Hey there. My name’s Ben Everingham, and I’m the director here at Pumped on Property, and in today’s video I’m going to talk about how many houses or properties do you need to be financially free.
Good day. My name’s Ben Everingham, and I’m the director here at Pumped on Property, and in today’s video I’m going to talk about how many houses or investment properties do you need to be financially free. So I kind of sucked you in a little bit with that title because I don’t believe it’s about how many houses. It’s actually about the total value of your property portfolio, how much property you own outright times by the rental yield, if you really want to be fully financially free, but that’s the first thing I wanted to touch on and start with actually.
When I was just getting started as an investor, it was like one of those things where when I bought my first property I was excited to tell people. When I bought my second property I was excited, and for some people, that ego or that concept of I own so many investment properties and that bragging right, it can kind of give you … kind of dissolves this whole thing. I constantly speak to people who just want to buy another property so I think they can say they own another property more than they’re thinking their long-term situation.
So when you see someone with a large number of properties, there’s a strong internal driver to achieve something spectacular financially and also sometimes a very strong internal driver to be recognised or for a need of owning a certain number of properties as well, and sometimes that ego can get in the way of making smart investment decisions because at the end of the day, as an extremely low-risk personality type like myself and a low-risk style investor, wouldn’t you prefer to own less properties with a better return on your investment, less debt, less risk, than own a heap of properties highly leveraged and get yourself in trouble like so many people often do. So my thought process is why take the hard way, the high-risk way, when you can be smart about it and you can be strategic about it and you can work on it over a 10-15 year period of time. I’m not the right guy to talk to I suppose if you’re looking to get rich quick because I don’t see things that way, but if you’re looking to take a longer term, lower risk approach then you should get some great value out of today’s video.
So the second thing I wanted to talk about is this concept of it’s not about how many properties, it’s about the total value of the properties times the yield, and I’ll give you two examples. The first example is I think this is a good starting point with the average income in Australia being somewhere between, I don’t know what it is anymore, like 70 or 100 grand per annum and city of Melbourne may be a bit lower and some other areas, is this concept of buying, not so much buying, we’ll get back to the buying in a second, but owning let’s say 1.5 million dollars worth of property times by a 7.5% rental return, and you might go, “7.5% rental returns high.” I agree. It can only really be achieved through buying a house and having a granny flat in some areas at the moment, but let’s just say that you’re really smart and you buy a couple of high-quality properties and you add granny flats to them. 1,000 bucks a week from a property in 15 years time from now, like an established high-quality house with a granny flat, isn’t too much to ask for in a lot of Australia’s metro markets at the moment. So again, that’s a simple calculation, 1.5 million dollars times seven and a half percent rental return. Obviously you’ll take 20% off the top so you’re really only left with 80,000 dollars in your pocket after expenses, and then you’ve probably got to pay some tax on top of that, but that’s one easy way to do it.
A second example of making 100 grand is buying a couple million dollars worth of property and owing that outright, and then getting yourself a five percent rent return giving you the 100,000. Again, minus your expenses and your taxes, so not leaving you with that much in your pocket or as much in your pocket, but still a great number and for most people, replacing their current annual salary. So the way to … taking a step back from there because it’s so simple once you understand it’s not about owning 10 properties in 10 years. It’s more like owning four properties in 10 years time but actually owning them, not just talking about the 10 properties that you do own.
So let’s look at this as an example. So let’s say we’ll talk about the first example where you’re looking at 1.5 million dollars times the seven and a half percent return. Maybe you go buy a high-quality 500,000-dollar house and then you go buy another one and let’s say that they rent it out for 500 dollars per week each, and they’re close to the CBD in Brisbane and they’re predicted by Residex or RP data to grow by six percent per annum for the next 10 years, for example. You’ve got to remember if you can buy 10% below market value, you can get a six percent return for the next 10 years compounded and then you can do a little renovation at the end. You should be able to easily double your money over that 10-year period if you’re smart and if the market continues to trend up over the longer term.
Let’s say that those two first properties you buy were 500 grand each and now worth a million dollars each in 10 years time, and then let’s say you buy a 400,000-dollar house that rents for 400 bucks a week in today’s money, and you build a granny flat for 115 grand in Brisbane, which rents for, let’s call it 300 bucks a week at the moment, so you’re currently getting 700 bucks a week with a three percent increase over the next 10 years. That’s compounded again seven percent, or 700 bucks a week might be a lot more like closer to 1,000 dollars per week from the two properties, maybe a little bit less, maybe I’m being a bit generous there and a little bit over the top, but it seems feasible, like a 30% growth in the value of that will give you 1,000 bucks per week at that time.
So now you’ve got four properties. You’ve got the two 500K houses that rent for 500 a week at day one. You’ve got the two houses with the granny flats that rent for 700 bucks a week now. In the future now you’ve got effectively those 400,000-dollar houses with granny flats also grow well in value, and all you want to do is basically get to that point where the two rental returns from the houses plus the granny flats are now 1,000 dollars per week each, and then you sell those two original houses, which have now doubled in value to completely wipe the debt on the other two properties outright, and that’s a really, really simple way of achieving a great rental return without taking on ridiculous amounts of risk.
For some people watching this, you’re like, “I can go a lot further than that, and I can buy a lot more properties than four over the next couple of years,” and then there’s other people going, “Man, I don’t want to buy that many properties in my lifetime.” So you’ve got to assess all of this stuff based on your current position, your risk, your income, your savings and equity and your ability to move forward, but what I’m just trying to point out in today’s video is that it is possible if you’re smart and you’re strategic and you actually start with a strategy that will achieve it for you as opposed to talk shit and never actually get there or never actually do anything like unfortunately 80% of the people that I’ve met in my lifetime do.
One of the big things with all of this stuff, I’m sure if you’re watching my video, you’re watching other people’s videos, you’re listening to podcasts, you’re going to seminars, you’re talking about stuff, you’re really thinking about doing stuff, but talking about doing stuff and actually getting on with it and taking action are two different things, and so we can take action on our own and get a result or we can have support to take that action and get a result, but either way taking action is where the rubber really hits the road. You need to be educated and you need to understand this stuff, but you also need to get on with it because the sooner you do something at the right time in the market, like think of all of you watching this video, myself included, that didn’t buy five properties in Sydney or Melbourne in 2011 and sell them in 2017 and the 80% growth we missed out on all of those properties because we weren’t in the market at the time.
So if you’re timing the right market at the right time, there can be big money on the table, and if you mistime the market, there can be huge losses, so you’ve got to protect yourself and be careful, but taking action comes down to a few things. One is getting a plan in place and a strategy in place and the second is executing that strategy one step at a time and stop being concerned about the big, big, big picture and focusing on needing to know every little detail all the way and just buy one great property and then buy another great property and another great property and keep tabs on those properties so that you understand where the market’s at and you can offload at the right times and add value at the right times and do the right activities at the right times.
So that’s my next point. Have a plan in place. It’s super simple to create an investment strategy. If you’re looking to create one, I’m not a financial planner or advisor, but I’d love to have a one-on-one strategy session with you where we look at where you are, where you’re looking to go, and what’s holding you back, and then bridge that gap between where you are and where you want to be in the future so that you do have a plan in place of how you can achieve financial independence in 10 or 15 years time, and I know there’s a lot of people going, “Shit. 10 or 15 years time?” It’s so long in the future, but think about how quickly the last 10 or 15 years has gone and all of the crazy things that have happened in your life for you over that period of time.
Had you had bought a couple of properties 10 years ago, you’d be absolutely laughing now because you would have got … or particularly if you bought them eight years or seven years ago from now, you would have got the timing extremely right, but even if you bought them 10 years ago and bought them at the top of the last peak, at least if you held them, those prices would be above where they were then at this time again now. So I don’t mean again to come across like an asshole and sometimes I think to myself, “Shit, am I … excuse me. Am I being too cynical with these videos?” But just get on with it. Stop talking about it and just do something. I feel like I just want to shake some people. It’s like there’s this whole life that can be lived. You can choose to do these things or you can choose to sit on the fence, but there’s so many people that just sit there and do nothing.
I remember talking to this one person, so I’ve been doing this now for like five years, 2017 at the time I’m recording this, and I was doing it for a couple years while I was working for my old boss, and there’s this girl from Sydney and I’ve been talking to her for five years now, and at that time she’s like, “What should I do?” I’m like, “Buy in Sydney.” Then three years ago she’s like, “What should I do?” I’m like, “Buy in Melbourne or buy in Brisbane.” I look back now and she’s probably cost herself 400 or 500K, and she’s only earning 50 or 60 grand per year now. She sends me an email once a year going, “Hey Ben, how’s everything going with the market?” I’m like … Seriously, man. You’ve cost yourself a fortune by sitting on the fences and not taking action.
I’m not saying take action at all times because like I keep hashing on about, I don’t mean to sound like a broken record but timing is everything. Read Phil Anderson’s book, read John Lindeman’s book, learn about this stuff and get educated about it because I think coming into the last thing I wanted to touch on with this video is the common challenges that we face as investors from taking action because it’s not so much that we don’t want financial independence in the future. It’s not so much that we’re not capable of it or that we don’t have the knowledge and skills to do it with someone else or on our own. It’s more there’s all this stuff in our heads and it’s like the success or failure is between here and here.
That is just so fundamentally wrong because we’ve been hammered by our teachers, by our peers, by our friends that are broke, by our parents, by people that are earning 50 grand a year writing articles, and that don’t know anything about this stuff, and it’s kind of like why wouldn’t you take a step back and learn from people that are already there and apply that stuff? So there’s common challenges that I’ve personally faced, I think common challenges that most of us face, and that’s first the information overload and the fact that I’m doing this video is kind of a contradiction because I’m contributing to that overload. Lack of social support and no mentor or coach.
I remember I started this business because I felt so isolated and lonely. Once I got to property two at age 24, no one wanted to talk to me about property anymore, like no family or friends, and I felt like a tool bag every time I did because it’s not about bragging. This was a very personal journey for me to achieve a better future than I had in the past, and so who cares how many properties you own as long as you’re a good guy or a good girl. So it’s kind of like I felt lonely and the people that I was reading stuff on I actually associate with them more than I associate with most of the people that I hang out with and I’m like, “If only that person was in my life.”
So I started this blog, which was Pumped On Property, which now became a buyer’s agency that’s bought over 100 million dollars worth of property for investors that are interested in low-risk and long term results, and a community of people that can touch base and grow and contribute together. It’s lonely. You don’t have someone to sit down with and go, “Hey, am I just being crazy? Have I lost it? Have I got too much information in my head and that’s stopping me taking action?” There’s realities as well, like challenges that we face like tired of financing environments.
It’s tough to save a deposit and it’s tough to constantly save deposits. It’s tough to take the time to buy the right investment properties and time the market and be patient enough to allow those gains to be uncovered and then to at that time refinance and go buy another property. It’s tough that you’ve got to constantly think about this stuff on top of your job and your families and your friends and your health and your connection to the world and your spirituality and the travel and all the other stuff you want to do, but if you don’t think about it now, no one else is thinking about it for you and you’re never going to get there.
There’s all this stuff and then there’s all the limiting beliefs that come up and the fears of failures and the fears of success that people have and all of that stuff that holds you back as well. So what my job is and what my purpose for this video is and my purpose I think in the world is is to just go, hey, don’t go crazy. Don’t get caught up in the hype. Don’t get caught up in the sprook, but do take calculated, conservative actions at the right time and set yourself up for the future because it’s not that difficult. Let’s say instead of doing it over 15 years or 10 years like in those examples I mentioned at the start of the video, you go, “Well, I’m happy to do it in 20.” You can accumulate four properties worth 500 grand over the next eight years and then you can hold those properties for 12 years and let them hopefully grow in value and sell some of them and repay some debt at the same time and have fun and hopefully buy properties that are cash flow neutral so they don’t impact your lifestyle in any way, and do smart stuff and just get on with it.
So again, I hope I didn’t come over the top with this video, but I care about this stuff and I really want people to realise it’s so easy to achieve this stuff if you’re just smart and you’re calculated over time.
So, I hope you got something from this video. If you’d be interested in booking a one-on-one strategy session, just jump over to www.pumpedonproperty.com and click the strategy session button at the top of the home page. Love to hear from you. Love to learn more about where you’re at, and maybe share some different ideas that you’re currently not getting based on, just like I felt a bit of loneliness or you’re a bit out there on your own, just a bit of a sanity check is always helpful as well.
So, until next time. Thank you, and stay hungry.