Story Behind The Numbers

Hi, Ben Kingsley here and welcome to another edition of the Story Behind The Numbers!

Now, if you’re not familiar with what we’re doing here — this is where we get in and actually start to tell the individual stories of each of the clients that we’re looking after, from Property Wealth Planning to the types of properties were buying.

 

I start this off by talking about the overall activity for the month. So, I’m going to go with October first. So in October, we delivered 38 Property Investment Plans for new clients coming to Empower Wealth — and we made recommendations inside of these Plans to purchase around $67. 5 million worth of property.

Of course, that amount is not all going to happen today — this will happen over the journey as they build out their passive income for life. Also in October, we were very busy in the Buyers Agency team, where we bought 33 properties. We did miss on eight other properties because, remember, we will walk away if the deal doesn’t stack up for our clients. So, we bought around $19.8 million worth of property in October.

In November, we were also very busy in the Property Wealth Planning team, where we delivered a further 42 Plans and we had recommendations inside those Plans of $64.5 million. Rounding out the broader numbers from the Buyers Agency point of view, we bought 13 properties to the value of $8.6 million. With more of a difficult month, we did miss out on six properties in November. So, they’re the broader numbers. But again, this segment is all about us sharing the “story behind the numbers” — giving a voice to our clients, the challenges they were facing, what they’ve overcome and the transformation that’s taken place, without giving away their personal details.

Hopefully those stories can relate to you…

 

The “Blowing the Cash” Story

So, let’s move on to the first story that we want to share, which comes from our Property Wealth Planning Team; a Property Portfolio Plan delivered in October. So, this is the story of one of our clients who worked with Brendan, one of our Qualified Property Investment Advisors. Our theme of this story — and I’m being a little bit critical here — but this is a “blowing the cash, wasting the money” story for me. Well, before they came in and we got them all sorted out.

Their backstory: a Melbourne-based mid-40s couple, circa income around the $150,000 – $200,000 p.a mark. Bryce actually bought one of their properties for them a few years back, prior to getting a Plan done! And so, that’s a good story for our Melbourne-based clients. In reality, theirs was a story of surprise of just how much money they were spending and how much money they weren’t putting away.

So, this Plan is mostly about savings for them. They had no kids on the agenda, so “the big rock in the jar” for them was about early retirement. There was no need for any future legacy. So, we didn’t have to factor in a lot of the costs associated with leaving a legacy, but there was some educational training that needed to take shape. This education was done through Dean in our Mortgage Broking team, who evaluated their situation and explained exactly why they weren’t going to be able to borrow much at based on their current spending,

These clients needed to rethink about their discretionary versus essential spending, to allow us, at the very least, to go to a lender responsibly and provide them with the loan they needed to secure their first investment property. Of course, they were definitely overspending and they needed to get some training as to how they were overspending money, and why their money wasn’t working hard enough for them. As a result, serious adjustment took shape.They took this information on board, and what happened next was amazing.

The transformation was great— they went from having very little clue around managing their money and lacking direction, all the way to having a clear idea of the right pathway to move forward. And guess what? Now, they’ll be buying two investment properties — only two — to build up that wealth over time.

We’re looking to target a passive income of $100,000 a year for that couple. And because, they want to retire in their mid-50s, once we build it up, there will be a sell down strategy attached to this particular Plan. Of course, this is a different type of planning story — it’s one of not organising their money, not getting their circumstances sorted out, but focusing on an educational journey first and then coming back for show us to show them what their potential is. Again, now they’re on a pathway to realising that potential. So, I think that’s a great outcome! We’re able to get them the finance and also start to get them on their pathway to buying two quality investment properties. And they can get on with their life, this time using Money SMARTS to organise their money on the My Wealth Portal Platform (fill in this form to get Free Access). Overall, this situation speaks volumes for what this couple is going to do to transform their situation.

 

The Aggressive Story

The next story comes from Rachel Cole, who’s one of our Qualified Property Invested Advisors out of our Sydney office.

Now, I’ve “themed” this story simply as aggressive. We have an early 30s couple, currently no kids and very high income earners. So, they are absolutely smoking it — getting on with earning a very, very high income. Now they came to us with five existing properties before they wanted to build a Plan with us. Now the realization when we reviewed those properties is that three of those properties weren’t so great. These existing properties were, what we would call, “under-performing assets” — Off the Plan properties.

With this in mind, some difficult decisions need to be made. In this case, this couple are willing to just “wait and see” with these particular properties because of the income they’re currently generating. But, big rocks in the jar: we’re talking about a $2 million family home, which they’re going to buy and then potentially rent out while they spend some time overseas as part of their careers. Obviously, these clients are very career focused — they are super time-poor and, unfortunately, were misled with some of the investments in the past. Unfortunately, what you can find is that spruikers like to get into these channels of high income earners, by saying things like, “We can reduce your tax!” and “We’ll get you these properties. You won’t have to worry about them.” And when you’re earning such a high income, the level of tax deductions that they can get are somewhat enticing.

That said, if you don’t get the capital growth, or if the value doesn’t come in at purchase price, then ultimately losing money to save a little bit of tax is not very smart at all.

Ultimately, we want our properties to be outperforming properties. We don’t want them to be underperforming properties. So with this particular couple, it was very much a focus of “Go hard, retire early.” And we’re in a position where we can plan out their owner-occupied property, looking at the downturn in the Sydney market at the moment, to see where there’s an opportunity to strike on that property. And that’s the Plan! Then there’s two more investment properties after that to be purchased within the next seven years.  The overall result of that is we are looking at a retirement date of 2038, age 50. This obviously highlights what can happen when you have very high incomes, which is a means to accelerate your outcome and passive income. A very impressive passive income of a $150, 000 dollars a year. This is aggressive, but action without knowledge and getting misled with the advice they’ve received in the past, which is evident with their current portfolio, has meant that we really want to bed-down quality assets and get that big rock in the jar, in terms of that dream home, as quickly as possible.

For me, this is a story of focus, direction and goal-setting. They’re going to do that now. They’re going to listen to Rachel, in terms of how they execute, and they’re going to go and shop to find those outperforming properties. And I have every confidence in this couple being able to build out their story and retire as early as they’d hoped to — with some right, professional advice this time around.

 

The Step-By-Step Story

In this Story Behind The Numbers, I theme this one step-by-step. This one comes from Matt — one of our great Buyers Agents in the team. I’m choosing to do this step-by-step because this particular couple had a lot of cash — they built up a very, very nice nest egg.

They’ve been working hard — good money managers — and they wanted to put that money to work. And whenever you get someone who’s investing for the first time, or anytime really —there’s a real chance to be able to build trust and take people on a journey. For first timers, it’s a great opportunity to build out that education, because you want to be able to make sure that you’ve got their confidence — their confidence that you’re going to pick the right asset. And when you’ve got people who are very detailed, that’s when it’s going to take some time. And we love detailed people, because in our business we’re known for detail.

We’re absolutely known for the amount of detail we go to in cash flow analysis in the research that we do. I mean, all of the parts of the process in our business. So, we get delighted when these people entrust us with their money. And this couple, who were based out of Sydney, gave us a Melbourne brief, which we were very happy to take. We call the process “a slow and steady; build that trust, get that detail right. The bottom line was that Matt was able to buy down Bayside way. He’s bought a really safe and reliable asset down there. A solid brick home, incredibly neat and tidy, on a good patch of dirt — 687sqm of dirt — three-bedroom, one-bath. It rented straightaway — with a nice yield, 3.4%, for the price point. Basically this property is really is a low maintenance and there’s potential for future value add on that particular site as well.

So, the transformation here is that first property. Just like every property, that very first one, once you get it away, you realise that it doesn’t impact your life.

I remember my first investment — you’re watching it for the first three, four months, maybe six months, and then you just get back on with your life. And I think that’s what’s going to happen for this particular couple. They’re going to be able to build more confidence from making this particular purchase, and this confidence will allow them to step forward with their next purchase. So, step by step is the process. Purchasing property is a process — it’s not an event. So build up that knowledge, win that confidence, be trusted to make the right execution. Matt did a great job here and we’ve got some happy customers who have got their first investment property!

 

The “Getting on the Same Page” Story

There’s a lot of lessons in this next Story Behind The Numbers. The theme of this story is “same page.” So, what happened?

And this is from Nicole, one of our great Buyers Agents here in Melbourne, who was dealing with our clients who had also built a Property Portfolio Plan with us through Damien. They’re mid-to-late 40s, professional couple, very time poor with couple of kids and Sydney-based. But again, they’re looking to buy down in Melbourne.

What we saw here was a situation where one person was the primary contact, but it was potentially the other person in the relationship who was the major decision maker.

If you have a misalignment in what they’re thinking should be bought, but you’re not dealing with the decision maker, it can be really difficult. So, Nicole was able to learn that she needed to get both of them on the same page to be able to get the result.

And early on, we weren’t getting that result. So, we were presenting properties and those properties weren’t necessarily meeting the brief, and it was confusing because we thought we had the brief right. To get a result for this particular couple was one of Nicole’s longer assignments, but I think the end result here speaks volumes of making sure you’re having that open dialogue. What we’re talking about here is what’s working and what’s not working. And Nicole is fantastic at reading the play, in terms of whether we were on the right page or not. So, there was some direct feedback, which was given and that allowed us to get that brief right again, in terms of what property we were really looking at. Again, one partner driving the conversation; the other one a little bit more conservative, listening to a lot of the market noise, which is very relevant when you’re in a market downturn. It’s only human nature that you feel that way. But if you lift your eyes and you’re playing the long game, you can understand that property is a fabulous long-term investment. It’s an essential shelter.

So, a great brief in the end. We went shopping. We got a great little cottage, a weatherboard cottage in Footscray, corner allotment. So, really, really good. The story of the negotiation here for Nicole was really a great one because it was passed in at auction, and so we just waited and waited and waited until the vendor adjusted their expectations and came down to the offer we put forward. So, it was a good negotiation. It wasn’t rushed, and that ultimately led to a great result. That property is now rented out. We’re talking purchase price of around $850,000, getting $520 a week in rent — so, a 3.2% gross rental yield. It rented on the first open.

In short, we know that this area here is very good for long-term prospects. A good allotment of land, corner block, future opportunities. So, I feel that the Sydney couple are going to look back on this journey and learn more about what’s important to them, how to get the brief right, and making sure they get on the same page early on. And I suspect, based on the fact that we’ve got a Plan for them to buy more properties, that the next purchase is going to be a little bit easier and we’re going to understand from our end that we get that brief right. So, there’s lessons on both sides here. I really like this story because, for me, it’s a story of a turn-around. We’ve been able to get that that not on the same page into a turnaround scenario. That’s been done. We bought a great little asset and that’s a good news story all around.

 

The “Rest of the Way” Story

I’ve pigeon-holed this next story as showing the clients “the rest of the way”.

It’s not very often that we compliment people on phenomenal money management; but it was pretty clear that we had some really superior money managers in this particular story.

That’s a story being told by Stuart, one of our Qualified Property Investment Advisors out of our Sydney office. This is a pleasing story for me because this couple had done an incredible job of paying down debt, trapping surplus money; a good saving story. They’ve got a couple of kids, they live out of Sydney, and have a household income in the $150,000 – $200,000 range. And their “big rock in the jar” was about that dream home.

With this in mind, the Plan was really about making sure we could fit that dream home in there. They already had an owner-occupied property and an investment property, but their story was also about leaving a legacy for their children. So, a couple of kids. They wanted to make sure that they could provide for children both today, but build out that family wealth over the journey. And I think they’ve done terrifically well, but they hadn’t actually benchmarked themselves. They were surprised just how good a position they put themselves into by being great money managers, by having that delayed-gratification story. And that has simply meant that, from now on, all we have to do is buy two more investment properties. That’s all they’ve got to go. Right? And overall, they’re going to have three investment properties. They’ve got their one. The big rock in their jar was the dream home. We’ll make sure that’s sorted out and is also included inside the Plan. They realise they were in better position than they thought.

They love work, so they’re going to retire in their early 60s — but they’re going to have a passive income of $100,000, combined with the three investment properties, and also their super. They’re going to be self-funded retirees. They’re going to find financial peace. By showing them the final pathway forward, they were able to be validated to move forward. It was a really simplified plan. It was clear purpose. They’ve now got everyone on the same page. And, again for me, I love these stories because they’re “a whole of wealth” story for us — we’ve been able to build their Plan for them, we’ve organised their mortgage refinances, and we’re going to buy the property through the Buyers Agency team. So, that’s a real solid story to be able to say, “Congratulations on what you’ve done so far. You’ve now got trusted advice to take you on that final part of the journey. And we’re going to hold your hand, in terms of taking you through to that final stage.”

So, I love that story! Congratulations to this couple for putting themselves in such a great position, considering their household income is certainly not, for Sydney, excessive. They’re going to really enjoy the fruits of their labour in retirement.

 

The Story That NEEDS To Be Told – Never Underestimate The Power of Goal Setting

When I share these Story Behind The Numbers, I’m really grateful be able to get an opportunity to look over some of the Plans that we are developing for our clients.

And you get the stories that need to be told. Remember, we’re doing anything around 40 plans a month — so, we can’t tell every story. Every one of them are unique and great, and it’s just a joy to be able to be given the opportunity to help these clients go on their journey! But some of our stories just jump out at you, and this is one of those stories.

A young IT couple out of Western Australia — they’re working with Paul Thompson, one of our QPIAs here in Melbourne, 20 years old. 20 years old. And they’ve built themselves a Property Portfolio Plan. They came across through our educational content — the books, the podcast, The Property Couch. They flew into Melbourne to have a meeting with us and they’re just a delight! And the theme for me on this one here is “Never underestimate the power of goal setting.”

This couple are driven. They’ve set their goals. They are going to have an amazing result, starting at the age of 20 with the power of compounding. They’re going to have future choices. They’re well and truly going to have an amazing self-funded retirement! And they’re highly motivated. They can see the picture in front of them. So, you set the goal. They chase down the goal. And here’s some of that story…

This particular couple are going to take a break at some point on this journey — a trip in 2021, six months around Australia, tick. Then medium-term, a little bit older, they’re going to have a couple of kids. Okay, but they’re going to buy three investment properties before they start their family. Imagine a situation where you could effectively have a nest egg that’s so life-changing like this journey this couple is about to embark on!

They’re very, very good money managers, but you’re probably asking… 20? How did they save for their deposit? Great question. They actually didn’t.

What they’re getting is a family pledge — a security pledge — from their parents to get them started. And this will be the norm into the future because that is the biggest challenge for young people getting started. But if they’ve got parents who have got a property, then it’s using that equity to be able to get them started.

Now, we’re not talking about buying 20, 30 or 40 properties for this couple. They also just want to move, to take action. I did have the privilege of meeting them briefly when they were here in Melbourne and they were talking about more opportunity by moving into Melbourne or Sydney, because they were IT focused out of Perth. But their plan was simple — retire at 55 years of age. They’re currently 20 now. $2,000 a week, a $100,000 a year passive income. They’re smoking it! They are ready to go. We’ve lined it all up. They’re using all of our professional services. So, they’ve got their Plan. They’re getting their mortgages organised. We’re getting that guarantee sorted, the security guarantee, and they’re going to execute.

And they get it. They understand. They don’t need to be in love with the property. There doesn’t need to be an emotional attachment to the asset. They want a performing asset that can set up their second purchase and then set up for the third property. Then they’ll buy their family home. They’ll start to look at having the children. That’s it.

Those types of things are really great stories! So, all kudos to this couple for starting as early as they are! And that’s what I said before — never underestimate the power of focus and having a goal and planning to become what you plan to become.

 

The “Getting on the Property Ladder” Story

The next story I want to share with you is around getting on the property ladder. So, this particular person, a single person in their early 20s, based here in Melbourne is again not listening to the noise, not trying to worry about overcoming the challenges. They have done an excellent job in saving, likely having forgone a few late night memories, drinking memories, to put a bit of money away. And they did a Plan through Joel, our QPIA. They’ve done their lending through Thomas our Mortgage Broker here in the team in Melbourne. And Nicole our Buyer’s Agent was also part of the process.

We pivoted a little bit on this brief.

Originally, this one was going to be a rentvesting property, but with the incentives that are on offer for first home buyers here in Melbourne, we decided, in terms of what that brief look like, that it may be better to buy the first home, take advantage of the first home owners grant, leaving the property. But down the track, maybe move out of that property when they find their future partner and be able to get that more significant home and that future place of residence. So, I like this story.

We had a good budget of $600,000 – $660,000.  Which is right in that sweet spot for first home buyers. Originally we were happy to be borderless investors, but because we are going to live in it now and take advantage of those concessions and those incentives, we stayed put and bought in Melbourne. It was certainly a great collaboration between the team members. Everyone was on the same page. So ultimately, what we were able to buy was a free-standing house on 600sqm of dirt in Frankston Central.

What can I say about this one? It was one of the best pockets of that area — a quality buy because of the opportunity to rent it out. And it already had tenants in place; it was rented. So, what happens for this particular client because they have to move into it, remember? And if it’s your first home, you have to move into it within the first 12 months — but this is rented out until April.

So, he’s getting a little bit of extra rent. He’s saving up a little bit of extra money. So, by the time he gets in there, there’s going to be more money in the offset account, in his primary account, as we call it under the Money SMARTS system. So, I just can’t speak highly enough of this opportunity. He ended up only paying $8,000 in stamp duty, instead of what he would have paid as an investor… $25,000.

That’s money in the bank, and alone pays for the majority of the professional advice he’s got! And the block is big enough to add value down the track. There’s real value-add here, and the second property in his Plan could actually be on the block of land that he already owns! If you think about then how much that’s going to be yielding, then it’s going to be well and truly positive cash flow, and there will be some good depreciation that he’s going to be able to enjoy. So, he’s adding value to be able to enjoy that. So, terrific result for Nicole and for our first home buyer here in Melbourne! Another great story I’m very, very happy to tell.

 

So , it’s been a busy couple of months in October and November here in the property division of Empower Wealth, as you can see by the activity from both our Property Wealth Planning team and also our Buyers Agents, who are getting out in the field and finding those gems.

I’m looking forward to telling you about the December and January Story Behind The Numbers, which will come out very soon. So, watch this space for those stories!

If you want to check out more of our Story Behind The Number real life client stories, click here. They’re all there. We want to make sure that you can relate to these types of stories. So hence, we’re putting some ideas and some themes around them — this way you can watch the ones that are most important to you 🙂

Ultimately, this is all about giving you the confidence to take that next step forward and take the opportunity in what will be a very, very good buyer’s market this year in 2019.

Thanks for watching.