““Have a strategic plan. Now planning is essential but you need to make sure that you don’t overdo it and sort of topple over into navel gazing and or paralysis analysis and not be prepared to move anywhere. Have a plan and start moving forward. ”

Well hello it’s Bernadette back with She renovates. And today we’re going to be talking about renovating to retire.

Now for me renovating has been the thing that I’ve used to solve most of our financial problems in life. Once you get over about 45 you start thinking about am I well enough prepared for retirement? And for the majority of Australians that’s no. And sadly for the majority of Australians they will never be well enough prepared for retirement.

So today I want to share about how we are going around about this. And I’ve got some really good strategies and ideas to share with you. This is the beginning of a series because it’s quite a big topic and I’m not going to try and deal with it in one session. This is Renovating To Retire part 1.

Now before I get into it I need to remind you that this should not be taken as personal advice. The information in this podcast is general in nature and it’s my opinion only. Buying property involves large sums of money. In fact I’m always surprised at how flippant some people are around spending an amount of money that they would not dream of in any other circumstance.

You need to protect yourself financially, minimise your risk and maximise your profit by getting advice from a licensed financial planner and accountant based on your personal circumstances. Okay that’s the legal bits over and done with.

Let’s get in to the episode. Before I do that I thought I’d tell you how my week’s been going and share a little bit about a day in my life and I have to tell you it’s been pretty up and down in the last week. As I’ve mentioned before I’m finishing a project in Queensland and so I took a trip up last week to get the kitchen installation and the painter sort of on the go. And so I have chosen to go up a day a week or a day a fortnight rather than staying up there, mainly because I’m trying to run a business and a family and everything else at home. That seems to be working, it’s taking longer but that’s fine because we’ve only just got the subdivision through to split the block to sell off the vacant block. It’s pretty well finishing bang on the same time. That project’s going along well but then later in the week.

Actually the other thing that happened last week was that I wasn’t feeling very well. So I took myself off to the doctor and had a chest x ray and discovered I had half a lung missing from the picture. In actual fact I had a lower respiratory infection so that required a bit of serious treatment. And thank goodness for IV antibiotics is all I can say. After a few days I have started to feel amazing that I guess often women tend to do this, we tend to sort of, well I do I know and it’s just ingrained in me I don’t know why. But I work till I drop. I just can’t help it. I’m really trying to look after myself but I just get so focused and driven and it’s not a good thing. So I am reforming the errors of my ways although it’s quite a slow and tedious process. Meditation, mindfulness, drinking plenty of water, all those things go really well for a few days and then I fall off the wagon. So consequently got sick but now I’m well and moving forward.

Now we’re going to talk about what you’re going to do. We’re going to talk about retirement and before I move on I just want to get the elephant out of the room. I absolutely hate the word retirement. It conjures up images of blue haired grannies, knitting booties and going out to lunch on shopper dockets. And so I want to really qualify it by saying it’s about living the life you want. I know that I won’t ever retire because I am one of those people that gets energy out of the things that I do.

However I do value having the freedom to do what I want, when I want and that is something that I think everyone should have. So while we’re talking about retirement it’s really talking about giving yourself the freedom to do what you want to do in your life and having the money to do it. But it’s all very fine to say I want to give up work and just start renovating full time. And plenty of people do say that and do that. But it’s certainly much smarter if you put some thought and strategy into it and plan for it so that when you do actually stop working you are able to move forward.

Because of course one of the key ingredients to a successful renovating career is to be able to finance your projects and if you toss in your job and you don’t have access to funds to be able to do a project then you really stop. Now there are ways out of that but the general person on the street probably doesn’t have the front or the boldness to actually be able to work their way out and do projects with no money. If you don’t think you can do that then following this process that I’m about to describe is the best option for you.

Why would you use renovating and property to fund your retirement? Well there’s quite a few reasons, but one of the reasons that I really love is that generally speaking property keeps up with inflation. So if you sort of work out how much money you need to retire, what income you need to retire. Say you need a lump sum of $2 million dollars to live off the interest, that will erode over time through inflation. Okay. So you’ve got your $2 million dollars there, you’re living off the interest. The $2 million is not growing because you’re using the interest to live on.

And as the cost of living rises that amount gets smaller and smaller by comparison that you’re receiving. But if you are to put your $2 million dollars into property then the value of the property and the income from the property actually grows along with inflation. That’s one of the reasons why I think it’s a really, really smart way to fund your retirement. Of course there is the argument don’t have all your eggs in one basket so diversifying your investments as a risk management strategy. But that’s a conversation for another day.

The other great thing about property is that you can leverage it. In terms of being able to borrow to buy property so that you don’t need the full amount of cash to be able to buy and hold it. Of course there are other elements to that scenario which I’ll talk about in a minute.

But a lot of people say to me I’m concerned about borrowing as I’m getting older. And I always quote the example of she was my greatest mentor. She was my neighbour. She actually left this world just before Christmas. Very beautiful woman who started her investing career quite late when she became a single mother. Pretty sure she started investing in her 50’s. And by the time that she died that she had a massive portfolio and she used to laugh and say that she had a loan that expired in 2043. So the loan certainly outlived her.

When people say to me I’m worried about being older and not being able to get finance. Yes, it is harder. But my advice is just get into it, get started. Start building up your capacity so that you can keep moving forward.

The next thing I need to talk about is the biggest mistake that most people make at this point. So when someone makes a decision to improve their financial situation through renovating and prop or property the first thing they usually do is start going to all the free seminars. And I’m really sorry to tell you but free seminars are about people selling your stuff.

You know the old adage that you don’t get anything for free. It’s absolutely true. And while I think it’s quite a good tool because it gives you the opportunity to see how an educator operates, get an understanding of what they’re about and whether they’re a good fit for you. Unfortunately there are a lot of people in this business who, I wont say unscrupulous, some of them are, but their agenda is purely for themselves. And so what ends up happening is people end up buying properties that do not serve them. Generally they’re off the plan or house and land which are overpriced, almost always overpriced. I know there have been a few instances where people have made money from off the plan but seriously statistically I am sure that they are the minority. Because I speak to people every day who have done this and find that they have properties 2, 3, 5 and even 10 years down the track that are not worth what they paid.

The reason that is two reasons, one is because these properties I call them cookie cutter properties. So basically there’s an endless supply because the developers keep churning them out so there’s no sort of scarcity. And they’re overpriced because they need to include a large commission to actually get them sold. So often quite a modest property will have $30K or $40K commission. So you can understand why the people selling them are quite keen on having you buy them. And they peddle this strategy which they may or may not call out as negative gearing but that’s pretty much what that is.

There are instances where negative gearing works but they are few and far between and buying something like that later in life is really not smart because they are in young areas and buildings. They take a long time to get up to speed for the area to mature and to recover from the overpricing. And so basically it’s a step backwards. The first step is make sure that you don’t get caught up with the shark. Now I’m sorry. You do need to be a bit savvy. You can’t rely on people that you don’t know.

I’m going to do a whole episode on that particular phenomenon because it is the blight of the person who is looking to buy property to assist their retirement. I personally have experienced it. Fortunately my skills, my due diligence skills saved me from making a horrible mistake. But not everyone has that. So you do need to get a bit savvy and learn some skills to protect yourself to at least be able to work out who you can trust and who you can’t.

What skills do you need? Well firstly, I should say, I’d call it tools actually first thing you need is a strategic plan. You may know that you want to be able to stop working at this point in time and the income you need is so much. That is actually the steps you need to take, the projects and the strategies of the projects that you need to take to get there, form part of your strategy. Have a strategic plan. Now planning is essential but you need to make sure that you don’t overdo it and sort of topple over into navel gazing and or paralysis analysis and not be prepared to move anywhere. Have a plan and start moving forward. I certainly do this and my plan changes probably on a monthly basis definitely on a yearly basis. You’ve got to move with the market and with changes in your environment but you do generally need to have a basic plan. I read on a wall recently going to work that the plan or the goal is essential and the details are optional. Because the details keep changing but you still need to have that big vision that you’re moving towards.

The next thing you need is you need to be a bit savvy about buying property. You need some investment skills and know what you need to buy. And of course you can use a buyer’s agent but once again a word of caution. I definitely used buyer’s agents but I have tried and tested them. Okay, I hear plenty of horror stories about buyers agents, buying properties that are lemons.

Just recently one of my students came to me and she said, she was in a bit of tears. Because her boyfriend had signed a contract on a property they were going to build a house on through a buyer’s agent and it had a sewer going right through the middle of a block of land. They had actually suggested to the buyer’s agents that they put in a due diligence clause. He said it wasn’t necessary. He said they just needed a finance clause. Well the finance has been approved and then they had a real battle to get it out of that contract. You definitely need to be careful about who you trust in that respect.

The next thing you need is some high cash flow strategies because any property that you buy where you’re using 100% borrowed money, which you probably will be. You’ll be taking the deposit from some equity and another property and you will be getting an investment loan. Most properties are negatively geared for a period of time and you don’t want that because you want to be able to move forward and you want that property to be actually delivering income not costing you money. How you do that is through high cash flow strategies.

One of my favourites is Airbnb but of course we know that Airbnb. There are a lot of people on Airbnb. There are a lot of them that aren’t making much money and there are a few that are making a lot of money. We call them the 1 percenters. In actual fact 1% of Airbnb hosts are making 20% of the revenue. A massive difference. You want to be skilled at that and then you also need some strategies for accelerating growth and that’s where renovating, a little bit of subdivision. Those sort of skills come into play. So basically what you want to do is increase your equity annual cash flow quickly so that you can move on and grow your portfolio but also so that you’ve got positive cash flow coming in. It’s actually putting money in your pocket rather than taking money out.

The next thing that you need to do is decide when do you want to stop working? Is it now or is it later? If it’s now then you will take a different path because you need to replace the income that you’re getting from your job or your business or whatever your cash flow strategy is straight away. If it’s later and you don’t want to toss your job in straight away, you can and you have the capacity to start doing projects. You can get going now and build what we call your money trees. Start building those little engines that are going to be producing the income when you are ready to stop work.

The other decision you need to make is how much money do you need? Because that will determine how many projects you do a year and how many you need to hold for the long term. Because the thing is we don’t consider buying, renovating and selling as in flipping as an investment strategy. That’s a cash flow strategy like a short term strategy.

The reason being is when you don’t work you don’t get paid. If you want to have true freedom and be in a position where you don’t have to work. Then you need to build those money trades off on the side while you’re doing the short term flipping strategy.

Now I’m going to be talking more about that in the next episode because of course they’re probably the people that I see the most people that are completely over their job and want to get out of it straight away and want to be able to replace it with renovating straight away. That’s going to be the topic of our next episode replacing your income with renovating straight away. It’s not just the good bits but the bad bits as well, the challenges. So that your eyes completely open about what is ahead of you.

I also have a little mind map that I created around this process. Around the fact that people come at this from different situations whether they want to get out straight away or they want to, they’re happy to stay until they’ve built up that foundation. And it just demonstrates the path how to approach it. If you would like to go over to our website you can download that and so that you can play along with the process with me.

Okay, so that’s it for today. Watch out for episode two of this series where I flesh out the steps to replacing your income quickly. So that you can leave work straight away. And also I would be very grateful if you would go into iTunes and leave us a review so that we can spread the love of #sherenovates. Thank you for listening and I’ll see you next week.