Financially free at 32 – My 10 year property journey

Nope, @Ace in the Hole summed in up nicely.

 

Hey congrats Jack on your property journey! Impressive indeed. Thanks for sharing your story!
I live a conservative life myself I like to think but I do love my avocadoes!

 

Hi Jack,

My short answer is though planning and running projections for different market conditions and income and expense permutations. It really depends on your number, how much income would satisfy you.

Directing funds in to dividend paying shares is definitely a significant component of my strategy. I have earmarked 3 units that I will sell in the next 2-3 years. Whilst these are cash flow positive, I'd rather liquidate them to reinvest in stocks, build cash reserves for my next assault and reduce debt to make myself more nimble. I'm more patient about offloading my premium assets, I will sell down (some of) these when the post cgt profits will provide enough of a trade off against the foregone future capital growth and to enable further acquisitions. Factoring in the ability to grow dividend income through reinvesting also factors on my mindset. For us, this is also about the market cycle and I'm more inclined wait until favorable buying conditions return. This one has been booming for over 4 years which has to end sometime. I'd rather be in the position to go hard at the start of the next recovery.

 

Thanks for your insights @Bunbury I'm still trying to make up mind whether I want to liquidate part of my Sydney portfolio or not in the next couple of years. Like yourself they are cashflow positive. Even if I liquidate and reduce debt I won't be able to redeploy into new markets as it's unlikely I'll be able to qualify for new lending given my current circumstances. It'll likely be redeployed into dividend shares.

Are you referring to Sydney by any chance, and when you say go hard at the start of the next recovery, are you thinking to re-enter the same market? Even with exit/entry costs is it still worthwhile to liquidate? Will you be redeploying into other markets in the interim?

 

Jack,

All my properties are in Melbourne and at this stage I'll keep that the case and execute a plan to gradually sell down to hopefully put me in a position to swoop after the market cools a bit.

The properties I want to sell first are units that have served their purpose and have limited capacity to add value to. The cash will be useful to redeploy into shares and as a partial contribution to developing a site I'm land banking at the moment. I'm not phased by the exit/entry costs as the benefits outweigh this.

At the moment I wouldn't qualify for additional lending either and selling those properties is part of a plan to change that. Once I sell the units I'll sell down a site I developed in 2015. I'd really only look at buying development sites in future and at that point I imagine that will be entirely possible.

Have you considered anywhere outside Sydney and Brisbane?

 

It sounds like you're in a pretty comfortable position with some quality assets in Sydney and a nice income that covers your expenses. Deciding how to proceed is one nice dilemma to have. If you are heading towards mortgage broking, surely it is less about the increased income that a sell down would provide.

 

Yes you're absolutely spot on. It's just my tendency (read: weakness) to tweak and optimise by trying to 'time' the peak of the Sydney market. Every time I have a lie down I come to my senses.

Worst case scenario prices stagnate for a bit. Vacancy rates are still extremely low and rents are still heading up. What's not to love about that?

 

This is precisely the reason why I love PropertyChat and connecting with other like-minded investors. I need to start investing in my own education and push myself to advance from being a boring buy-and-hold investor to one that is actively creating value through development.

I would love to add some Melbourne exposure to my property portfolio. I fully expect the high-speed rail from Brisbane-Sydney-Melbourne to be completed in my lifetime.

 

I'll say... you don't have to become a developer! However if you find a site, it all stacks up, then being on the forum gives you a great head start on what to do. You could even sell a site with plans. The great thing is, the forum can give you ideas and plenty of feedback.

+1 for Melbourne. High speed rail.. I'd like to see that too. Maybe a Chinese company might end up building it...

 

Viva la Sydney. Well done Jack.

For me personally to declare "financially free" it would take a much bigger level of income that what you are quoting. But hey, Different folks different strokes.

But that's taking nothing away from what you've done. Nice work ✌️

 

I hope you're right about the high speed train. Lamentably I fear we may be waiting a while though.

Developing can obviously be very fruitful, especially so in a rising market. Although, boring is sometimes the best option. Especially if the alternative is buying at the top of the market.

Indeed. I'm emboldened by the experiences of other investors like yourself and find the things mtr and bedevelper are doing in the USA fascinating.

 

You're absolutely right. Even if I don't become a developer at the very least I want to develop an eye for it for my next set of purchases. All about continuing to up my property game.

I love hearing about other investors experience with developments every time I go to a PropertyChat meetup.

 

Yep I completely get that. I don't think I've ever heard anyone say they're targeting less than $100k in passive income. In fact $200k seems more common these days.

I'm different I guess. My current level of spending is already providing peak levels of happiness. I came to realise that spending more won't add value to my life. Therefore, my passive income target is set by my current level of spending + a small buffer for emergencies.

 

Yep, there's more than one way to skin a cat.

 

@Jack Chen fantastic story well done to you & your wife!

I'm interested to know about the sacrifices you made along the journey, what did you do to reduce your expenses etc to assist you in completing this story?

And, did you celebrate the wins along the way? And if so, how did you celeberate?

Once again well done, these sorts of stories help others like myself to maintain focus & determination

Cheers

 

@Jack Chen Congratulations on your achievement . I have been thinking in the similar lines but not achieved much and its always very difficult to act than think and talk.

I have just signed for a PPOR and it will be ready next year. So I think I will be able to make one more purchase only next year if everything goes well. ( some more savings or by taking equity out of PPOR )

You have quite a big amount of money into ETF's or shares . Can you please share the breakdown of shares you hold similar to the property breakdown.

I was also thinking investing 1000 every month on to ETF, with ( 6%) yield in10 years it could make only 164429.

 

Right now it's about a 50:50 split between ETFs and LICs. There's also a small amount in direct stocks but they're such a small proportion of the portfolio it's not worth mentioning. ETF's are just in two holdings: VAS (tracks the ASX 300) and VGS (tracks the developed world ex-Australia).

However, going forward new funds will be put into LICs unless they are trading at substantial premiums to NTA. I currently hold AFI, ARG, MLT, BKI, AUI. The big boring LICs.

I share the same sentiment as described here: Listed Investment Companies (LICs)

Also, if you're not familiar with Peter Thornhill's work, it might be worthwhile to consider going to one of his seminars. Great intro to investing in shares for the long term.

 

Thanks @Jack Chen . Which online platform you use to buy shares/LIC's/ETF's ?

 

I agree too - same as a few others, we went through a shocker of a time when the bubble burst in 2003/4, having overextended due to doing a development that completed 3 months after the market tanked and that property ended up hard to sell. We had to flog it off for a substantial loss as holding on would've sucked us completely under. We then had to unload nearly the rest of our property portfolio to clear the loss debt and get us back on even keel.

Put us back around 10 years - so only recently got back to bettering where we were prior to crash, but did make us a lot more cautious going forward. We managed to remain relatively unscathed during the GFC.

However- that takes nothing away from Jack and a super huge WELL DONE! You've obviously worked hard, and sacrificed, to get where you are and to be applauded

 

I couldn't even imagine how I'd deal with a setback like that. Good on you for not giving up and sticking with it. Any learnings you're able to share with us?

Thanks @Lizzie!