The 2 Types of Properties Ben Invests In

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Ben Everingham invests in two very different types of properties. One type for the long term growth and cash flow and one type for the short term profits.

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Transcription:

Recently me and Ben had been talking about this two properties, so financial freedom idea where you purchased two properties, build to granny flats and then overtime pay them off. Then once they’re paid off, you achieve financial freedom, and in this episode we wanted to talk about the two ways ben actually personally himself invest in property to both build those foundational properties that we talk about as well as to accelerate the payoff of those properties through investing. Again. So, Hey ben, thanks for coming on today,

Aaron, who I am.

Good thing. So for those of you who don’t know, ben is the owner and he’s a buyer’s agent, runs pumped on property but also has a successful investment portfolio himself and we’ll just kind of chatting and he was talking about how you didn’t really think about it, but he doesn’t just invest in property in one way. He invests in property in two major ways. So Ben, do you wanna elaborate on that and tell the good people out there. The two ways I like to invest in property.

Hey, good people out there. So I think there’s two ways to invest in anything. And that is one for the very, very, very long term, which is the way that I personally like to invest and that is with a low risk, very calculated approach, high cash flow, sorted passive income for a lot. So if we talked about the two properties strategy, that’s really locking in those foundational properties that I’ll end up owning outright and will pay me an income and my family and income for the rest of my life. But then I’ve sort of realized the way that I’ve been able to speed up my personal journey is industry that longterm by holding hope type approach. It’s actually through trading short term opportunities or manufacturing value in the marketplace either through buying well or um, you know, building well and then selling a property or renovating a property to sell and making a short term chunk of cash that I can either go buy more property with or just pay off debt from property as well. Which ultimately is the goal. Like the sooner you own the properties outright, the sooner you have choices in your life. Which I think is the reason why we’re all doing this.

Yeah. And so I’m going to pick your brain today and like be the interviewer today, whereas usually like it’s a bit more back and forth. I’ll ask like what is it that makes you go for one versus the other? Because you’ve obviously bought more than two properties like you bought quite a few. So what is it to make you go? Okay, like the next property I’m going to buy is going to be that long term capital growth, cashflow foundational property versus the next property I’m going to buy is going to be that acceleration property where I’m going to get good growth with the suburb or I’m going to manufacture growth somehow.

Seven really good question man. If I could openly and so this like I would say fear of debt makes my next pair decision. If I have, I find my pattern is if I’ve just bought a property that I’m planning on holding long time and I’m not comfortable with the loan to value ratio position on that property, which is effectively how much money I’ve put down in our as a reflection of the entire purchase price. So it’s a, well, it’s not worth a million bucks and I owe $700, that makes me super uneasy and so what I’ve noticed is the next couple of properties I’ll go and do are ones where I can create, you know, a hundred or $200,000 worth of short term value and then I’ll sell them and I’ll reduce the debt on that property as quickly as I can so that I don’t have a panic attack every night.

So really it’s like anxiety driven because you get yourself in the loan to value position that you’re like, I’m just really not comfortable with this. Let’s get this down and that’s to action.

That’s what it has been in the past. That’s not obviously what it is now as much because I’m getting into a position where I strategically think about the decisions in a much better way. So now you know, that’s what it has been. I was to look at my past. What it is now is more planning in a systematic way for the future. So I’ll look at my current assets that I’m planning on holding and I go, I was in all of these assets outright. I might have 50 grand a year worth of income or whatever it is. Um, if I want to, if I want 100,000 dollars worth of income per year, then I might need to buy another one house and add a granny flat to it. Um, so that in 15 years time, you know, the 800 bucks a week I’m getting today is 1200 bucks a week at that time. So that’s more how I am at now. I’m looking at it more now as, as you said in the previous video, like a business and really reflecting on what’s missing from my portfolio to fill the hole, but I won’t cash buy was in the future.

And so you’re more strategic now. Not driven just by.

I’m trying.

Okay. The next question that I had is that what do you find is the difference when you’re looking for a foundational property versus an acceleration property? What’s the difference in process that you take to look for those sorts of property? Like suburb, suburb, research, different. So different talking to the agents, um, you know, what sort of approach do you take that’s

different. Um, so when I’m looking at the foundational properties, which is I applied the exact same strategy that you and I talked about, which is I truly believe in buying high 40 houses in Sydney, Melbourne, Brisbane, and then in Sydney and Brisbane. I like to add granny flats them for cashflow because I hate properties. It cost me anything out of hand. A twig obviously either you don’t like that either. So you know, when I’m looking for that foundational star property, I’m looking at timing of the Sydney, Melbourne and Brisbane market and making the best decision I can there. Then I’m looking at the longterm timing of where we are in the global cycle. And for those of you interested in understanding more about that, Phil Anderson’s got a great book called the secret life of real estate and banking that goes into that stuff and a lot of data obviously, you know, take that on board.

Don’t delay. The note is a silver bullet. Just another idea in the marketplace. But I factor in timing, then I get really granular like we’ve told you about in previous videos about, you know, which market within the city that I’m buying them, the specializing, which suburb in after I’ve done that, I’ve really obsessed and laser focusing on one suburb. I never look at more than one suburb when I’m buying for myself ever because it’s just a distraction. Having multiple options to look at. So I’ll reduce it to a suburb, um, are then go and look at what opportunities exist in that suburban housing. Like is there an opportunity to buy a three bedroom, one bathroom, unrenovated home with a big block of land in a good straight and turn it into a four bed, two bathroom, renovated home and make a good amount of money on the way in.

Then I’ll wait for that really distressed property to come onto the marketplace where I can buy it at today’s market value or sometimes even below market value. But most of the time I just try and buy market value because, you know, buying market value in a rising market or the right time is like winning the lottery. You know what I mean, like if you know what you’re doing with timing, you will stop obsessing about trying to make 20 grand on the way in and focus on the 500 k you’re going to make in the next 15 years on the property. So I try and buy the best I can do. I generally chuck attendant into the Front House, put a fence up, build my granny flat in the backyard and then go back and clean up the front house at some point in the future when I’m ready to and once that’s all done, I kind of set and forget it. So the approach is very much long term, low risk. Once it’s all set and forget, then I go back to the banks and I go, well who’s going to be the best loan? I get my depreciation schedule set up and all of those things that we talked about in previous videos around ways that I can save myself as much money as possible.

Yeah. So once you’ve built the granny flat, once you’ve got tenants in, maybe you’ve done out the front house as well, then you kind of go back and you, I guess, yeah, you focus on that property to get the best deals on your mortgage and stuff like that. Get it set up to the point where like it’s really running smoothly, is that right?

A hundred percent. Like I will focus on how I can make money on the way in at first through buying well and through adding value. Then after the property set and forget, I focus on how can I reduce the expenses on the property while still maintaining the quality of the advisors that I have around me to make sure I’m only paying the bare minimum to keep that property running. Therefore my cashflow positions better. I’ll look more attractive to the banks for future purchases and I also can sleep at night because I’m in a cash flow positive position up to a six or seven percent interest rate.

Okay. So that’s like how you go about the foundational properties. What about those ones where you want to kind of manufacture growth over a shorter period of time,

making money quickly, and I hate talking about this because it’s sort of contradictory to everything that we say. Making money quickly comes again down to the market intimately. Like when you’re buying for the longterm for foundation you can make a mistake and over 25 years the market is going to be very forgiving, but when you’re making a decision to make short term money, like $100 or $200,000, then you’ve got to be very, very specific. And the only thing that really matters is timing the cycle and making sure that we’re not going into a really bad time while you’re trying to do it because you can get caught out there holding something that you may not want to hold or lose money on it or you know, end up going bankrupt like a lot of people do or Turnitin. So what are focused on is the buying.

And I don’t necessarily obsessed as much about the market. It’s still always Sydney, Melbourne, and Brisbane, but, but what I do obsess that, that is the feasibility, which is, you know, what’s the property worth when I purchase it, what is it going to cost me to hold it, to do the works, you know, tax on the way in and the way our expenses on the way in the way out and what’s the buffer or what’s the margin in the deal for me after our reduced all those costs and if, if I can’t see myself making 15 to 20 plus percent in a 12 month period, then it’s just not a dfma and the only way to do this is to be very, very patient and to be very, very, very diligent in your analysis of the marketplace. So it’s a very dangerous game for beginners to play.

Sometimes people accidentally do this stuff like people that bought property in 2013 in Sydney or Melbourne that sold in 2016. Like there could be a problem there for a lot of investors because I think everything they do turns to gold, but that’s a once in a 20 year opportunity that really comes up that is not the norm. So you’ve got to be really careful, careful with like your investment bias if you’re planning on making money and you’ve got to get other people to check your facebook and to sanity check your thought process and your thought process has to be linked to worst case scenario. And um, comparable sales in the market is the only way to do it. So I don’t be overly optimistic or now like conservatively, yeah, I’ve done it now. I’m like, I’ve made the mistakes. I’m like I lost money in northern New South Wales trying to do this.

I lost 30 or $40,000. Um, which sucked luck. I thought I was going to make 109 without losing 40. And I was lucky to lose 40. You know, it’s, it’s a scary thing. Losing money. And that was at a time of my life and I was ending in $80,000 a year salary like that was, I worked half of that year to pay for that loss, you know what I mean, like it was devastating. Um, but then I’ve also learned from that experience and you know, bought land, speculated on it and made really good money in a shorter period of time as well. And you know, it’s not my preferred way of doing business life. I might only try and do that once every three years or something because I just don’t have the stomach for that type of risk. But if you know the market well enough, like you can sort of sense the opportunity there when it, when it does come up.

Yeah. Well I think this is why, I mean you love the two properties to financial freedom strategy, which if people haven’t checked it out, go to on property dot four slash five slash eight where we talked about that one. Um, but just, yeah, that idea that it’s low risk. If you make mistakes then you can make up for it in the end. And you don’t, I feel like with the acceleration sort of stuff, you need to get everything right. You need to get your feasibility right, the market needs to be right, you need to do it really well to make money and there’s a lot of risks to lose money. Whereas the thing I love about the two property to find financial freedom strategies, like it’s a lot less risky. It’s a lot easier to do and easier for people to wrap their head around. When you’re looking at these properties to manufacture growth into actors like acceleration to pay off your foundational properties, do you have like one set strategy in mind that you’re looking at the market through the lens of this set strategy, whether that be renovation or taking a three bedroom house, turning it into a four bedroom within the current roof span, do go, do you go to the market thinking I’m going to do this?

Or do you kind of have a more like you’ve got four different strategies that you could do and then you look at the market to see if any of those are available.

I’ve gotten multiple strategies personally. One, and then instant buy very, very cheap, um, and to just immediately sell it. One of them is to buy cheap, you know, cosmetically renovate, add bedrooms and bathrooms and then sell another one that’s worked for me successfully as a subdivision. And now the one that’s works, he says fifth amaze, buying land at a good price, building in a very good price. I’m at a wholesale rate and then selling those properties. So they’re probably my four things in my bag of tricks outside of that I wouldn’t even try and speculate like, um,

you don’t look well but she needs to like build townhouses or to buy units that are on one title and then strata titled them and then sell them off like, oh, there’s so many different strategies out there that people use or they purchase a commercial property and strata title that like, there’s so many different things. So you just kinda stick to the four strategies that you know and look at the market through those, through that Lens.

Yeah. And you know, sometimes there’s an opportunity and sometimes there’s not like every now and then house prices rise in certain areas like Sydney, Melbourne and Brisbane, but laying values always take longer term increased, like it takes longer for the marketers and the developers to actually factor in the gains of the normal process. So you know, I’ve been buying in Brisbane now for three and a half years and what I’ve noticed is that like you get these six month windows where land is really cheap, it has moved in some surveys by 50 year 100 k and there’s an opportunity there to create a brand new product for the same price as an existing time. And that’s unnatural. So I’ll go, oh that looks like an opportunity. But as you and I have been talking through this to property for property strategy more and more recently, particularly the two property strategy, I think my future personally is going to be noting the two ideas which is buying very well and having a property with some potential decline it out.

Not everyone wants to do that. Like most of the stuff we buy for clients is very, very low maintenance, low risk set, and forget, but in 10 years you could come back and clean it up a little and still make money. But for me personally as a more active investor, I’ll probably buy well add a little bit of value to the property or have some value that I could add at some point in the future, do my, you know, Renner or build my brand new house and build my granny flat and that’s probably what I’ll focus on doing live. Trying to still make the money on the way in. But you know, there’s, if you make $100,000 when you factor in the costs of doing it, you know from what you originally purchased the fourth to what you sold for after you take all the costs that you end up with about 35 K in your pocket and there’s just easier ways to make 35 grand, you know what I mean?

And then taking on all of that work and you know, how do I have just kept that property, the bank would have valued the property at 100 grand more. I would have had 100 grand at my disposal as opposed to 35 and I would’ve had to pay that tax so you know, I’m becoming a much more mature invest in now, which is only buying really high quality assets that I want to hold. And then, you know, getting rid of that speculation stuff, which I think is just the amateur investors game or a very, very professional investors, gang life. People in the middle just aren’t making money from that speculation. Like they were a. well that. Yeah,

I love this idea of melding the two because I had this conversation over email with someone who was talking about like different investment strategies I think that we’re talking about they liked the two properties, so financial freedom strategy. But do you have to buy like a house and build a granny flat? What about buying a house and turning it into a dual income? You know, and I was like, well obviously you can do that, that you don’t have to build a granny flat and then, but just this idea. I was like, well why don’t you buy a house? If you could turn it into a Julian come great. Can you then add a granny flat as well? Is there an opportunity there and just opening people up to that idea is that there’s more opportunity out there. You don’t have to just do it this stock standard way and so I love how you’re talking about like doing the acceleration and the foundational properties in the one like you find that property where you can manufacture growth by buying under market value or buying in a fast rising market or you know, buying something that you can do up because it just, it gives you so many more options as well.

It just gives you so much more to play with. Like if the equity goes up, then you can potentially borrow against that in order to buy again. Or if you needed to sell that at some point, then that could turn into an acceleration property. Even though you plan it to be a foundational property, just I love and like we about it, we talk about what has financial freedom given us those choices and those options and so it just makes total sense to show he can do it the stock standard way. If you don’t want to be a super active investor, you can do that. You can pay them off, you can achieve financial freedom that way, but if you want to be more active you can still take the same strategy but just just tweak it a little bit and you know, adds a manufactured growth into there.

Like man, like there’s so many different ways to get the same result. If you’re a passive investor at this stage of your life and I talk to people every day in your community that are like, I want to be passing now, but in the future I really liked the idea of maybe getting my hand steady and cleaning it up. I’m like, cool. You should talk at a low maintenance property today that is still dated, but in great condition that in 10 years, 15 years time, you can come back and make it modern anyway and you know that you can still manufacture value just because you don’t do it on the day you buy the property, which I think is a huge mistake that most amateur investors make. Um, you know, like you really only want to add value with. There’s a reason to add value. Don’t want to put money out of your pocket to do something for the sake of it because you’ve got like, I used to have like I wanted to end nice looking properties where these days I’m like, I just want to make above average returns and I want to be strategic about my use of that money.

So as you go through this journey, your strategy will change. Minds changed a lot. Like your ideas around property is changed. But the thing I like about the house and granny flat for me is I can get my seven percent yield. I can be close to the city, I can be close to the beach in Brizzy, I can still get that longterm capital uplift and if I want to be active now, which I do because I enjoy doing that stuff, then you know, I’ll probably target ugly duckling properties as opposed to, you know, livable with renovation potential properties and that’s the only fundamental difference between active and nonactive, if you know what I mean.

Yup. And so, well I guess that kind of brings us to the end of the two types of properties that you buy and how you’re trying to meld them into one property. So the next video will be the one type of properties probably. Um, but yeah, so we hope that that’s been helpful to you guys to see a bit inside Ben’s Brian about how he goes out and tries to find these properties himself and why he chooses to invest in 100 versus the other, whether it be anxiety driven because of his loan to value ratio or whether it actually be more strategic that he’s going after it as well. I liked the idea that, you know, speculation came, it’s like an amateur game or it’s a super professionals game, like I love that because so many people just talk about speculation and doing that higher risk stuff as the only way to make money in property. So I think it’s good for people to realize that’s not the only way. It’s higher risk. You can do it another way and then you can dabble in that. Like if you want to or if you’re really good.

I didn’t send it the pro still lose money man. So you know, images that bring in that stuff is why 60 percent of Australians lose money. Yeah. That’s crazy. That figure like that. So many people would lose money investing in property because I feel like if you do it straightforward, do it well and take your time then it shouldn’t be that bad because when you, when most people particularly amateurs feel like they should, it is completely the wrong time. When most amateurs feel like it’s the right time to sell. And um, I mean today, like derogatory. When I’m saying damages, I’m just saying like there’s a difference between experience and you cannot fake that experience, like the market will burn you until you learn from it and you’ve got to understand that that’s how it is because I can say that as someone that’s been parent multiple times over the years and all the bands and stuff, but you know, like there is a huge difference there. And I think the sooner people recognize that. Um, yeah, like I don’t even know how to say that any better than that. I’ll just leave it at that without going on like a full brain rent. You can go on a rant.

I just think the way that most people invest in properties, super dangerous and if I knew better and I knew the rules to the game, like I went and saw Tony Robbins recently, like I said with my brother and a few friends and you know, there’s, there’s just a huge difference there between the way that successful people do things and the model that I try to, you know, consistently achieved success versus the way that most people try and reinvent the wheel when they’re trying to create success. And I think property investing is no different and for some reason because we have the power to govern buying hines in Australia and sometimes you make a lot of money on those homes very quickly. We feel that, you know, like going out and buying our own properties, knowing what we know is enough. And that’s exactly how I felt.

Like I didn’t even know there was such a thing as a buyer’s agent until like I bought six properties or something. Like it would have been really helpful to not so much used one, but just to even understand that, you know, there’s content like this available to check out and there’s so many little things that you learn over time with experience and you know, sometimes I even think it’s better for people that are planning on doing it themselves to not do anything than to jump into markets at the wrong time. So coming back full circle life, what are made by those people buy at the wrong time is they buy when everyone else is buying. Like I see a huge buying opportunity in the next two years in Australia because Sydney is coming off the boil and so everyone living in Sydney feels like the whole of Australia stuffed and Melvin is soon to be the same. Like Melbourne is already losing value. If you’re looking at the early indicators and you know that correction, you just can’t have 80 percent prostrate every five years indefinitely or the whole thing explodes. But markets like Brisbane that have been flat for 10 years, people in Sydney and Melbourne is sitting on the fences because Sydney and Melbourne are working, but they’re not realizing that Brisbane’s

in a similar position where they both were 10 years ago. And that fundamentally because to people that understand them look interesting or worth considering. And you know, the other effect of that is when things go bad, people start selling properties as opposed to just holding through that poor period of time. Like when things go bad it means that money is available and sentiments really low and when sentiments low and money’s not available and there’s less than and in the marketplace, prices drop and maybe not for those people that hold properties, but for those people that are forced to sell at those times. And that’s why you hear these stories of people losing 20, 30, 40 percent at the wrong time or you know, buying at the wrong time. Like all of those people that bought in Sydney last year. Like how many times did we talk about, you know, videos in 2016 that the top is near.

Like stop and people just like feel like the rush is never going to stop and they’d missed out and I don’t want to be sad again and it’s just, you know, the winner’s curse at the top and bottom is dangerous and people that don’t understand that, so timing is very, very important. Now suppose this is what I’m trying to sound a little brand and the sooner you can recognize if 80 percent of the money you make as a developer or as an investor that holds the long term is related to timing, the sooner you can just take the pressure off yourself about what happens in a month on your property or a year or two years and start actually caring about the longterm averages and picking the markets that are going to perform long term, which if you can consistently do that at the right time, you can train a fortune through investing in property and a fortune for me isn’t much, but unfortunately for some people is you know, a lot more on wherever you want to take it. You can, you can take it if you’re smart.

Yeah. And so I think that’s awesome and if people are out there and they’re listening to this and they’re thinking, yeah, you know what, I kind of am just acting like an amateur speculator at the moment. I want to get more serious about my financial future. I want to push you financial freedom and invest in a way that is more strategic, but you need some help with that. Then ben at the team over at pumped on property are offering free strategy sessions to listeners of today’s episode. So we to own property Dotcom, value for such session. You can read about that strategy session over there and you can book a time with the team over at pumped on property to look through your current portfolio, where you’re at, where your goals are, like what’s the gap between where you are now and your goals and how can you potentially get there.

And that’s just going to be really helpful to so many people out there who are listening to this today. So again, that’s on property.com, forward slash session for those people who are interested and as well if you haven’t washed already, please check out the video on two properties to financial freedom that mean ben did where we talked through this strategy that you can purchase these properties, build granny flats, and pay them off over time to achieve financial freedom. It’s a really cool concept that I think you guys will really love. So that’s on on-property Honda. You four dash five slash eight for that episode, or I’ll leave the links to everything in the description down below as well. Thanks so much for your time today, Ben. And until next time guys, stay positive.

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