How To Get Unstuck In Growing Your Property Portfolio
You may be stuck and not moving forward with your property portfolio. Here are some ways to get unstuck and buy that next property.
For a lot of people, at one point or another, they get stuck in their property investment journey. It might be that they have a deposit but they feel like they can’t move forward to buy their first property or maybe you’ve bought 1, 2, or 3 properties and for some reason, you can’t move forward to the next property. Well, today, I have with me Ben Everingham who’s my buyer’s agent of choice. And we’re here to talk about some different ways that you can get unstuck in your property investment career.
Ryan: Hey, Ben. Thanks for coming on today.
Ben: Hey Ryan, thanks a lot for having me.
Ryan: Before we get into the tips, I was wondering if you could tell us about a situation in your own life where you got stuck in terms of your property development and what was something you did to move forward?
Ben: I might share 2 stories because I’ve just had 2 come to mind. To put it in context, I spent the last 6 years of my investment journey being stuck and then I had this magic month for 1 year where I was able to do what I wanted to do. Now, I’m pretty much stuck again so I feel everybody’s pain on this video.
The first story is an example how being stuck cost me a fortune. About 3 years ago, just before the Southeast Queensland market started to really move, I found this property that was for sale. It was a mortgagee in possession. I could have bought it. It was 3 houses away from the beach for $375,000, which is significantly cheaper than you can buy it for, obviously, now. So I went to my bank because I had, like everybody else, a number of properties with one bank and sort of trusts my bank manager as long as they kept giving me loans. This was before I learned about structuring correctly and moving properties away from the same bank. She said, “Yes, yes, yes.”
I put my offer in and then, on the day of finance, which she just said, “Unfortunately, no.” and I lost this property and somebody else picked it up. 2 weeks later, I met my mortgage broker who I now use who’s an absolute gun, he’d been stuck a number of times himself as well. He said that I could borrow twice as much as that property was worth. That property actually just re-sold 6 months ago for $660,000 and they hadn’t done a thing to it. So that was a hard pill to swallow and that made me realize the power of your advisers in your network.
Another time that I became stuck, it wasn’t so much financially, it was mentally. Again, I found this amazing property couple of roofs from the beach on the Sunshine Coast. It was on a huge, huge block of land that I could have actually put a secondary dwelling in the backyard. I picked it up for $323,000, which was a great price. And then, I started to listen to everybody around me saying it was such a rubbishy property and it was going to take so much work, which would have been $50,000 at the time.
I let that property go again. On the day of settlement, I used a pull out of jail free card to walk away from it again. I just drove past the property the other day. It’s been knocked over 2 4-bedroom, 2-bathroom, 2-garage houses on this 800 sqm block. Both of them have just re-sold for $750,000 each. There’s some real world pain for you.
Ryan: Yeah. So there’s probably like half a mil profit or something in that, at least.
Ben: Absolutely, at least. In 18 months.
Ryan: Okay. You’ve had a few experiences with getting stuck. So, hopefully, we can help people who are stuck themselves get out of it. We’re going the same order of your story in terms of if you feel like you’re stuck financially and you can’t get servicing for one reason or another. We’ll talk about some things you can do there, just like Ben’s first story. And then we’ll talk about if you’re mentally stuck and for one reason or another, you’re not moving forward as you should, then we’ll talk about some strategies for that.
Let’s look at financially first because a lot of people get financially stuck. Especially they hear about the new APRA rules that have come in or they hear about the government potentially removing the negative gearing benefits. You know, all of this sort of stuff. And then, they feel like, okay, financially, I can’t move forward because for one reason or another. What are some steps people can take if they feel like they’re boxed in financially and they can’t move forward?
Ben: You get your most creative and I think I’ve learnt the most lessons from being stuck. As long as people are giving you money, you can take it or you have the option to take it. It’s when you become stuck that you actually begin to learn the ins and outs of the banking system and what they’re looking for.
I think the number one thing for me, personally, was when I found my mortgage broker. I’d always used bank mangers or your sort of second tier lenders type thing where they drive around to your house and they’d come and see you for a personal visit and it was amazing because you didn’t have to really do anything. Until it wasn’t amazing because you couldn’t get money anymore.
I found a guy, he says he owns 25 properties, but I’m sure it’s closer to 50 properties. He’s just that sort of low-key guy. He’s my broker and he’s gone through that pain himself. He’s so black and white in terms of the lending criteria, but he’ll always be able to help you get to that point where – okay, if you can get money, here it is.
If you can’t here’s the steps that you need to initiate to get access to that money. It might be earning some more money. It might be waiting for a tax return. It might be saving an extra $10,000, but he will not just tell you what you need to do. He’ll actually give you the support that you need to go and achieve it.
Ryan: What a lot of people do is they’ll go to the bank that they had their credit card with or have that everyday banking with or their home with or their first property with. And they’ll say, “Can I get another loan? I want to buy another property.” and the bank may say, “Well, no. You can’t afford another loan.” but little do these people know that there’s 20 to 30 other lenders out there who may be willing to give you money and may assess your criteria differently. Because, obviously, every bank, every lender is going to assess things a little bit differently.
As me and Ben would both probably say, we recommend that you go and see a good mortgage broker who can really assess your situation across multiple lenders. Like Ben was saying, find a mortgage broker who gives it to you in black and white and says, yes or no, you can get a loan. And if you can’t get a loan, here’s the next steps. Because often, you go to the bank and they’ll say you can’t get a loan and you’re like, “Okay, see you later.”
Really, you want a mortgage broker. Mine’s on the same thing. He’s like, you can’t get a loan, but here’s the next steps and here’s what we need to see in order for you to get a loan. To have those next steps in place, then you’re kind of unstuck in a way, because you know what you need to do to move forward. So, definitely, going and getting a mortgage broker – a good one – would be probably a first step for anyone who’s in that situation.
Ben: Definitely. The rule of thumb with the banks is, “No doesn’t mean no.” It just means that it might be you have to be slightly re-packaged to become a “yes” or you may just have to go another lender who’s criteria is a little bit different this month because they can write more investor loans because they haven’t written any in a few months. It’s crazy; one day you’d get a loan from CBA. The next day, you’ll get it from NAB. The next day, you’ll go back to CBA and they won’t give it to you. There’s no science to it, it’s literally sometimes it’s just about what their criteria is for that week in terms of their loan writing.
Ryan: Well, that’s the thing. We’ve both worked in decent-sized companies and when you’re under the gun and you haven’t hit your sales targets for the month, sometimes things loosen up. Yeah, definitely seeing a mortgage broker and seeing what you can get across a line would be a good idea.
Something, I guess, to speak to your mortgage broker about would be to really look at your entire portfolio as well and to see if there’s any re-financing opportunities there or any opportunity to pull equity out of one property to invest in another. Because sometimes, I think people get too shortsighted and say, “Well, here’s the properties that I own, here’s the loans that I have at the moment. Can I get a new separate loan to purchase another property?” and then they say, “No.” they can’t. But if you were to assess the values of all the properties you do own, then you may free up enough money to go ahead and buy it. So that would be something to see a mortgage broker about as well.
I guess something else people could do would be to add value to their property, which we talked about in the last episode.
Ben: I’m big on adding value to property, as you know, because whether the market’s going backwards, it’s sliding sideways or it’s going up, there’s almost always something that you can do to the right sort of property to add some value.
It’s a super simple way. A cosmetic renovation, as a rule of thumb, for $1 you put in, you should be able to get $2 out if you do it right. If you put in $10,000 and you can get $20,000 out, that might just be enough combined with your $20,000 that you’ve got saved to get you over the line and into your next property.
It can be as simple as that. Or it might be something more major. You know, where you invest $2, but you get $5 or $6 back out and then, you’re good to move on a couple of properties or another property again.
Ryan: Yeah. So for some people who might be stuck financially and can’t move forward, you might actually need to go back to your existing properties and to say, “Okay, what can I do to these existing properties to add value to them?” and obviously, you want to add more value than it’s going to cost. As Ben was saying, it could be a small cosmetic renovation, which you should never underestimate the value of, or it could be something more major in terms of extending the house or doing that sort of stuff.
If we’ve tapped out all of those different options, you know, we’ve looked at re-financing, we’ve seen a mortgage broker, we’ve added value to our properties and we’re still stuck, what do you think are our other options?
Ben: There’s probably 2 options that I can think of. I’ve seen a lot of clients recently tap into equity in their, for example, parents’ property. That seems to be one way that people are moving forward. I definitely don’t endorse it, but pretty much cross securitizing one property or refinancing a parent’s property to access equity against the new property that you’re moving forward with and then at some point, obviously, you’ve got an agreement with your parents that you’ll re-pay that property or when there’s enough value in your own property, you go an re-finance both loans again and pull the 2 properties away from each other.
That’s one option, which is fairly simple and a lot of first time buyers are using that one particularly at the moment with the APRA changes.
Another one would be finding a wealthy joint venture partner who might be prepared to finance the deal. It means that you’ve obviously got to go find something that makes enough business sense for them to even consider that.
Ryan: Yup. I think we should probably give people a word of warning with joint ventures. I tried to do this on my first property and it ended up falling through and just didn’t work out and I think there’s a lot of first time investors who go out there and say, “Well, I don’t have the money, but I’ve got some time. How about I just get someone with money and go and buy a property with them?” but I think it’s not as simple as we would like it to be. You’ve done a joint venture. What do you think first time investors or people who are stuck, what kind of skills do you need to pull off a joint venture.
Ben: Before I did my first joint venture, I’d already bought 9 other properties and I’d built, I’d subdivided, I’d built granny flats, I’d renovated. So, I had quite a few skills. Even then, going into the joint venture partnership, I was a little bit green and probably gave somethings to that joint venture partnership because I was so eager that I wouldn’t give away now knowing what I now know. You’ve got to be careful because anybody with money is sophisticated with money. There’s a reason, particularly if they’re self-made, that they still have savings, they still have equity.
The thing that I always think about is – and this is the first thing a joint venture or people approach me for joint venture, I would be thinking is why don’t I just go and do it myself? The only reason they’re not going to go do it themselves is because they’re time poor. That’s the perfect joint venture partner. Someone that’s cashed up that want to see 20% return on their money in the next 12 months that doesn’t have time to do it themselves.
A lot of people that bring deals to joint venture partners don’t do their research properly. They don’t do a proper feasibility and so, as soon as somebody with any sort of property intelligence looks at the deal, they see straight through it and the $100,000 profit that somebody that’s a bit green or was estimating actually looks like $15,000 on paper and that’s a big mistake most people make. They’re not going to laugh you out the door, but they’re definitely going to have a laugh about it when they’re having a beer with their mates later that night.
Ryan: A lot of the books make it easier than it actually is. They say to do a joint venture if you’ve got lots of time but no money, find someone with money but no time. But really, you need skills and you need value that you can add to the table more than just your time. Because what if your time is only worth $20 an hour or something like that? But if you’ve got super experience like Ben and you’ve been through multiple different properties and you know what you’re looking for and how you can draw the most value out of a deal, then obviously, that becomes more valuable. So don’t just think, “Because I’ve got time, I can do a join venture.” You also need to have some experience and you need to know what you’re doing.
Ben: To put that into perspective, in terms of the way that the roles are broken up. Like I found a subdivision project in a builder developed, a friend of mine was good enough to help me bring it to market. I found him the deal. I negotiated the purchase price. I managed the renovation of the existing property. I worked with his town planners to get it through council.
I worked with his building team to actually get the property built and I sold it for no commission. So, there’s a lot of different steps different steps that need to be lined up. And there’s a lot of skills that need to be built to actually be able to do all that stuff as well. It wasn’t a simply walk in, “Hey, you give me some money. You teach me all the way through the process and at the end, we’ll split the profit.” It just doesn’t work like that in the real world.
Ryan: Yup. So you can do it by all means, but just be wary that it’s not as easy as you might think.
Something else that you can do that both me and Ben did when we had jobs is to generate some extra income on the side. That could be looking for other employment, because you may need to change jobs to earn more money. It could be earning commissions from a job. I used to have a job and then I ended up getting extra commissions on top because I was adding so much value to the business that I could negotiate that. Or you could do something like me and Ben did, was to start a business on the side and generate some income on the side.
I started an online Internet marketing service on the side. I did client work, I ran my own websites on the side while I was working full time, earning over 6 figures. I was earning some extra money on the side as well.
Did you start your buyer’s agency while you’re still at work?
Ben: Yeah. I started the blog and the buyer’s agency while I was still at work and similar to yourself, lots of long nights and lots of weekends. But it got to a point where I was making as much money in my buyer’s agency for 6 hours work per week as I was making my salary. So it came a point I think again after another conversation with you where you help me get the big picture and I walked away from work.
Ryan: Yeah. There was a guy who used to mow our lawns back when I live in Sydney and he worked at the oil refinery and then in the afternoons or on the weekend, he would mow people’s lawns. He actually got to the point as well where he was making more money mowing people’s lawns than he was making in his job at the oil refinery as well. So he had basically doubled his income. Obviously, he was doing a lot of work. He was big, burly guy.
I don’t think I could have done that much hard labor, but, yeah, he did really well for himself. So it doesn’t have to be as difficult as starting a buyer’s agency or some online business. It could just be mowing people’s lawns. My dad’s doing handyman work on the side, which he gets paid for. He paints people’s houses and stuff like that. There’s so many different things you can do on the side to explore that can help you in terms of the amount of money you have saved and stuff like that.
There’s also one last thing I want to talk about financially and then we’ll get on to the mental stuff. I did an interview with a guy called Nathan Sawtell, I think. You can check it out, go to onproperty.com.au/290. He actually had a relationship with his bank. I think he was in the investment-banking sector and so he had 2 relationships with 2 different banks and he ended up purchasing something like 27 properties or something like that using this as his finance structure.
So he would have a professional manager working with him to finance deals and that’s something that I haven’t heard before. I don’t know a lot about it, but you can go and watch that video to hear what he had to say about it and you can talk to your banks about that as well. That’s something that I haven’t seen anyone do before, something that I haven’t seen a mortgage broker recommend, but something that he was doing quite successfully. I think it was about halfway through that video that we start talking about that.
I guess that kind of covers in terms of if you’re stuck financially, but I think the majority of people are actually going to be mentally stuck for one reason or another. It’s not going to be finances that’s holding them back. It’s going to be they don’t know which way to go for. They don’t have a strategy. They’re overwhelmed. They’re scared. There’s so many different things that hold people back. We broke it down before. We talked about 5 major things that we see holding people back.
The first one was information overload or sometimes I like to call it “shiny object syndrome” where you’re just like, “Oooh! Look at that shiny object!” Go over there and then you’re like, “Oooh! Look at that one.” and you’re just kind of going left and right and you never really set on anything or you’re just doing so much research on so many different areas, you just can’t make sense of all the information. So there’s multiple different ways people get information overload.
What have you seen with some of your client, Ben, in terms of information overload?
Ben: Yeah, definitely. I think for some of my clients, they’re more than capable financially. They earn a decent income or a decent combined income or have equity in a property, they’re just stuck. They start reading the major magazines and then they start going to a couple of training evens and then they start listening to the sort of things that we’re talking about today. The thing is, unfortunately, everyone’s got a completely different opinion, or fortunately.
That means when you start listening to 5 or 6 different channels and everybody’s telling you something different, a sophisticated investor is going to take bits and pieces that work for them from all of those different channels. Where somebody that’s just starting out is going to potentially look at those things as gospel and must-haves, which definitely isn’t the case. I don’t know anyone that started in property that new everything. I don’t know anybody that’s finished with even hundreds of properties that knows anywhere close to everything. There’s always more to learn.
Ryan: Yup. I think a lot of people, especially the teachers out there who sell their courses and stuff like that, they often say, “This is the way to invest in property and get rich.” Yes, that is one way to invest in property, but there’s so many different ways to do it. You can do capital growth, you can do development, you can do positive cash flow, you can do unit blocks, you can do so many different things – renovations. There’s so many different ways to achieve the same goal. I think you’re right.
A lot of people, when they’re newer to the game, they’ll follow someone that say, “Well, renovation is the way to go. That’s the way to do it.” and then they’ll watch something on subdivision and they’ll be like, “Actually, subdivision’s the way to go.” And then they get to a point where they’re like, “Well, I don’t know how to move forward.”
Something else that we said was a big thing that held people back, which I guess ties in with information overload, was just a lack of strategy for people. Do you want to explain that a bit more so people can try and work out, “Is that me?”
Ben: Yeah. I’m a massive culprit of what you called the shiny object syndrome. I’m like, “Oh my God!” The world is a candy store and I’m a kid in it and I want it all. But the reality is, that worked for me until I got to property 4. And then, I hit a servicing limit. And all of a sudden, these properties that I thought were the right ones and the structures that I thought were the right ones maybe weren’t the right ones anymore.
It’s like how do you avoid those things before they creep up on you? The first thing in terms of developing that bigger picture is looking at your current situation and possibly talking to a broker and then, after you’ve done that, looking at really where you want to be long-term and it’s simply, here’s you pegging the sand out here and here’s where you are right now. What are the small little incremental steps that you can take to actually achieve that goal? The first one might be go find out how much you can borrow.
If you can borrow $400,000, look for opportunities within all those different ways that you can build wealth through property that fit. Look at one step at a time, look at how I can get the best possible purchase now and how that purchase might impact my future. But never buy a property knowing that that purchase is going to stop you moving forward to your long-term goal.
Ryan: I think when it comes to shiny object syndrome, when it comes to information overload, not having a strategy is the number 1 enemy because then, you are drawn by so many different things. But as soon as you have a strategy in you’re like, “Yup, I’ve decided I’m going to invest in this way.” Then you start doing what Ben talked about that more sophisticated investors do, is you still listen to the same stuff, but you draw little bits out here and there and you don’t take it as gospel. And you’re like, “Okay. What can I learn from this person that’s going to help me with my strategy?”
I guess some tips that I could give when it comes to finding a strategy is that first, you’ve obviously got to set a goal and something that you want to work towards. I think me and Ben are on the same page in terms of income replacement is always a great place to start if you don’t know what goal to set. Obviously, we all want to be billionaires, but none of us want to work as hard or take as much risk as someone like Richard Branson or Steve Jobs or those sorts of people.
So billionaire, probably not the best goal to have, but just to replace your current income, I think is a great first goal that you can work towards. And then once you’ve achieved that, obviously, go for the billionaire status, definitely.
Ben: If you know how to replace $100,000 a year in income and you can do that in 10 years, you can probably replace $1 Million at some point in the future, but you’re not going to be able to hit $1 Million without taking that first step, for sure.
Ryan: Yup. As well, knowing who you are and what sort of things you like to do is really important when it comes to strategy. The best example I can give of this is you hear about investing using options in property, which is a whole other discussion in itself. But if you want to invest in options, because it’s not readily done in Australia, there’s a lot of sales calls. There’s a lot of talking to agents. A lot of talking to property owners.
A lot of trying to sell people on this. And for someone who doesn’t like cold calling, someone who doesn’t like doing sales calls or being in awkward situations, that’s probably not going to suit you that well. Maybe buying a house and renovating it where you can just keep to yourself, that might be a better strategy for you. So I think you need to assess who are you as a person, what sort of things are you good at, what do you enjoy? Because if it’s something that you really don’t enjoy, you’re not going to do it. So when setting your strategy, I think, definitely assess who you are as a person as well.
Ben: That’s an awesome point and I fully agree with that. I wish I could have heard that a long time ago because I love building properties. I love dual income properties and I really enjoy subdividing and renovating as well. They’re the things that I tend to focus on and it can become a little bit boring once you’ve done a few of those deals.
Human nature is find something new to learn, but the successful people just rinse and repeat the same thing over and over and over again until they’re where they want to be. I think by finding what it is that drives you, what makes you excited. I talked to so many investors and they come to me saying they want to do a subdivision and I say, “That’s fantastic. Have you got the money?”
“Yup. We’ve got the money.”
“Have you got the time?”
And they said, “No, we can’t invest more than an hour and a half of our time per week into that sort of project.”
I’m like, “Well, that’s awesome. But are you prepared to pay someone $70,000 to manage it for you? Because that’s what it’s honestly going to cost you.”
They might have been thinking about that for 6 months and obsessing with it and looking for all these deals. When in reality, they’re asking the wrong questions upfront.
Ryan: Yup. Because they don’t have the time. I think another mistake people make that we talked about before was that people put too much pressure on the next investment that they’re going to make. They basically feel like they’re betting their entire life on this property deal going right and they get so nervous about things going wrong that they just feel stuck.
What do you think are some mental strategies people can use to take the pressure off of it? Just chill out, you know? Because they don’t make chill pills yet.
Ben: I thought they called that “surfing” and isn’t that what we both love to do?
Ryan: Yeah, well, surfing or Valium, maybe.
Ben: What’s happening at your house late at night? But seriously, that’s a really hard question to answer because it’s easy with retrospect and the experience that I’ve had to look back and go, “This is how you do it. This is how you get over it.” because at the end of the day, each purchase is important, but it’s only important if it’s getting you in the direction of your dream and your goal and property is only the vehicle to achieve that.
I was one of those people who obsessed about it. Like spend all of my time outside of work – that was when I was working – looking for that next deal and trying to find it and when I lost one, getting really emotional, attached to it and all that sort of stuff. I don’t know if I could have overcome that without experience personally, but there’s other people that are much better at seeing the bigger picture and just realizing that it is only a property. It’s a purchase. If it makes sense, if you do the right research, if you’ve got the right strategy and if you’re confident in slowing down to speed up.
A lot of people, again, rush out, buy the first thing they find and then they realize that it’s the wrong thing. Where, if you had taken that extra couple of months to do the right research and the right research, not jumping around realestate.com around 15 different suburbs in 5 different states, but really getting to know one place really well and knowing that when that cheap property comes up that fits your strategy, jumping on it. That is an amazing way. You know you can sleep well at night having made that sort of decision.
Ryan: I think you’re right. It’s going to be different for everyone. Some people are better at seeing the bigger picture than others. One thing that has helped for me, especially with my online business as well as with property, is knowing my goal being X amount of dollars per year in terms of passive income. And knowing that I will achieve it at some point and not giving up. So knowing that I’m going to give this a go, but if it doesn’t work, that doesn’t mean it’s the end of the world. It just means that I’m going to try something else. Next time, I’m going to learn from that experience and move forward.
So if your goal is to replace your income through property or whatever your goal may be, realize that the next property that you’re purchasing is a step towards that. It may be a good purchase that moves you towards that, but even if it’s not, well, you still got that goal and you’re still going to achieve it. It might take you just a little bit longer.
Don’t put the whole weight of your entire life on this one property purchase and if it doesn’t work out you’re screwed, you’ll never be financially free because if you’ve got that dream, if you’ve got the passion, then you can achieve it. It just might take more time. I guess I found solace in that, in knowing that I will achieve this and it just might take me longer than I would like, but I’m not going to give up. That’s given me a lot more confidence in myself.
Ben: Can we dig into that a little bit? Because I think that you brought up some really interesting stuff. Like in terms of my personal journey, same as yours. We’ve had deep conversations about this stuff. About 3 years ago, I actually went to a psychologist because – for 1 session, is all it took. I went for one session and she helped me figure it out; what my problem was. I went into this session and I just didn’t understand why I wasn’t happy.
I replaced my income through investing basically; I had a great job for my age. I’d done all the stuff, had beautiful kids, trips, house. All the stuff that I wanted to achieve and I still wasn’t happy. She said, “What’s your goal?”
And I said, “The only thing I can think of right now is being a multi-millionaire.” It was such a stupid response, but it was the first thing that came to my head.
And she said, “Okay, I’m going to do an exercise with you.” She said, “Stand in this side of the room.” and I stood there.
And then, she said, “Here’s your goal on this side of the room, which is becoming a millionaire.” and she’s like, “Go back here” she said, “When did you set that goal?”
And I said, “I set it when I was 18 years of age travelling Europe with my friends and seeing all of these wealthy people living the life and I wanted it.”
And she’s like, “What did those people actually have when you set that goal and who were you?”
And I said, “They had time and they had friends and they had the lifestyle.”
She’s like, “Why do you need a million dollars for any of that stuff? You’ve already got that stuff.”
And then, she made me walk across the room and go, “Where are you now?”
And I said, “Well, I’m pretty close to where I wanted to be.”
And she said, “The person that set those goals for you isn’t the person that you currently are.”
Now, I’m going off tangent here a little bit.
Ryan: No, no. This is good.
Ben: But this, to me, was super interesting to go, well, what you might really want and where you might end up might be completely different. Same with Ryan, I constantly set my goals at the start of the year and then, at the start of each month so that I know where those incremental steps are and at some point in the future, you’ve got your lofty goal out here. When you’re a bit younger, you put a lot of pressure on yourself to achieve that, but in reality, whether you achieve it at 25 or 35 or 45, you still achieve the same thing.
For most of us, talking to so many investors every month, it’s not millions and millions of dollars, it’s actually time to do the things that you want to do and not being so financially dependent on something that may or may not give you happiness everyday.
Ryan: Yeah. I think this totally happened for me. Like 5 years ago or a bit over 5 years now, I wrote this cocky post. It was titled “Why I Will Be Financially Free in 5 Years”. It’s over at ryanmclean.net, if anyone wants to go and read it. I’ve actually talked about why I’m so awesome and I’m going to be financially free. At the end, I talk about I know my “Why”. I’m just trying to look at it now. I wanted to have as much free time as I want to spend with my family and so I can have a platform of which to speak into people’s lives.
The whole reason I wanted to be financially free, the whole reason I wanted to be a millionaire. I was always down the get-rich-quick train when I was younger and wanting to be super wealthy and stuff like that. But then, my whole “Why” was summed up in one sentence that I wrote 5 years ago. When the 5 years hit, I assessed it and I’m like, “I’ve achieved everything I set out to achieve, but I’m not financially free.”
I have as much free time as I want to spend with my family. Because I work from home so I get a lot of free time to spend with my family. We home school my daughter now so I spend time doing that in the mornings. I still want to work. I don’t want to not work because I would just get too bored. And then, I have a platform to speak to people’s lives through On Property and through the other websites that I have.
Ben: That’s really cool. That’s awesome.
Ryan: I liked what you were saying. How it was the person who set the goals all those years ago isn’t the person you are today. And so, looking at yourself and saying, “Well, what do I want to achieve now as a person?” rather than, “What did I want to achieve when I was 17 or 18 or whenever I set a big goal for myself.” is so valuable because we’ve all changed so much since back then. I used to want to be super rich and now, I’m a vegan who home schools my children and I work from home.
Things change. And that’s the thing. I think understanding what you really want as well, versus what you think you want. You thought you wanted to be a millionaire, but what was that actually going to get you?
Ben: The thing is, to relate it back to property, the properties that I bought because, again, when I was buying properties at 23 is completely different to how I buy properties now. The properties that I bought, and this is why people get hung up, every single month, Clients of mine on what properties they should purchase if they’re trying to do it on their own.
Some of those decisions that you make now are going to look so different. Because if you find out from buying 10 properties over a 10-year period all of a sudden, you have confidence to go out and build and make $100,000 that day or you have confidence to go and do a subdivision. Or you have confidence to apply all these more advanced things that when you bought those first properties, you could have never known you’d be able to do.
It’s realizing that some of those properties, especially those foundation ones, all they need to be is good capital growth, great cash flow, opportunities to manufacture growth over the lifetime of that property. You’ll probably going to be able to buy better stuff in the future at a better price, but to take that step and to just have faith that if you follow those 3 things, it’s always going to be a great asset to have in your portfolio long term, anyway.
Ryan: Yeah. I think, thinking along those lines, mitigating risk – if you’ve got this fear and you put all this pressure on a property. Rather than putting the pressure on to say, this has to be the best property in the world, why not just look at it and try and mitigate your risk as much as possible so at least it’s not going to be a complete and utter failure. So, do your research, make sure you’re not buying in a dodgy area and you’re not betting your entire worth on it.
Making sure that it’s cash flow neutral or cash flow positive so if your situation does change in life, at least you’ve got that covered. If you lose your job, you’re not going to have to sell the property as well. There are ways that you can mitigate your risk and like Ben was saying, it’s not going to be your best property purchase ever. Because you’re going to learn every step of the way and get better each time.
I guess, one thing you can do is try and mitigate your risk as much as possible. Learn as much as possible from the experience and then, try and buy better next time. Take the pressure off. It’s not the only property you’re ever going to buy.
Ben: I’ve been speaking to this one guy for the last 2.5 years and he’s an awesome young guy in Melbourne. And every time I talk to him, he has another idea about property. The first idea about property, which I supported, was buy in Sydney. This was 2.5 years ago and he didn’t buy in Sydney, unfortunately. And then, the next concept that he had was I’m going to buy in Brisbane. He hasn’t, to date, bought in Brisbane, either.
He still hasn’t bought a property, but in that time, he’s gone from property to shares to gold to trading currency to starting a business back to being an employee. And in that time, I’ve got other clients who have literally made $1 million in capital gains on 3 properties over that period because for people that got into Brisbane early, they’ve already made 15%. For people that were in Sydney early, some of those people have made 45%, 65%. You know, it’s just get started, if you know what I mean.
There’s always going to be something greener, but as long as your fundamentals are right, you’re still going to be in a better position acting now than in 3 years time. As long as we don’t have a major global depression, which the worse ones of all time have knocked property prices back by 20%, 30% and then they recover within a 10-year period anyway. So it just might mean that your rent’s going to cover your property for a period of time.
Ryan: Yeah. We’ve covered that pretty well, in terms of being mentally stuck and some things that you can do. In terms of de-risking the situation. In terms of getting in the right mindset of what you actually want. In terms of miminizing your information overload by setting yourself a strategy and then only looking at properties that fit in with that strategy.
I’m sure we could go on for ages and ages and if we get lots of responses from people saying they want us to talk about this mental stuff more, then we can go through that. But I think this is going to give a lot of people some ideas of how they can move forward.
So you talked about your mate who hasn’t done anything for 2.5 years. Do you have any stories of clients who were stuck and who ended up coming to you and have gotten unstuck and achieved something?
Ben: Yeah. I’ve actually never worked with a client that hasn’t been stuck. They’re either financially stuck and they reach out to me because I can introduce them to someone like I’ve found myself to get over that financial hurdle.
That might be through the strategies you mentioned before – better mortgage broker, refinancing, getting a little bit creative in terms of adding value to existing portfolio and moving forward that way. And then you’ve got the other people that have analyzed the market for the last 3 years or 12 months or 6 months and freaked themselves out because they build all this pressure around making a decision which really isn’t there.
And so, I would deal with a heap of those people every single week. Then, there’s the other people that are just super busy and time poor that they’re earning good wages but are busy. They’ve got families or they’ve got relationships or they just want to enjoy things outside of property investing. So, each day those people come through and it’s just about identifying where you are, where you want to be and then we just help them bridge that gap.
Ryan: Yup. Do you have any specific examples, obviously, without giving away details of someone that you can think of that was stuck that you helped move forward?
Ben: Yeah. I can think of a really good guy. Actually like I’ve become friends with like I have with you, with a lot of our clients. Like we catch up for a couple of annual dinners a year and sort of create a bit of a community. This one guy, he wouldn’t mind me saying, Steve. He came to me just before December last year and he’d been wanting to buy for a while. He’s married. He’s 30, working in the construction industry and he’s really good at what he does, but he doesn’t love what he does, either. And he’d been looking around at businesses and shares and property for a long time. He had gotten himself so caught up with information that he couldn’t move forward.
So we had a conversation and gave him a strategy just before I got married, actually. And then, he went away for a month and just thought about it and then ended up coming back to us and said, “Okay, I’m ready for some help.” and so, he became a client. He actually just finished settling his first investment property, which was a completely renovated 4-bedroom, 1-bathroom house within 12K’s of Brisbane CBD, which we picked up for him for a ridiculous price. I think it was $370,000 in this suburb and he has got that property now rented out for $410 a week.
He’s so excited. Because he’s a builder, he’s gone around to this property and he’s already adding value to it. I know, because we bought well for him and because this suburb’s increased in value by 7% already since we picked it up for him, that he’s going to be able to re-finance in 6 months’ time and move forward without saving a single cent of his own money again. And he’s a single income family with a couple of kids and one of his kids has got some issues. Like that stuff, I get goosebumps because that’s the reason that I want to do this stuff.
When you just know that that property is the right one for him long term. And there’s room in the backyard for a granny flat. There’s room in the floor plan to add another bathroom. Things that he can do using his natural skill set over time. He’ll just ring me up just stoked because now he’s moving forward in the direction of his dream, which is the same as all of ours – get away from full time work within the next 5-10 year period.
It’s not that he doesn’t want to work, he just wants to be able to have a choice in the matter of becoming a contractor 3 days a week or moving into a new profession.
Ryan: Yeah. I think that’s a big thing. We want to have the choice. It’s not that we want to stop working, it’s that we want to have a choice as to the work we do or whether we work. That’s an awesome story. We’ll finish it up there.
If you guys are stuck, then Ben – we are working closely with Pumped on Property and Ben is offering On Property listeners a chance to have a free strategy session with him. So if that’s something you’re interested in, if you’re stuck, you haven’t moved forward, whether it be financial, whether it be mental and you feel like, “You know what? I could really use some help to set a strategy and someone to come along side me and help move me forward.” then, Ben may be a good fit for you.
If you want to sit down with him, talk through your situation, see if he can help you get unstuck and set a strategy, you can get one of those free strategy sessions. Just go to onproperty.com.au/session and you can request a free strategy session over there. Thanks so much to Ben for offering those.
And just so you know, if you do let him know that you come from On Property, I do get a referral fee for that. I always like to be transparent there. But I highly recommend Ben. Me and him are good mates. We’ve worked together for a long time and he’s my most trusted person in the entire industry, I would have to say.
Go ahead, check it out, onproperty.com.au/session if that’s something that you’re interested in. Otherwise, take the tips that we talked about today. Go and see a mortgage broker. Maybe refinance your properties or maybe set a strategy yourself. Stop getting shiny object syndrome. Set a strategy yourself, de-risk the situation and then move forward.
We wish you the absolute best in your property investment career and until next time, stay positive.