3 Properties to Financial Freedom
What if you want a little bit more in your retirement than the 2 properties to financial freedom strategy gives you? Well Simon Everingham is planning on doing the 3 properties to financial freedom strategy to set himself up for financial freedom in the next 15-20 years.
0:00 – Introduction
0:33 – Why 3 properties to financial freedom?
3:10 – What is the time frame for 3 properties and what are some challenges that may come up?
7:09 – Land banking while your borrowing capacity is good
9:44 – Goal to pay them off before 40
13:22 – It can be as many properties as you want to financial freedom
we talk a lot about the two properties to financial freedom strategy in order to go ahead and achieve baseline financial freedom but what if you want a little bit extra or a little bit more in your retirement or when you are financially free so today I’m sitting down with Simon Everingham buyer’s agent over here at pumped on property who is actually doing a three properties to financial freedom strategy so we’re going today we’re going to talk about the three properties to financial freedom strategy it’s obviously very similar to the two property one just with an extra property on top of it just getting a little bit greedy yeah so I understand what I need in the future for me to live a life where I have the choices that I want to do to do whatever I want whenever I want so you know I figured that $100,000 would allow me to get to financial independence it would allow me to sustain the lifestyle that I enjoyed living but there may be some situation some choices that will be hinted because I may not have the amount of income that I need whereas if I went one more property three properties to financial freedom it will allow me the decisions the choices that I really want and that kind of includes you know sending your kids to whatever school you want to send them to help them out with university go traveling take the family traveling overseas Simon’s just been to shrink up yeah just got magazine time over there yeah first podcast back since being overseas I’m like rubbed off in this jacket here it’s only like 15 or 16 degrees outside but I’ve just been in like thirty five degree warm weather over in Sri Lanka it’s a beautiful country guys like if you were thinking of doing a holiday and I just a property podcast but if you’re thinking of doing a holiday and you’ve got deterred by the attacks that happened in Sri Lanka don’t it is such a cool place Simon was posting Simon and Taylor his girlfriend posting the Instagram all the amazing food that they were having there the amazing Beach spots and the food you get this big breakfast buffet with his arrow smash and everything it was like six to eight dollars for the both of you it was so good like food over there is just insanity insanity so anyway stepping up from the baseline financial freedom moving to the three properties three properties with three granny flats to effectively get six six sources of income from your properties it’s just going to bump up your wage and bump up your passive income that much that it rather than being baseline financial freedom and okay I can quit my job and get by and live a pretty good life it bumps it up to okay now I have a lot more flexibility in what school I send my children to in the traveling that I do and just get a little bit more luxuries in your life yeah exactly and because I’m starting this journey at 25 or 26 essentially when I purchased my first property like I’ve got that extra few years then a lot of people do have so I’m the kind of guy that likes to set a bit of a stretch target and go out and achieve that so I figured three properties is going to be a massive challenge for me to actually get the three properties plus or three granny flats in the timeframe that I actually want to achieve this so so let’s talk a bit about the timeframe and let’s talk a bit about the challenges that come with three properties over two properties so for a lot of people two properties is quite achievable given their level of income given borrowing capacity and stuff like that three properties does tend to stretch it a little bit for some people what do you foresee as your challenges getting to the three properties and what is the timeline so my timeline is I want to purchase acquire the three properties within the next three years so I purchased my first property at the very beginning of 2019 I want to purchase my second property at the very end of 2019 or early 2020 and I want to get the third one by the end of 2021 so basically three properties in three years three properties in threateners it’s just the property so that’s without building the granny flats yet so this is I guess a strategy would kind of call land banking where you’re actually purchasing the properties upfront you’re banking that land in a good market in a good area good time of the cycle and obviously if you get at the right time in the cycle and those properties go up in value if you spend your capital and if you spend your borrowing capacity building granny flats then you miss out on those early years of capital growth so when it comes time to let’s say you did a property than a granny flat then a property than a granny flat that might delay your third property by a few years which could may not pay a premium which could mean that you pay tens of thousands of dollars more for that property so that is why I guess you’re doing that obviously the risk with that is that it’s going to put you in a more negatively geared situation definitely which is why some people don’t like to take that strategy they want to take a more conservative approach but I think given your age you’re looking at just doing it as quickly as possible and taking that extra level of risk because you are young that’s exactly right like I want to take advantage of the current market conditions some of the opportunities that we’re coming by at the moment which really believer once-in-a-decade opportunity and I don’t want to be 36 years of age when I’m taking advantage of the next opportunity so I need to work extremely hard right now I need to sacrifice certain things and I know I’ve just been to Sri Lanka and things like that but you know being really diligent with the amount of money that I spend in my day to day life so that I can get closer and closer and closer every single month to that savings goal that I need to move forward and with property prices not really moving too much at the moment sitting really flat or even declining it means that I’m not getting any equity increase to help me acquire that next property so I’m doing it all with cash deposits so it just means it’s really hard work and then on top of that as you said the negative equity situation so if those properties aren’t paying for themselves which my strategy not negative equity you mean negative cash negative cashflow apologies yeah sorry so I want to get properties like my strategy is really run down properties in great suburbs on great pieces of land that I can either knock down and rebuild or renovate and add granny flats so most of the properties that I’m probably going to be looking at you know are going to be negatively geared just lightly in the short-term so that once I get those three properties you know I’ve got my portfolio that I need to achieve my longer-term goals but they’re all going to be in a negative gearing situation and I don’t know what at that point in time how long it’s going to take me to actually convert them to jewel the income because at that point I may be relying on an equity increase in the property to release some of that and convert it into Jewel income or I may have to continue to use my own cash if the market at that point in time is still sitting flat yeah so there’s a lot of things to take into account there obviously something else I guess we haven’t touched on is with your land banking strategy and doing it earlier you currently don’t have any children you don’t have those sort of costs and overheads like me and Ben each have three children here that we send to private school and that’s a choice that obviously we make to spend that money but children are expensive even if you don’t send them to private school and the more dependents you have the less your borrowing capacity is as well so at this point in time getting those larger I guess parcels of land versus the smaller loans for the granny flats yeah it does make sense at this stage of your life giving your overheads are lower yes is going to help with your borrowing capacity as well yeah and that might be affected in the future and all of this is being considered in my strategy like I understand what stage of life I’m at at the moment and me and my partner talk extremely openly about you know when we do want to consider having kids and when we do want to get married and all of these different things and I’ve gone look babe like we are in a period about life where we’ve got really strong income and extremely low expenses we should put those things on hold so that we can you know set ourselves up really well and that’s a very selfish thing to do like especially as a guy trying to tell a girl that you know we’re gonna wait it’s you know you get a little bit of pressure there and a little bit of kickback because she doesn’t understand the value of this as well as I do at this point in time so you’ve always got that battle in the relationship about okay you know when do we do it but she’s really now come to terms with the fact that it is more logical to work really hard right now utilize the stage of the life that we’re at to set up our future completely so that then when we are ready to you know move forward and have children get married etc we’re you know we’ve just got those assets taking care of themselves completely and look after looking after themselves so that we don’t have to be too stressed and then we can be extremely present well then you got it set up so then if you you don’t have to worry about your financial future and so if you have children so you’re 26 now so you’re able to purchase your three properties by the time you’re 28 build the granny flats in the next few years so around the early 30s where I am now then give it another 15 years to pay off those properties the killer only be 45mm and be effectively have them all paid off and be financially free 20 years before ya even think about retiring yeah exactly so you know I’m in a great situation and all of you don’t accelerator as well and you don’t try and pay off that debt yeah well I’m actually trying to I really want to pay them off before 40 yeah so 14 years from now to have those three assets and completely outright once again setting myself a stretch target like I’m not going to shoot myself even if I don’t achieve that but for what he like I’m not naive but at the same time I know that I’m in a situation to do that if I if I do work hard yeah so I guess a couple of the challenges that have come up in just this conversation about doing three properties to financial freedom as opposed to two is I guess the negative cash flow situation of the properties given that you’re doing the land banking strategy before going back and building the grain flight even uncertainty around when you’ll be able to build the granny flats and when your cash flow will improve I’m sure that’ll be a super exciting time when you have the three properties and each time you add a granny flat your passive income just gets better until you’re in cash flow neutral cash flow positive actuation and then you’ll be like oh yes absolutely so much better at night so there’s the cash flow situation there’s I guess the uncertainty around it the as the delay in lifestyle things that you want to do in order to stretch to achieve that given as well the current market conditions that you’re saving for all these deposits with your own money well I guess there’s some of the challenges that I can think of and on top of that is uncertainty with market conditions like nobody can predict the future I don’t know if the areas that I’m considering purchasing and they’re going to go crazy and I don’t know how long they’re going to sit flat for which that uncertainty is obviously tough too tough to understand which is why I have this cash flow strategy to try and combat combat that so yeah you know it’s not always about the capital growth and I really do want really strong consistent capital growth forever because you know that’s what I believe smart investors focus on but at the same time I want that cash flow as a backup and also to provide me with the income that I need to make those choices that I want yeah but at the moment you don’t need the cash flow because you’re you and your partner are both working full-time yeah I’ve got low overheads you don’t have kids yet so you can afford to do that yeah so you know that’s that’s in an ideal world that’s what my next three years or five years is gonna look like and I’m prepared for it I’m ready for it I guess we’ll track it on the channel and see how yeah and hopefully in six months time or eight months time you’ll be purchasing that second property which will be really exciting and be starting to watch that journey over a number of years definitely and to see how things happen and when you have kids and what happens with that so we are going to talk in a future video about how to incorporate your own home into this strategy because that’s part of Simon’s strategy as well and something that we haven’t talked about today is not only is it three properties to financial freedom in having three investment properties or six incomes that eventually will be paid off and living off that income living off the rental income you can hear the rains coming down I wonder if they can hear it I don’t know it’s just pouring down here not so sunny Sunshine Coast right now yeah so having those six incomes but then also as you were saying you know we’re starting a family and stuff like that having the security of your own home as well and investing in your own home and paying that off too so we will talk about that in a future video but I guess we wanted to create this video today to talk about the fact that yes we talk a lot about two properties for financial freedom but if you’re a single person with no kids then that and low income I mean low expenses that could be one property to financial freedom if you’re you could do the two properties or you could do three properties like Simon’s doing there is a client that we we met yesterday or me and Ben met yesterday who’s doing five properties and five granny flats and so they’ve obviously really stretched that out and they’re going to have a much larger income once all of those are paid off and included in that is their own home and a holiday home as well yeah so you can take this wherever you want whether it be two properties three properties or however many you want mm-hmm that’s yeah it’s really cool to see someone implementing this strategy tweaking a little bit and hopefully going to achieve good success yeah I think you just need to look at the lifestyle that you lead at the moment and you know look 15 20 years down the line and think okay well what do I want my lifestyle to look like and what what do I need essentially so that I can lead that lifestyle like do you enjoy traveling do you want to go overseas all the time are you going to be having a family like where do you want to be living what sort of lifestyle do you want to be leading how much do you want to work and you know what sort of businesses do you want to start and really start to you know get some maps together get some ideas together maybe get some spreadsheets together and start looking at different ways that your life could look so that you can get this understanding and start figuring out what your baseline financial freedom is going to be which essentially for me that was a hundred thousand dollar mark but then if you’re in a position how can I take that to the next level where I really never have to worry about anything ever again yeah and so if you want more details the finances behind the to property to financial freedom strategy and how it can work looking at purchase prices of properties estimated rental incomes how all that sort of goes down then I will leave a link in the description down below or you can go to onproperty.com.au/mortgage – two properties and you can download a cheat sheet there that really outlines everything in details and obviously you can see it all there and then stepping up to three properties it’s just times by at one point five yeah or if you step up to four properties times that those figures by two but you can really see everything in detail there that’s it on property condo you forward slash to properties go ahead and check that out and I’ll also link up to the video I did with Ben Simon’s brother talking in detail for about an hour on this strategy and exactly how it works so I’ll link up to that go ahead and check that out otherwise until next time stay positive