Wouldn’t it be nice to retire at 25? A true story…
Our eldest son, Joel at age twenty-five is in a position, after just seven years of leaving school, to retire if he chooses.
How?
By utilizing the power of LEVERAGE through equity finance in residential property.
Joel grew up, enjoying life on the family farm and surroundings. He had the opportunity to experience and learn many basic skills, often having to use good old common sense to overcome many daily challenges. I think this grounding helped prepare him for the outside world in the future.
Joel completed his schooling and at eighteen and began an apprenticeship in boiler making. Unlike school, where he wasn’t particularly interested in the subjects offered, Joel excelled in his chosen field, obtaining at one point, apprentice of the year and winning an overseas holiday with his work.
After leaving school, Joel, like any other regular boy his age was more interested in living life, racing his motorbike, etc etc than saving or investing for the future. This was the last thing on his mind.
Starting Out
John and I wanted to come up with some sort of strategy to help our children get started investing earlier, rather than later in life. So we devised a simple investing plan that we put in place and replicated for each child afterward.
Joel was our fist guinea pig so with some gentle persuasion and encouragement he agreed to the following plan: (No whip required)
- Live at home during the years of education and apprenticeship or further education for free
- Purchase of a car up to a certain dollar value (not a bomb)
- Weekly fuel allowance
- Match their savings dollar for dollar during their apprenticeships, further education etc.
Joel’s first year wages in 2000 were $180 per week. He saved $150 a week which we matched. While his mates had hotted up utes, Joel drove a little economical Barina which at first caused much amusement amongst his co workers.
In Oct 2002, Joel purchased his first investment property in Burnie, Tasmania for the grand total of $65k. So with a loan of $52k at 6% and his rent at $140 per week, he was getting a gross return of $80 per week which was a good strategy at that point in his investing career.
A few months later, we lent him the deposit (which he has since paid back) for his second property, in Caboolture, Queensland.
Less than a year later in August 2003, he was able to acquire his third property by accessing increased equity from his first two properties.
The First Hurdle
At this time Joel’s loans were with the one bank so when he went for his fourth home loan in 12 months and was a fourth year apprentice, the regional bank manager ( an older man, fully conditioned to full doc traditional lending) strongly suggested it wasn’t worth putting in an application as it would be knocked back.
The client manager agreed with this decision and added if he was to get the loan, he would also need mortgage insurance which he personally felt was very risky and would never recommend using to anyone. It seemed like there were so many battles with the bank, even though we all knew they were wrong, it didn’t matter, Joel still wouldn’t be getting the loan.
Joel was able to refinance to another local bank utilizing the mortgage insurance and getting an 85% lend. It was a small fee to pay considering this allowed him to move into the Mackay market and purchase a house for $150k in Oct 2003. It has recently been revalued at $320k.
The Second Hurdle
Early in 2004, Joel went on a six month, travelling holiday and was busy enjoying life to the max. He’d taken unpaid leave, knowing he could afford to take this time off, allowing himself to access a calculated, strategic portion of his line of credit. While travelling down the west coast of Australia, his attention was drawn to the township of Geraldton as a potential place to invest. He was very impressed with the area for many reasons, so on returning home a couple of months later, he was anxious to get the ball rolling again.
However, finance again became an issue. This time the local bank he had recently refinanced to would not accommodate his needs. It was time to move on again or remain dormant and miss out on endless opportunity and capital growth.
Striving Forward
By now, Investors Direct had come into the picture, so with their support and encouragement, Joel forged ahead, refinancing his existing properties, which allowed him to purchase two more properties in Geraldton WA in 2004. Over the next couple of years, these have more than doubled in value.
Joel moved up to the Sunshine Coast with all our family at the end of 2005, Shortly afterwards, he located and purchased a great development opportunity, in the form of a house on a large block of land, on which he now lives. He is currently subdividing a 1000sqm block. In today’s market the block will be worth $350k plus and the value of the house(once subdivided 3000sqm) isn’t impeded by the block being taken off at all, leaving a potential $300k net profit ($50k subdivision costs).
Over this period Joel has all the time been working up here in his trade. He hasn’t had time to work his equity because he has been too busy working his body. He’s recently found himself in a position of being 52% geared. In short, working physically hard has been costing him a fortune
He retired from his JOB at the end of March to focus on growing his property portfolio. On the first day of his new career, he located a “renovate or detonate” property near the sea up here on the Sunshine Coast that was priced at land value. He and the local agent believe, in that particular area, if he spends approx 30k to renovate, it could possibly value up an extra $100k.This potential $70k profit would take him eighteen months to make in his former employment.
I relate this story because we truly believe in the power of property and leverage to improve the standard of people’s lives. We hope that those of you that read Joel’s story can use it as a source of inspiration. As you can see you don’t need a lot of experience and money to get started, which may be beyond your control. You just need the right attitude, support and the right advice, which are definitely things within your control.
Joel’s story shows it is possible to achieve financial freedom through property. But you need to take action first to have any chance of making it a reality.
Market Insights
Up here, where we follow and purchase in the market from North Brisbane up to the Sunshine Coast, we have seen significant growth in recent times.
The lower end of the market is red hot in all coastal areas causing a severe shortage of stock. Most properties in this bracket are only on the market for days.
We inspected several properties in Caboolture last week and by the next day more than half were under offer. We spoke to a local principal and he estimated a jump of 20% in the lower end had been achieved since November 06.
Buderim and surrounding areas are experiencing similar conditions. Looking for property for clients at the moment the biggest hurdle is to actually locate a property with the relevant criteria and have enough time to put in an offer.
Months ago there was a smorgasbord of property to choose from. At that time you could negotiate through the agent to get the price down, but that is rarely the case at the moment.
There is an old saying that seems to be very applicable at the moment in the market… “He who hesitates is lost”’
Until next time
Happy investing,
Marg Turner
This article was written by Marg Turner, founder of Harvesting Houses, a unique company that offers Property Sourcing services and the unique Harvesting Program for residential property investors which guides and supports its clients through the investment maze; from the very start, being the basic understanding of equity finance, through to the actual settlement of the property.
www.harvestinghouses.com.au
Copyright © 2007 Harvesting Houses
Marg Turner
Founder
Harvesting Houses
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