What I’d tell my younger self

It’s an interesting thought. I’d tell myself many, many things. Mostly I’d tell my younger self not to do a lot of the things that my parents warned me about. But when it comes to property and building wealth, there are four key things I’d tell my younger self.

The first thing I’d tackle relates to career and subject choices. I wish I’d studied subjects that excited me. Instead, I studied science and maths. I was spurred on by ambition, but selecting a career in science was based on expectation.

Now that I’m facing subject selection again in my household, (like many other parents I know), I understand the complexities my parents would have faced in guiding and supporting us through our own subject selection.

I could have tried something more commercial, economics perhaps. Career guidance and clever online surveys existed back then but I didn’t make full use of them at all. It’s a lesson for us all as parents, because engagement and passion counts for a lot when it comes to fulfilling our potential and optimising our happiness.

All is not lost by any means. My chemistry degree taught me a lot about scientific report writing, rigorous analysis and finding trends. I think I would have enjoyed economics more though.

My second piece of advice I’d give my younger self relates to the people I listened to when I shouldn’t have. By the time I had saved enough money to set my sights on a property acquisition plan, I had someone trusted and knowledgeable in my corner; a lovely family friend called Bruce. Bruce was a real estate agent in the town that I grew up in and he has enormous knowledge from a lifetime career in real estate. He spent time with me cutting out newspaper clippings and sharing great insights that could have helped me select a high-performance property at the time. My biggest failing was that I asked him for advice, but I didn’t take it.

Instead, I leaned on my Dad for advice. My Dad is loving and protective, but not a property expert by any means. Like most dads, he had purchased a couple of properties in his life and that is where his real estate expertise starts and stops. To compound the issue, my dad is very conservative, (a qualified accountant) and he is risk adverse when it comes to debt.

My dad talked me out of a sixty’s era house in Melbourne’s south-eastern suburb of Bentleigh and he encouraged me to buy an off-the-plan townhouse in Mordialloc instead. The townhouse didn’t outperform, but the house in Bentleigh did.

Bruce and I still catch up and cherish the guidance he’s given me over the years in my exciting career.

My third piece of advice for my younger self relates to equity and accessing it. I didn’t understand loan structuring very well when I was young, and I should have made the effort to. Instead, I naively went straight to the bank and let the lending consultants pluck a product off the shelf and sign the loan up. I didn’t take offset accounts into consideration, nor did I think about future tax deductibility options. I not only left money on the table, but I also reduced my own ability to convert good owner-occupied properties into investments.

My naivety was silly, and I did pay a price for it.

I only understood one way to unlock capital growth gains. Instead of refinancing loans to access equity, I sold good properties to unlock my gains. I then leapfrogged into a subsequent purchase, and so on. It took me four ownership cycles to discover the merits of a good strategic mortgage broker and smart loan structuring.

I haven’t made that mistake since, and we haven’t divested good properties we’ve previously lived in. What’s more, we haven’t lost future tax benefits either. We’ve preserved our loan balances on investments, channelled our surplus income into offset accounts and sensibly navigated our portfolio cashflows.

My last tip relates to planning a portfolio and targeting debt retirement.

Too many budding investors get carried away with acquiring more properties, irrespective of their long-term retirement goals. As our incomes rise, so does our borrowing capacity. It is easy to aspire for more properties in the portfolio if salary enables it, but what we often overlook is the burden that a property can represent when we are approaching our later working years. Unless an investor is satisfied to sell down assets into retirement, (and with this comes Capital Gains Tax obligations), a ‘buy and hold’ strategy will likely require an investor to work for many years after the purchase. If the investor’s acquisition activity was late to begin with, a property portfolio can leave them feeling like they are trapped on a corporate treadmill, working hard to pay down the debt while everyone else around them is starting to retire.

Fortunately, I started my property journey quite young in life, but I did fall prey to buying more property in my forties when I could have resisted.

When temptation strikes these days, I resist it, (and it happens a lot!). I remind myself that every acquisition takes more time to pay down, and time becomes precious for us as we step closer to retirement.

How much is enough? My best advice to my younger self is to work this out by forecasting carefully, and to pay particular attention to when would be a great time to retire/do something different/have choice to stop working.

Overshooting the runway is exciting, but it also costs my future-self time.