The 3 Stages of Property Investing
The full journey from not owning property to being financially free or wealthy through property can seem confusing and daunting. How do you get from zero to financial freedom through property?
What I’ve found is there are 3 distinct stages in most people’s property investment journey.
0:00 – Introduction
0:52 – What are the stages?
2:15 – Stage 1: Buy
5:09 – Some cash flow figures for an example property
6:06 – Stage 2: Choices (paying down debt)\
11:27 – Stage 3: Lifestyle
13:07 – Summary
14:03 – How to get started on your property investment journey
investing in property and the full journey from not owning property to buying property and actually achieving financial freedom or certain level of wealth can seem confusing and daunting, how do you actually get from zero to financial freedom through property. And what I found by working with Ben Everingham from Pumped on Property is that there’s three distinct phases of your property investment journey. And by breaking down the property, investment journey and property investment timeline, which we talked about in a previous video into three distinct phases, makes it really easy for you to say what to focus on. Now, in order to achieve whatever your goals are down the track. And for me, that’s financial freedom. So in this video, we’re going to be looking at those three stages. And what you could be focusing on in each of those stages. The stages are super simple. The first one is called the buy phase, or the buyer stage. And that is when you’re actually purchasing properties, building up your portfolio, all of that sort of stuff. So where’s my pictures, properties, here, we’ve got properties with granny flats as well, that is during the buy phase of the journey. The next step, the next stage, is what we call, we call it choices. You could also call this the paying down debt phase. So we call it choices because this is the stage that you get real choices in your life, and you can really change your life for the better and start to live consciously. And this is I think the most exciting phase of all of them is the choices phase. And then the third phase is lifestyle. And that is where you can actually go ahead and live off your properties. And so your properties, and now you either own them completely outright, or they’re just generating enough cash flow for you that you don’t need to work anymore. And you can go and live the lifestyle that you want. But ideally, you should have started doing that in choices anyway. So let’s go ahead and look at these three stages in more detail. So you can get a better idea for them. So the first stage, which is the buy stage, now this is the most active stage, this is where you’re going out and you’re looking at the property markets, you’re choosing a market, you’re choosing a city, the area of the city, you’re researching suburbs, and choosing the best suburb that fits your price range and your goals and what you think is going to be good long term, you’re looking at the properties in that suburb, getting to know it inside and out, inspecting properties, and ultimately negotiating, purchasing and settling on a property and then renting that property out. So that stage of from saving deposits, all the way up to actually buying and selling on your property is the buy phase. Now that phase can last, you know, as long as you want really, it could last up to 15 years, if you want, what we find is that a lot of people can do quite a lot within just a two year period. And so they can actually go ahead and purchase a house and build a granny flat and purchase another house and build a granny flat within a two year period. Or maybe within that two year period, they just go ahead and they buy the two houses. And then later, then they focus on putting the granny flats on there. So it might take them maybe five years in total. In order to buy the houses and build the granny flats. Or maybe rather than two, you only want to do one. And so then you could achieve that in one year. Or maybe instead of doing two lots of these, you want to do three, or four, or six or 10, then maybe this can this by phase can actually expand out for you for up to 10 years or even more, you can look at it in terms of your journey and how you’re going. You can also look at it at individual property level as well. So if we look at this one property here, we can say that the buy phase for this property might just be one year. Now that might occur in our first year if it’s our first property. Or maybe it’ll occur in our seventh year because that’s where we are in our property investment journey. But you can see this as its own timeline where you have the buy phase for this property in the beginning, and you then enter the phase of paying off debt for the property. And each time you do a property. It’s got its own different stages of property investing, if that makes sense. So you can look at it as your whole portfolio
or you can look at it on an individual property basis. But basically what we tend to look at with clients is that within a two year period, or however long it takes for you, that is going to be your buy phase where you’re saving posits you’re actively going out and you are building properties and you’re building granny flats on those properties and so here’s some of the figures behind it in resuming here these are the figures for buying a house worth $400,000 in brisbane building a granny flat for 120,000 at 3.3% interest only because interest rates is super low at the moment you’ve then got other expenses associated with it so your total expenses here house renting out for 380 per week with two weeks vacancy granny flat renting out for 300 per week with two weeks vacancy some depreciation thrown in there as well looking at a 12 to $15,000 positive cash flow on those properties so the buy phase is you’re buying the properties building the granny flats if that’s what you want to do and then you’d be ideally in a positive cash flow position so let’s go ahead and move this down here so while we got one property and granny flat here that could represent two properties in two granny flats 346 however many you want to do now so once you’ve done your buy phase you then move into the longest phase of the cycle which is what we call the choices phase and i’ll explain why we call it the choices phase but you can also look at paying down debt or call it the paying down debt phase it’s up to you what you want to call it and basically the reason that it’s called the choices phase is you now have a choice what to do with your life and what to do with your portfolio the goal of this choices stage or stage two of the property investment cycle is to pay down your debt now currently interest rates are super low you can get them around 3.3% some people can get a move lower some people paying a bit more but this is crazy low so at the moment it may or may not make sense to pay down your debt maybe you want to use an offset account i’ll leave that up to you to decide but interest rates aren’t always going to be this low and interest rates have an average that is much higher than what they are at the moment but so the goal of this phase and the focus of this phase is paying down debt now as we saw with our statistics here this property is actually positive cash flow so that means it’s actually paying for all of the expenses where the property is paying all the interest all the expenses and they’re throwing off extra cash flow so you could use this cash flow and live off it or you could use this cash flow to pay down debt so effectively the property is both paying for itself and paying itself off so that’s pretty important it’s paying for itself so the money that the property earns then goes to pay down the debt and the expenses that the property has so it’s almost like in its own self contained little silo there and so why this is important is that property is paying for itself you could just kind of leave it and let it do its thing and this then gives you the choice in your life that you know that eventually down the line here maybe you’re 15 maybe you’re 20 you’re going to reach the third phase which is the lifestyle phase which is when your property is completely paid off and you can now live off the rental income of that property and so that’s on here so your property is going to get here anyway because it’s positive cash flow it’s paying for itself and it’s paying off its own debt so if you just leave this if you let it do its thing obviously you got to take care of it make sure it’s maintained and is continually rented all that sort of good stuff but if you maintain that and barring unforeseen circumstances eventually this property is going to make its way over to the lifestyle phase where it’s fully paid off and you can now live off the rental income so what choices do you have now where you now have the choice of do you want to just let it do its thing or do you actually want to work and earn money so let’s put some money here and do you want to put that extra money into the property to pay it off faster so instead of reaching lifestyle phase at year 15 or year 20 maybe you can actually reach the lifestyle phase somewhere here around year 12 and so you’re actually financially free three years earlier and so you could choose in that time to work hard i’m going to draw a tie here so you could choose to work hard during that time to burn money
in order to pay off your properties faster that’s one choice you have another choice that you have is i will draw a son here you could you know move locations you could change careers you could work part time because you know that you’re going to reach this lifestyle phase anyway as long as the properties continue to pay for themselves you can now take advantage of this and in this time of your life or just two years in you’ve you’ve done your buy phase you’re done two years into your property investment journey you can actually get this choice to actually change your life completely you might not need that high paying job anymore you might think i hate my boss i hate my job it’s not fulfilling you still need to pay your rent or pay a mortgage you still need to pay for bills and pay for food and that sort of stuff so you’re still going to need some sort of job but you don’t necessarily have to stay in a career that you hate you can go ahead and pursue something that you love now that might mean moving somewhere like moving into state to somewhere like the sunshine coast where it’s sunny all year because you want to go to the beach or maybe you want to move to tasmania and get that real slow lifestyle and a more rural life or maybe you want to stay exactly where you are because your family’s there but instead of working in a high pressure job you actually want to go back and study your you want to work in something cruzi our work less have less money so maybe cut back on some of your expenses but enjoy your life and find fulfillment in your life because this choices phase is long okay you know two to 15 years you’re looking at 15 and 20 years of your life that’s a big enormous part of your life they you do not want to waste you don’t want to waste 10 1520 years of your life until you’re financially free and you can live your dream life because let me tell you i achieved financial freedom at 28 through my businesses i didn’t have to work for two years when i got to that position i was extremely depressed it does not make you happy this is not you know a rainbow this is my horrible rainbow with a pot of gold at the end of it this is the wester i give all the time but reaching this lifestyle phase didn’t does not equal happiness you actually have to live consciously and find happiness in your own life and so many people delay and wait to this lifestyle phase when really you could be making maybe some monetary sacrifices here but you actually making those conscious lifestyle choices all the way back in the choices phase within you know just a couple of years from after you purchase your property so this is what’s so exciting and this is why we call it choices because you can choose to work hard to pay off your properties faster to achieve your lifestyle stage three faster also you can work hard to instead of doing one property with a granny flat instead of doing two you can work hard so that you can continually build this up to four six or 10 which is obviously when you reach the lifestyle phase going to give you more passive income and a more luxurious lifestyle if you own more properties that are generating more passive income so there’s a choice there that you know you can do that and work hard maybe you love your job maybe you’ve got a great career and you love it you could do that or you can find fulfillment in another career hopefully it pays well and you can do that there’s so many choices of what you can do but they have the three stages of property investing again you’ve got stage one which is the buyer stage that is when you’re actually acquiring properties that’s when you’re actually doing the hard work then you’ve got stage two which is your choices your only focus in stage two is to go ahead and pay off debt you can choose to do that quickly through your job you can choose to let the properties paid off themselves and you just focus on living your life and being happy and then you got stage three which is lifestyle which ideally shouldn’t even be a stage at all because you’ve made the choices in stage two to actually live your best life live consciously so when you reach stage three lifestyle and no longer have to pay your mortgages anymore you just you just end up wealthier you just end up better off and you don’t have to worry about money or worry about recessions or worry about anything again but you should be living your best life anyway and so yeah they have the three stages of property investing
if this has got you riled up and this has got you as excited as it’s gotten me and you want to get on this journey and start buying high quality assets in metro markets that can generate positive cash flow and pay themselves off to give you choices in your life and deliver lifestyle we’ll then go to onproperty.com.au forward slash strategy and you can book in a free strategy session over there you go ahead over there you can read more about it and if you go ahead and click on the book my free strategy session then you can actually book in a time in the calendar that suits you to get on the phone to one of the team over pumped on property talk about where you’re at now where you want to be and how you want to get there and what your property investment timeline and journey can look like and what your next steps are so rather than sitting on the fence and doing nothing take action move towards your ultimate goals of lifestyle and start making the choice to live the life that you want and live consciously so again that’s onproperty com.au forward slash strategy where you can just go to onproperty com au and click on this free strategy button in the menu bar there we go over there booking a free time that suits you otherwise i wish you the absolute best in your property investment journey go ahead and check out the video that i did on property investment timelines and so when we talk more about how this timeline plays out in your life go ahead check that out otherwise until next time stay positive