What would you say about somebody who has two properties in their portfolio and a healthy chunk of equity?
You’d assume they’re doing well as an investor, right?
But what you see on the surface can hide problems. All of that equity doesn’t help if you have a negative cash flow.
That means you’re paying money out of your own pocket to sustain your portfolio.
That’s exactly the position that Basia was in before she came to I Love Real Estate.
The year was 2016.
That’s the year Basia chose to be her year.
Before then, she and her husband had worked themselves into the ground. In addition to taking care of their own family, they helped out other people as much as they could.
Basia felt exhausted and couldn’t help but think she was going in the wrong direction.
That’s why she needed a change in 2016. It was also in this year that he learned about I Love Real Estate.
When Basia came to her first seminar, she already had two properties. Neither generated positive cash flow, though she had a decent amount of equity built into them.
Attending that seminar changed her entire outlook on property investing. She says that she’s never handed over $10,000 so quickly to get started with something.
The good news is that Basia wasn’t in a bad position thanks to her previous investments. But she’s made five deals since 2016 that have made a huge difference.
The first was a seven-apartment development in Perth. Most will tell you that Perth is a flat market, which makes it bad for investors.
But Basia wasn’t going to rely on property growth cycles. She manufactured her own growth.
With a subdivision strategy, she created a set of seven apartments that have $130,000 of equity in them.
That’s from the moment they’re built.
Plus, they’ll generate a rental income of between $10,000 and $11,000, even with rents going down.
The second deal she made followed the same template. It’s just around the corner from the first. And the money she makes from it will help to pay down about half of the $1.6 million she has on her investment property in Sydney.
Deal number three came from a neighbour who lived near the location of the second deal. Again, the strategy is subdivision into apartments. That project’s in progress as we speak.
For her fourth deal, she focused on getting a principle place of residence (PPR) for her son. At 22 years old, he’s on the real estate ladder right after leaving university. Plus, he’s benefitting from the education that Basia can provide, which means he’ll understand property better than most.
Basia also owns her own business. That’s where her focus went for her fifth deal.
With the help of I Love Real Estate, she managed to negotiate $38,000 off the lease for the business property she rents.
That’s a 50% reduction on the previous lease.
And she’s not stopping there.
Basia has another project in progress that will see her building a commercial property to sub-let out to other businesses.
Combined, these deals will provide Basia with the positive cash flow that she didn’t have from her previous portfolio.
Plus, she’ll have even more equity to leverage, should she need it.
More importantly, she’s providing for her family with every deal. Buying a PPR for her son means that he gets a head start on many young Australians.
And Basia gets to do something that she absolutely loves for a living.
Now, let’s look at some of the lessons that she’s learned along the way. Of course, these are all lessons that you can take into your own investment journey.
This is the big issue that Basia had when she came to I Love Real Estate.
Both of her properties were negatively geared. That meant she had to pay money out of her own pocket to keep them going.
What happens if that money isn’t there?
The problem with this strategy is that it can force you into doing more work elsewhere just to invest.
That means you don’t have the freedom to do what you want with your life.
Going for positive cash flow every time means you never have to worry about where the money’s coming from.
So many investment “experts” advise people to invest based on market cycles.
If an area’s bottomed out, they’ll tell you to avoid it until it starts growing again.
Basia learned that you can manufacture your own growth. If you know enough about the location and the people living in it, you can create opportunities where others can’t see them.
Best of all, you can acquire properties for less and profit from them using your strategy.
Basia says that it was never in her nature to celebrate. She admits to being a perfectionist in most things, which makes celebration seem a little indulgent.
But it’s so important that you pat yourself on the back when you achieve something.
Celebrating builds your confidence in yourself. It’s a recognition that all of the hard work you’ve put in had paid off.
That confidence will help you to confront new challenges and projects in the future.
Even a portfolio that seems healthy can have a few dangers lurking within it.
In Basia’s case, having negatively geared properties put a huge strain on her financial resources.
When she decided to make a change, focusing on positive cash flow is one of the things that made a huge difference for her.
Her story shows us that many experienced investors can still learn a lot. And once you find something that works for you, stick with it so that you can continue building your portfolio.
DB
