Michele's B grade epic
At age 35, I was technically bankrupt and living on rice and chickpeas. So my tale might reassure those who worry that they’ve come to investing too late.
I worked 3 jobs to put myself through uni where at 19, I met my lifelong partner Nick - it was cool back then to wear army surplus but not yet cool to want to be a graphic designer which is where we were both headed. As soon as we started working, we drew a big house (the design thing runs deep) made of 100 x $100 bricks which we fixed to the back of the kitchen door in our rented maisonette (half house) and started colouring in bricks - this was our house deposit. Then our landlord asked us if we’d like to buy our house – both sides!! Yay!! We became landlords. This was wonderful for precisely 3 weeks, and then our tenant was jailed for social security fraud. I had to learn quickly about property management.
Life rolled on for us, consummate yuppies that we were, till I became pregnant. Then Nick was retrenched just as our firstborn arrived, which prompted a highly educational trip to Centrelink – you had to laugh. Soon we were both back at work and we bought a modest 3BR house on acres in the Adelaide Hills. It was wonderful of course, but why oh why didn’t we buy instead in Norwood or St Peters…doh. Or in Sydney or Melbourne….double doh. We sold our pair of maisonettes because it never occurred to me then that we could have kept both properties (Lesson: don’t blindly follow assumptions, always check out ALL your options). The bank manager assured me interest rates would stay at 12%, then they promptly soared past 17%. (Lesson: don’t rely on advice from those unqualified to give it)
Nick bought into the business he worked for, I worked part-time and we had two more babies. Disaster then struck when the business was embezzled just as two large clients went into liquidation owing the company huge sums of money. We looked certain to lose our house but managed to take over the company, placate all creditors and eventually trade our way out of debt. (Lesson: never sign directors’ guarantees and protect your assets with the right structures). Childcare costs negated my salary (I had 3 babies under 4 years of age!) so I had to work from home. To make ends meet I looked after other people’s children along with my own during the day and lectured at uni at night. Hence the rice and chickpea rations mentioned at the start.
Things got better. I joined the business full-time, we both worked hard and were well rewarded financially. This is when I learnt a very valuable lesson: BUSINESS is where you make money. And as I started to understand leveraging, I saw that there are no upper income limits in business.
Where to put the cash? Well I like old houses so we bought and renovated some properties in inner Adelaide just as the boom got underway. We had renovated our maisonettes and painfully learned what not to do. (Lesson: a coat of paint and basic cosmetic reno is usually all that’s necessary). We watched our properties appreciate quickly and began to understand that it’s capital growth that makes you wealthy (even in Adelaide!) and business that provides the cashflow. And if you define business as any profit-making enterprise then positively geared IP also qualifies. I’m something of a contrarian and I’m not known as a team player. So I often tend to look where others don’t. Unhappily, as in fishing, if you arrogantly ignore the tides and deliberately use the wrong bait and tackle just to be different, you’ll usually go home empty-handed. (Lesson: ask questions, learn from others, then go replicate what they are successfully doing but add your own spin – the wheel works just fine - why re-invent it?).
I became a bit frustrated with IPs - our ability to expand was determined entirely by capital growth, a cyclic phenomenon over which we had no control. My properties were worth only what the market said they were worth and the banks lent me whatever they felt like, if in fact they decided to talk to me at all. The potential for business as a way to accelerate our wealth creation plan slowly dawned on me. With business there are no such limits – outcomes are entirely within your hands. And I have seen this firsthand.
Working on the assumption that if one is good, then lots must be even better (Lesson: this doesn’t apply to everything) we are now working on other business opportunities. We want to replace ourselves in our design consultancy and in any case, Nick needs a very long rest as he has worked diligently for many years to support and make happen my various manias – and there have been many!
Re property, at the moment we are just treading water. I’m involved in a land division which threatens to become my life’s major work – it’s in its seventh year. I’ve just completed my first building project which was an architect designed beach house (this for the 4 people on this forum who haven’t yet heard this saga) and I’m about to start a major back end addition on an 1880s villa which I will attempt to do brilliantly but cheaply from the lessons I learned with the beach house - we shall see! It will be our home. I guess I should mention that for the past six years we have lived with our turtle in an upstairs 2BR apartment of closet proportions – this was us paying lip service to delayed gratification – no gain without pain, right?
Getting back to what I said at the beginning about starting late, don’t despair if this is you. Sure, it helps when there are two of you and yes, we’ve enjoyed a property boom, but remember I’ve been investing in Adelaide and not a lot has happened here compared with Melbourne or Sydney. Even so, it’s been possible for us to accumulate $2M in assets within 6 years after starting $150K+ in the red. Your own business is the key – read everything you can on this, then go do it.
I see that Sim has ended with some relevant pointers. These would be mine:
- there is nothing more important than being healthy. Granny was right. Without health, there is no energy and therefore no passion. Even if you are only 20, nurture your health every day – it will pay you huge dividends later, if only to insulate you from the unavoidable effects of stress. And if you smoke, consider my dad who is undergoing cancer treatment – his cancers are directly related to smoking which he gave up 28 years ago. Smoking has a long footprint.
- nurture your relationships – what else is there really? Sharing your good fortune makes its acquisition meaningful.
Can I add my thanks, along with previous posters, to the Somers who so kindly host this forum and who have launched so many of us into the world of IP. On this forum I’ve met some of the most special people I’ve ever known. My love and thanks to you all!
Michele