Building their FIRST Investment in a nearby suburb!

In sitting down with Paul, I got to learn about a Melbourne couple, one of the couples that he looked after this last month, and they’re on moderate incomes.

They’re living in a comfortable lifestyle, they’ve got a principal place of residence in Melbourne, and they’re also currently building a property just up the road is their first investment property in a neighboring suburb. So, we believe they’ll do quite well out of that, so well done in terms of getting on that pathway already.

Now, the motivation is to come and speak with us. There’s a lot going on in this couple’s lives.

They’re actually not married yet, so the first big rock in the jars, they’re going to have a wedding!

Get married and then they’re going to be planning for that family. So, they wanted to come in and look over the plan around that family story in terms of what it looks like but, in addition to that, they had this itch that they needed to scratch around potentially moving closer in. So, they wanted to move closer to the CBD, which would have meant a really [much] higher price point and how would that impact their, number one living [and] number two having a family? All of those things.

So they needed to solve that problem and that’s why they were motivated to come in and have a conversation with us and as they went through that, they went on this discovery of trying to work out exactly what came about.

And, in this case, here’s what the story was:
The story was we could potentially move them closer in and get a higher price property closer to the city. But the challenge with that is that that would effectively wipe out their surplus cash, which meant that they would have to compromise on their living and lifestyle spending. (And) That would potentially mean that they might have a nice home, but they wouldn’t be able to have the money to enjoy that whilst also having children as well.

(And) Especially when the children came along that would make money really tight which could mean that that really good investment property is just gone and [they] bought the land and a building that probably thought they may have had to sell that to actually get through. So all good for them, for now, but not giving them a passive income into the future, so that was ultimately what they were looking for (and what they discovered)!

(Recomended blog post: How Important is Asset Selection?)

The solution that Paul came up with was a really, really clever one and that is to simply stay in your principal place of residence, okay, and we’ll keep our personal debt lower, okay, we’ll finalize the build on the first investment property and get tenants into that property straight away. Now before we have kids, but after we get married, we’re going to buy one investment property before that time so we get another one. So, we’re up to two investment properties before we actually start to build out the story around having a family and the maternity leave that we’re going to also see coming into that story. So, that allowed us to try and make sure that we had the right price point that wasn’t going to overextend them, but also be comfortable in that story.

So, their ultimate plan looks like this:
Home, an investment portfolio of four properties. So once they have the kids and they’re old enough and the wife returns back to work, there’s going to be more income and we’ll buy two more properties. Their plan is to retire around that sort of 58 to 60 range on $2,000 a week or $104,000 in passive income over time. So, for me, this is a really good example of what a lot of mum and dad households out there have to go through. They have to go through this thinking, this discovery session, what’s possible for them based on their cash flows?

And so, for me, the transformation for them was they needed to compromise on some of their expectations. So, the expectation to live closer in when the property that they live in now, in the area they live in now gives them a lot of what they needed but wasn’t necessarily closer in. They compromised on that but the compromise on that has meant that they can go about in building out this investment portfolio and a couple of important things in here.

When they sat down to think about having the two children, the wife wanted to have a little bit more of extended time on maternity leave and also in part-time work, so she could enjoy the company of her children as opposed to just going straight back to work. So we’ve also accommodated that into the cash flows, into the numbers and related that back to what was important to them. So, you know, for me these guys are on their pathway to achieving their financial security. So another great result for one of Paul’s clients.

There are some great real-life stories about how people are getting on with it. Yes, there are lots of numbers involved when you do these financial models and you build these plans but there are real life stories. These are people who have ideas, decisions to make around their futures and getting help with those ideas in those futures has meant they’ve got clarity and confidence to acting their story. So I’m really, really pleased to be sharing those stories.