Client Case Study: How Tony & Maria Reduced their Financial Freedom Timeline from 15 Years to 2 Years
In this episode, I discuss the journey I went on with my clients Tony and Maria and directing them towards the path of financial freedom. While they had amassed a diverse property portfolio, it was actually causing them more financial strain. I worked with them closely to align their investments with their ultimate goal.
00:00:00 – Welcome to the Show
00:00:28 – Background on Tony & Maria
00:02:18 – Problems with their property portfolio
00:04:25 – Directing them on path to financial freedomRead More
00:09:34 – Benefits of investing in the US
00:11:23 – How I met Tony
00:13:24 – Wrapping up
When it comes to achieving financial freedom, sometimes having less is more.
Here in Australia, we’ve always been sold the idea of ramping up and aggressively growing the size of our property portfolio to achieve financial freedom. Unfortunately, this can’t be further from the truth.Read More
I met Tony through an interstate speaking engagement in 2018.
It was reasonably serendipitous as to how Tony became a client of mine. The flight I was meant to catch to my speaking engagement had been grounded as there were was a major storm. The friend of mine who organised for me to speak was able to push to the final slot on the night.
I was conscious that the audience had already sat through 12 hours of different talks and more likely than not, would have very little energy or attention to offer when it came to my turn.
But the deed was done, and I had committed myself with it so I figured I’d give it a crack anyway with little to no expectation.
What I remember most vividly was just how intently Tony sat and listened to what I had to say about achieving financial freedom and building a financial legacy.
He got in touch with me afterwards, and we agreed to see how I could help him with his situation.
Tony and Maria shared a lot of alignment with me when it came to financial values – they had good stewardship, lived relatively frugally and avoided splashing money around where they could help it.
They were both from migrant families who came from simple upbringings, and it appeared that their parents instilled the virtue of hard work and the need to be wise with money.
In the 25 years of investing, they had amassed an extensive property portfolio that was diversified into commercial, residential and even holiday rentals.
They followed “conventional” advice around diversification and continued to grow their portfolio as this was the advice they got if they wanted to achieve financial freedom.
The first thing that struck me when they had me take a look at their property portfolio was that they seemed to be in a lot of financial pain despite having such an extensive portfolio.
Tony ran a successful business that earned a good income. But the vast majority of the funds generated from the company were going towards supporting their property portfolio.
From an accounting perspective, their books were a mess. They were dipping into business bank accounts to cover property overheads that were held in personal names.
A lot of clean-up was required.
We first looked at identifying what assets in their portfolio were working or not working well for their goals.
Their immediate goal was to relieve the financial burden they were feeling as a result of all the outgoing expenses they needed to pay for their property portfolio.
After growing a significantly sized portfolio, things needed to change as there was no additional financial comfort, nor were they closer to financial freedom. He was fed up with the advice that he had to amass more to reach an adequate net worth to deliver him the cashflow he needed to become financially freedom.
Like many other investors I’ve worked with, high net wealth often equates to high outgoing expenses. And Tony was no different.
Short of selling their assets, the options to achieve this outcome were limited.
After a thorough evaluation of his portfolio, I told him that he didn’t need more. He just needed what he had working harder for him.
We identified that two particular properties were draining a significant portion of their cash – $100,000 per year to be exact. It was clear that short of selling these two assets, his options would be limited.
Had made no changes to his portfolio and followed the same trajectory, he and Maria were looking at a 15 to 20-year timeline before they could reach financial freedom.
The next step we took was a deep-dive into each property where we assessed the prospects of these assets and whether they aligned with his overall goals of achieving financial freedom.
Since then, they’ve shed a couple of properties, and we looked at optimising the remaining assets he had.
Positive Cash Flow & Alternative Investing Opportunities
Now, they’ve found themselves cash flow positive and are on track to reaching financial freedom in less than 6 – 12 months after working with them for the past 18 months.
The bonus is that they will achieve this regardless of whether the business makes any profit when they sell it.
Finally, with their financial burden lifted, we looked at some alternative methods of property investing, particularly with investment opportunities in the USA.
The way investors transact property in the U.S. is very different from Australia.
In Australia, it’s a very rigid approach where the buyer and seller come together with a conveyancer or solicitor, fill in the paperwork, involve the bank, before transferring the title.
While in the USA – there’s a broader range of options such as through a quick deed, a title transfer or with a title company.
What this affords is a more versatile and creative way towards designing an ideal strategy when it comes to investing in property.
We’re now at a stage where we’re looking at options for Tony and Maria so that could potentially use any remaining cash flow towards such investment options to help improve their cash flow position further.
Tony and Maria’s situation is not uncommon.
Many Australians who are still ‘wealthy’ yet still have to work.
Part of the reason for this has been the perspective advice that many investors find themselves receiving, and I believe this shouldn’t be the case.
Instead, each individual approach should be tailored to the specific situation of the investor.
In Tony and Maria’s case, less was more.
We were able to strip back and shed a few properties that ultimately delivered a better outcome for them.
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