Why Is Property Investing A Great Way To Achieve Financial Independence

Hey there, my name is Ben Everingham and I’m the director here at Pumped on Property and today we’re going to talk about why property investing is a great way to achieve financial independence.

Good day, my name is Ben Everingham and I’m the director here at Pumped on Property, a buyer’s agent that specialises in buying properties in the Queensland and New South Wales markets and today we’re going to talk about why is property investing a great way to achieve financial independence. I’m really excited about this video and I say this often because property excites me, but financial independence is probably the thing that I’m most passionate about.

I think property investing is a very easy vehicle to achieve financial independence, and by easy I mean extremely difficult for a period of time but then it becomes easier, and easier, and easier over time. Before I start today’s video, I generally don’t talk about my personal background much, but I think it’s important if someone’s talking about financial independence to give you where they’re coming from so it’s just not some other young guy that’s talking about something or some crap that he’s never actually achieved himself or done for himself. I’ve been an investor since I finished university at age 24. At the time recording this video I’m 31, over that period of time my wife and I have been able to buy, hold, sell, develop, renovate, and build a really decent property portfolio. We’ve used property as a vehicle to do a heap of things in our lives, from ending up on our beautiful, waterfront home on the Sunshine Coast in Queensland now to buying cars outright to spending more time with our family to holiday.

Most importantly we’ve used that money to continue to invest in more property and continue to walk towards our dream, which is achieving full financial independence through passive income received from our property portfolio. Today’s video is some of the things that I think are important from the journey that I’ve personally been on and then obviously as a business as well. We buy about 60 plus million dollars of property per year for our clients. We get to speak to some amazing people from first time buyers to very sophisticated investors with property portfolios of 10 to 15 investment properties. The underlining thing that I’ve learned about property is that it can be a great vehicle for those of you looking to achieve that financial independence.

I was lucky enough to walk away from full-time work at age 28 because some of the income from some of the properties that we owned allowed us to achieve a base-level of income that meant that I didn’t necessarily need an income to survive anymore, which is fantastic because every single day now I get to do what I love. I think when you’re doing what you love and coming from the right place, you can help yourself move forward faster, but more importantly, help other people which is a big part of the reason that I get out of bed everyday now.

There’s nine things that we’re going to talk about today. It might be a slightly longer video because I’m passionate about this one. I hope I don’t rant too much, feel free to jump in and out. Let’s get started. The first reason why I think property investing is a great way to achieve financial independence for you or your friends, your family, and the people you care about is … More importantly than anything else it’s quite easy. People do get overwhelmed with starting to build a property portfolio and they get overwhelmed with identifying the right properties and their strategy. At the end of the day, it’s very simple. Identify a strategy, follow that strategy to achieve your goals and make sure that you’re buying high quality assets as opposed to things that are cheap or things that you think come at a slight discount or that easy money stuff that a lot of us frequenting the Australian property market talk about, which makes me physically sick. Property investing is easy in the sense that if you do identify a high quality market to target or state to target, then market, then suburb, then type of property in a particular area, you can go out to the marketplace without the help of somebody else and find that investment.

If you hold that investment for long enough, there’s a good chance that it will double in value, it’s not going to double every 7 to 10 years like it did in the past but hopefully the Australian market continues to double once every 20 years moving forward, regardless of where you’re at in your stage of life. There’s a way that you can speed up that process of your property doubling in value, for example you could buy under market value, you could buy in a rising market. Anybody that owns in the city of Melbourne has seen the benefit of buying in that rising market in the last four years and got that 70 to 100 percent capital gain in a small window of time. You can renovate, you can develop, you can add granny flats, you can speed up the process, through any number of ways and bring that cycle of the property doubling back down to 7 to 10 years, but you do have to be patient as well.

The second thing I thought, more than anything else, is that there’s so many examples of people who have achieved financial independence from buying property. There’d be more people than you expect, the cool thing about this business is I get to talk with a couple thousand investors from all over Australia and all over the world every year. A lot of people that we work with are sophisticated, earning very good money and already have good portfolios of between 3 and 10, 15, 20 properties to date and those people are literally on the track or a lot of them are already there. It’s a simple strategy that the majority of them use, buy that high quality asset, add value to that asset, increase the cashflow on that asset and then at some point own that asset out right. We’ll get to that a little bit more but the cool thing is you can buy the property investment magazines, actually I think the Australian Property Invest went bankrupt. You can buy your own investment property now, you can jump online and you can look at case studies of people that are doing very well, that are sharing their stories for whatever reasons they share them for and that’s really cool.

If someone else has done it, it means that you can go out and achieve it yourself. One of the things that I love and the third thing that’s important to me around property investing is you can use leverage, with other asset classes, like businesses, like shares, like bonds, like resources, like commodities, it can be difficult to use leverage, the way you can with property. In certain times in the property cycle and it’s not always the right time to do this and this is not advised but you might be able to put down 20%, you might be able to put down 5, 10 percent. I know clients that use 100% loans where they’re leveraging out one property without using their own money. Again, it’s all about risk management and about getting the right advice around those things, what I’m trying to say is that if you put down that 10% deposit on an investment property that means that the bank is lending you the other 90% and there’s not many asset classes where you can put a dollar down, that dollar automatically becomes $10 of value and then the gain that you’re getting in the future on that property is based on the $10 that someone else has helped you contribute as opposed to $10 out of your own pocket.

That’s the power of property because a 5% gain on $10,000 of your own money is fairly insignificant but a 5% gain on a property worth 500 grand or a million dollars is far more significant and that’s why that compounding your effective leverage is what helps create wealth and in turn financial freedom through investing in property over time.

The fourth thing I wanted to talk about in today’s video is … This concept around it actually works, there’s so much get rich quick bullshit online and people speaking about this and that on stage that it actually makes me sick. The thing about investing in property is, in the past, property in Australia has gone up fairly consistently. If you look at the 10 year average in Brisbane, it’s 4.9% pro annam. In Sydney and Melbourne, you’re looking at just over six and just over seven percent. Not that the past is always a reflection of the future. Regardless if you’ve got a 15, 20 year strategy ahead of you and the patience to follow through on that strategy over time and you’re really sticky about your expectations, there’s a really good chance ,if you buy the right type of property, add the right type of value to it at the right time, that you can make really good money over the longer term.

The fifth thing is it gives you a range of different options so in the future when you arrive where you’d like to arrive you can either own two million dollars worth of property that you owe a million dollars on that is going up by 5% per year, a 5% gain on a two million property portfolio is $100,000 per year equity. If you’re still continuing to work but you only wanted to work part-time, you might be in a position where you could re-draw $40,000 out of that $100,000 of equity each year and live off that equity. It’s really powerful from that perspective, you can live off the rent as well by either buying a number of properties that are all positively geared by 100, 200, 300, 400 bucks a week and live off the rent that way, or you could build a decent portfolio, sell half of it to pay off the other half outright and live off the passive income from the rent that way. Also there’s that option at the end of the day to sell half of it, sell all of it, have a big chunk of money in the bank or have an income source for the rest of your life.

If you’ve got 10,15, 20 years in front of you then property can be an amazing investment class. If you’re trying to do it all in one to three years like this group has talked about then it’s going to be very difficult unless you want to get into heavy developing and higher risk. I suppose the sixth point I’m talking about is – Sorry, I just jumped to point seven, I was looking at the wrong one behind me, I’ll jump to seven then I’ll come back to six. The reason I’m laughing is because to me property investing is super fun. I’m obsessed with property and I have been ever since I read Robert Kiyosaki’s “Rich Dad, Poor Dad” book when I was at university. Property’s super fun, it’s like finding that little diamond in the rough and that’s why I love what I do as a buyer’s agent everyday because you find that little diamond in all the rubbish which is the Australian property market and you polish it up and all of a sudden you’ve got a beautiful stone. Property investing can be so much fun if you take the stress out of finding investment property away and you know what you want, you go to the market, you find it, and then you’re happy with and you add value to it.

I have a wife who’s an interior designer. We love building, we’ve just built a beautiful home for ourselves. We love renovating, we love creating, property can be a lot of fun from that perspective as well and you meet some really interesting characters throughout the journey and form some really good relationships and friendships.

The sixth thing I wanted to say was with property investing you can create a plan and follow through on it which is a huge thing because sometimes with shares or other asset classes or businesses, things can come in and wipe you out very quickly. I know during the GFC my parents lost half of their self-managed sudo-fund money and they weren’t the only people to do that. It’s really important to understand that if you’re patient and you’re looking longer term, you can say that you’d like to buy a property every couple of years for the next 10 years and then for the 10 years after that that you can add value to those properties. You’re going to renovate them, add granny flats. Year 15 or 20 you might sell some and pay off the others. You can try to plan and stick to it and follow through or you might be like me and you weren’t always starting out and were a bit more aggressive and aim to accumulate a couple properties a year. Whatever it is you can say what you want, you can set some expectations around what you’ll buy and what you won’t buy and then all you need to do is act and follow through and execute which seems to be the problem for most people but is the thing that gets me excited.

Once you’ve got the plan, get to work and go do something. The eighth thing is you can touch and feel it. I’m, as you’ve probably seen in my videos, I’m a visual, feely guy. My poor wife, I’m always trying to hold her hand or if I’m giving her a cuddle I’m always trying to hold her tight. I’m a feely touchy guy and I should edit this out but I know my wife’s the one that’s editing the video, she’s not going to edit this out. I should take some time before I speak. The reality is that you can touch and feel property, it’s bricks and mortar, it’s there and it’s very difficult to take that away.

One of the cool things about property and this is the final thing that I’ll talk about and the ninth thing for today’s video. That is that it’s very low risk in the sense that the property market definitely fluctuates, it’s not stagnant. There’s years where it goes up dramatically, there’s years where it goes up by a small percent. There’s lots of years when it’s flat and there’s also years where it goes backwards depending on the stage of the cycle and the timing. The important thing to remember is that if you have the right strategy, at the right time, in the right market and don’t have unrealistic expectations and do your due diligence and do your research properly you can mitigate a lot of the risk. It’s very difficult, like shares or commodities or bonds or resources for people in those asset classes, dump everything at one time, ride it all the way to the bottom, buy shares you can ride it back up. With property, a lot of people in Australia in most suburbs, at least 50 to 80 or 90 percent of the properties in the suburb or people that live in them, not all of those people are going to get into financial hardship at one time.

Not all the people in the market are speculating which means the fluctuations can be less severe. There are examples, like in Japan and in America, where property prices drop by 30% in a couple years and that hurts and it takes a long time to recover from that. If you make sure that you buy at the right time of the cycle and there’s some great people that you can start listening to and following that will enable you to do that, like Phil Anderson or HTW or Apple Data or The Daily Reckoning if you’re into that economic political talk and following what’s going on in the bigger picture. There’s some great people that you can follow and the more educated you can be, the better chance you’ve got of succeeding as long as your approach is low risk. I personally like to put down a big deposit these days, buy low market value, buy at the right time and add value to the property so that after a couple of years my position on the property can have an LVR of 50 or less percent. Most investors aren’t coming at a property from that low a risk but that’s personally where I come from these days with a couple of kids and the businesses.

There’s so many things to consider on loan – It must be a sign because the guys upstairs in the office up there are renovating their bathroom and I can see them starting to turn on the drills. Before they make me end this video because they’re coming over top of it, I will just say thank you so much for listening and for the opportunity to talk to you today. In today’s video we talked about a lot but in reality we talked about why property investing is a great way to help you achieve financial independence. We mentioned it was easy, there’s heaps of examples of people doing it. You can use leverage, it’s proven to work in the past. It gives you lots of options, you can create a plan and follow it which is the biggest thing that I find most people don’t do. It’s fun, you can touch and feel it and it’s relatively low risk.

If you’re someone that’s interested in developing that plan and you’d like to book a one on one strategy session, you can do so here...

I’d love to spend an hour with you learning about where you are and where you want to go and maybe sharing some ideas of how you can get there a little bit smarter, a little bit faster. Or if you’re already on the track, tweak a few things to get to the same point quicker.

Until next time, thank you so much and stay hungry.

Ben Everingham

About

Ben founded Pumped On Property after building a multi-million dollar property portfolio over a 5 year period. His mission is to show you how to replace your income through property investing so you can do what you love…full time.