Financial Articles

How we escaped the rat race and stress of small business by investing in property and shares.

Keith and Viebke Mason

Hi, and welcome to our website www.learntoberich.com.au

My name is Keith Mason and my wife Viebke and I have put together our website to help you find your way to become financially educated so that you may reach your financial goals in life.

This is our story of how we turned around our financial situation in a relatively short timeframe from one of scarcity to plenty.

Money isn’t the most important thing in life (unless you don’t have any) but life is certainly more fun and you have more choices when you have plenty of it. We have found that the journey of creating wealth is an exciting journey with lots of fun and adventure along the way. It has given us freedom to explore life much more fully than we could before. Our goal is to empower you with the same freedom.

Viebke and I struggled in small business for many years, thinking it would give us a good future, only to realise the years were going by and not much was changing, and we were not building a wealthy retirement as there was just not enough money left over each month to invest.

We were paying our mortgage on our small 2 bedroom house (worth around $100k with $60k mortgage, and had no super, but were looking after our employees and paying their super. The government had us working for them, collecting their taxes and doing their bookwork, and kept making life more difficult with more and more legislation for small business to comply with.

We were working very long hours, and were both in our 40’s. If we had not decided to change our situation, we like most Australians would have ended up on the government pension, which is not where we wanted to be. Viebke had been running a small pancake café restaurant for 20 years with her sister, and I had run a furniture manufacturing business.

Both business’s were started on a shoestring. Between us we employed 30 staff, who probably all thought we were on the road to wealth, but in reality we worked hard and long, and had not much to show for it, which I suspect is the story of the majority of small business in Australia.

We began a quest to discover what the rich did differently so that we could share in some of what they had. Our desire was for a life of adventure, lots of overseas travel, adventure sports, being able to see our family in the UK every year. These had been our goals in life all along, but small business had bogged us down. Before starting in business we had both travelled overseas and had a yearning to get back to it, but the small business’s had put a noose around our necks.

We began reading as many books as we could, books such as Rich Dad Poor Dad by Robert Kiyosaki, buying tape sets such as Jim Rohn, and going to seminars on investing in real estate and the sharemarket, even travelling to the USA, learning as much as we could about investing strategies.

We invested a sizeable amount of time and money in our financial education, our library of books and tape sets now almost fills a room in our new office. I suspect many of our friends thought we were crazy, and it wouldn’t work. Some would even put us down for it. (This is probably true for many of you also). We just believed that this was the way we would find the answers to improve our future.

We came across John Burley in the USA who taught us how to invest in real estate for cashflow, which was the first strategy we used. We now have an Australian friend Rick Otton who teaches Aussies how to do similar strategies here in Australia.

By good fortune we came across Jamie McIntyre and 21 st Century Academy, purchased the Homestudy in September 2001, and it was delivered on 9/11, a day we will never forget, and the beginning of a new chapter in our life.

From Jamie we learned how to synergistically use a combination of different strategies, real estate, sharemarket and business/internet marketing to develop cashflow, build assets and create real wealth. His money management techniques helped us get our finances in order, which enabled us to gather together funds for investing. We discovered the importance of having a team of experts and mentors around us to help us achieve our goals.

Jamie is a master of making complicated investing techniques so simple to understand that we were soon able to implement his strategies. For example Jamie coined the phrase “share renting” to explain the covered call strategy. Everyone understands the concept of renting out a house and can relate it to renting out shares. Whereas trying to explain covered calls in the sharebroker jargon to someone, is a far more difficult task.

Initially we went back to basics, focussed on saving 10% of everything we earned (which was not very much at that stage) but by setting the habit and automatically putting the money away into a managed fund, we didn’t miss the money. Gradually we increased the savings, and when the savings grew to a large enough amount, we used it to buy property.

The first investment we did was a $50,000 unit in Queanbeyan in which we were able to recover the majority of our initial outlay, and so achieved a cash on cash return of almost 200%per annum. Buying the first property was the most difficult for us. Putting in lowball offers with agents, wondering if we would be able to onsell the property, was the property good enough etc etc.

When the deal was completed and we handed over the keys to our first client (the same day we settled on the property) we felt totally elated. We now had an investment bringing in a monthly passive income, which we didn’t have to go out and work for. It wasn’t a large cashflow, about $250 per month, but we had done a deal that worked. The second deal got easier, we started to systemize things, and then began showing potential investors what we could do for them.

We built up cashflow from our investments over the next few years to the point where we didn’t need to work for wages. I said goodbye to my small business and all of the associated hassles.

We had done 18 real estate deals, 16 of them with none of our own money. By finding joint venture partners and creating great investments for them, they were happy to put up the funds, and we split the profits. We onsold the houses on terms contracts (or “wraps” as many people call them), so we collected the monthly payment from the purchasers, who also paid the rates, insurance and repairs on the houses.

Our net cash on cash returns on these investments was minimum 40% per annum and as much as 200%. The people we onsold to also got a great deal. They generally couldn’t get mainstream finance to buy their own home. So we provided a solution for them for home ownership. Once the houses rise in value so the buyers have 20% equity, they can refinance with a conventional lender and cash us out. We then get a nice lump sum to reinvest elsewhere. (Our ebook “UltraCashflow Realestate” explains this strategy in detail for those of you who are interested in exploring this strategy)

During this period of investing for cashflow, I also became an accredited mortgage broker and began writing loans (this was very handy when buying all the houses and writing the loans for our investors) It provided an additional stream of income and also further knowledge of our new industry.

By refinancing our own house and extending it, building the third bedroom with ensuite, we added enough value to refinance again and borrow the equity to build a second house in front of the existing house. This again created more equity, which we used to reinvest into investment property ,business and sharemarket investing.

Because of our passive income from our investments, I no longer had to work for a wage and had time to focus on other ways to generate “streams of income”, and so was searching for other business opportunities offering high leverage of time and money. At this point I was offered a marvellous opportunity by Jamie McIntyre to become a business partner and promote the 21 st Century Academy Homestudy. The demand for knowledge in financial education is a growth industry, we had invested a sizeable amount in courses ourselves, and so we became affiliates of 21 st Century Academy.

This was our first foray into internet marketing, and with the systems already in place it was virtually a turnkey business. Due to the high quality of the Homestudy education and our own belief in the course having achieved great results ourselves using some of Jamie’s strategies, the business soon started producing excellent returns.

The internet marketing strategies we learned from the Homestudy helped us to build our business on the net. We created our website http://www.learntoberich.com.au and learned how to market it online. Web business is a business which allows us to travel whenever we choose. For example we have been overseas several times in the last two years and had several holidays within Australia.

This business now provides an excellent growing stream of income, and is a very rewarding business to be involved in, helping other people achieve their goals. As an example, one of our clients after purchasing the Homestudy began using the share renting and insurance strategies and was able to retire from his job within less than a year. He is doing real estate development and internet marketing and is now helping his friends and family do the same.

We also get to attend all the seminars and meet and keep in touch with positive like minded people which is important for your mindset. Jamie continually brings new speakers into the Academy who have created a slightly different strategy, and are happy to teach the Homestudy Graduates how they did it.

One of our favourite strategies now is to purchase well researched investment property off the plan. We came across a fantastic property sourcing company, who on our behalf analyse investment opportunities, negotiate with developers to buy in multiples off the plan, and take away all the hard work and research of finding good quality investment property.

This again leveraged our time rather than us having to do all the research. The amazing part of the service is that it’s free, and the properties are independently valued so we know we are buying at the right price.

The sourcing company are totally independent from the developers so we are confident the developers are not overcharging us.

We only buy in small developments which are situated in areas where there will not be an oversupply, as this frequently happens with off the plan investment property, and is not good for the valuation of the property.

They are in areas with higher than average growth, so we can access the equity quickly as the property increases in value and reinvest it in more property. One major benefit of buying off the plan is that time is working for you.

By that I mean you put down a deposit now, which can be a deposit bond, for a fraction of the normal deposit. The property may take 12 to 24 months to be completed, so we don’t have to pay for it until then. So the property has had chance to increase in value even before we pay for it.

If it increases by a sufficient amount, by settlement, there could be enough equity to refinance and take out enough cash for deposits on more property deals.

As an example a $300,000 property would normally need a $30,000 deposit. A deposit bond for two years would work out at approximately $3000. So you secure the $300,000 property with $3000 and in say 18 months it could possibly revalue at $345,000 (10% growth per annum). This means a potential return on your $3000 investment of 1000% per annum. Where else can you get a rate of return on your money like that with very, very little risk.

Now obviously the main advantage is that you control a $300,000 asset with only $3000, and it allows you to use your capital to invest and produce income until required at settlement.

By controlling multiple properties and using the power of leverage of OPM (using other peoples money) you have the benefit of a valuable asset increasing in value each year.

For example lets say we are controlling 3 properties valued at a combined $1million, each year on average they increase by 10% (Residex statistics show slightly more than this in all major cities over last 10 years for houses, units slightly less)and well chosen property will increase faster than this. So each year the value increases by $100,000. Now by using this equity to reinvest in more, well sourced property, we have a very powerful compounding strategy.

Good quality, well positioned real estate averages 10% growth per annum, so every 2 years on average a property will yield enough equity to reinvest in another property. This can compound into a very solid property portfolio, in a short number of years, providing the properties are well located and researched.

This is a strategy that is achievable by most working Australians if they can manage their money, save 10% of all they earn, invest in one property at a time, within ten years it should be possible to control a $1million property portfolio. Many Australians can achieve this much faster, some in their first year investing, depending on their serviceability of the loans.

(see our ebook “How to Create a $million in Property in 9.5 years, starting with very little (except a job)”for more info on this great strategy)

Now our current investment plan is to continue increasing our cashflow, from internet marketing business’s and share renting in the US market (returns in the US are better than Australia, but it is good to learn the strategy here first), then to channel this profit into buy and hold real estate using off the plan leverage. We revise our goals and plans twice a year to make sure we are on track, and maintain good bookkeeping records which is the scorecard for our progress.

The most triumphant milestone achievement for us was finally being able to sell the café restaurant, after 24 years in business. The difference in lifestyle is now enormous. Viebke had not had an Easter, or Christmas and New Year, out of the shop in 24 years. She is now able to relax and enjoy these wonderful times instead of them being the busiest most stressful time of year.

Next Christmas, we plan on spending with our family in England, stopping off in Dubai to see the amazing things happening there. Also, to spend some time in Italy and Switzerland.(we did heli skiing from Queenstown New Zealand last year, and want to compare the European Alps.)

We hope our story will inspire others among you to take action and go for your dreams, rather than settling for doing ok, or struggling along as we were. The major factor, which made the difference for us, was getting financially educated and finding mentors to model. As Jim Rohn, one of our mentors would say, we hope you take action out of inspiration, rather than desperation.

The 21 st Century Academy created by Jamie McIntyre is a great place to get started, check out the Free DVD by ordering it here, if you havn’t already seen it. Just click on the link:

www.learntoberich.com.au/free_products/free_dvd.php

May you go forth and prosper.

Keith & Viebke Mason.

LearnToBeRich.com.au