all that happens when you buy property is it goes up. That's not correct. We go through cycles. So I think the reason is that they're most vulnerable market is because they're preyed upon
• 15:32
  by these investment groups, builders, you know. And these people, these industries are really good at selling product, right? We're in this industry race. We have to sell ourselves. You know, we're competing with people that are extremely good at selling a story on social media. So, and they can be very, very convincing. And I was there at university. I got sold the absolute dream and
• 15:56
  I can see why. So when I say, how can you be so stupid? When I hear my mate say, I've just bought the off the plan apartment in Darwin, I have to go, that probably wasn't the best idea. But the reality is they're very good and they've got really good tactics and they try to manipulate data to support their story.
• 16:11
  Yeah, I mean, that's why I brought it up. That was my first investment, your first investment we had. Chris Halsfall is a property advisor with the business. That was his first investment as well. And we're going back sort of 13, 14, 15 years with some of these acquisitions, yet it's still happening in today's market. And the amount of times I get caught in a conversation at a friend's barbecue or something and someone's got this tip or this advice on these off-the-plan stuff, it always just seems to end in tears at the end of it.
• 16:40
  And it's often the same product wrapped up with a different story. Like it's NDIS. This is a new thing, NDIS. We're getting 13%, 14% returns. Or it's room sharing. Or it's Airbnb. It's short-stay accommodation. It didn't work 10 years ago, but this is a new wave. So it's the same product. It's the same type of people selling this product. They just wrap a new story to go with the times.
• 17:03
  How do you minimize risk when buying multiple investment properties? Especially, let's go back to the original statement, which was the two investment properties. How do you minimize risk once you start to go to that third or that fourth investment?
• 17:16
  Yeah, what you will find is people's tolerance, what you'll find is people's level of diligence, the more properties they get becomes a lot less because they bought a property, typically their first property, they've dotted the I's, crossed the T's, they've listened to 1,000 podcasts, they've come in, they've prepped themselves, they've missed out on a lot of properties, they've understand their local market where they're buying really well and that serves them well and they get confidence. They're like, okay, well, that worked. And the second one, they're like, well, I know what buying a property is, not that big of a deal.
• 17:46
  I'll take a few shortcuts. I've got equity there, so it's a bit of a safety barrier. They put in a little bit of work, but not as much as they did on the first purchase. By the time they get to the third or the fourth, often definitely haven't inspected it. The person that they bought it through, whether it's a buyer's agent, they haven't even vetted if it's been inspected. Their level of DD or understanding the market is a lot less because they've been reinforced with positive experiences in the lead up to that.
• 18:11
  So I think the biggest dangers typically come often with your second, third or fourth purchase because your level of diligence in that process becomes subdued, right? People just get complacent. And particularly when you're investing or diversifying into other markets,
• 18:27
  You know, you had a really good experience with a buyer's agent here in Perth and, you know, you just assume that that's the benchmark, that that person was exceptional. And you expect that to be across the board. It's just, it couldn't be less true, right? We say that in every industry. So I think that's an important component.
• 18:44
  A lot of the clients or potential clients that I speak to, once they start maxing out on their capacity, whether it's at two or three, they then look at self-managed super fund as a vehicle to fund that house, I guess, or that loan. What's some of the biggest issues with people out there pitching self-managed super fund properties?
• 19:04
  I think the misconception of some of these groups is they're treating their self-managed super fund just like another investment in a trust or another investment in their personal name. They're not understanding that your self-managed super fund is your retirement fund. It's a long-term play, right? And with that comes a level of responsibility. It's a long-term play for a reason. It's not a speculative asset. You don't speculate with someone's retirement fund.
• 19:34
  And off air, we spoke about it. There's a number of groups out there pushing these regional plays and off the plan plays in really speculative markets. I'm okay with speculation when it makes up less than 5% of your portfolio in your personal name. For those that have done well and can afford to take the risk, why not? But when that comes to people's retirement funds, and particularly those that are really vulnerable that will probably need to lean on that retirement fund in the next decade, that's when I have grave concerns. So...
• 20:02
  It needs, when buying in the super fund, I'm all for it. I've got one in my super fund, but it's very blue chip. And I'm not there to speculate. I'm not there to shoot the lights out in the first 12 months. I'm there to hold the asset for the next 10, 15, 20 years. And I know it can weather the storm of any downturns that could happen in any market.
• 20:20
  So super should be a place for very low speculative assets, A-grade blue chip only. And understand there's only certain things you can do in it. You put self-managed super funds, so large renovations, developments aren't allowed per se in your self-managed super fund. So it's getting a really good quality set and forget asset. Understanding it's got cash flow requirements because what you're interest rate in super is higher than in your personal name. So we need to keep an eye on cash flow. Otherwise, you can't claim any negative gearing or anything like that.
• 20:48
  So, yeah, this regional push in super does give me some concerns. I mean, I guess the example we're alluding to was actually a podcast listener and they were dealing with another agency out there that were recommending these two highly speculative assets in regional plays when actually one blue chip asset would have been the preferred option for what their strategy would be.
• 21:11
  Yeah, when I hear this stuff, Reece, like straight away, I just go to the default. My mum and dad are at that age where they're going to draw on their super in the next five to seven years. And would I go and buy mum and dad a regional speculative asset in Gladstone and another one in Darwin with their retirement funds?
• 21:29
  And hand on heart, I could absolutely not do that. So, yeah, I know it's a silly test, but the fault rule often is, would I buy this for mum and dad? And if it doesn't meet that metric, then clients shouldn't be buying it.
• 21:42
  Investors will have speculative assets in their portfolio and will produce some quick capital growth over a period of time as well. When should they look to upgrade into those blue chip assets? Kind of referring back to the previous point statement from two properties to three to four to five, when should they start to look to diversify those into some better quality assets?
• 22:05
  If you're in a speculative market, which I'm sure some of our investors are, probably a lot of our investors are, it's okay to have some exposure. And there's no point listening to this and then selling it within six months because it would have defeated the purpose. So still, you want to be holding and selling into the FOMO of those markets. So there's a few of those markets now that absolutely have hit that FOMO phase. That's when you want to be selling. And obviously, ideally, you've held it for more than 12 months because then you get the capital gains, the discount, et cetera. So...
• 22:35
  The answer is, when should you be upgrading to a more blue chip asset? As soon as it's feasibly possible. Understanding due to entry costs, you've probably paid a buyer's agent. You've got exit costs, you're going to pay selling fees. And you've got holding costs, stamp duty, and taxes to pay. You want to make sure there's a gain in there. But there's some regional markets at the moment that are very much at that top of the cycle, hitting that FOMO phase.
• 23:00
  Even if there is no net game on paper, bought a place for $300, it's worth $500. There's not a lot of dollars in that, which would surprise a lot of people. Once you take out all the fees and everything else, there's very little for the client. And you might say, well, I'm not going to sell that. I'd be taking my money and run in some of those speculative areas that we've spoken about. Can you fix a property portfolio if you've received bad investment advice?
• 23:22
  Without a doubt. Absolutely. We spend a lot of time, but it's not a quick fix though, Rhys. Some of our clients, it's taken us three to five years to turn around a portfolio and they're reaping the benefits of that now. But often people want instant gratification. We're in 2025. Everyone wants to get quick, rich game and they've listened to a reel and that's why they are probably the most vulnerable.
• 23:44
  There is no quick solutions to fix a really ordinary portfolio. I had one last week. They had five assets in their portfolio on paper, absolutely killing it. That would have to be the most speculative portfolio I've ever come across at one of our more vulnerable clients, right? They're heavily commission-driven in their job. They're the most volatile to a downturn in the market because, A, their income's going to half because they're –
• 24:07
  in a very much volatile field of work, and their portfolios also in such volatility. So for me, that was like, how can we undo this as quickly as we can to get you some stability? Because if your work takes a haircut, then you don't want to be forced selling assets in a downturn because, like we said, sometimes you can't sell these assets. Yeah.
• 24:27
  We've spoken a lot today about strategies and metrics that you should be looking for to build a portfolio beyond the two, two investment properties. But can you achieve financial freedom just with two investment properties, like 90 or 80% of Australians that are stuck at the two investment properties?
• 24:44
  Define financial freedom. It's very different for everyone else, right? Financial freedom for me is owning your primary place of a resident debt-free. And with two blue-chip quality assets, you can achieve that. We've spoken on the podcast. With one really good quality asset, you can achieve that definition of financial freedom.
• 25:02
  The game around passive income, and this is what a lot of people sell, right? The dream that you get five properties, you get $200,000 of passive income, or typically 150 income is the buzzword, and live off that. No, you can't. But that's a different strategy, and that takes time, and it's not going to happen in five years.
• 25:21
  Off the back of the, just to wrap it up, off the back of some of those lending changes and a bit more noise around certain influences out there or the industry in general, do you see there being a restriction in investment lending in 2026? Banks want to give money, right? I think we're starting to see that the likes of APRA and PICCA have an interest in it, but it's going to take
• 25:49
  a downturn before we see any regulation get put into this space is my opinion. I hope it happens sooner because it needs to come in now. But I think things will tighten for things like trust lending and potentially self-managed super fund lending.
• 26:04
  but the banks are in the industry of giving money and want to give out as much as they possibly can if they can't give it to you under their their policy they'll give it to private debt to give it to you somewhere else so 2026 is going to be a year of massive speculation and we're going to see more debt handed out in 2026 than we've ever seen before what a way to end it on been listening to the folio property podcast thanks