How to Manage A $50 Million Portfolio Of Properties with Nathan Birch
We’re chatting with Nathan Birch, property investor extraordinaire and owner of Binvested, a group of companies that helps investors, in this episode of Property Investory. Nathan Birch has founded many businesses, from a law firm to an accountancy practice, and owns and managed an amazing 200 properties. He has been interviewed on TV 71 times and also makes Youtube videos about property investing. Come along with us as we delve into how his family reacted when he continued purchasing property after property and the freedom owning properties has given him.
Learn about how he managed to start a “portfolio revolution”, encouraging others to buy properties; his first property, which, despite not being ideal, helped him to achieve a bigger dream. Also, we’ll be exploring his worst investing moment, brought on by the fact that APRA’s lending requirements changed at the time, important advice on how to run your property investments and much, much more! So what are you waiting for? Click the play button and let’s get started!
Nathan Birch starts off by telling us a bit about what he does, the companies he’s founded and the businesses he’s created.
I founded a company called been Binvested. Binvested is a group of companies that sort of helps investors. I was one of the first buyer’s agencies in the country, even been in business for over 10 years. I’ve got a group of different companies, so I’ve managed properties. For my investors, I help people build wealth and build strategies and build property portfolios. I have a finance company. I’ve founded a law firm and accountancy practise, a financial planning business. I’ve got national real estate offices. So yeah, I don’t even know what I would have as a job title. I just buy properties and the main thing that I do, and I personally own over 200 properties and yeah, just hustle.
Gosh, that’s no small feat to be able to open up that many companies and own 200 plus properties. And on top of that, you know, you’re just an average everyday great bloke.
Wear the thongs and the T-shirt and jeans every day, I look like Homer Simpson just with a bit more hair.
In terms of what he does on a day-to-day basis, Nathan Birch also delves into that with us.
At the moment, I put on all different hats. This year, I’ve moved to five offices of mine. I employ over a hundred staff, so there’s always something going on throughout one of the companies that I need to attend to. I always do a lot of research into what’s happening out there in global economies and the financial sector, which maybe we can touch on a little bit later. And I just always look for properties as well, so I’m always sort of hustling a deal, have always got hundreds of offers out there with agents, just making deals happen.
He then goes on to tell us a bit about his upbringing and where he grew up.
I grew up in Western Sydney from around in the Paramatta area for those that are familiar with Sydney. A lot of people think I grew up in Mount Druitt. I’d bought my first property at Mt Druitt at the age of 18. I was scared of that place as well back in the day. I grew up in a family, my parents nearly 50 when they had me. I was a surprise package and my brothers were much older and I didn’t really have a childhood where I wanted to go play with toys, have friends and all that sort of stuff, kind of like a loner and still feel like that a little bit sometimes with my crazy ideas that I have.
How many kids do you have in your family?
My parents had four boys.
Wow. And you’ll obviously be the youngest out of them. What were the age gaps between them?
Oh, like 11 to 20 years difference. I’ve got nieces and nephews that are almost my age.
Nathan Birch reflects back on his life and the events that occurred which have shaped him to become the person he is today.
I’ll look back and think, wow, I could’ve been such a small brat, but I didn’t turn out that way. I sort of carried a lot to the family and sort of helped out where I can. So I grew up in a blue-collar family as well. I’m just a typical family that worked for 40 years, died of a heart attack at the age of 62. The last thing I said to him was, I swore at him, had a fight as a teenage kid. As a young kid, I thought you work your whole life and you just die. And you know, my dad didn’t get to enjoy it a lot, not trying to be morbid here. But that sort of gave a bit of inspiration to be like, I want to do something like…but this is back in early 2000 or 2001, he passed away and he had a heart attack and I thought to myself, like an average wage of 50 grand a year,
I’d have to work 40 years, get 50 grand a year. That’s not a really cool way to live my life. And I just thought, how can I be rich? And rich people seemed to own property. So I wanted to own property and sort of hustled from the age of 13 to the age of 18 to buy my first property in Western Sydney, which was all I could afford, had a goal, had a vision and dream of being able to build a passive income stream of 50 grand a year in order to not have to have a job. I’d failed a lot at school, not because I was dumb, but just because I wasn’t a fan of a 12-year indoctrination camp where I had to become a tax slave. So I didn’t really fit into all that. And I ended up just working out a strategy of how I could get retirement by the age of 30.
And I thought it was impossible at the time. There was no internet, there was no YouTube, no podcasts, no mentors, no nothing. I just did some simple mathematics and thought hard work is important at the start and commitment and focus are important. And I just went out to set out a plan to build an income stream that meant I wouldn’t have to go to work for the next 40 years. I would sacrifice 10 years of my life and if I lived to 60, hopefully, I’ll live longer, but if I lived sixty, there’s the other half of the life left.
For Nathan Birch, high school was not where his interest lay and he spent his time occupied by other matters that would eventually help lead him to success later on in life.
I wish I was me now going back to school, I would’ve sort of stood up to the people that picked on me because I went to five high schools and I couldn’t fit in. I had no friends. I’d spend my time in class sort of being disobedient sometimes because I didn’t know how to communicate with people. Communication is one of my most important things nowadays, I’m a professional negotiator and I just had no communications skills and I’d just have my lunchtimes in the library. I’d think like this school’s two began for me, this school’s too snobby for me and always changed schools. I was sort of like a spoiled brat, my parents were like, okay if you don’t like this school, we’ll put you in another one. I couldn’t fit in.
It was just a normal sort of upbringing though. But my brothers were older. I got along with my brothers, not kids and teenagers at the time and I just spent my afternoons working in a family business. We had a fish, like an aquarium, and I used to try and sometimes wag school from 12 o’clock onwards so I could work and then earn more money. But I had goals. Actually, it’s funny, I moved house a while ago. And when I moved house, I found this old school diary from back in school. I was in like Year 9 or something and I’d written on the bottom of all the pages in the diary-like how much I could earn on each afternoon for like four months in advance on each day. And I said, what sort of money could earn throughout the year?
And then I saved that and I hustled and was like that’s going to be as my first deposit, and I hustled every year from about the age of 13 to 18. When I left school at the age of 17 in 2002, I worked two full-time jobs just to have enough deposit to buy my first property. And one thing I realized back at the time, I didn’t know until probably five years later, is that every time I kept saving up 10, 15 grand, the property market would rise like 50 to a hundred grand because we were going through a boom in the early two-thousands. And I realized that money loses its value. The property goes up. All these things go towards playing to building a successful strategy to get ahead.
Nathan Birch tells us a bit about his first job, how he did at school, and the large gift he was promised at the time he would get if he went to university.
So my first job was working in the family business in the fish shop. And that’s where I saved my first deposit. From there I thought rich people are real estate agents, I failed every grade from kindergarten through to 12. I actually posted on my Facebook one day, for those that remember what a UAI is, I think it’s like an ATAR now or something, but if you got 32% or less, you missed the mark. I got 32.8 and it was just like kind of funny and I thought to myself, I’m not going to uni and my mom actually had a deal with me because I’m family we’re really sort of just battlers, not poor but not wealthy.
And when my dad passed away, she actually had this thing which was in his super, which was like an annual fee. It was like an education fee. So if you had a kid in school when the person passed away, you’d get 25 grand a year income to support that. So my mom said to me if I wanted to go to university, I would have had university paid for. And she said, she kind of encouraged me to go there and she said, I’ll buy you whatever car you want. I said, I want a Honda S 2000. It was pretty cool back in the time and she said she’ll buy it for me, and I turned around and I was like stuff this uni crap. Right? Like I don’t want to go and it was no disrespect to people who go to uni, I was like, this isn’t for me.
And I was incentivized by having a brand new sports car when my family only had old debts and bluebirds from the wreckers that were five, six hundred bucks a car. And I turned that away because I realized that I could go out there and earn money and build an income stream. And then I said to my mum at the time, I joke to sometimes now because I went out and bought a Bentley for quarter-million bucks, I got it cheap, not market value like my properties and I was talking to her one day. I said, “Do you remember that time you said you’d buy me a car? I just bought a freaking Bentley.” I didn’t know what it was back in the day.
Oh, that is so cool. Just to be able to do that. And mum’s still around to be able to share these things as well with?
Yeah, I saw mom last night. She’s almost 80 now.
His Property Investing Journey
Nathan Birch tells us about his mother and her reaction when he started buying properties, not just one or two properties, but multiple properties.
My mum was like a housewife like just back in the day. My mum’s, like, you meet her and she’s very strong. She’ll tell you her piece and she’s kind of like me and I do sound very similar to my mum. She would sit there and just talk to people as things are, and she was very hardworking and driven. She was a housewife until I was like five years old like she minded the kids and everything back in the day. And then she had like a drive to work and get a job and whatnot. And she kind of had a fight with my dad one day and she went out and got a job and then she bought the business, which is a fish shop, which is the family business. And she worked hard until old age, like up until about 65. And then when she saw me buy property, she was like, okay, cool. The first property, that’s good on ya. The second property was like, yeah, this is really good. My son’s 18, he’s got two properties. The third property, her mindset was like, mate, you’re going to get yourself bankrupt. Her mindset was stuck at two. And she’s like, don’t do it. You’re going to go bankrupt. Right, you’re getting yourself into too much debt. I’m like, it’s 350 grand debt, mum.
But it was big money for an 18-year-old. And my mum that bought a house of $13,000 in Parramatta 52 years ago now. And that was a big sort of the change in the thought process. And the second, third, fourth, fifth, sixth, seventh, eighth, ninth, tenth property was, it was like starting to be an intervention at about five or six, after maybe six, seven, eight, nine, ten, it was like, it was like I was Brittany Spears and shaved my head sort of thing, gone off the rails. And then after that, I think it was about 20 properties, 30 properties. It was about 25 properties when I quit my job in the middle of the GFC.
So by this time you had made a big leap and changed into investing property full time. What were some of the jobs you worked in?
So my first job I thought real estate agents were cool, so I thought I’d be a real estate agent, the worst job in the world. I then worked a job pouring beers as well as like in a newspaper, as an advertising role. And then I became like a manager, when I quit my job in 2004 I was just around the six-figure level, no one in my family ever earned six figures. Mum saw my dad die like 10 years, like six, seven years beforehand, he was like on 50, 60 grand a year. And she’s like, you’re throwing away your job at a hundred grand a year income? And I was like, my servicing doesn’t matter anymore.
At the time, Nathan Birch’s mother couldn’t believe he was throwing away his hundred grand income, but eventually, when she saw the success he was reaping, she came around.
I only had like four jobs. But my mom’s mindset, she lost it and then she was I like, okay, whatever. And then I just started hustling. Like I had like 30 grand a year passive income at that point. This is in the middle of the GFC by the way, I quit my job. From there I thought I’ll just buy one property a year and had a strategy to flip it, buy, reno, resell, and make myself an extra 50 grand and I’ll be on 30 grand plus 50, I’m on 80 and all I’ll have to do is just one reno a year. And from there I just kept pushing my portfolio. I got bored. I started making YouTube videos before anyone knew what YouTube was and people asked me, the media got behind me. I saw something the other day in my office of sort of media like TV interviews I’ve been in, 71 times, I started a sort of portfolio revolution out there.
People wanted to help with building portfolios. You have a very candid and unorthodox business of just saying things, I make more money out of property, business is more just the fun of it. My mum, to answer your question, she’s like I don’t know what you do, Nathan. And she swears a lot too just like me. She had four boys of course. She says, “I don’t know what you’re doing, Nathan, but you know what you’re doing, so keep doing what you’re doing.” So she’s onboard now but for many years it was like, and it’s hard because your friends and family aren’t on board.
For Nathan Birch, the barometer for success when it comes to building portfolios boils down to one thing. He also informs us of the importance of having a strategy when building your portfolio.
I remember when I first started my business, I had these flyers. I thought I needed to have flyers. Like we used to do, like the little seminars that I’d put on my social media, YouTube and Facebook and that. And I do these little things. I had these flyers printed out. I said like edgy because I started with the investor group. It’s like an education business and then it grew to a shared services model with all the other vital things, building a portfolio. And I used to have these flyers that say numbers don’t lie and it’s the fact, numbers don’t lie. Like your emotion can lie. Your ego can lie. Your thoughts can lie. When I say emotion, like whether it’s a fear emotion, whether it’s like an ego emotion, whatever, your numbers tell you the story. It’s just purely numbers.
It’s numbers game and people can tell you, oh, I wouldn’t buy there. I wouldn’t want to buy this. I wouldn’t want to do that. I don’t see the value. Well, if the numbers tell you the story, then do it if it works. But you need to have like a plan, you need to have a strategy, need to understand. Like for example, for me when I first started, there was no one like in the early two-thousands, for those that remember back to the Y2K, there were a lot of people out there saying like buy a property, it’s negatively geared, buy this off-the-plan thing. There was no one that ever spoke about a property portfolio, nothing. So I thought to myself, if I could just have 10 properties that brought in 100 bucks a week, positive cash flow, that’s 1000 bucks a week, that’s 50 grand a year.
I don’t have to work again. I can do whatever I want. I’ve freed myself from the slavery of a nine-to-five and that’s all I hustled for. I thought it was impossible. Like I really thought it was impossible. And I think I had eight by the age of 21. Made my first million bucks in Mt Druitt at the age of 21 as well. And then I just kept wanting to expand it from there. So having a strategy, like some people, like if you wanted a hundred grand a year today, you’d need to have said seven properties that rent for 300 bucks a week, owned outright. So it’s 300 bucks times 52, 15,600, 15,600 times 7. That’s about a hundred, 506 grand. That could be a strategy. It’s like how do you get there? And everyone will give you that feedback, your colleagues, your family, your friends, and it’s like, well, cool for your opinion, but that ain’t going to pay my bills.
Despite his incredible success now, Nathan Birch’s first property was far from ideal.
It was the worst property in the world. I was 17, my dad died when I was like 16 and I’d been saving up, I had about 30 grand at the age of like 16, 17. I was earning like 10 grand a year, like 200 bucks a week on average. Every holiday, every afternoon, every weekend. Just sacrifice my youth, I sacrificed my youth. I sacrificed a lot of what I had to get to where I am today. It’s fun, right? It gives me options as well, like being silly, liked to have a laugh. At that time, I was 17, I thought to myself, I would try and pick up some chicks at the time and I was like, I’ve only got like a $200 car, that’s just all my family sort of had at the time, we used to buy $200 cars.
I went out and just bought a brand new car, cash, and I thought I couldn’t sign a contract for another 18 months and I could save another, you know, 20 30 grand in that next 18 months because I’m going to be leaving school and all that sort of stuff. I’ll be able to get it still. So I bought a brand new car and then by the time I bought my first property, I was 18 and I had about 35, 40 grand saved. And I bought the first property in a suburb called Hebersham out in Mt Druitt, it was 48 grand, remembering that there was a boom in Sydney, which peaked in 03 and the market collapsed in 03. A lot of people think the market’s just been going up ever but the market collapsed in 03 until about 08. So when the GFC came the market actually took off because of quantitative easing, stimulus money being injected in the marketplace, whatnot. And in 2003, it affected all property. And I found this property that was a no…I wanted to have it close to Sydney and I thought well, Mt Druitt is where the cheapest properties are.
He tells us how much he picked up this property for and despite being a less than ideal investment, it helped him achieve a bigger dream.
I picked up something for like 200, 250. They just kept going up. Howtos were selling for 300, and I picked up a ton howso house out there, howso being a house commission, and I picked up this property for 248. So I thought it was below market value. I minimised all the risks. There was no reason why I bought it, it was just because I thought it was a good value and I have to get a bargain on everything. Everything I buy, like doesn’t matter, like I’ll choose a fridge based on how cheap I’m getting it. Not cheap, but well-priced on getting it or choose a car based on, I’ll take that colour one because it’s 5% cheaper, 10% cheaper. I saw this house and I was like, and my mind said, oh, you still use the word house? You never hear me say the word house.
It’s always property because it’s just the assets I need to accumulate. But this house was all termites, which the pest and building reports said it had no termites, the roof collapse on me. I built a legal granny flats because I thought granny flat’s cool so I can build a garage, little granny flat. It really sucked the life out of me when I got the truck from the council, just everything went wrong with it. But I think that sort of slowed me for like a little bit to go, okay, well I need to minimize risks. Like, it was an educational lesson. It was like, I remember at the time I used to say from having to work on this property so much that it was like an apprenticeship in life. It was an apprenticeship in how to be a tradie and apprenticeship on how to be an investor mindset, everything.
I ended up selling that property just to prove like at the time I needed cash, but I sold it in about 2012, I think it was about 10 years later. I think I sold it for like 450, 460, so it sort of doubled, but I sold it to use the money as my deposit on my first principal place of residence. So it was significant, that property was purely a vehicle to get me onto five acres and in Dural, that was like a first principle place and it’s like that property was purely…it’s what it did, it grew me the deposit big enough to get into my dream house.
And you’re still living in that dream house?
I moved out and I’m building another one. I’ve got like 140,000 square meters of land in Western Sydney to build on. So I’ve just got land backs now, some of my stuff, and I still buy the original sort of a cheapy sort of properties still, but I still buy like some of these land backs. A future. Good stuff.
Nathan Birch delves into one of his worst investing moments, which affected him not being able to get funding to settle his properties.
One of the worst ones that’s happened this year, and it was a good one…out of all my properties, I’ll point to a few of them, so some of our best ones, my best properties would like my little cheapy ones. The stuff I sort of specialize in, and you can still pick them up today, like 150 grand, rent for 250 bucks a week. I picked up one for a client this morning that was like 220,000, it’s only 2 years old. The owner paid 340,000 for it, rent for 350 a week and it’s in the capital city. I was like, that’s cool, you can’t even build the thing for that. But some of my really good ones could be whether it be my land banking, my motels, shopping, I’ve got all different stuff, but my worst ones, I’ve never lost money per se.
Like I’ve never bought something that’s gone, well, I bought it for 300, it’s worth a hundred,I never had any sort of losses like that versus had like shit decisions or things that I didn’t see happening. One of them was when APRA changed, and this is why a lot of people think that I was a bit cuckoo two years ago, three years ago, when I said the market was going to turn and exactly what would happen with interest rates coming down and the equity in the markets. I bought $10 mil worth of property in a month and I thought I was a property gangster. I’m clicking these things like a boss. I’m so cool. And then I didn’t see APRA coming in and they changed all the lending requirements and these were stacked on delayed settlements and stuff. And when I went to settle the first batch, I couldn’t get funding.
But that first batch wasn’t the only one to be affected by APRA’s change in lending requirements—there was soon a domino effect that resulted in a loss. However, Nathan Birch has never suffered losses from property crashes due to his strategy.
So say I had March, a property settling, April a property settling, May a property settling and so on and so forth. What occurred is that when I went to several, the first one I couldn’t settle it. I had to wait another month and then the bank let me down again. I had two properties to settle. Then three properties to settle in. The first property is getting angry that I haven’t settled yet and it was just a really big problem. I think I ended up maybe losing about a million bucks. I was going to lose 1 million bucks in deposits if I didn’t complete. And also, I’m not not going to complete, but I probably lost about 1 million bucks in just being dicked around with loans, penalty, interest, stuff like that at the time. And sort of breaking up for a bit. Worst property experience was this year, as I’ve got properties all around Australia.
At one point when I quit my job, I bought a couple of little cheapies in regional Australia to renovate and sell. And it was one of my flipping strategies and I never sold them because it was like I bought this thing for 22 grand, spent like 20 grand on renovating, it was worth 200 and it rented 250 a week, it’s been rented for the last 10 years. The real estate agent in his town just changed hands and they’d been paying my insurance for like a decade. I didn’t check my insurance. They never paid for it. They left it vacant. The house burnt down. I would’ve been paid out 300 grand, but because my property managers are on the right track, they cost me a quarter-million bucks sort of thing. So that was a big lesson. This year, I took like, because I’ve got a rental business as you know, I run a very different than real estate agents because it’s just I don’t like real estate agents like anyone, but I just gotta take it as a level of control onboard.
So I look after my properties and some of my clients and whatnot, but I took my business national because I’m like, I can’t deal with incompetence out there. So there are little things that occur. Like I’ve never had like a big doozy one, like I’ve bought something that crashed. Like when I buy, I always make sure to buy it below market value. So if I’m picking up like 20% cheaper than everything else, and the market would have to drop 20% before I was in a loss. So I’ve always built-in that sort of buffer and I make sure it’s got a positive cash flow or neutral positive. So then if I have to hold onto it for 10 years, 20 years, at least it’s going to look after itself. And I like capital cities because that brings in the growth.
For Nathan Birch, running a business that manages his properties is one of his dislikes and gives us some important advice on how to manage your property investments.
I actually don’t like it, like out of all my businesses, it’s like this thing seems painful, always dealing with some bloody tenant issue, it’s like babysitting a lot of the time in property management and I look at it like very different, because a real estate agent, if you’re employing a real estate agent, generally you’ve got someone that’s like 18 or 20 and looking after your properties, they’re on 40 grand a year. If they have a complaint from a tenant, they normally side with the tenant because the tenant just bullies them in life. And I don’t like agents that are pro-tenant because I employ the agent, I’m the one that wants to be pro-land. I want it to be pro-landlord. So $10 to me is 500 bucks a year, 520 bucks per year. So if I get my rent increase just by $10 to someone, just probably 10 bucks, that’s $520 per year.
If I’m going to a hundred properties, you know, 52 grand a year just by increasing a hundred by 10 bucks. So you need to look at the intricate numbers. Like I’m very fastidious with like every little dollar that comes in around in my portfolio, it is important I think for all owners. There’s so many owners, like when I pick up properties via myself or my buyer’s agency clients, I’m thinking, why would you keep your property rented at 280 when it should be 320? 40 bucks a week less, that’s two grand a year, 10 years, that’s 20 grand as a deposit for another property, but it’s those numbers, you need to be on top of it, like a business. Treat your investing like a business. Probably a good tip that I recommend to everyone.
Owning $50 Million Worth Of Properties With Nathan Birch
Nathan Birch starts off by telling us about a realisation he made on his property journey that could be defined as an “aha” moment, as well as reminding us what makes the value of property go up in the marketplace.
First one, I remember I did sweat equity all the time when I first started investing, I thought to myself, this isn’t scalable. And I was like, I was pulling apart old houses and using not the kitchens, the bathrooms, the vanity units, everything, windows. I clip like a second inch and scrap yard in my backyard of parts that I’ve used on other properties when I’m getting them for next to nothing. And there’s a point where I sat there, I was doing it. I was like, I need to do this now because I’m earning more money by saving than what I would from my job. So I’m okay to do it now. But you know, successful business people wouldn’t be laying secondhand carpet in crappy rental property in Western Sydney. And I thought of myself, find a skillset that’s going to be your best.
Like I’m a property investor, that’s what I do. I invest in property. I’m not a paper, I’m not a tradie, I can employee someone affordable who will do a much better job and I can focus on doing my next deal that’s going to make 50 grand or a 100 grand or whatever. So at a certain point, yes sweat equity is good, but I see people that are thinking too small. When you’re picking up 50 cents off the floor, you can’t look ahead and grab the other hundred dollar note that’s sitting in front of you, so it’s about choosing your battles. The other one, like I’ve learned lots of my views like how I can intricately build my portfolio and whatnot. But another one would be is when I realized that the system, like this is very deep, what I’m about to say I don’t want to go too deep enough because of where we are, the media tells you stuff which is aligned to advertisers in the networks where the real world could be different.
So when they’re saying the property market’s fine and you can see it’s crashing out there in the real world, you need to do your own research and your own knowledge because when it hits statistical data or whatever and then they can’t hide it or whatever, then it’s generally 12 months too late. So if you can be before a market…it’s really important to be before the market. So I saw that APRA was tightening, I saw CARCLATOR reverse engineer the financial system to workout liquidity getting sucked in out of this market. That’s what’s causing the prices. And I realized today, and it might be very controversial, that properties haven’t gone up in value in the last 10 years, the value of the money that you bought the properties with has lost its value. So you need more of it to buy that same asset as a really important thing because debt becomes irrelevant with inflation.
Nathan Birch goes on to delve into his strategy as to how he finances his property purchases and the favourite property he has ever bought.
The more inflation there is, the cheaper the debt is. If the property doubles in value, it just means someone needs double the amount of the money to buy that asset. So what is real? The property or the money, which is just a piece of plastic or even just a digital email now that was a big deciding moment for me is where I like this whole game that surrounds the playing bulldog. People say the property market’s in a bubble. It’s the monetary system that’s in a bubble. And what’s going to happen next? We need to work out what’s happening in the monetary system to work out what’s going to be the ripple effect and the repercussions into other asset classes.
The monetary system aspect of it, that was about three years ago when I got stuck with APRA and their lending, and I just went to myself, look, I’ve got a good asset base. I’ve spent the last 15 years, 20 years building up assets and hustling. I’m just going to make these things that I’ve got, which is why I did it. I’m just going to make the cashflow so much stronger that I don’t need to use the banks anymore. So I don’t use the banks, I’d like to use the banks but I don’t sort of fit their mould. So I’ve got to focus on what I can and that is my cashflow from different properties. There was a point where I was like way over the half-million dollars a year passive income from properties.
That’s what buys me a Bentley and that’s what lets me live life on my terms. I’ve got one whole property which I bought for 400, and this is my favourite deal ever. It’s a little shop on the Central Coast. I’m not a big fan. My disclaimer on this is I’m not a fan of commercial. I like residential better, but I’ll take any property, whether it be a house, a unit, a villa, a shop. I bought the shop that was basically land value for 465 grand about seven years ago, eight years ago. Hadn’t been rented for 10 years, took a punt on it. I ended up finding a tenant on a 20-year lease for 100 grand years. Like one of the big top…it’d been in the A6200, one of them took a lease on it and that’s a cool property.
However, he reminds us that despite his success with this property, he wouldn’t have been able to do it without the proper financial foundation.
If I didn’t have a foundation of portfolio and that was like chump change at the time, then I could be sitting there for another 10 years with no income having to service a debt of 465 grand, which could have severely impacted as well. I’m not a fan of, you need to have the foundation portfolio set first, which is just bread and butter, residential properties, houses, units, fillers. What if something goes wrong you can offload them easily, minimization and whatnot. But building up cashflow streams…I realize now like I’ve got all these assets like properties which I can do stuff on some, building a motel. I’m signing up to a motel franchise, it’s sitting on my desk for one of my properties. I’ve got a storage facility that I want to build in three different locations up the eastern seaboard. It’s about taking those assets and expanding everything in the future years. The house has been rented for the last four months.
Nathan Birch has accumulated 200 properties worth 50 million, and he tells us how he was able to finance the process of buying one property after another.
That’s really a good “aha” moment, it happened when I bought like six or seven houses and I use the word houses now, mindset, feedback from other people. Like everyone goes, you have to buy a house. The house goes up in value. The house is what appreciates. The land appreciates. Like, it’s not a townhouse or units, it’s the land. You need a house that has land. And I started buying that and I realized like I was working two jobs and only get like 50 grand a year passive income. And with the 50 grand passive income what I had realized was I was negative about 800 bucks a week, which is 40 grand a year. Being negative 40 grand a year was hurting me. I was working two jobs, but I’d build the asset base. They don’t realize that I could keep pushing forward. I was getting stuck,
Like I wanted to buy, I don’t know exactly which one it was, but like say six to seven or seven to eight, I was like, the bank won’t let me buy the house. And then I found this townhouse and it was like 130 grand. It sold for 280 grand or something. Three years beforehand, the person had gone bankrupt because of bank repo deal when the market had collapsed. And most people were scared back from 2003 to 2008. Even up to about 2010 they were scared in Sydney that is, and I was like excited because I’m like these people paid 280 beforehand, I could pick it up for one 130 and I went back to the bank and asked if I could buy it and they let me buy that property is like probably number seven or eight, and it was renting for like 220 or 230 bucks a week.
And I realized it was the cash flow from that new asset that was enabling me to buy another one. So a lot of people just focus on I want to buy three houses, build a granny flat on or whatever, but it’s like how’s that going to get you to your end goal? And it was at that point that I realized I need to understand finance and I need to understand what the bank’s appetite is and I need to understand that if I can match the bank’s appetite or risk strategy with an asset that worked for me to get to my goals, then that’s what’s going to work. So part of it’s finding a cool deal, anyone could find a cool deal, but then it’s having the right strategy from a finance front to be able to go, okay, this is going to meet the bank’s appetite to allow me to buy more and more properties.
Nathan Birch further elaborates on the importance of showing the bank you have enough income to fund your property purchases.
From there I started buying really crappy regional area properties, which all they did was increase my PNLs for the banks to go, okay, this guy’s appetite, he’s got enough income coming through to support other properties. So in today’s market, people do continue to buy properties. Sometimes I have people coming in and they’re like, the bank will only allow me to borrow another $200,000, I’ve got $100,000 equity here. Well, you’ve got 300 grand, 500 grand with the equity property, whatever the case might be, you could use that cash, buy a specific type of property with the purpose of buying it cash, which has got a high rental income in order to improve your cash flow position to then make the bank lend you more money.
And they’ve got their like calculations in the back end and it’s sort of important to work out okay, will the bank take this? No, they won’t take this, they won’t take this. They won’t take this like security, but they might take this risk appetite if I can minimize the risk appetite if they won’t take this risk appetite I want to make sure the bank will take the risk appetite on which will allow for you to continue buying. So,
For example, there’s some properties out there at the moment you can pick up for like 50 60 grand which rent for 450 a week and they’re not the best properties, but they’ve got high income coming through. If you added that extra 450 bucks a week to your cashflow position, these are not in mining towns or crappy areas, but big, large capital cities. You add that property cash to your commission, the bank will then allow you to borrow another 2, 300 grand and it sort of gets you back on track. So back in the day, I didn’t realize that to that extent before. So I started buying little regional properties that I could renovate and sell, boost up my income by getting an extra 50 grand from this deal, a hundred grand from that deal. And appeasing the banks, it’s like I don’t like hearing no as an answer. It’s like, what do I need to do to get around that to get to the next level?
He goes on to compare figuring out the risks and understanding how debt works in the property game.
I’ve got at the moment about 18 mill worth of debt to the banks. And some people will be like what, he’s got 18 mils worth of debt? Well, it’s with 55mil worth of property, but I’ve got more debt than anyone in the country probably on corporation sort of thing. And for me to understand how that debt works, I need to work out what risks surround it, you need to understand that. So it’s like each level will bring like a new devil and it’s like working out how to overcome that. Just like as a kid when you’re playing Mario kart or whatever to gets to the next level, people play Fortnite now, I don’t know, I don’t know what the games are today, but you need to unlock checkpoints to get to the next level. Finance is one of those hurdles which a lot of people just give up on or they plan so badly they don’t even consider it and it’s a very big consideration.
He begins delving into strategy, stating that it isn’t complicated.
I’ve got a very simple strategy. I remember there was a BRW article once and I saw it a while back. I think it was like, mate, it’s the same as a cheeseburger or something, was the heading. It was like 2010 or 2011 or something. It’s like I did an article on this stuff because it was like, I look at it…each of my properties, people like just go out and go, I want to buy something or buy this, it sounds good or whatever. But strategy, right, Maccas still sold the plain one-dollar hamburger and then it makes them successful. They’ve got a strategy and a system and a process in place. So for me to buy and hold, for the next person, it might be bought, build and sell. But I’m a pretty lazy guy. I might be pretty active out there. I’m pretty lazy. Like I don’t want to have to keep churning something.
I’ve never heard someone sit there and say, I’m glad I’ve sold a property 20 years ago because inherently the money keeps losing its value. And the price of goods, the entry to obtain something keeps rising in value. So buying a property for 200, selling it for 250, let’s say 280. So 30 grand costs in an hour and making 50 grand profit. That might sound good. You’ve made 50 grand. Cool. But at the end of the day, you don’t have an asset. I’m all about building assets and having a portfolio of assets so that when inflation comes, the monetary system dies further than my asset-based increases in pay. So often I joke about as I measure when the market doubles again, my 50 mil property portfolio turns into 100 million, I don’t have to do anything. It just sits there and goes up. It’s pretty easy. So I’m all about having a buy and hold portfolio, but the three things that I mentioned before, but buying it below market value meaning that you can pull out that equity. So say you buy property one for 200 grand today and it’s worth 250, you need 40 grand to get into that deal for the deposit plus 18 grand closing costs, you need 50 grand, put 50 grand into that deal. You’ve got a loan at 160, it’s worth 250. You go back to the bank, get repaid 250, pull out 80% of that, 50 grand. You’ve got your deposit back, you can put it into another deal. You’ve got a 200 grand loan on that.
By utilising the equity, Nathan Birch was able to leapfrog into the next deal and the next, with the property also able to service itself, and he goes on to further tell us how it is necessary to maintain properties in this fashion.
I didn’t do it all the time. Like I used to work those two jobs and just hustle real big-time. But I did a mixture of saving the deposits, using equity for deposits and the more assets that you can accumulate, let’s say that, like people go, Oh, you were lucky. I wasn’t lucky. People called me crazy. They called me crazy these years ago. What I look at is that if I didn’t do the hustle between 2003 and 2010, and that was a very bad time in the Sydney market, the market was going backwards, but I saw the opportunity that things were on sale, there was the opportunity. In 2009, 2010 I quit my job. The market doubled overnight. So if you buy 10 properties for 200 grand and they go from 200 grand to 400 grand, and you’ve turned 2 million to four mil, you’re now sitting there in the future with two mils worth of equity or profit if you to sell them off or whatever. That gives you options of choice on what you can do for your next step. If you’re buying 10 properties in negative cash flow, you’re going to get stuck at like property number one or two. So that’s where the cash flow perspective comes in, it needs to look after itself, needs its own heart, lungs, respiratory system, the property does to be able to support itself
This year, Nathan Birch has been working on a couple of projects, one of which he goes on to describe in detail.
I’m still trying to acquire as many assets as I can even give him the fact that I don’t meet the bank’s criteria today. So I picked up five, six properties this year. I use a mixture of different cash and different sort of settlement techniques on. With the other properties, I could spend that cash get coming in to sort of renovate or repair or develop my properties. But at this point in time, I’d just rather have more assets, more things from sale if I’m picking up something 20%, 40%, 50% on sale. I’d rather do that than build on something. Because it’ll still cost you the same sort of money next year to build this year.
But for me this year I’ve done a lot of renos just because some of our properties are a bit tired, a little bit dilapidated. So I’ve picked out a few of them and smacked those renos just to improve my cashflow. One of them I had this house and it had a big granny flat out the back, the granny flat was eaten away by termites. The roof height was so low, I just took it down, the structure, and then re-erected the structure on the same spot which was made out of steel. And it cost me maybe like 60 grand all up. It’s going to cost me. I’d choose trades and our project managers to deal with myself. A bought the frame and the structure on Facebook marketplace, it worth 45 grand, I believe. 40 grand, something like that, and I picked it up for 15. And that thing is going to rent for about 700 bucks, 750 bucks a week for me.
In regards to this property with the granny flat out the back, he tells us the percentage of return per year he is receiving from it, and informs us what other plans he has for some of his other properties.
It’s an 80 per cent return on investment per year. So I’m taking cash and in getting a return on it, like to try and…I’ve got the assets there. I’ve got the properties that are sitting in my portfolio. I just need to capitalize on it. I don’t want to do the big developments at this point. I’ve got lots of land banking options that I’ll probably come back to them later. Like they were all bought with the same premises of buying below market value, strong cash flow, the good upside for growth. Well, I’ve got this street of houses that are in the Gold Coast where all the houses I picked them up 500 grand apiece. Probably like 600, nothing too crazy, but I own like nearly an acre of land in the heart of the Gold Coast, which is high density. If I wanted to sell a lot on the sell-off each individual house, probably go for like 700 or something now but I plan on coming back there.
It could be I saw off another side somewhere when I can build on it and get a big chunk of cash and go and use that cash to develop that side or another side. Like I’ve got a few sites I’ve collected over the years. The sites are what killed my cashflow a bit and took me away from my original, I feel like if I was Maccas, selling cheeseburgers and Big Macs, then I started pizzas.
How To Have A Great Mindset
He tells us how he gets the most out of every situation and the importance of having a good team around you.
It’s an active activity. That’s how I got to do it, but I look at it if it’s dollar productive. If it’s going to cost me money or is it gonna make me money, what’s going to be the biggest impact to me negatively or positively? If something’s about to blow up, then I’ll jump in the fear. Having the right team around you is important. So I’m only as good as the people in my community. I’ve got fantastic lawyers. I’ve got fantastic accountants, fantastic finance people, fantastic property managers, fantastic staff in my business, I’m only as good as what they can perform as well. So if I accept sort of sloppiness, laziness, whatever, then it’s gonna show in my result. Managing people probably has been the hardest thing over the years.
Nathan Birch didn’t seek typical sources for information like seminars on his property journey, and never even had a mentor.
That’s the funny thing. I’ve never been to a seminar in my life, like I’ve gone to some of those ra-ra things and I’m just sitting there like, wow, like this crazy for me. I just see this stuff. So I’ve never actually really done seminars myself, as in like tours or anything. And I’ve never been to seminars. I’ve never had a mentor. There wasn’t anyone out there that had properties or had what I wanted to do back in the day. And that’s sort of why I started making funny YouTube videos, being candid, not really caring about the outcome of or with an agenda as to what I’m saying. I just say it. And if I give good value, then people may want to use our products and businesses. But I never had a mentor. I just thought of what I didn’t want in life. And probably like sort of like fear-based growth. It’s worked well for me. Like I don’t want to be this, I’ve gotta do this in order to get to where I want to be, just accepting what I didn’t want to have. So it’s been a lot of discovery, self-discovery.
He gives us an inside glimpse into what it was like for him to be financially free and quit his job, and the biggest reason he continues to do what he does today.
When I first quit my job, I didn’t go away. I was like 25, had like 25 properties. The TV was loving me, all that sort of stuff. And I set up my businesses and also I just wanted to be doing cool things. And when I quit my job, all my mates were finishing university, they were working and stuff like that. And I had nothing to do. I don’t travel, I’m scared of aeroplanes. I’m okay with 20 mils worth of debt, all those. But I’m scared of an aeroplane.
I never travelled anywhere. So I was to say I kept like anxiety at home and so many times I thought all caught a terminal illness and whatever, and I’d always go to the doctors and all that. So I realized I needed to keep myself occupied, so I started the Binvested group. And then I realized that the cool stories that I’ve created throughout the community were very touching. And then over the years, I realized I look back and I’m like, I’ve got a hundred-odd staff that I need to make sure like they’ve given me their commitment. I need to make sure that they achieve the things, I’m looking at my office at the moment, I’m thinking these families I need to make sure they’re a part of this vision, they’re part of helping people build wealth or whatnot. It’s more for the people, it’s not about me. It’s bigger than me. It’s cool cause it keeps me out of trouble, I could do things that make me more money and have far less stress than business but it’s just the community that we’ve built at Binvested.
Nathan Birch lets us know what sources of information he goes to for knowledge and gives us some advice on what it takes to succeed.
I used to be in that class where the teacher used to have to read you a book out sort of thing at school. I read a couple of books in my time, but not really. It’s probably been like 10 years since I read a book. I’ve got people to give me books I’ve never read. But I watch videos. There’s a lot of people that have opinions out there. A lot of the podcasts that are cool, what you’re presenting here as well is a community of people with different opinions, different views and different stories. If people can just share their knowledge and I guess people resonate with people that they feel comfortable with is what I’ve noticed over the years. If they want to do this, then they’ll start looking down that road and find the answers that they need. So whatever it is a one wants to achieve, whether it be a, you want to be a professional sportsperson, you want to be a professional property investor, you want to be a professional health person, whatever. Like just go down that road and question everything and just look for something that’s going to get you to where you want to be internally.
There are a few personal habits of his that have contributed to his success, and he shares them with us.
I used to smoke two packs of cigarettes a day. It was bad. I quit, which was good. I actually started smoking because I had nothing to do, so I used to smoke cigarettes. But the healthy habits that I do, one of my ones for 2020 is to go to the gym sort of three to five days a week, which I haven’t been doing, which is why I’m a bit chubby, bit more like Homer Simpson. But I eat healthy because anything that I put, like when I quit smoking, I thought to myself, if I’m going to put something in my body, it’s going to benefit like my actual body. So you know what, I don’t drink alcohol or anything like that. I make sure that the food I eat nowadays is like clean food because you can feel it how your body performs for you. So that’s one thing.
I’ve been changing a lot in 2019. On habits, every day I have about 10 Excel files that open on my screen. That’s a minimum. They are like my goals for the year, my life, things that I’m working on. It just becomes like two lists, I have to-do lists everywhere. My desk is a mess. It’s like an organized mess. But I need to constantly be reminded by having something there in front of me about what I need to do. Call this person, do this, do that. Because being alert of what actions you need to do creates that person. And I think a lot of people pick up bad habits and it ties back to my smoking, a lot of people say, I want to be successful, right? I want to be rich.
I want to have whatever like define what rich does. These things even like measurable, you need to be measurable to it. Have it happen. You need commitment in order to achieve it. People want to be successful, but they’re not doing what it takes to be successful. You don’t become successful by hanging out in the booth at the back of the club getting bottled surfers. That doesn’t make you successful. That takes you away from it because you’re not doing the things you need to do. If I’m not going to the gym, my body’s not being the healthiest. So when it comes to property investing, are your habits, is getting that new car, is going on the holiday. I’ve seen these people that are like, it’s all about brands and consumerism and stuff and that’s why I wear a white or a black tee-shirt every day.
He highlights the importance of not getting distracted by things which can stop you from achieving the success you want and of having the people around you on board.
I don’t have any brands I don’t represent. I don’t go and buy a brand and go represent, represent. I don’t care about a shirt like it’s just little sort of habits that we’ve even got. I need to have a new build the bag or a new LV belt or there’s nothing wrong with LV, I like Louis Vuitton. It’s like those things are going to take…are they your distraction, are they your goal. Most people right now are planning for getting drunk at the Christmas party, spending more time planning the party on the weekend. They’re spending more time thinking about stuffing the Turkey or where the holiday is going to be rather than planning for their financial future. And as we head into 20, 20, like I always take like the week off, like I never have a day off throughout the year, not even a day.
Sometimes I do for a wedding or something. But this year I actually had no days off for three 65 days. But I take the time off between Christmas and New Year’s. I lock myself away and I reflect on the year that I’ve had and I’ll look at the year that it’s ahead of me and what steps do I need to take. So it’s like I’m travelling the future stuff, travelling in the future, seeing what it’s going to look like and then work out what steps I need to do to be that person and to become that person to get there. And then throughout the year I work backwards and that’s why I have all those Excel files and everything to remind myself like, okay, cool, I need to do that. I haven’t done that yet. And it’s fitting as much stuff in your day. Like people go, oh, can’t get ahead, so stressed, so depressed or whatever, but you got to work no time. It’s like, well you have time because you’re getting pissed with your mates. You’ve got time to watch Netflix, you’ve got time to spit beer at the TV and tell the TV how you want a game where you play it, you’ve got time for that, why don’t you spend that time learning, researching, listening to your podcast, watching YouTube videos, reading books, researching properties, researching finance, researching tax. But people have time. They probably just don’t use it correctly. So always try and use my time effectively and efficiently to improve myself.
I look at it as a business plan for your personal life. Successful businesses that have plans, no-one opens a business and then goes, “Oh, yeah, she’ll be right,” because the business will go broke. It’s the same as your goals, your dreams, your ambitions. If you’ve got a spouse or children or whatever, get them on board, get them creative about it, like get them excited and share the same dream because sometimes people either get belted from a spouse because they don’t share the same vision or the same dream. You need to be on par with the other people that are around you, your family members, colleagues, your spouse, your friends as well.
If Nathan Birch met himself ten years ago, he certainly has some things he would like to say to him.
I would tell myself, that’s not me, you’re a liar. I wouldn’t believe myself. I mean, I hustled, I knew where I wanted to go, but I still thought I was crazy at the time because everyone else programmed me to feel that. If I met myself, if I went back in time and found myself from 10 years ago, I’d probably give myself a kick in the ass or something. And give myself some advice, things that I’d do differently and whatnot. But if I saw myself today from 10 years ago, I’m a totally different person and every…there’s actually this thing, this is like pretty crazy, like in your body there’s like, I forget what it’s called, it’s like some drug that your body creates for itself and as a child children have it and they lose it when they’re about like 10 or 12 years old like it stops them from growing.
It’s like the sort of inquisitive sort of side where a child goes to ask questions, learn, whatever. But society sort of belts them out of it and it doesn’t form anymore. I don’t know what it’s called, but I always think of myself as like a little kid, like every quarter I’m changing, I’m growing, I’m trying to be the better person of where I want to be in the future and leaving that old purse behind like a kid, take it home, feel like my head’s gonna fall off the first three months, then gets a bit of strength, interacts that turning over, makes noises and it’s like standing up, crawling, talking a little bit, that it can go potty train—like the kid goes through phases and that happens to like, but you know, try and keep growing, try like, don’t let society beat you up.
Nathan Birch feels optimistic about the next five to ten years.
I scare myself with knowledge, I went deep and I’ve been learning, I see things like the Matrix nowadays. It’s like how I can see that it’s actually happening before for it does because you put yourself in there so well and you download as much as you can. So for the next, five years, 10 years, people go, oh the property market can’t go up. If you listen to the news stories from like morning to afternoon, the first story might be that the sky’s going to fall, at the same outlet they say the market’s going to double. Give yourself bipolar or something, Jekyll and Hyde I’m an investor. I invest in all different stuff, so many different types of vehicles that I invest into, property’s my favourite, but I don’t just limit that, but I looked at everything even if I don’t have control on them, whether it be all politics, whether it be the Dow Jones in US, whether it be the repo rates as these things are, like the repo market, which is like the banks in the US how they have to fund their liquidity.
Because if there’s liquidity issues around world that’ll have a ripple effect and injection of new liquidity, property removed for liquidity from the system will be bad for property and the same thing will occur in the monetary system and it’s the most fascinating thing. And I think the next five years we’re going to see a lot of changes out there. A lot of changes will be positive to property. We’re going to see negative interest rates, negative interest rates will make a lot of people be able to service to buy more property. People say we’re in a recession. Well, the only way to get ourselves out of recession is a lot of people use to use their house as an ATM. And I say that loosely because I had gone pled equity, do a reno, the tradie has money, then he buys a new car. If that stops, then the system sort of stops. So I know that there’s going to be a big injection of liquidity in the marketplace. We start seeing three interest rate reductions in 2019, we’ll probably see another three to five reductions in 2020 and that’s being conservative. And that changes the paradigm, like each 1% on the $18 million worth of debt. 1% rate reduction is 180 grand a year savings.
The property market goes up by 10%. There’s five moodles to net worth. I’m very optimistic about the future. I feel like we’ve been through a lot of the deflationary cycle in this marketplace. And I don’t believe that mainstream media will report on that and go, oh, you know, we’re seeing this happening or whatever. You don’t read it, it’s like the Kardashians, it’s not specialized, it’s scripted where, finding that knowledge in, I read the RBA reports, I read the scripts. I read the research papers. I’ve tried to reverse engineering, calculate what was happening in the marketplace, what’s happening now. It’s an exciting time. I’m very optimistic for the next five to 10 years.
I love to hear that. That’s very, very good to hear from you know, a successful investor like yourself. Now, Nathan, last question I have for you, how much of your success is due to your skill intelligence and how work and how much of it is because of luck?
It’s all about luck mate, just ask anyone. You were just lucky. I think I actually had a chat with someone, a business person, as one of my clients, I was on a call like 11 o’clock last night. I was talking to them and they like actually brought up this conversation and I was like, the only thing I think I’m lucky for is I’m lucky that I have an able body. I’m lucky that I live in a place which isn’t freaking war-torn and all that sort of stuff. I’m lucky that I’ve got access to opportunity. That’s like just things being right. I’ve got the same opportunities everyone else, no advantage, 24 hours of the day. Everyone else has got the same thing. The only thing I am lucky for is the mindset to take action. Being committed, having a plan, being determined and my commitment. The other things that I’m lucky for everything else, I’m very calculated. The moves that I make are calculated, the actions I take in my life are calculated. For me, for my life, for me to get to where I am, it didn’t just happen. It happened from the choices over and over and over. Compounded effects of this move doing right because I see how it’s going to work. This one working because of x, y, z. There’s no luck in it. It’s a commitment, it’s focus, it’s taking action.
This episode was produced by Annie Gao with narrations and interviews conducted by Tyrone Shum.