December 12, 2018 by Dymphna

How this beginner earns $160K pa… tax free!

The follow-up onDesley’s amazing story – how just two commercial deals set her family up for life.

So yesterday I shared the start of Desley Ritter’s story –Desley was the winner of this year’s Student Success Story Competition.

In short, she managed to take on the financial burden for her whole family, and set them up with a brand new $160,000 a year income stream… from scratch!

So how did she do it?

Well, as I mentioned, Desley threw herself into the education and the programs on offer, joining Ultimate and then quickly following it up with the Platinum Program. She was also very dedicated in putting together her A-team – her team of mentors, lawyers, brokers etc.

(Remember, this is someone who had never paid an electricity bill or filled out a tax-return!)

What she and her team realised was that for Desley it was all going to be about cashflow.

The sale of the farm had left them with a decent war chest to work with, but not enough to retire on. And they were still too young to be living on dog-food, so Desley needed an income stream.

And if you’re talking cash flow, then the most obvious go-to is commercial property.

If you know what you’re doing and find a good property with a secure tenant, then the yields on commercial property beat residential property any day of the week.

And so Desley started hunting for deals. She actually lookedat 20 or 30 deals before she landed her first one. This is a case of persistence pays off, but every deal you look into – every feasibility study you do, every time you set up the structures and sort out your finance – you gain experience.

And experience is invaluable.

Anyway, after getting down the track with a few deals that never quite landed, she found a set of 31 storage sheds in Townsville. It was on the market for $800,000, but Desley found out that the couple who owned it were in the middle of a break-up, and with Townsville in the middle of a soft-patch, the vendors were very motivated to sell.

So Desley put in a low-ball offer of $455,000… and the vendors went for it.

With some of the sheds still available to rent, the complex already earns $42,000 a year, which after costs, creates a passive income stream for Desley of $33,000 a year.

This is a great result, but Desley knew they needed more. With the confidence she gained, her and her team set their sights on something bigger.

The property was a Townsville shopping centre, fully tenanted with seven tenants. The vendor was asking for $2.88m, however the deal came to Desley through a friend who had had an offer of $2.8m accepted, but who couldn’t get the finance together.

Desley (and her team!) crunched the numbers and realised they could only make it work if they got it for less than $2.4m. She put in anoffer of $2.325m, which the vendor accepted… so long as they could close the deal within the week!

With her team and the guys at Pacific Law working over time to get the right structures in place, Desley and Murray drove seven and a half hours up to Townsville to inspect the property and close the deal. They signed the contract in a service station in Rockhampton, and the vendors signed the next day.

All told, having knocked half a million dollars off the asking price, the complex will pay Desley and Murray another $130,000 a year in passive income.

But this is the thing. Desley and Murray put both deals in a self-managed super fund. A SMSF won’t suit everyone in every life stage, but since they were going for cashflow, not equity, and since they were already in their pay-out phase, the SMSF structure made a lot of sense.

It actually means that $160,000 a year she’s earning is completely tax free!

So that’s how Desley did it. With a focus on commercial property, in just three short years she was able to set her family up with a lifestyle income.

Not bad for someone who couldn’t even do a tax return.

Good on you Desley. It’s an inspiring story if ever there was one.