46 yo SWF seeks Financial Freedom

[Pikachu052]

Sorry for the long thread, but you do need the whole picture.

Settled on the sale of an underperforming IP last week and now don’t know which direction I want to head in. I don’t normally sell but this was a JV and the other party wanted out.

I was watching an episode of The Secret Millionaire and it was about an average lady who called herself a professional property investor, who was worth about $20M. I understand that the property market in the UK is different to ours, but it got me thinking: How to I become a multi millionaire, or at least give up my J.O.B (just over broke) without waiting until I am too old to spend the money. Yeah like I’m the first person to ask this question!

Sure I could just buy another IP but then it is the waiting game for the market to do something. I live in the Canberra area and the market here is really expensive, so I it is all but ruled out.

So I am opening myself up to suggestions. My only risk aversion is to invest in low socio economic areas where you have tenant issues and/or high crime rates. Here are some details:

• 46 year old single mum with an almost 17 year old son
• Hate spending, except for groceries and shares
• Live a modest comfortable life
• Would love to open a coffee shop but am too lazy to work that hard
• Don’t hate my J.O.B. just couldn’t be bothered going every day. The people are nice and I can usually fit in a couple of hours a week of personal stuff like share and property hunting etc.
• Spend a lot of time on the internet searching for different real estate and share opportunities, so I am not time poor and reading mags and books on investing
• I am known for my organisational and budgeting skills and keeping to a plan, when I have a focus point.

Financials
• J.O.B = $94k pa gross
• PPOR = value $410k, owe $96k, min repay $820pm, pay $550 pf, fixed at 7.99% until Oct 2012
• 1 IP = paid $246k, value $330k, rent $300pw, IO repay $1145 pm, fixed at 5.99% until May 2014
• 2 IP = paid $240k, value $300k, rent $310pw, IO repay $1100 pm, variable
• 3 IP = paid $299k, value $300k, rent $320pw, IO repay $1250 pm, variable
• LOC = limit $220k, owe $172k, bal $48k, IO repay $950pm
• Car = paid $35k, owe $15k, min repay $464pm, pay as of last week $1000 pf.
• Shares = $35k, mostly REITS, some resources and misc others
• Super = $160k

No other debts. I have a credit card with a $5k limit, but I paid it off out of the settlement money.

Like any other investment I am starting my 6 months worth of due diligence. Come October when the car is fully paid off, I will have $1000 per fortnight with nothing to do and I refuse to waste it by putting it in the bank. Obviously I could do something now and just keep the loan, but I hate bad debt.

Well there is my life, out on the canvas. I am 46 yo now and I want to put a sustainable plan into action so by the time I am 50 I have the financial freedom to do what I want, when I want. I looked into joining a mentoring programs but there are way too many out there to choose from.

Hey if all else fails, I will just keep buying houses. Thanks for listening.

 

[Paul Do]

The first step is to get some big picture understanding of investment markets and the second step is to be realistic. And then go from there.

Over the long term (the last century), the All Ords has returned just over 10% p.a. - that's capital gains plus dividend yield. Other investments of similar risk will provide similar returns.

You can earn more than this by taking greater risks (e.g. by gearing up), or by being better than average. The problem is that 80% of the population think they are better than average. My financial plans since I started investing were always based on average returns, and anything else was a bonus. That way, I don't delude myself.

Given your capital base, you probably can't realistically achieve financial freedom by the time you're 50, based on say average weekly earnings. If you aren't realistic, then there's a risk that you and your money will soon be parted (e.g. losses from excessive risk, fees for boot camps promising the Holy Grail of investing, etc.).

However, don't be too wedded to the concept of strict financial freedom and acronyms for J.O.B. which you probably picked up from some silly seminar/book. For example, you might be able to achieve a lot of freedom by downshifting jobs to something you really enjoy after 50. So don't close off any of your options.

Finally, as you get older, consider super as an investment vehicle due to its tax effective environment.

 

[WinstonWolfe]

I've got your equity ex super around 430k, and infer you have no free cash flow (until car is paid off).

My view is you would be wise to stay more liquid over the next 2-4 years, on the presumption your interest bill is going to expand $400 a week (allow for 2% rate rise) and rent rises will lag.

Hence, I'd recommend direct blue chip shares with no more than 60% margin loan, and use stop losses.

Anything passive property investment related would have too low a risk adjusted reward, imho.

You sound like you are single. Investors often overlook the value of a good partner.

 

[Pikachu052]

Hey WW
Quite the contrary, I know I have cashflow but want a smarter way of using it than the current sit and wait model. It's just that I would rather get rid of the car payment first.

It's just that my brain is constantly trying to think of ways to get the best use of my dollar and now that I have disposed of the underperforming IP I have cash not working for me adequately.

And yes I am single, hence SWF (single white female) I stole it from the movie and you are right, never underestimate the value of a good partner. Finding a GOOD partner is harder to find than a good property deal.

 

[WinstonWolfe]

Anything I can think of to accelerate your returns is a non passive value add.

- fix and flick
buy a tired house/apartment and tidy the garden, new flat pax kitchen, new bath, coat of paint inside, hire nice furniture for the resale. do as much yourself, then use one of the many rea's charging cheap comm.

- jv
buy a dev't site with 1 or 2 others, and add a property. 2-3 townhouse subdivision, battleax, splitter.

- look for positive cash flow opportunities...houses for student accommodation near ANU.

- research whether you can get a better return on your current IPs....i.e. defence force housing.

- shares. educate yourself first before going here. it is too easy to lose money when leveraging and chasing higher returns. Money mgt and calculating risk adjusted reward are extremely important to understand. If you are good with numbers, then that might be more enjoyable than installing a flatpax in an unlevel kitchen out of square, or masking off everything to operate an airless spray gun.

BTW, before putting time and energy into anything active, work out the return above 6.3% bank interest.....and decide whether that margin is worth the time and effort. And finally, do your cash flows carefully to accommodate interest rate rises.

 

[Dazz]

before putting time and energy into anything active, work out the return above 6.3% bank interest.....and decide whether that margin is worth the time and effort.

Sage advice WW.

Whatever endeavour you strive to do, always reference yourself back to the "do nothing, cost free, risk free" benchmark to see how you are performing, and whether the time and cost inputs are worth it.

 

[craigb]

we will help you sort those little issues out, so i guess i will see you at the investment meeting at the MBA , don't be shy, come along 21st april $15 cheers,

 

[Pikachu052]

Thanks WW

Would love to do fix and flick, just trying to find the right location and price. I did find one that I was keen on but I missed it by a couple of days. Will keep an eye out for something else. I just want to do it to see if I can.

JV - the IP I just sold was an JV with my brother so wouldn't go down the path of strictly buying with another, however the thought of a development excites me greatly. But how do you find others also wishing to do it. Most of the people I know already think I am crazy to have up util recently 5 houses.

Shares - love them. I spend every other waking moment, when not on property looking at shares. I have invested a bit in REITS, stick with what you know I guess, some quick and nasty resources companies and a couple of really new startups. REITS and startups are 2-4 yr investment, so again sit and wait. The resources are just for my amusement to see how much I can make or lose in a day.

Student accom, gives me an idea that I hadn't thought of and I know a pretty good location. Ta's will do more research.

Thanks for taking the time to reply, I really appreciate it. That's what i love about this forum, people are so generous with their assistance and aren't tight with their information.

 

[Paul Do]

I spend every other waking moment, when not on property looking at shares.

If you manage to achieve financial freedom at 50, I'm curious to know what you'd do with all of your free time?

 

[WinstonWolfe]

Thanks WW

Student accom, gives me an idea that I hadn't thought of and I know a pretty good location. Ta's will do more research.

Re student accom, suggest you contact ANU student union, or whoever facilitates student services/accom, and see if they have an accom advertising service. and what the supply demand scenario is, how much students usually pay to be close to uni, etc. All part of good dd....work out what the demand is like before trying to supply it.

Another angle. check supply/demand of short-medium term self contained accommodation... I vaguely remember Canberra being tight for business and holiday letting.

 

[Rob Williams]

However, don't be too wedded to the concept of strict financial freedom and acronyms for J.O.B. which you probably picked up from some silly seminar/book.

I think the Kiyosaki disciples use that term (J.O.B) a lot.
$94k pa is NOT Just Over Broke.
In fact, I think it starts to become a bit of a comfort zone, which many people find difficult to break free from.
Whether one is feeling the pain of a low income or the comfort of a higher than median income, making the decision to break away from the comfort zone is where it all begins.
If it wasn't for my J.O.B I'd not be able to borrow the funding that I have in order to build my portfolio. My JOB is a tool and a means to an end, not something to be denigrated.

 

[WinstonWolfe]

Sage advice WW.

Whatever endeavour you strive to do, always reference yourself back to the "do nothing, cost free, risk free" benchmark to see how you are performing, and whether the time and cost inputs are worth it.

Noted that edit Dazz......didn't know where you tongue was prior.

 

[Pikachu052]

If you manage to achieve financial freedom at 50, I'm curious to know what you'd do with all of your free time?

I currently do volunteer work teaching people how to manage their finances and budget etc. I would like to commit more time to this.

I am also starting as a volunteer with Legacy tomorrow so would like more time there too I imagine.

I think the Kiyosaki disciples use that term (J.O.B) a lot.
$94k pa is NOT Just Over Broke.

You are right, it is a saying I have carried around for many years and I guess I have used it since the days when I wasn't earning what I am today. I am fortunate enough to have worked my way up to earn this salary but I guess I do take it for granted. I wouldn't be able to borrow what can if it were lower. So point taken.

 

[Dazz]

I currently do volunteer work teaching people how to manage their finances and budget

This appears, at first glance, to be quite paradoxical given the topic of your thread ??

 

[Paul Do]

The reason I asked is that there are are two main paths to achieving your goal of doing more volunteer work.

1. You can try to rush the investment process and spend all of your time on investing to try to be financially free by the time you're 50 and then do the volunteer work. But this is very risky - and there's a chance you might have to start from scratch.

2. The second path is to let compound interest do its work. This will take longer, but is more sound, and most importantly, you can start doing the things you want to when you are financially free right now.

In my experience, many new investors that go down the guru route (seminars/books etc. from "gurus" that don't have a sound investing background), start investing late, and then try to make up for lost time taking path 1. However, when they reflect on their performance 10/20 years down the track, they realize that they probably would have been more successful following path 2, AND having more time to enjoy the things they want to do when they are financially free. For example, a fix and flick strategy will most likely set you back compared to a fix and hold strategy.

 

[Pikachu052]

This appears, at first glance, to be quite paradoxical given the topic of your thread ??

Ha ha, yeah it does.

When I divorced in 2001 I had an 8 yo son and a job that paid just on $50k pa. I had a friend who had property who was willing to give me the time of day, as well as the name of her broker and accountant.

I dusted myself off and have managed to buy 7 properties. I have sold 3 to upgrade to better ones.

If I can help just one person like I was helped then I will consider myself a very lucky girl.

In the eyes of many I have already achieved financial freedom. Initially I started the thread to get ideas for how to muliply my "wealth" in the shortest period of time but looking at it now it just seems greedy and I feel a bit embarrassed.

I am grateful for what I have already achieved.

On second thought, why should I feel bad or embarrassed. I am sure Donald Trump didn't go "Oh I am too rich I better not build anymore buildings, it's too embarrassing being rich".

I am taking that monkey off my back and standing up and saying "Why shouldn't I be independantly wealthy?". I have the capacity to earn, I am great with facts, figures and research and am going to do what the government cannot do for me, provide for my financial future into retirement.