The 3 Stages Of Property Investing

[youtube id="KfJII8-yYzw" align="left" mode="lazyload" maxwidth="500"] There are 3 main stages to property investing. We look at them in detail and give tips on how to make the most of each stage. Interviewer:      There are three major stages of a property investor's life cycle if they're aiming for financial freedom. The first stage is accumulation where you're accumulating properties and growing your portfolio. Then you're consolidating your portfolio and adding value. And then, you get to enjoy it and live the lifestyle, which is the third part. So today I have with me Ben [Averingham 00:00:19], my  [advisation 00:00:20] of choice from Panton Property. And we're going to go through these three different stages and what you can look at doing in these stages to help you be more successful with your property investment. So, hey Ben! Thanks for coming on today. Ben:     Thank you. As flaky as it sounds I'm actually pumped and excited about this episode. This is cool stuff for me. Interviewer:      Yeah, well this is an exciting topic. I love mapping it out more step-by-step approach to actually achieving financial freedom rather than...I guess what we usually talk about, which is have your goal, what's the next step towards that goal...but that's as far as we get...so it'd be fun to map out the journey and I know you've been through this journey yourself or are still going through it, and so you'll be able to provide people with a lot of insight into things that they can do. We're assuming with this episode that your goal is financial freedom, and that will look different for different people, but generally that means a set amount of income per year coming in passively through your property investments. So we're not talking about having a billion dollars in the bank or even having 10 million dollars in the bank, we're talking about getting to the point where you've got more income coming in than you're actually spending in expenses so you can live indefinitely. You can play golf. You can go to the beach. You can do whatever without having to work. So I just wanted to set that at the start so people know what we're talking about. Obviously, to achieve financial freedom through property and to get to the third stage, which is lifestyle, you first got to get some properties, right? Ben:     Yeah. A lot of people just want the lifestyle, myself included, but there's a price that has to go through unfortunately before that. Interviewer:      Yeah, so stage number one is the accumulation phase. So, if you want to talk us through that then. Ben:     Yeah so the accumulation phase is where 90% of the hard work is going to be. The way that I think about accumulation for me personally when I was doing it...and I've just gone through my first accumulation and consolidation phase and I'm back to accumulation again...I think about accumulation like a massive plane trying to take off a runway and it takes a huge amount of energy to get off the ground, but once it's in the air it's just minor tweaks to actually get to where you want to be. It's a lot easier. The accumulation phase is really where you get confident at identifying the right type of property. You get your strategy in place, and then once that stuff's done you just stop thinking about it and you just, like your email the other day that you sent out to me and some other people that subscribe to you, you just get on with your shit and focus on doing stuff instead of talking about doing stuff, planning to do stuff, or just planning because you enjoy planning and never actually starting anything. Interviewer:      Yeah, because the strategy, and setting your strategy, and thinking about how you're going to invest is really exciting but really it's not that that's going to move you forward. The goal is to create a strategy...have a goal, create a strategy, set that strategy, and then just start doing the work. That's going to move you towards your goal. So we will always talk about...you have your strategy, what's the next property to get you towards that...but really the accumulation phase is going to be multiple properties and so it does make sense to actually map that out...how many properties are you going to need to buy, what are they going to look at, et cetera...before you start purchasing. But, what sort of properties do you think people should look at in the accumulation phase? Ben:     If you want to do this as quickly as possible...and as quickly as possible in my mind- Interviewer:      So like six months? Ben:     -if you're very aggressive...Yeah- Interviewer:      Three weeks? Ben:     By quick, I mean 10 to 20 years. People are probably just like I'm never listening to this dude again. Interviewer:      But quick 10 years is a good time frame. To achieve financial freedom in 10 years, and then you've got the rest of your life to live and not worry about it...that's pretty good. Ben:     Without going insane and taking on a huge amount of risk, 10 years would be really aggressive, fifteen years is super achievable in my mind. And we're talking about replacing your current income, so again, that depends...the activity you need to do is dependent on your income or your expectations for passive income in the future. Fifty grand is obviously going to be a hell of a lot easier to replace than three hundred grand and I know there's people earning both on this video right now. Interviewer:      Yeah. One of the big things that I want to say about the accumulation phase is often when people will go buying a property, they're just looking at the property as it stands now, and they might be thinking "oh yeah the market's going to grow and how much can I make by buying this property and getting growth in the market." But something that we'll cover more in the consolidation is that if you actually purchase property now that has potential in the future to do things...so that might be increasing its value through renovation, it might be increasing its cash flow by splitting it up into dual occupancy or putting a granny flat on the back...Buying these properties that have options to increase the cash flow or increase the value in the future will really pay dividends down the line because when you're focused on the accumulation phase you don't have a lot of time to be renovating properties or adding heaps of value to your properties...you're out there buying properties...but down the line you're going to want to do that, and so it's good, just when you're looking at properties, to think "Okay what could I do with this in the future. Does it have potential." Ben:     That's actually a really good point. I say this to clients all the time. I need two reasons why you would renovate a property. One, to sell the property. Two, because you cannot borrow any money, you cannot save another deposit. You need to manufacture some growth to release equity for another deposit, for another property. Outside of that, all I would ever do is the maintenance stuff: paint, carpet. Interviewer:      Yeah. Ben:     Because that's more than enough to get a great tenant in then. People renovate properties because...I don't know...I used to renovate properties and I'm like...I renovated the property for my own ego so it'd look nice for me and then my tenants trashed it and by the time a valuer came around it was two years later and the value was gone anyway. Interviewer:      Yeah. Ben:     So, if you think about that, in accumulation phase unless you need to renovate because you physically need to keep moving forward, don't touch the property. Your time in accumulation is actually spent buying stuff, and you made a really good point about when you go into consolidation having property you can add value. If you just want to buy and hold and sit. That's cool you will achieve financial independence in 20 years because I think being pretty conservative Australian property should over a 20 year period maybe go up by 5% per year, so it will double in value over 20 years, maybe. But, if you wanted to be a bit more aggressive and do it in 10 or 15 you really have to buy property where, if it's only going to go up by 5% per year for 10 years, or 50% growth, then you've got to find a way to add another 50% of value, and that could be through buying well, as you said, renovations, bedrooms, bathrooms, splitters, granny flats, all of that stuff really helps over time. You're going to have to be creative to do it in ten years because the market is just not going to do the heavy lifting for you, unless you bought it 74 years ago. And then every property's... Interviewer:      Well something to think about as well is that, obviously like the last video where we talked about how analysts got it completely wrong we can't necessarily predict the market...and if something does happen and the market does stagnate or go backwards having the opportunity to add value, to regain what you've lost or to grow your property even if the market's not growing...is a great thing to have in your back pocket as well. You don't really want to buy a property where everything's been done...well you can, it just depends on your strategy. I think we just prefer having multiple avenues to make money rather than just one being the market going up. Ben:     Yeah, that's a really valid point because in that year that's going to come in the next 10 or 20 years or period of years, it's going to get back...definitely going to go sideways...it's in that time that you need to access more money, that you definitely want to have a strategy to add 5, 10, 20 percent worth of value through doing some smart stuff. So, accumulation is a really shitty stage to be in as an investor from my personal experience. It's super hard work. The banks or your mortgage broker is always telling you to wait, or you've got to do this,