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Almost Ready To Exit The Workforce, Thanks To Property Investment

Almost Ready To Exit The Workforce, Thanks To Property Investment
February 7, 2024 Propertyology

Imagine how you might feel as an everyday Aussie who, a little over 8 years ago, commenced an investment journey with $100,000 in equity and now it is worth $1.35 million.

That is the situation for Leigh and Hayley, a lovely couple who are now in their early 50’s and began their relationship with the Propertyology team in early 2015.

They are not retired yet but can well and truly see the light at the end of the workforce tunnel.

Using a combination of strategic planning, expert analysis of property market conditions of each of Australia’s 400 townships, and skilful buyer’s agent services means that Leigh and Hayley now have a high performing investment portfolio.

Seven (7) properties, in very different cities across four (4) different states provide a combined asset value of $3.7 million.

Having already done the hard yards to create such an outstanding asset base, the real rewards from skilful investment in real estate over the next 5 to 10 years will be incredible.


Intelligent strategy

When this journey commenced, they had $400,000 equity in their family home, plus their initial $100,000 deposit sitting in a non-performing investment property located not far from their own home.

During our initial consultation, Propertyology invested heavily in Leigh and Hayley’s property investment knowledge.

This included sharing many evidence-based research studies, replacing factually false assumptions with growth driver proof, forming a responsible risk mitigation strategy and developing a very important (borderless) mindset.

Through executing our property investment philosophy, the Propertyology team initially helped Leigh and Hayley invest in two handpicked properties in 2015, at opposite ends of Australia – one in Hobart TAS ($305,000) and another in Cairns QLD ($345,000).

Both locations were out of the national spotlight, chosen through our structured research process, and both properties were cash flow neutral for a few years.

2-years later, the capital growth from the original investments was put to good use with the purchase of two more properties in 2017 – this time in Dubbo NSW ($350,000) and Burnie TAS ($224,000).

Rinse and repeat.

$332,000 was invested in a low maintenance house in Townsville QLD (2019), followed by Albury NSW ($420,000) and Wodonga ($395,000), both in 2021.


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The relaxed feeling which everyone associates with taking a quality annual holiday is something that Leigh and Hayley can now appreciate to be within their reach of experiencing year-round, well before their 60th birthday. Something that only 5 percent of Australians achieve.

Leigh and Hayley put themselves in a position to achieve something better than 19 out of every 20 couples by ignoring generalisations and biases, distributing investment capital and cash flow in a more responsible way, and engaging expertise to (intelligently) select locations through following a comprehensive research process.


Lessons from the experience

Lesson #1

The 2-bedroom Brisbane apartment that they purchased prior to meeting Propertyology was sold in 2021 for exactly the same price as what they paid for it in 2013.  This experience provided Leigh and Hayley with strong appreciation for avoiding hometown bias, instead adopting a healthy mindset of a ‘borderless property investor.’

Lesson #2

Leigh and Hayley’s journey is yet another tangible example of the benefit of not falling for the naïve assumption that investing in the biggest cities is the best strategy.

Their strategy makes more intelligent use of (both) investment capital and cash flow, getting money into markets quicker through prioritising affordable assets, and helping money to work harder by understanding what influences higher rates of capital growth.

Lesson #3

Propertyology’s ongoing service includes supporting Leigh and Hayley throughout the journey.

During 8-year journey together so far, a series of major events have occurred.

They included threats to scrap negative gearing, lockdowns, population decline, multiple doomsday forecasts, rent moratoriums, overzealous rent legislation in multiple states, land tax changes, multiple state and federal elections, 13x interest rate increases, various natural disasters and high inflation rates.

The reality is that every single year produces multiple challenges, negative speculation and market ‘imperfections’.

With the growth of (both) their asset values and rental incomes as proof, it is clear that things are rarely as bad as initially reported.

Making money while they sleep

In addition to Leigh and Hayley’s investment portfolio increasing from $100,000 to $1.35 million equity over the 8.5 years thus far, the combined rental income from their 7 investment properties has already increased from $125,000 to $168,000 per annum.

While this lovely couple clearly has oodles of equity to keep adding to their portfolio, a period of consolidation has recently been forced upon them.

APRA’s enforcement of an overzealous 3 percent debt servicing buffer combined with the 2022-23 RBA interest rate increases means they currently do not satisfy bank benchmarks to invest further (for the moment).

Most investors will experience ‘inactive’ stages along their journey. But the capital growth wheel continues to turn.

On the balance of probability, their annual income from personal wages and rents will continue to increase by a meaningful sum, interest rates will reduce before too long, and they’ll be able to add to their investment portfolio.

The below graphic illustrates how, in the unlikely event that they do not add to their existing property portfolio, Leigh and Hayley will still reap very attractive year-to-year rewards from having already completed the heaviest lifting.

Market performance from year-to-year is never linear, but 8-decades of evidence confirms that, over the longer term, the value of a standard Australian house increases (conservatively) at an average annual rate of 6 percent.

If the last 80-years of history repeats itself, the current combined gross asset value of $3.72 million will be worth $5 million, $6.7 million and $9 million in just 5, 10 and 15-years from now, respectively.

In other words, Leigh and Hayley’s journey commenced at aged 45-years with $100,000 equity and is on target to having $4.2 million equity in 7-properties by the time they are in their mid-60’s.

And if rents increase by (say) 5 percent per year, their gross investment income will be circa $215,000 and $275,000 per annum in 5 and 10 years from now.

It is not as if Leigh and Hayley have been gifted a financial leg-up. They earn everyday incomes, they have two teenage boys to raise, and a mortgage to pay on their family home.

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Active people who choose to live a healthy lifestyle, they are looking forward to the days of not having to rush to and from work, significantly fewer daily pressures, and having more time for leisure activities and hobbies.


Exit strategy

With the resources to enjoy living a year-round life on their own terms now on the horizon, Leigh and Hayley’s attention turns to thinking about their strategy for exiting the workforce.

At this point, there are lots more questions than answers.

But we already know that selling everything is far from the most intelligent decision. The graphic earlier contains appreciation for the significant ‘lost opportunity’ from disposing of hard-earned assets well before one needs the liquidity.

The main priority during the years after stepping out of the workforce is to have ready access to liquid assets of a value which is sufficient to fund desired lifestyle needs for (say) 2-years ahead.

Between the personal investment portfolio and superannuation, there will be various options, each with unique pros and cons.

The right answer will be made after giving careful consideration to these factors:

  • Desire to continue to work versus drive for an alternative lifestyle
  • Health limitations on being able to work
  • Part-time income versus full removal from the workforce
  • Amount of cash required each year to support the desired lifestyle
  • Superannuation balance when exiting the workforce
  • Superannuation access age (it seems to be heading closer to 70yo)
  • Amount of non-deductible debt owing
  • Net annual holding costs of each investment property
  • Outlook of each individual property market
  • Capital gains tax implications
  • Level of desire to leave a financial legacy / inheritance


Your turn

Now that you’ve read this true story about one everyday Aussie called Leigh and Hayley, it is time to think about your own story.

How do you want your story to read?

Remember, that first property which Propertyology purchased for Leigh and Hayley with just a 10 percent deposit of $30,500 has increased in value from $305,000 to $640,000 (110 percent) in the first 8.5 years.

A well-chosen investment asset purchased today for (say) $640,000 growing at the stereotypical average annual rate of 6 percent will be worth more than $2 million in 20-years’ time.

One property will not fund a comfortable retirement, but it sure would be a good start. Just ask Leigh and Hayley.

Propertyology are national buyer’s agents and Australia’s premier property market analyst. Every capital city and every non-capital city, Propertyology analyse fundamentals in every market, every day. We use this valuable research to help everyday Aussies to invest in strategically-chosen locations (literally) all over Australia. Like to know more? Contact us here.