In 2024, reaching early retirement is more achievable than ever with the right real estate strategy. From defining a purpose-driven mindset to choosing a winning investment strategy, this guide breaks down the essential steps for building wealth through real estate. Learn how to allocate funds, take advantage of growth opportunities, and leverage a team of experts to accelerate your journey to financial freedom.
Now, I’m going to share with you the secret around really building wealth in 2024.
I will simplify it with some practical advice that you can follow whether you're building a $2 million portfolio or simply saving for your first deposit.
If you guys are interested, then definitely keep reading.
The goal is we want to grow in 2024, and the three key pillars are going to be:
We're going to break down each one in a second here.
When it comes to mindset, we've really got to ask ourselves “why”.
When you're doing something specifically like wanting to save $10,000, chances are you'll execute with a lot more conviction when you have a strong purpose. So, why do I want to save $10,000 this year?
This might be because, the following year, you want to travel, so you're saying: Okay, I want to take my family on a holiday. I need $10,000 this year, which means every week I need to save about 200 bucks.
If you don't have that "why," it means that at the end of the week, if you have a surplus of 200 bucks and someone calls you up and says: “Hey, Ravi, let's go get some KFC," you're going to be like: “Yeah, cool. I've got an extra 200 bucks anyway, so I'll go and spend it."
Therefore, that strong conviction is really driven by the purpose.
When you're going out and making your plans for 2024, just know that your mindset is really driven by your conviction, and that's going to be attached to why you're doing something.
You can have the mindset of knowing this is why you want to do it, but "how am I going to do it?" is the question you need to ask next.
That's where your strategy comes into play.
Your strategy and your risk appetite will basically live together and will determine what risks you're willing to take or what actions you're willing to take based on your risk profile.
I like to personally focus on my end goal.
Now, everything moves very quickly in my world, very volatile, and that's largely because I'm self-employed; I run my own company. So, in that, I could have earnings that are really good this month and not so good the next month.
If I'm scaling up my business and hiring more people, then I'm probably going to see increases in expenses relative to the income, which comes later. In your case, you might be going: Well, I'm training at the moment, but in three years, my income drastically improves.
That's why I like to start with the end goal, which is loosely based on living debt-free, living with choice, retiring early, and having everyone around me also do the same. Then, I'll work backward and say: Okay, what can I realistically plan for with a high level of conviction and certainty? That's really about a three- to five-year window that I can see max out for.
Once you've got the "why" and you know how you're going to do it, you need to know how you're going to execute.
In order to execute this plan, you need to ask yourself the following:
There's a lot to handle, right? So, if you say: I'm going to go and do all of these things, if your priority that year is not to have a life, then you probably do quite well. But based on a lot of the people I speak to, including myself (because I do speak to myself and happen to be quite entertaining), I like to live a balanced life. I like to have a balanced approach.
That's why I outsource everything I can possibly outsource. This comes down to not just my business life but also my personal life.
I know that I will do a really bad job when it comes to cleaning my apartment, so I'm going to say: Well, okay, I could do a bad job every week, which would probably be about two hours and really not that great, or I can outsource that and have a cleaner come every three to four weeks. That way, it's always maintained; the cleaner is happy because they get paid; I'm happy because I've got a cleaner space, which means a cleaner mind, and that means I can perform optimally because I work from home.
It is the same thing that happens with real estate.
I see it all the time when it comes down to execution.
You can have all the education in the world, go out and do every course possible, you can learn everything you want about data, statistics around real estate, but unless you're going to go and put pen to paper and actually buy a property, it means nothing.
It's similar to if you go out there and say: I've got this workout plan, I've got this meal plan, I already know what to do. I'm going to get that 10% body fat or whatever my goals are.
I can do that, but simply looking at the plans without executing that first push-up means you aren't going to get anywhere closer to that goal.
Therefore, when you're outsourcing, you need to know where your resource is being used effectively, and maybe you can improve and optimise the speed at which you execute.
The goal for many people will be to build wealth.
We're in such a wacky period where the economy is slowing down inherently, but you've got stocks at almost all-time highs, if they're not already past that, you've got property at all-time highs — and that's just in Australia.
Overseas, the same sort of stuff's happening, but the economy underneath is crumbling. So, as we see all of these things happen around us, we want to have more choice, we want to have more accountability for our actions and for our future.
Therefore, building wealth is super important to you, and that's why we're going to figure out what we need to do.
It starts with the bare basics, which is sorting out our finances.
So first up, when we're sorting out our finances, we need to think of our finances like a meal plan. If it's not in the plan, you're not allowed to eat it.
If you think about your daily calories and you say: Okay, I can only eat this much. Otherwise, if I eat more than this, I will put on weight, and that's going against my goals. This is the exact same way finances work.
If you say: I need to save this portion of my income; if I spend over that, it means I'm going to have a deficit at the end of the year, and if I don't spend as much, I can save more, and that means I can go and splurge later on, or I can use that savings towards investments as well.
Now, it starts with your major expenses, and I would focus on the major expenses first whether it's a holiday, a car, or maybe it's your health.
The way I would break this down would be to say: Okay, I need to look at what my major expenses are for the year, and this might be: I'm planning for a holiday in September.
Great, that's a yearly plan.
Next up, I'm going to see monthly what my biggest expenses might be — private health insurance. So that's monthly. Then, I'm going to look at what's my biggest cost weekly, and most likely it'll be shelter in the form of rent or mortgage repayments.
To put all of this together, you're thinking about the 50-30-20 rule:
This could be groceries, food, shelter, transport to get to work. Then, you think about 30% being wants. You might go: Well, I want to go and eat out every second day, or I want to get Uber Eats. These are wants.
Could you cook at home and have some tuna cans? Yeah, you could, but, you know, who wants to do that?
This is very important, so we're going to take a pause here. So many people will think about building wealth and say: Oh, that basically means I won't have a life. I won't be able to eat out. I won't be able to see friends. I can't do anything. It's so depressing. Like, why would I want to do that? Let me just go and splurge my money. I'm in my 20s, my 30s, my 40s—YOLO.
You are right? It's only once.
That’s why you've got to be very well-prepared for what's coming, because if you go out and spend all your money in your 30s, guess what happens in your 40s? You're not having the big Zinger box anymore; you're probably just going: Hey, I'll have a snack box from KFC, because it's like $3.
By then, it's probably worth $15, who knows? The plan is that you want to have a balanced approach so you take care of your needs first, peace of mind.
Now, you go into your wants and say cool, I know why I'm doing this, I'm enjoying my life as well, smelling the flowers. Then you've got your 20% which is going in and saving and investing. You keep to this 50/30/20 rule, which sounds so basic, yet most people won't do it. It will get you further in life if you don't have a budget already in place, so definitely follow something like this.
Now, I really want to focus on not just your budgeting, which is fundamental to this. I also want to focus on realising:
Now, let's assume you guys have a $100,000 household income.
Before you ask me: "100K, who's making that, and is that before tax or after tax?" This is after tax, and I don't assume everyone's making this.
I'm just saying that the majority of people that come to use our services—I'm basing it on that information. You could be higher; you could be less, and accordingly, you would work out the numbers.
So, in this case, from the $100,000:
What I want to focus on here is $20,000, because if you realistically look at house prices where they are now and where they will be in 12 months' time, $20,000 probably doesn't cut it.
Now, if you're making more than this, you're happy, you're okay with that, but if you're making less than this, it feels like you're always going to be left behind. You get further and further away from your goals, despite doing the right thing, which is, "I'm still saving $20,000 to go and invest."
However, if the market moves faster than me, there's nothing I can do.
This is where the importance of real estate is.
You might be starting with zero in your bank account, and unfortunately, you're going to have to go and strap in to save as much as you can to get started. But if you're someone who's already got savings, and you're saying: Well, I want to kick the can down the road; I don't want to get into real estate, and whatnot, just look at the power of real estate.
Therefore, if you're looking at $100,000, which is after taxes, you're saving about $20,000 a year.
However, if you used that savings and you said: I'm going to buy a 400K property, and you might already have some existing savings, at 5% growth, that means $20,000 tax-free passively. That's on one property, right?
You might go: Well, I'm saving to buy my own house, but the house is going to cost you 8 years.
You could go out there now and go and invest properly and could be building your net worth and position passively every single year.
If you decide then in 8 years that you want to buy something, you could always go and sell your properties; you could take out some equity on some, depending on what your borrowing capacity and your lifestyle look like. You have a choice at that point.
However, if you're someone that goes: Well, I'm buying in 8 years; I'm just going to save my money, you just get further behind because what you can save versus what you can save by investing is going to be vastly different.
Here's a classic example:
If you go in and say build a portfolio for $2 million at 5%, you're making $100,000 passive equity.
Therefore, when you think about it, that replaces your 20% portion that you would have to originally allocate for if you were making $100,000 anyway, and this does a couple of things. You could go out and spend more, whether it's needs or wants, so it increases your living standards.
You're happier because you're spending more money on things that matter to you, and that might be donating that money or spending more time with family. But the whole idea is to build up that machine, and you do it with speed.
Now, think about it—how quickly can you actually build a $2 million real estate portfolio?
Well, one of the things you'll have is: To access $2 million worth of real estate, I need to go and find a bank that's going to be willing to give me a loan.
Now, if you pay as you go, chances are most banks will give you a loan, but you don't know if one bank has a better rate than the other because what's advertised online is not actually the right rate, you probably need to go to someone who's got access to policies from all banks and institutions; that's where the importance of a broker really kicks in.
As a result, you would go: Okay, I could go in and see all the policies, and I still probably don't get the best answer, or, I just outsource it to someone who does it 24/7, and so you get to the answer a lot quicker because you used a broker.
Same thing when it comes to depreciation, saving tax, what structures to put properties into. You go: I could figure this out, or you could go to the expert who probably has all these other clients they take care of. They can maximise tax incentives, they can go and structure it properly for what I want to achieve, so you go to an accountant, and the same thing happens for the right property.
If you logically think about this, would you rather spend 1 or 2 hours competing on trying to find a property, versus someone as a buyer agency who runs this all the time every single day of the week and does multiple deals?
You don't want to compete on that. I mean, who would want to do that?
That's like effectively saying: I'm going to go run in a race tomorrow, and yeah, I'm pretty fast, but I ain't Usain Bolt fast. That's what I'm effectively going up against if those other buyers' agents are out there.
Think about it; there's not just one Usain Bolt—there are many out there.
That's the whole idea behind speed.
So, you might just think: If I want to find the right property, why would I want to sit there and look at data and say, 'Oh, this is days on market'? I could just outsource that.
Now, if you go out there and do these things yourself, you're probably going to research for about six months.
I've seen it happen; I've seen people email me, and it usually takes a lot longer, but six months is being optimistic.
Now, if you assume you're looking at the Perth market, and Perth has outperformed this year, and it's been doing really well, you're probably getting about 15% growth in the year. On a $400,000 house, that means $20,000 in six months.
Therefore, if I start today and I start researching, if I buy in six months, it will cost me $420,000 for that same property or you could outsource it, have no headaches, and then you're getting a better deal anyway because there are probably client relationships there; there are off-market deals that are happening that I don't know about.
As a result, in six months' time, I will have a property that's already grown by $20,000. I extracted that equity, and now I've got a deposit starting to build up for my next property.
Mindset is key. If you want to go further, you will need a team.
You've probably heard this across all of the internet, and you may ask yourself: Okay, do I really need this team? Do I need this person? Do I need this person?
Just think about owning a football team. You would want your Beckhams, your Ronaldos, your Messis in that team, right? You want the best of the best. So, if you want the best of the best to take you to the Grand Final and win what you want to win—in this case, financial freedom—you need to attach yourself to the right people at the right time.
This way, you can get in with speed, execute, and reach whatever goals you have in mind.
I hope you guys have enjoyed this article! I'll catch you guys in the next one. Thanks, guys!
Disclaimer: Search Property Pty Ltd (SP) does not provide financial or investment advice and does not hold a financial services license as defined in the Corporations Act 2001 (Cth). Any advice given by SP is general in nature and does not take into account your personal circumstances or objectives, financial situation or needs.
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