So many investors stall out after buying their first property.
Something goes wrong and they end up having to sell. That experience puts them off for good and they never think about investing again.
Vicky could have been in that situation. Before coming to I Love Real Estate, she’d had an investment property that she had to sell.
That’s what’s going to happen when you face a choice between making a mortgage payment and buying the essentials for your kids.
But she didn’t get discouraged.
It’s fair to say that Vicky hasn’t always made the best choices when it comes to property.
Take equity as an example. She and her husband both have decent jobs and could build equity in their home. But whenever they got a little, they’d take out an equity line and use it to add to the home.
A new pool here or a new shed there.
Anything to make them look successful.
After her previous investment, buying another property wasn’t at the top of her mind.
Then, she had a serious health scare. A cancer diagnosis left her reeling and she spent a couple of years dealing with the issue.
Happily, she’s fully recovered and cancer-free.
But that scare lit a fire under her and she decided to look at investing again.
The “Big House” was the first thing that she and her husband bought.
It was an amazing space and a great place for them to live in. But a big house brings with it some pretty major problems. They spent thousands of dollars on fixing different issues with the property.
They knew they’d have to move out soon. The house was essentially a mansion but the couple didn’t earn enough to maintain it and deal with all of the costs.
They also kept piling on the debt. They had loans, car finance, and even boat finance to consider.
This left them with a negative cash flow of about $31,000.
That hurts.
Finally, they sold the “Big House” for a little over $1 million. The dream house is gone, but so too is the huge mortgage attached to it.
Vicky then bought a beach house.
They basically swapped one debt for another and ended up with this ugly duckling of a property. She used that house as her principal place of residence (PPR) during renovations.
Unfortunately, some of the money earmarked for the project ended up going elsewhere. Vicky had to go to the bank and explain to them why they’d spent everything and only had half a house built.
Another mistake made. But she’s learned from her experiences and is now turning everything around.
Building a granny flat on the beach house lot was the first step. That’s now generating an income that’s helping with expenses.
And with I Love Real Estate’s help, she started another project.
Vicky started working on a duplex after putting down the deposit on June 2017. It should have settled in September of that year.
A small loss of focus meant that it didn’t settle until July 2018.
But that’s okay!
Once she’s finished the project, she’ll finally go from negative cash flow to positive.
Vicky hasn’t quite seen her hard work fully pay off yet. The duplex is still in progress, after all.
However, she’s still enjoyed a massive turnaround.
She started with $191,000 in equity and $31,000 negative cash flow.
Once the duplex gets finished, she’ll have $667,000 in equity and a positive cash flow of $33,000.
For the first time in her investment career, she’ll have money coming into her bank account from her properties.
But she’s had a rocky road to get there. These are the lessons that she’s learned along the way.
Vicky will tell you that she fell into a trap that many Australians fall into.
Whenever she and her partner built a little equity, they’d access it to buy something. Whether it was a pool for the house or a boat, they’d spend on the success factors.
Those don’t mean anything in property investing.
And if you’re not careful, they can create debts that you’ll struggle to recover from.
The lesson here is to use your equity responsibly. If you wish to build wealth and create a better future, the little success factors can wait.
Vicky’s issues with the beach house came about because she got emotionally invested in the property.
Instead of renovating it as an investment property, she renovated it as a residence for herself. That meant she spent a little more than she needed to on the work.
This is a huge risk for investors.
If you become emotionally invested in a property, your judgement gets clouded.
Take the emotion out of it and treat it like a business venture.
The good news is that Vicky’s duplex will finally put her in a position that she can really build from.
However, a loss of focus means that this didn’t happen as quickly as it could have. Vicky says that losing sight of her strategy for a while contributed to the slower-than-expected settlement.
It’s crucial that you have a clear strategy in place before you invest. Do your due diligence and understand exactly what you want to achieve with the property.
There’s no shame in saying that Vicky has made some mistakes during her investment journey.
The real shame would have been if she gave up on property investment altogether. But she’s stuck with it and learned important lessons along the way. Upon the completion of her current project, she’ll finally be in a positive cash flow position.
It’s okay to make mistakes. All of us do.
Be like Vicky and don’t allow those mistakes to prevent you from using property to create the life you’ve always dreamed about.
DB
