The 4 Stages of Property Investing

Going from nothing to financial freedom through property investing can be quite an overwhelming task. Breaking it down into the different stages of the property investment journey can be extremely helpful. Here are the 4 stages of property investing.

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0:00 – Introduction
1:00 – The 4 stages summary
1:37 – The 2 Properties to financial freedom strategy
3:18 – Stage 1: Buy Properties
5:32 – How to know when you’ve finished stage 1
7:20 – An example based on today’s market
8:29 – Stage 2: Pay Off Debt
9:02 – 2a. FAST Strategy – How to pay off debt fast
11:15 – 2b. SLOW Strategy – Enjoy life while the properties pay themselves off
13:49 – Dave’s success story
15:56 – Stage 3: Freedom
23:38 – Stage 4: Wealth Creation
27:01 – Summary
28:25 – This can really accelerate your financial freedom
30:01 – Get help implementing this strategy in the right market

Learn more about the 2 properties to financial freedom strategy

Ikigai: The Japanese secret to a long and happy life

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2 Properties to Financial Freedom: Quickly Explained

Transcription:

if you’re looking to achieve financial freedom by growing a property portfolio it can be quite a daunting and overwhelming task to go from nothing or just owning your own home to actually grow in your portfolio and achieving financial freedom and we find it much simpler and much less daunting if you actually break down the journey into the different stages of the property investment journey or the property investment cycle so today I’m joined by Ben Everingham who’s a buyer’s agent from pumped on property how’s it going Ben hey man how you doing very good and we’re gonna talk about the four stages of property investing so this is in line with our two properties to financial freedom strategy if you haven’t checked that out go to onproperty.com.au/plus two properties and you can learn all about that over there but the goal here is that we’re going to invest in what we call foundational properties that are going to then go on to deliver us financial freedom or deliver us a financial position where we can actually live off the rental income that those properties are generating so the four stages are property investing to outline them quickly is stage one which is buy properties which we’re probably going to spend most of the time on stage two which is pay off debt which you can do to which you can choose to do quickly or slowly Stage three is freedom or financial freedom that’s where you get to live off the rental income and gain choices in your life and then stage number four is wealth creation now that you’re financially free you can focus on building your wealth becoming rich whatever it is that you decide to do so do you want to talk quickly about the two properties to financial freedom strategy Ben and then we’ll get into stage one about buying the properties yeah so the concept of two properties to financial freedom I think you came up with that idea while you having served on the Sunshine Coast and you gave me a call after and I kind of wish I’ve known about it ten years before I got started because of all the ups and downs and mistakes that I’ve made as an investor on my journey and effectively the strategy is simple and it’s about owning a couple of good quality low risk low maintenance homes completely outright in the future so that that passive income stream provides you with surplus income and allows you to have better quality choices in your life you know down the line whether that be ten fifteen thirty years from today yeah so we’re talking about kind of a 15 to 20 year strategy towards achieving financial freedom but something that’s really interesting with this strategy as opposed to the myriad of other property investment strategies out there is that the hard work is largely done in the beginning so we’re investing in high-quality Metro markets that are going to have long term demands and we’re working hard to save our deposits and to buy those properties in stage number one that might take us a couple of years to buy those properties and maybe build some granny flats on them but then we’re in a positive cash flow position where those properties are paying themselves off over the next 10 15 20 years where we don’t really have to do much we get to live our lives and enjoy our lives knowing that we’re set up for financial freedom so that’s what makes this strategy a little bit different is that it’s very heavily weighted to the beginning just buying the right properties for long term success and then letting them do their things so yeah we’re looking at high quality properties and long term demand that ideally would be in a cash flow neutral or cashflow positive position so let’s talk about stage number one which I think should take anywhere from about two to five years for most people which is buying properties and acquiring what we call your foundational properties yeah so the thought of buying a couple of properties and building a few granny flats might feel really easy to some people listening to this and then it might feel really difficult to others but the reality is it’s a staged approach which can take you know six months we’ve had clients do it in six months we’ve had other clients do it in you know just take their first action step in five years and really step one is about as Ryan said finding a really high-quality market understanding that marketplace and then going out and buying a really high-quality property but in the future you can actually build a granny flat on now some people like to go buy the home and build the granny flat straightaway to put it in more of a cash flow neutral to positive position depending on interest rates and your deposit other people prefer to get the purchasing over so they go buy two properties in X amount of years and then after they own the two properties come back and add granny flats – yeah and so they come back and add the granny flats to those properties and I think you know for me personally on my journey I preferred to go out and buy the right market at the right time and buy a property with potential for a granny flat and then it’s only sort of now or in the last couple of years that I’ve really begun to think about cash flow primarily because I met Ryan and he sort of introduced me to this strategy so yeah so stage number one is quite difficult so obviously depending on what position you’re in as you’re listening to this will depend on what your next steps are if you don’t own any properties at the moment then step number one for you is going to be actually buckling down saving that deposit and getting ready to buy that first investment property if you already own your own home or already own some investment properties you may be able to leverage against the equity in those in order to purchase properties but basically the idea here in this stage is yet you spend the time in the market you’re researching areas you’re buying at the right time of the market cycle you’re buying in good areas you’re saving deposits you’re doing all of that hard work how does someone know when they’ve kind of finished stage one and they’re ready to move on to stage two so I think stage one officially finishes you know for some people financial freedom might be one home one granny flat owned outright they might have a really low living cost for other people it could be two or three or four so stage one really finishes when you own as many houses as you need to achieve financial freedom based on the cash flow on those properties in fifteen years and you’ve actually completed it once you’ve got the granny flats on those properties as well so at that point you’ve kind of done everything you needed to do you bought you’ve built granny flats as many times as you needed to and therefore longer-term you’ll have enough passive cash flow coming in to achieve your longer-term cashflow goal yeah so if you look at your current property portfolio and the rental incomes that are coming in imagine that you had paid off all of those properties you owned them outright would you be able to afford to live off the rental income after you pay the expenses of the property or not if the answer is yes you could afford to live off the rental income if they paid off then you could effectively move on to stage 2 which is to focus on actually paying off that debt or if you say you know what if all of these were paid off I wouldn’t have quite enough money to get by then you might want to stay in stage number one look at purchasing another property building another granny flat or you can jump between these so you can move from stage one you might be ready to reach a lending limit and so then your focus becomes paying off debt and improving your cash flow position before you can go back to stage one again but yeah so once you’ve purchased enough foundational properties that if paid off you would effectively be financially free and could live off the rental income then you move on to the stage two and what are we doing stage two Ben Before we jump into that can I just give an example so that people can understand the numbers based on today’s market and also an example of a client of ours that did this actually 15 to 20 years ago and the result of that today yeah so in stage 1 effectively today Brisbane is really the only high quality Metro marketplace that I am looking to implement this strategy in with my wife Lisa so that looks like going out and buying a home for a rounded outs of four hundred to four hundred twenty thousand dollar mark that rents for about three hundred and eighty dollars a week and then coming back and building a granny flat which costs about a hundred and twenty thousand dollars that rents for a further two hundred and eighty dollars a week so you look in the strategy that cost you somewhere between five hundred and twenty and five hundred and forty thousand dollars for the house and the granny flat and then from that you’re looking at about six hundred and sixty bucks a week in the short term and then long term obviously we hope that inflation continues like it has for the last hundred years around the world and that you know rental ink runs improve over time with wages yeah and so then we move into stage number two which is paying off the debt and this is when you focus on really reducing the debt on your properties and paying them off either as quickly as possible or you let them pay themselves off and you focus on enjoying life so I’m more the enjoy life kind of person bends more of the let’s work extremely hard kind of person I’ll let Ben talk about ways that you can pay off debt faster so that you achieve your financial freedom faster and then I’ll talk about ways that you can just let the debt pay itself off and enjoy life in the mean time so with the fast way and there’s no getting rich quick there is absolutely no true fast way like it takes time to pay off debt and I just want everyone to recognize that but fast we’re talking about 10 15 20 years for some people like obviously if your income is very high then it can happen a bit sooner but with the fast way what we’re really talking about here is you know one option being creating a you know budget like Ryan and I have even though we both dislike budgets it is highly effective in reducing your fixed and lifestyle cost in your life and so once you reduce your life’s you know your fixed costs to the lowest possible amount then you can use that surplus income to pay off debt another idea is to use the depreciation benefits from the granny flat that the Australian government currently gives us and instead of taking that big chunk of cash and just blowing it at tax time paying off debt you can use the little increases in rent over time to pay off debt as well you can pay principal and interest and then there’s the whole next range which is like starting a side business your partner working as well if you have one you know starting a full-time business or maybe even looking at buying other properties that look a bit different so that you buy them at the right stage of the cycle you know get a little bit of capital growth on them over the next ten years renovate them and then sell them hopefully for a profit and then use that profit to pay off a big chunk of debt at one point so there’s so many different ways there that you can think about this but you know they’re some of the ways that you can speed it up if that’s important to you yeah so the fast way is about being extremely active in paying off the debt so working hard in order to earn more money or to spend less money so that you have more money that you can pay off the debt faster and so if you’ve got a loan term of 25 years eventually those properties will pay themselves off over that 25 year period but you might want to be financially free in 20 years or 15 years or ten years and so by being active and using going the fast route you’re actively paying off debt faster and therefore you’ll reach stage three which is financial freedom faster than if you take the slow route so the slow route is just you kind of let the properties pay themselves off so let’s say you purchase the property you build the granny flat you’ve got a principal and interest loan over a 25 year period basically if you’re in a positive cash flow or cash flow neutral situation that property is paying for itself and it’s paying off your mortgage so it’s paying the interest on your mortgage it’s also paying the principal and what’s going to happen over the next twenty five years is that people who are renting that property will effectively pay off your mortgage for you and so in 25 years time your mortgage will be paid off now in that slow way I do still think that when you get rental increases then you can put that extra rent towards your property to pay it off faster so you can still do that and take it from 25 years down to 20 or maybe 18 years but the idea we’re taking it the slow route is that these properties are gonna pay themselves off anyway you’ve done the hard work in stage number one of buying your properties and building the granny flats you’ve done the hard work they’re paying themselves off eventually you’re gonna be financially free so you’ve set yourself up for financial freedom the slow route in stage 2 is all about let’s now enjoy our lives let’s find what makes us happy let’s find the best contribution that we can give to the world so because you’re not stressed about retirement because you’re not stressed about your future financial freedom that then frees you up to then look at your life and say okay what do I really want to do for my career what do I really want to do with my time so you’re not financially free yet so you can’t just go and play golf every day and not worry about money you still need to earn enough money to pay your bills but you may not need to earn as much money as you were so it gives you the potential to leave a high-paying career that you might be unsatisfied in and to then push you something you’re more passionate about or maybe you can drop down from full-time to part-time it’s about getting flexibility in your life this might also be a time that you think okay I want to try and relocate so move from one of the bigger cities to somewhere like New Tsar where I used to live which is a smaller town but the weather’s better and you might not get a job that pays us high but the lifestyle is going to be better and you decide to move up there with your family so it’s a time in life where you can make a bunch of those decisions to try and pursue what ultimately makes you happy so you’re not wasting the best years of your life working in a job that you hate living in an area that you hate etc so it’s about exploring your life exploring your happiness you still have to pay the bills but there’s less pressure because you know that long term you will be financially free um I recently worked with a 53 year old investor from Sydney who was buying in Brisbane for the first time but before he came to us he’d actually implemented this strategy 15 to 20 years ago so for anyone that remembers Sydney actually used to be really cheap and so 15 to 20 years ago what Dave was doing was buying nice big 600 square metre piece of land with existing houses on them for about four hundred thousand dollars at the time same as Brisbane now renting for about three hundred eighty bucks a week and then he actually went out and built granny flats on them for about a hundred and thirty thousand and got a further three hundred bucks a week from them fast forward 15 years on those properties he did that three times very slowly over 15 years because rather than you know chasing a lifestyle he was just really content with the work that he did he was raising a family and he just you know didn’t necessarily need a change he was just content doing what he was doing and wanted to slowly set himself up and so what’s happened now is you know these properties that he spent five hundred twenty five hundred and thirty thousand dollars on with the granny flats and now worth 1.1 to 1.3 million dollars because obviously over time the market rose in value in the housing granny flats rose with him and now the rents on these properties are between 900 bucks a week and 1300 bucks a week so he’s in a position where like Ryan said all these Danny’s worked on paying principal and interest and he’s reduced the debt over that 15 to 20 year period he knows that within another five years most of his demise will be the end of a three-year soft 25-year cycle he lined them all out right and the cool thing about Dave he never earned more than one hundred and thirty thousand dollars per year he wasn’t doing anything crazy it was just a slow and steady approach to financial freedom which gave him this insurance policy now that he’s 53 to do what he wants to do and he just he keeps wanting to go to work because that’s what he loves yeah and we’ll come back to Dave when we talk about stage number four which is wealth creation so stage number two is all about paying off debt you can do it the fast way or the slow way stage number three is where you move into freedom and this is where you can now live off your rental income and we rename stage number three freedom rather than financial freedom because so H other three is all about having choices in your life that might mean the choice to work even though you don’t need to or it might mean the choice to stop working for a time or the choice to pursue something else or live wherever you want but effectively stage number three is super simple it’s like once you finish stage number two and paid off all the debt that you owe the money that you were putting towards the debt so the rental income was all going towards paying off the debt that now gets funneled into your pocket into your bank account and you can now live off that money so I guess I have been in this position through my businesses and reached stage number three Ben could have but kind of didn’t he kind of kept working so if you kind of want to talk about your experience to stage three and I’ll talk about mine yeah so you know cause I’ve got a young family with three children I’m actually completely passionate about working and the job that I have and the business that I run you know I got myself into a pretty strong financial position particularly in terms of the equity in cash just from investing in properties over time and at that point you know I could have just invested in a number of assets and you know potentially paid those assets off outright and lived that financial freedom life but I’m like I’m 32 years of age I still have a huge desire to help other people and a purpose in my life to help those people and you know so instead we bought a expensive home on the Sunshine Coast with my wife and we tied up a lot of that capital which would have given us the financial freedom in that home and obviously we still have the other investments which slowly working down to pay off the debt but it wasn’t a sprint for me like I know that any day of the week you know six months from now I could turn that equity or cash into a passive income stream for life but I love what I do so I choose to continue to do it and over the medium term I’ll end up in a much better position because of that yeah and so for me at the age of 28 I achieved what I call pseudo financial freedom so I have online businesses that generate passive income and so I did enough passive income coming in from them that I didn’t need to work anymore so it’s not the long-term financial freedom that a property strategy like this would deliver but it was financially free at that point in time because I didn’t need to work for a couple of years and at that point I discovered that okay financially free financial freedom doesn’t make me happy I thought it would be this pot of gold at the end of the rainbow that when I achieve this when I didn’t have to work anymore that magically I’d be happy and I found that that wasn’t the case and that depression that I’ve been struggling with for years was still there and now got even worse because I don’t know what my goals are or what I meant to do with my life so I really took some time at that point to stop working and me my family relocated up to Noosa at that point in time I did spend a lot of time at the beach I spent a lot of time with friends and gaming and just exploring what’s going to make me happy as well and so Stacy the freedom stage for me was not about I didn’t buy a house that I wanted to live in like Ben did I was renting at the time but I was renting where I wanted to live and so I chose to enjoy the lifestyle for a period of time and now I’m back at work harder because I want the long-term financial freedom but stationary is really cool because it’s kind of like where the journey starts for a lot of people because you you’re on the rat race you’re on the hamster wheel for so long buying properties paying off debt it’s really nice to reach stage 3 freedom to step off that hamster wheel and go okay now what do I actually want for my life and you may do what I did at 28 which was just stopped working remove somewhere beautiful and just live your life out there which is definitely nothing to be scoffed at and was an amazing life for a time or you may choose to move on to number four which is wealth creation I think this stage is really exciting and it’s been I guess this is what Ben has done has been really exciting to watch him is that rather than just saying okay I’m just going to go to the beach every single day to say okay now I have this foundation of wealth I’ve got this financial freedom that I know that I’m going to be fine so the risk doesn’t feel like it’s there because you know you’ve got your baseline to fall back on your foundational properties to fall back on then you can look forward and say okay how do I want to build my wealth and not only do you have a great financial foundation but your time is now freed up completely in order to pursue wealth creation to become wealthy to become rich in whatever form that looks for you yeah like I just wanted to share this book that I picked up at the airport a couple of days ago on the way back from sitting it could be a guy and it’s the Japanese secret to a long and happy life and why I bring that up because it perfectly transitions from stage to stage for which is you know it looks at the communities particularly in Japan and other parts of the world where people live the longest and the happiness the happiest and they’re kind of the communities where the average you know like a lot of people living over 100 years of age and it kind of breaks down the way they live and the number one thing which this book is all about is for your life to be meaningful and full whether you’re financially free or not it’s about being present and it’s also about being you know having a purpose for your life and I think in this society today so many people you know knew and I have both been through this right in the last five years where we’ve had purpose at times and very strong desires and then we’ve achieved things and that purpose is sort of dropped away for a period of time until we’ve looked inside rediscovered what’s important to us and I think you know a Purpose Driven Life is you know not that many people are going to feel contented from sitting on the beach for the next 50 years you know I know that after a couple of years of you doing it man like it seems like you found this burning desire to help other people and do really cool work again across a number of spaces and I sort of did the same thing like I’ve achieved something big for me and then I went five o’clock now like I just lost and I think you know understanding that living a Purpose Driven Life whether you’re working for someone else or yourself you’re financially free or you’re not is about enjoying that journey and that perfect transition from okay now that I don’t have to work for the man anymore you know how far do I want to take it maybe that’s far enough and I just want to volunteer for the rest of my life or maybe I want to do something a little bit bigger and as you say create you know a stronger foundation of wealth so that you know we’re not just talking 50 or 100 grand a year passive we’re talking a little bit more than that to have lifestyle not just basic cost net I don’t know is that sort of a backwards kind of coming into that no I think that’s right like in stage number three the financial freedom stage or the freedom stage I really did explore what is going to motivate me because I knew I’m not gonna be happy doing nothing with my life and just being on the beach and so at that time you’re pretty you had a lot of stuff going on too like I’m not speaking specifically there I’m talking about like most people like 50 years on a beach is sort of like Tom Hanks castaway like it does I’m gonna go crazy and play and your best friend’s gonna be a soccer ball like that that’s not the kind of people that we want to be and I knew that at the time and I was exploring what is what’s going to motivate me so that I can move toward stage number four and live a life where I can add value to the world and grow my wealth at the same time and so yeah stage number four wealth creation can be done in so many different ways and so coming back to Dave you can leverage against your existing property portfolio to buy in a new market that is now at the right time in the cycle to repeat the process so basically you can go from stage three you’re now in stage 4 which is wealth creation but you can go straight back to stage number 1 which is buying those foundational properties and building those granny flats and you can just repeat that process over and over again moving through that paying off debt getting a higher level of financial security and then repeating the process so you can buy foundational properties you can buy what we call like acceleration property so the higher capital gross properties that might not be positive cash flow you can look at investing in them you can start a business you can just continue to work and invest there’s so many different options and ways to explore wealth creation but because you have such a good solid financial foundation you can grow your wealth faster than you would have been starting at stage 1 with absolutely nothing and I look at some of the things that I’ve been fortunate enough to do like I’ve been able to outside of this business build and sell another business because you know all of my time and attention wasn’t focused on just earning one income from a job I’ve done a subdivision project which enabled us to create a nice chunk of cash I’ve you know now moved into the stage where I’m adding granny flats the properties and renovating them to improve the cash flow position even though the portfolio is balanced I’m starting another little business at the moment with my wife which is kind of like really exciting for us which is another income stream medium-term you know it’s allowed me to take Friday’s off and spend more time with my kids it’s enabled Ryan and I to decide that you know last year we’ll take him on walks from ten twelve fifteen clients most months and we made a decision at the start of this year to sort of just take on really really high quality people maybe five maybe seven a month and those types of decisions can’t a difficult to make for most people that are still in survival trying to figure it out moon as opposed to just thriving mode like what do I truly want from my life what’s my purpose and is this in line with it and you know to the point where us as you know Ryan I’ve sold four properties in the last two years once I hit that stage because it was no longer about how many and it was about the quality of my life and you know those are the types of decisions that you can get to once you get into that you know sweet spot where you’ve got a little bit more than you need so that that primal pressure of survival is off you yeah so you don’t need to make the short-term decisions that you’re investing in a property that’s not great long-term but you know pays the bills short-term you’re not doing that you can really wait and I’ve seen it in you I’ve seen you wait until you find the exact right property that suits your needs that’s both that’s going to deliver you the long-term goals that you want I’ve seen you move from buying shanty shanty properties Australia’s worst suburbs in dodgy areas moving up to much more higher quality properties in higher-quality suburbs but still getting the cash flow as well so you just way more picky are with the investments that you make and you can see the longevity of the investments now versus some of the initial investments that you made when you were younger and when you were in survival mode so they have the four stages of property investing obviously there’s lots of different property investment strategies and so this is kind of in line with people who want to achieve financial freedom and want to be able to live off rental income really simple I guess four stages in order to achieve financial freedom in order to start building your wealth as well so again stage number one is buying those foundational properties and growing your portfolio building the granny flats as well basically getting yourself set up for financial freedom stage number two was paying off debt which you could choose to do the fast way where you’re very active in it trying to do it as quickly as possible or you can do it the slow way which is really enjoying your life and kind of getting a taste this age three which is freedom but before you’re even financially free then stage three is freedom where you can now live off the rental income and you have the freedom of choices in your life to do what you want or to maybe take a bit of time out before you decide what’s next and then stage number four is wealth creation where you go back into the market and you invest again whether that be properties stocks businesses working whatever it may be so we hope that this kind of gives you clarity around where you’re at in the property journey and what you need to focus on and it’s a good way to track it as well to say okay what stage in my art what do I need to be doing is there any final words you would give before we sign off Ben yeah I wish I hadn’t met you and knew this ten years ago when I was just getting started because you know – I’ve bought so many properties and made some good decisions and bad but if I had have just done this in Sydney in 2011 when I was buying my first couple of properties down there couple of good houses in a good area and built some granny flats five years later I’ve been equally or a better position than I am now from doing that versus all of the trying to figure stuff out on my own before their YouTube videos like this and I just it’s such a stupidly simple strategy that sometimes it can feel too easy and I just want people to recognize that just because it is simple doesn’t mean that it’s not going to challenge you and it’s not going to enable you to get to where you want to be it’s just not the old way of playing the game which is 10 properties in 10 years or 140 or 30 in 3.5 like there’s a a different way of doing this and what’s beautiful Ryan is there’s cash flow which is the major component of this strategy but if people do pick long-term quality market places like your Sidney’s Mel burns brisbin’s you know hopefully property prices in Australia in the future do continue to rise over the long term and they get themselves into a strong wealth creation so that they can pass that on to their children and their children can start with a better start to their life as well because a lot of what you and I are doing the three kids each is not just about us it’s about you know like them getting a bit of a step up in their life and hopefully teach them some of the stuff that it’s taken us 20 years to learn ourselves yeah and this strategy can work in multiple markets but you do really need to pick your market timing you need to pick the correct market where you can implement this strategy and you need to do it in a way that is really tailored to you to your financial position and to your goals and what you want to achieve in property so if you need help with this property strategy if you need help knowing what your next steps are then bending the team over at pumped on property are offering free strategy sessions so you can jump on the phone to Bernal Simon or one of the team over there talk about where you’re at talk about what you’re hoping to achieve they can help you understand where you’re at in the stages of this property investment journey and help you understand what your next steps are and where might be a good spot for you to invest and for you to start implementing this so go to onproperty.com.au/suburb your time that suits you otherwise until next time stay positive