At first you will most likely think I’ve got the details wrong, I know I questioned the calculations myself. Please don’t underestimate the timely message this story sends to every homeowner currently sitting on the sidelines, in no rush to add their first investment property.
I was having a coffee with Gordon, a long-term friend, passionate investor and one of Australia’s most highly regarded Property Investment Strategist, who told me a story about a couple he was working with that I simply had to share.
The couple are in their 40’s and have been following my commentary in the national property market for years but up til now hadn’t taken the step to invest. Over our coffee (actually a Chai Latte for Gordy), Gordon mentioned the investment strategy he was putting in place along with the result it would have on the couples finances and I had to do a ‘double take’. It was unbelievable!
I’m a little embarrassed to say that I had no idea the effects the current market conditions could have on an average investor. These days I’m just so focussed on researching the national markets that I’d lost some connection with seeing those numbers, and for me it is very much about the numbers. The couple’s home was not a big blue-chip, multi-million-dollar home, it was a lovely $650,000 property. They had a mortgage which was quite conservative compared to many families, with a current balance owed to the bank of around $350,000.
Like most homeowners, the couple were pacing themselves to pay out the family home loan in time for retirement, with around 20 years left on their mortgage. Whilst they were now looking to buy their first investment property, they weren’t sure if they would be able to afford it. They certainly didn’t feel flush with money, often feeling like they didn’t have much left over at the end of each week to even consider adding another property. But they also knew they had to do something.
The couple admitted to Gordon that they had been watching the property market over the years, and often watched great opportunities pass them by. After following my research for years they felt they at least needed to explore the possibility of purchasing an investment, but nothing could have prepared them for what they learned.
Just one smart investment property changed everything
When Gordon showed this couple the numbers, they were in disbelief, as was I. Even days later I’m still in shock and now can’t understand why more people aren’t doing this!
Gordon had spent a few weeks working with the couple leading up to this meeting, helping them become what we call ‘Buyer Ready’. This is a careful balance between being ‘strategy ready’ and ‘financially ready’. Once reaching this important milestone they next identified the optimal property example that would perfectly match the couples goals and ability.
The property they targeted was an Invest Approved property valued at $639,000.
They were able to use the equity in their family home to fund every single cost associated with this purchase bringing the purchase cost to a total of $657,000.
As expected, given Gordy’s involvement, the property was an ideal match for the couple resulting in a strong positive cash flow from day one, protecting the couple from using even 1 dollar from their pocket before or after the purchase. Even after the couple came back with a list of expenses such as council rates, property management fees, insurances, etc, Gordon was able to show them how every expense was covered in his comprehensive strategy without them needing to contribute a cent. In fact they were cash flow positive to the tune of around $250 per week.
But the good news was just beginning!
Not only was the property going to protect their lifestyles while they built wealth, this one property also had the ability to do far more than they ever expected. The couple soon learned that, with the help of Gordon, they were also able to restructure their mortgage and use the extra cash flow to rapidly reduce the mortgage on their family home.
Has there ever been a better time to invest?
By simply restructuring their mortgage and utilising the extra cash flow to reduce the loan, this couple was able to own their family home 11 years earlier, saving $249,000. They have shaved 11 years off payments towards their family home, saved a quarter of a million dollars on principle and interest payments, all while building wealth!
And to top it all off, they have an additional $1,000,000+ in equity and at least an extra $65,000 per year in positive cashflow.
Do most people realise this?
Do people understand this opportunity?
Interest rates are the lowest they have ever been in history and lending criteria is now easing, which has led to 1 in 4 Australians looking to enter the market.
Please don’t sit on your hands, you do not want to miss out on this once in a lifetime opportunity. It’s a unique window we are experiencing. Please, use this 2020’s period to take this opportunity over the next 10 years to build life-changing wealth, as we will never see anything like this again.