Hello, my name’s Ben Everingham, and today we’re gonna to talk about how to retire within the next 10 years by investing in property.
Hi, I’m Ben Everingham, and I’m the director here at Pumped on Property. I’m super exited about today’s video, because this is something that I’ve personally been obsessed with for the last seven years, and probably will be obsessed with for the rest of my life. It’s my passion around, how can I personally get myself out of the system that I was in seven years ago, and begin to produce chunks of cash, or pieces of passive income, that could allow me to go and do the things that I cared about? Like spending time with my family, spending time training, spending time with my friends, travelling, starting businesses, and feeling like I was in control of my own life and I had the choices that I wanted in my life.
So today’s video, “How to retire within the next 10 years by investing in property,” is something super close to my heart. I hope you get a bit of value out of it. For some of you who have seen our stuff before, you’d know that we’ve run webinars on this topic. We’ll definitely be running these webinars again. If you’re interested just jump over to pumpedonproperty.com, you can google that, and subscribe to our newsletter for when we’ll be running our next webinar which will flesh out this short 10 minute video into something much more significant. That webinar normally goes for a couple of hours and we get super, super deep into the strategy.
What I wanted to start off today’s video with, is by saying there’s no such thing as a get rich quick scheme in anything. I’ve never met a single investor, or a single person that follows high-risk, high-reward strategies, that goes out to the marketplace and replaces their entire income in 12 months from earning $50,000 a year with no cash in the bank. It just doesn’t happen, or it definitely doesn’t happen to the people that I know.
The cool thing about my job is I get to talk to so many investors every single month and so does my team. By talking to hundreds of investors you begin to see with direct clarity the people that have gone out there and done something and actually achieved their goals, versus the people that have spent the last 15 years jumping between this idea and this idea. Learning, learning, learning, and not actually doing anything. Jumping between options, or vendor financing, or developing, or get rich quick this or that, so that they can achieve this goal that they’re never gonna achieve, because they just don’t get down to the business of getting stuck in and realising that it isn’t going to happen tomorrow, but this is a big possibility of what could happen over the next 10 years.
One of my favourite quotes at the moment is one that says, “Most people completely overestimate — myself included — what they can do in 12 months, and drastically underestimate what they can in the next 10-15 years.” For those of you who have a little bit more patience, or that are a little bit younger or a little bit older, it doesn’t matter, this is a strategy, or a number of strategies today, I’m gonna share so that you can look at ways to replace your current annual income and have that financial security. Not tomorrow, but definitely at some point down the future.
The first thing I wanted to talk about, or the second thing, is the average Australian investor and the type of person I talk to each month. It is so clear to me, after reading “Rich Dad, Poor Dad” by Robert Kiyosaki, that there are definitely two types of people with two distinct types of mindsets. Everybody is equal in my eyes, but these mindsets either help you or hinder you from moving forward towards your goal.
In Robert Kiyosaki’s book, he talks about my rich dad versus my poor dad and the differences in their mindset. For anyone that hasn’t read it, it’s a great book. It’s also a very basic mindset book, but it helped me understand that assets are better than wages. In terms of, you’re never gonna save your way to financial freedom, but investing in something that produces income while you’re asleep is a great strategy. Also, for those of you that are looking at that next level, businesses are always gonna be better than your own job, in the sense that you can possibly create more income in the same amount of time, with the same amount of mental energy. So definitely worth considering. I think it’s super important to frame this conversation that mindset has everything to do with it.
I was recently at the Dymphna Boholt Conference, which I did last year and I absolutely loved. I got a lot of value out of it. She talked about it a lot, and that was that mindset for success and really getting yourself in a position where you believe in what you can do. You’re not just believing it and it’s this big goal, but you’ve got a concrete action plan to go out and achieve it. Some of the people in her network are very, very inspiring to people like myself that are still working my way to where I’d like to be, but I’m definitely on the journey now.
The first part of this strategy in regards to how to retire within the next 10 years by investing in property is to set a goal. That goal might be, if you don’t have one, to replace your current annual salary within the next 10 years. If you’re earning $40,000 a year, that should be your goal. If you’re earning $200,000 a year — it depends how much of that you’re spending. Sometimes the more you earn, the more you spend. Having a concrete goal of what you’re working towards is super important, and that goal will drag you forward.
The next part is to develop a strategy. You can either do it two ways. You can start from here, and work towards there, or you can start from where you end up, and reverse engineer it backwards. Either way, you need to know what the key things that you need to do in the next five years or in the next 10 years are, to achieve that goal. You may not need to know every single step of the process, but you definitely have to have a clear idea around that next step. Strategy’s absolutely important.
For a long time, as an investor, I was personally running blind, because every time I saw an opportunity I was like the kid in the candy store, but some of those original properties that I bought weren’t in alignment with the strategy and the very intense criteria I had for myself and for my clients as a buyers agent buying a significant amount of property every year for our clients.
In terms of the different strategies, and I’m only gonna be able to touch on them very briefly today, but the first option is to buy and hold high-quality properties in metro markets with the potential for average or above average rates of capital growth over that 10-year period. A simple strategy might be to buy five properties, one property per annum, over the first five years of your strategy. Again, for some people on today’s video, that might be completely overwhelming. For other people, I’m sure you’ve already got your five properties. You might be going to the next level.
Wherever you are, a property a year for the first five years is a fantastic way to start. If you’re following this strategy, you really need to be buying properties that are achieving at least 5% per annum consistently over that 10-year period of growth. Again, I’m very conservative in my projections for the long-term capital growth rates in Australia. Property’s not gonna double every seven to ten years, like it did in the past. Completely get that out of your mind.
It’s been tough for me to understand that, because there’s so many people from my past that are just like, “Just buy this property in this area and in 10 years it’ll be worth twice as much as it was worth when you bought it. You’ll be looking back laughing and sipping on martinis.” Unfortunately, most of those people never quite got there, because they never did the things and the work that they needed to do to get to that point. With that strategy, you might buy and hold a range of quality properties and then just redraw a small percentage of that equity gains that you’re making at the end of the 10-year period to live off. That’s a strategy that a huge amount of wealthy investors and individuals that I know use.
The second one is to buy and hold the same type of property in the high quality metro markets and target capital growth. On top of just holding those properties, at the end of it, you might decide to sell the first two properties that you bought, which have now increased by 5% per year compounded, so maybe 50-60% over that period, and try and pay as much debt as possible off those three remaining properties that you hold. So that you’re now in a positive cashflow position and you can live off part of that positive cashflow or you can live off part of that equity that you’re making.
What I’ve learned is, when you achieve financial independence, from talking to hundreds of people over the last few years that have achieved it, they often don’t stop working. They love working. They just decide to do different things with their time. If they’ve had to work in the corporate world for the last 10 years to achieve their goal, some of them get out and start their own businesses, or go do volunteering, or go spend that time working for NGOs, or just take off overseas for a period of time with their children. Reset the model and have a think about what they really want. That’s something that I’m personally aspiring to do, and obviously, at the age of 28, walked away from the full-time corporate world myself.
Your third option is really around cashflow, so targeting properties with above average rent returns. The rule of thumb is, most of the cashflow orientated properties that most investors buy aren’t going to achieve the same rates of capital growth. Let’s say you buy 10 properties over a 10-year period that each give you $10,000 per year in passive income, which means targeting properties with a 8-10%, 12% rent return, is one strategy. The problem with that strategy is that as interest rates rise, that passive income deteriorates, and if you don’t have the capital growth to back it up, sometimes you can put yourself in a hole.
The fourth thing that I wanted to talk about is a combination strategy. This is what I personally love. The combination of buying high-quality properties in growth areas and then finding a way to add cashflow to those properties. For example, for those who love buying in Sydney, Melbourne and Brisbane, buy a high quality house in Sydney and Brisbane, for example, add a granny-flat in the backyard, get your 5% per annum capital growth, get your 6% rent return and hold those properties for that period of time. Similar thing, either keep them at the end of it all, or sell a couple off to repay debt and increase that passive cashflow effect.
The fifth thing is a bit more of an advanced strategy, so development. I know plenty of people that just do development as a living, and end up replacing their salaries and move into that full-time. For some people, they’re just looking to replace their income. They might do one splitter block every 12 months for 10 years, and make 100 grand per annum doing that. Some of those people will be smart enough to invest the profits, once they get to a point where they can, into high quality, long-term properties. Others will just blow that money over a 10-year period, and that’s cool. Whatever you want to do with that money is your decision, but what I’ve learned is, you’re gonna end up somewhere in 10 years time, you may as well end up exactly where you want to be.
The other thing that I love about developing, and this is something that I’m personally moving towards as an investor now, is maybe doing a four-pack of townhouses, for example, selling three of those townhouses and keeping one. I think, again, you can put yourself in a very strong passive cashflow position, have very low LVR, almost no debt on properties, if it’s the right type of development. Again, this is probably the strategy that I’m personally going to look at moving forward for the next 10 years, because I don’t like risk. I don’t like something that’s too good to be true. That strategy’s been tried and tested by hundreds of developers and builders over the past 50 years in Australia, and can work really well if you know what you’re doing.
The last thing that I wanted to talk about is, there’s so many different strategies and these are just some of them. Everyone in the property industry, and I’m sure if you’re listening to this video, you’ve already found it, has a different opinion. There’s people that are looking at manufactured growth in chunk deals. There’s people only talking about positively geared stuff. There’s people promoting negatively geared stuff. Sometimes it can all get jumbled up and you really don’t know where to start.
For those of you that are having a problem weaving through all of the information, I’d be more than happy to offer you a one-on-one complimentary session with me over the phone, where we can look at exactly where you are right now, and where you would like to go, and map out a plan for the next five years of how to get there and also identify your next action step.
I hope you’ve got some value out of today’s video and you’ve realised that it is actually super achievable. There’s so many ways to retire within the next 10 years using property investment as your vehicle. Until next time, stay hungry.