What To Do While You Wait For Your Equity To Grow
Sometime you need to wait for your equity to grow before you can invest in property again. Here are some things you can do while you wait for your equity to grow to put you in a better position to invest again faster.
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0:00 – Introduction
2:03 – 3 main areas to focus while you wait for your equity to grow
2:35 – Section #1: Get Ready To Go Again
3:14 – Start saving money
7:26 – Look to increase your income
9:07 – Section #2: Improving your existing portfolio
12:15 – Look into building granny flats
14:20 – Look into selling underperforming assets
17:18 – Section #3: Getting Clear on Your Strategy
19:42 – Start educating yourself on the right market
22:11 – Don’t forget to take a step back and enjoy your life too
23:33 – Always ask yourself “How can I MAKE this happen?”
26:59 – If you’re looking to purchase a property but need some help
10 Things We Have Cut From Our Budget – https://www.youtube.com/watch?v=eX5DoSRFjN4
Create Your Ideal Property Investment Strategy – https://www.youtube.com/watch?v=RuTp7Z_wIko
Ben’s Property Strategy Video – https://www.youtube.com/watch?v=yr4_GGa-HfA
There may come a time in your investment journey where you’ve purchased some properties or maybe your first investment property and you’re waiting for the equity to grow before you can invest again.
And so today, while Ben bangs around with his keyboard, we want to talk about what to do while you’re waiting for your equity to grow. So as I mentioned, I’m here with the buyer’s agent Ben Everingham from pumped on property as a gallon today.
And what did he do while you’re waiting around for your equity to grow? You’re selling me a great story off camera. About the weekend. Give me shared that with everyone up.
How is your weekend?
My weekend was a bit casual man. Lacy got food poisoning on the Friday night and um, I pretty much just literally looked after the kids in gardening all weekend. No joking. It was a long weekend up everywhere, as you know. And um, you know, through three days of tanking around in the gardening and looking out to the kids. Let’s just say I’m excited to be recording videos today.
Yeah, it’s good to be back at work. I’m definitely excited as you can save a lot on me. I’ve got bunk beds on like in this tiny room at the moment. I will be actually emptying out my van this afternoon and my office will be there. I found my spot at the beach that I’m going to park and work. I’ve got mobile internet set up, so next time we record it I’ll probably have better lighting, better position, maybe some segal noise in the background. It’ll be a slight improvement on what I’m doing. I’m trying to fit 12 people into a tiny room.
She had spoken to Bay Pinella yelling for admission?
Um, no, just a granola. Just up the road. My Dad’s like one street back from the beach at this place and so I’ll just park my van at his house, but then in the mornings I’ll just drive it to the beach, park their work for the day and then come home.
Oh, I want to say your van across for Carfax at North Chronology and takeout. Say how much the life is a love it.
They would have loved that on Australia. Okay. So let’s get into the meat. And content of this episode, so we’re going to break this down. What to do while you’re waiting for your equity to grow. We’re going to break it down into three main areas. Those that being, getting ready to go again. So getting your finances in order so that you can borrow when your equity does grow, looking at improving your current portfolio and also looking at getting your strategy set so that you are ready to go mentally and you’ve got the right strategy to buy something good when the time does come. So let’s start on the section that I’ve called go again. And so we’ve got five points there. So the first thing is starting to save money or continually save money. Yeah. So I think it’s in
sixth or seventh video for the day, but I don’t know what’s going on. Sorry,
you’ve caught me too excited by your thoughts of my thoughts of going again and then just to buy lots of properties this year. 12, but I’ll give it my best. So I think in terms of going again, obviously you know, one of the main things to do when you’ve got nothing else to do is to start saving money. Now, I hate the s word, I hate the b word, which is the budgeting word more, but the thought of, you know, knuckling down and reducing some of those fixed costs in your life. Look at your variable costs and just, you know, why not save you money, why not take the time frame down for maybe two, three years in the future to 12 to 18 months in the future just by some discipline and saving some extra cash.
Yup. And so that savings, you could focus on saving money maybe in an offset account or maybe in a savings account. So when it does come time to purchase, you can put that money towards your deposit and you’re not fully reliant on equity. You could use that money to reduce debt on your properties as well or to reduce personal debt in your life, which is going to put you in a better position to borrow as well. Um, you know, and also focusing on decreasing your expenses is an important thing too, because when the banks are going to assess whether or not you can borrow again, when you do have enough equity, they will look at your income and your expenses in your life. And so if you can decrease those expenses, then that could potentially put you in a better position to borrow.
Um, it’s not just, you know, because I’ve just gone through this process and you’ve just gone through this process as well. Did you say every time I look at you smiling and happy about this shit, all this gone through this process. Every GC MC.
Oh, this is terrible. This is terrible.
Okay. Yes, we have both gone through reducing the costs in our life and my, have a friend of mine and a client of ours, um, pull won’t have a problem with you mentioning his name on camera set. It’s not just the concept of reducing your expenses because for a lot of people it can be actually easier to go out and make more money than it can be to save money. Um, but he said there’s almost something sort of simple and minimalistic about this concept of reducing some of the overhead costs in your life that you no longer need. So you know, like some people are very into myself and Ryan included a simpler life in a simpler way of living, reducing your expenses. Also take some of that pressure off having to keep earning big money and also just watching, watching your money wash out the door.
Um, so I literally last week paid off a car loan. Um, I know I’ve been like five. Yeah, thank you. I know I’m always telling people don’t get a car loan, buy a property, but I think I bought 10 properties before I’ve got the car loan. So, you know, I was sort of like, okay, I have a kindle, I can borrow the money and sensitively paid off. I don’t know why, I just, I looked at the numbers and unlike I’m going to pay $11,000 in interest on these car line for absolutely no reason. And so, you know, as someone who’s sort of going through the same phase as a lot of people saving money in these video and it was just easier to sort of wipe that debt and there’s a number of other things I’ve been looking at in my life like phones, we’ve talked about this in other videos, Internet food and where I buy it, Petrel, the cars that we drive, the interest rates that we’re paying on our homelands. It can be very, very easy to save yourself 20 or 30 percent of your wage when you start actually reducing the nonessential costs in your life or string down, you know, the providers of those services for you.
And even just that idea of apply minimalism to your expenses is actually a new concept for me. So I’ve applied minimalism in my own life in terms of the stuff that I have, the clothes that I wear and all that sort of stuff. Focusing on things that make you happy, but I guess I haven’t thought of applying that concept to my finances as well. And saying, well, is this cost making me happy? Can I reduce this from our life and living a more simpler life and having less expenses in your life. So yeah, in order getting ready to go again, you want to reduce those expenses, save money if you can, as well as reducing debt, but as well as doing that, you also want to look at increasing your income, so increasing income both on a personal nature either through your career or through your businesses or side hustles as well as increasing the income ideally of your properties too.
Yeah, and you know, it might not be that easy for you to increase your wage in your job or your business might be capped. Um, your properties might be kept, but I’ve worked second jobs, I’ve worked for jobs, even
side hustle where you’re earning some money on the side and if you declare that, then you know, that’s extra income that you can use when it comes time to get a loan
for sure. Or you can get your partner into work or a little bit more work. There’s so many different ways of, you know, working through that and making it a little bit of extra income and you’d be shocked at what an extra 10 or $15,000 a year right now actually means in terms of extra borrowing capacity.
Yup. And in the same respect also look at your properties and how you can increase the rent on those properties. We will kind of go through that in more detail in the next section, but yeah, I’ve been looking. Keep your rents up to date up to market rates as well as look for improvements you can make to the property that will then increase the rent that’s going to improve your cashflow. That’s going to help you save and reduce debt as well because you’re getting more money through the door, but it’s also going to put you in a better position cashflow wise when it comes to looking for lending. So that’s kind of just getting I guess getting your house in order for when the time does come to buy. And truthfully, when you’re waiting for equity to grow, most of what you’re doing is that is just like getting ready for when you are able to go again. So the next section we want to look at property improvements and so for that, one thing we have is a cosmetic renovation on the property. So look at your property portfolio. Are there some renovations that can be done? Often people might buy a property and they just put a tenant in straight away, but now that they can’t focus on buying another property now might be the time to focus on the properties you do have and how you can maximize the return from those.
Yeah. So I think it’s such a simple thing and you know, we’re not talking about a full structural ran. Our, a big cosmetic one that’s going to add equity. You know, this conversation is purely around adding cash flow. Now if someone who’s owned a property management business and made a lot of mistakes with renovating and spending too much on my Reno’s, we’re really just talking here. Here’s the, here’s the simple list door handles. As weird as that is, light fittings, fans, window, finishing’s carpet or polishing floorboards and painting as well as tidying up the garden beds and literally anything more than that outside of that in your bedroom or a bathroom is really not going to add too much extra cashflow per weekend in an average environment with a home that’s in a very basic oldest star condition. Just those things alone. My Dad, 20 to 50 or 60 bucks a week of extra cash flow on a $450 a week rental.
Yeah, and you can get really smart with that sort of stuff and really increased the vibe and increase the rental income of that property. Even things as simple as painting a bathroom that has old style tiles. I went to look at a property the other day and it was like pink, an apricot colored tiles in this bathroom and this bought this property, had water views as well, so it was in quite a nice location, but the bathroom was just disgusting and something as simple as getting tall pain. Painting that bathroom. What would really spruce that up and just make that more appealing, which you could then obviously rent that property from war. Same goes for the kitchen as well. There’s simple solutions that don’t cost you a lot of money that can improve the quality of it and then maybe down the line you could do a larger renovation if a cold for it, but a simple cosmetic renovation like that can definitely increase your rent.
Such a good call because you know, ripping out a bathroom which is effectively what you need to do to replace tiles and re waterproofing. It might cost you 3000 bucks in waterproofing and tiling maybe four, maybe five were a couple of teams that paint, which I’ve used before as well. And a new vanity just for Maven. Bunnings, you know, might set you back 500 bucks plus some of your own time and you know, exponentially the value of that bathroom to someone looking to rent it.
And that’s the thing that tall pine might not last as a brand new bathroom ward. You might need to go in and definitely want to go in between tendencies or have it redone if someone stays for a long period of time, but given the low cost of it, I think it’s definitely worth it. So renovations, one of them looking at granny flats is another one. Now this can be hard if you don’t have equity. If you’re unable to borrow then it can be difficult to build a granny flat, but given the lower costs or granny flats, you’re not buying a $500,000 property. You can be building a granny flat for around 100, 2100 and 3,000 and $40,000. That’s less money that you need to borrow. So you may be able to borrow enough for a granny flat, but you might not be able to borrow enough for a new property. And so that could be something to explore as well.
Yeah, I think you’d be just sitting there and you’ve got some equity, but you don’t have enough income to go borrow. Um, you and I both talked to people that have been in that situation in mortgage brokers suggested, hey, if you build a granny flat for 120 and get 300 bucks a week in rent, you’ll be in a position where after the completion of that, you can move forward again. And a client of both of ours, charmaine recently was in exactly this position. She’s building a granny flat at the moment and then with the extra income should go borrow money to buy another property. And I think it can be really good from a cashflow perspective in order to enable you to move forward faster or to pay down debt or to reduce your ultimate risk of process across your portfolio to. So again, it’s not for everyone, it’s not always the perfect time to build one, but if you’re sitting there doing nothing for two to three years anyway, why not get an extra 15 grand a year of income?
And that’s the thing. Building a granny flat can have multiple positives that can increase your cashflow. Um, which could put you in a positive cashflow position, which can also help you save, can help you pay off debt, but then can also make you look better from a lender’s criteria in order to borrow more money. So granny flats aren’t without risks. Some of the valuations for granny flats do come back worth less than what you actually pay for them, even though the market might not reflect that. Um, I know I do know some banks and some lenders have trouble valuing them, so that can be an issue. So that’s something to consider if you are looking at building granny flats. But for a lot of people it can be a good option. Another thing as well to consider is to look across your existing portfolio and see if there’s any underperforming assets in there that maybe now would be a good time to sell those properties because they’re not performing well. So then you could go ahead and purchase of property that’s going to perform better based on maybe a new strategy based on your new financial goals or based on what you’ve learned along the way.
A lot of us, myself included, get emotionally attached to the decisions or we don’t want to lose out on a decision, you know, I’ve lost money from properties before by selling at the wrong time or by buying the wrong type of asset, but what I don’t want for anyone listening to this is for them to not connect the dots between what they have in their portfolio now and where they’ll be 15 to 30 years from today because you’re not just losing out by having an underperforming asset in today’s market. We know based on the history of that, some assets just aren’t going to perform as well. And so what is the cost of you holding that asset? That’s perfect. I’m going to under perform not just today, but for the next 20 years. When you could replace that with something that performs in a better way, not just today and in the future.
And what I’m saying there is, you know, we know that houses outperformed units. We know that buying in the metro markets generally outperform the average regional market. We know that, you know, buying closer to the city or on the beach generally outperformance being further away and so when I was accumulating my initial properties, always buying things based on I don’t God knows what now, honestly like I don’t how the fuck I was buying. I was just buying property because I thought it all went up in value, but now I look at it and I’m like, oh, that’s a four percent a year, you know, unit that’s never going to do better than that versus this is a seven percent a year home in this market. And now that I started to think that way more strategically, it’s not just what it’s costing you today. It’s having all of that cash tied up in an underperforming asset for the longterm that really cripples people and, and cost them years and years and years in terms of what they ultimately want, which is choices and financial freedom.
Yeah, and if you have an underperforming asset, if you’re waiting for your equity to grow and you know that looking at the current statistics that your property is unlikely to grow, then you’re going to be waiting a long time to get that equity, but if you think, okay, maybe I could sell this property. Then obviously talk to your mortgage broker and stuff like that as to whether or not you could then rebuy something in a better performing market might be a solution for you or even maybe your criteria of what makes a good investment property might might’ve changed, so I know that’s happened for you many times over your investment. Whereas you might change from focusing on capital growth, so then focusing on getting a higher rental yield and paying down debt and so sometimes things change. It’s still a good asset, but it just doesn’t line up with your financial goals and so it could be time to shift that money into something else. And then the last section we wanted to talk about is strategy. So it talks about getting your finances in order so that you can go. Again, we’re talking about looking at your existing portfolio and how you can improve that. Now we want to talk about strategy and getting clear on your strategy and yeah, how, how you want to invest moving forward because how you invest it in the past might not line up with how you want to invest when you purchase your next property.
I absolutely love talking about strategy and I like sitting down with my wife was sitting down on my own and thinking about and sort of darting out some ideas for my future and it doesn’t have to be any harder than where would you like to be in 12 months? Where would you like to be longer term in 15 or 20 years from today and what would the amount of passive income that you have coming in at that time look like for you or what? What would you have achieved financially over that period of time and it’s literally that simple men to work out a strategy from there. Now, if you don’t know where you’re starting, generally 12 to 24 months from now, if you’re just getting started, the idea should be maybe the right property in the right market at the right time, but 15 to 20 years from now, whatever your current annual salary is, you should have been to at least have replaced that through passive income, whether that comes from businesses or properties or shares. That’s your call, but that should be the absolute minimum to get your life back in your choices back within 15 to 20 years.
Yeah, so spend some time while you’re waiting for the equity to grow, to focus on your strategy, get your strategy right so that yes, you’re buying good quality properties in the short term, but that you have that end goal in mind in maybe 10, maybe 15, maybe 20 years to achieve that financial freedom, to have that freedom of time and the freedom of choices so that you can go ahead and live the life that you want. So yeah, I guess look at everything that you’ve learned. Look at reassess where you are now. Reassess where you want to be and reassess what is the best way to get there, and me and ben both just recently did videos on talking about setting strategy and we both have different slightly different approaches to it and I think combining both of our insights because we work in different ways is really good, so I’ll link up to those in the description down below. If you guys want to learn more about how to create your strategy and start creating your strategy, you’ll also want to start educating yourself on the right market even though you’re not ready to buy. Now. You want to start looking at what markets would you want to invest in based on the strategy that you now have.
I think that’s a huge point like and Ryan and I are talking about just going really broad and going, okay, Australia is my market. I’m going to look at little Haiti from everywhere. What we really want is for you to go, okay, this is the state, this is the city or regional area. These are the suburbs and become an absolute specialist over the next couple of years. In that one thing, and then by the time you’re ready to buy, you’re not wasting six months looking around and getting educated. You know the right property at the right price on the right day, and you pick it up at a great price.
Yeah, so that’s the thing. By assessing your market, by educating yourself on the market and as Ben said, you become an expert in the suburbs that you’re looking and investing in. That’s going to put you in the right position to purchase a property when you are ready to buy because you’ll know what the value of the properties are in the area because you’ve been keeping tabs on for sale as well as keeping tabs on the sold prices of those properties. You may be going to some open for inspections, so you’ve got relationships with the real estate agents, but obviously I guess being clear with them so you’re not wasting their time, but keeping your finger on the pulse of those markets. Then it means when you are ready to buy, when an opportunity does come up, maybe it’s an undervalued property or underpriced property. Then you can jump on that because you already know the area.
If you wait until you’re ready to do your research because you’ve got to look at like so many properties come up on the market. It can take months to really familiarize yourself with the market, with what streets are the best, where the owner occupiers were the busy streets that you want to avoid, where the power lines, all of that sort of staff can take months to accumulate that knowledge and so to accumulate that wall, you’re not ready to invest, can be really good when it is time to invest. So obviously there’s. There’s the potential that you research a market, you find a good market, you’re not quite ready to buy and then things change and that market no longer looks as good and so you may have to rinse and repeat this, but even if that happens and you’ve wasted time assessing the market that you ultimately decided not to buy in because sentiment changes or the market changes, you’ll still build up skills and that time that when it comes down to assess the next market, you’ll be able to do it so much quicker.
Yeah, I think it’s always important during this time when you’re not doing as much activity or getting, you know, the results to just take that step back. Also, remember to enjoy your life. You know, like I used to get anxious when I couldn’t do anything. When now I get excited because it gives me an opportunity to focus on some of the other things that give life meaning and now made to have a rich life as well. And I think too often as investors we go goal to goal, to goal, to goal, and never sort of look back or enjoy the ride, you know, so it also gives you an opportunity to take the foot off the gas, educate yourself, have a bit of fun, learn some new skills, and get yourself in a better position than you would have been if you could have just probably bulldoze straight into the next property like unfortunately or fortunately used to do.
Yeah. So I think taking this diligent approach, taking this focused approach while also taking time to enjoy your life will just put you in a better position when you are ready to buy it and will hopefully help you be able to buy your next investment property faster as well so that you can build up those foundational properties that are going to give you financial freedom. And then you can go on to live the life that you want and maybe focus on paying down the debt on those properties and paying them off completely. Or maybe you just want to keep going and keep investing and keep doing this. Whatever you decide is completely up to you.
Can I have one thing? There is one question that I ask myself that you and I talk about an acceleration phase of the strategy. I suppose it cumulation Bang when you’re getting started. Acceleration, how to speed it up is how can I do this faster or like there is one question that you can ask if you’re sitting there doing nothing at the moment outside of everything and that is how can I actually make this happen? Now, just because your broker says to you know your bank that you’re currently with says no, doesn’t mean that everybody else in the industry is going to say no to you or that you can ask them a question, which is will what do I need to do to make this happen? And I think I’ve been knocked back a bunch of times. When in reality I was in a perfectly safe position to lend money to and ready to go. It was just that particular lender at that time didn’t want my business and I took that personally and I sat out of the market for six to 12 months, even 18 months, as opposed to just looking at an alternative option and figuring out a way to make it happen. Now, not everyone’s always in that position. Sometimes you should just do nothing because you’re over leveraged or expose, but often you’ll get nosed just because of certain lending policies or a lack of education from a certain broker as well,
but even that question, what can I do to make this happen? If you’re in that position where you’re over leverage, making it happen might be reducing your debt, and so what can you do to make this happen would be to maybe earn more money through your career, start a side business, grow your business so that you have extra money to pay off debt faster to improve your position, or it could be renovating the properties to increase their value, to improve your loan to value ratio, or it could be improving the cash flow, the properties. You know, there’s. Yeah, that question is really good, like what can I do to make this happen? Rather than just as you said, saying, oh, I can’t do anything. My hands are tied saying what do I need to do to make this happen? And then you’ve got a clear goal and you have clean next steps as well. So if you’re a mortgage broker says that you need x amount of income, then you’ve got a goal that you can work towards that you need to earn 20 grand more per year and that’s your goal. Focusing on how to do that or if you need to reduce debt, then that becomes your goal and so knowing what you need to do in order to go. Again, I can give you a short term goal to work towards that really sets you up for your longterm goals. When it comes time to buy,
you know the difference between somebody getting financially free 15 years and somebody’s taking 40, 50 years, which is the average working life of the average Australian. Eighty percent of aussies will work for more than 40 years, which is just insane. You know, in terms of not having a choice to go and do that work or do what they want is that is the ability to ask good questions and then problem solve those questions as they come up. So it’s one thing that you and I think are both really, really good at and we ask ourselves good questions and then we hold ourselves accountable to figuring out a solution. Now that solution isn’t always easy. That solution always doesn’t come up straightaway, but fuck man, what do you want to do? Work for 40 years or work for 15?
Yeah, well that’s the thing. That solution is not easy. You got to be diligent, you’ve got to be focused in order to get it, but getting older anyway, so you may as well in 15 years you’re going to be 15 years old are you could be financially free or you could not. So it’s your decision, what you decide to do, so they have some things that you can do while you’re waiting for your equity in your current portfolio to grow those things as well can apply to a lot of people who haven’t even purchased property yet too. So some really great tips in there. We hope that you enjoyed this. If you are looking to purchase a property this year, if you are looking to buy a high quality investment, but you don’t quite know where to start, then Ben and the team over at pumped on property are offering free strategy sessions to you guys. You can get on the phone to them, talk about your specialty, talk about your goals, and they can help you create a strategy that’s going to get you towards those goals so you can have that security and financial freedom in the future and live the life that you want now. So go to on-property dot com, forward slash session to check that out. And until next time, stay positive.