Seven ways for property investors to reach financial freedom

Most Australians spend 40 years or more preparing themselves for retirement, yet over 95% of them fail, remaining dependent on the government for their main source of income. However, a small group of wealthy individuals reach financial freedom in a fraction of the time. 

I’ve found these wealthy investors have mastered seven skills that make it easier and faster for them to achieve financial prosperity. 

Let’s examine these master skills: 

1. Creating and controlling capital

The wealthy understand the importance of building a substantial asset base. Some do this by building a business while others grow a sizable share portfolio, but my preferred method is growing a multimillion-dollar property portfolio.

Smart investors know how to create and add value to their properties using techniques like renovations and development. They also add value through their expertise or through smart negotiations and buying well.

And it’s no coincidence that the wealthy control as big an asset base as they safely can by leveraging and borrowing against appreciating assets.

2. Transforming capital into passive residual income

Successful investors grow money trees and recognise that cashflow is the fruit. This means that once they have built a substantial asset base, they transition into the cashflow stage of their investment life by lowering their loan-to-value ratios and then borrowing against and living off their equity.

Savvy investors follow these four rules of capital:

1. They concentrate it – rather than diversifying, they focus their energy and efforts on their area of expertise.
2. They don’t risk it –once they’ve built a substantial capital base the wealthy invest rather than speculate. They are prepared to forgo a “potential” future profit not to risk their current assets.
3. They protect it – by owning their assets in the correct structures to safeguard their capital and by having financial buffers in place.
4. They value it – professional investors don’t eat away their capital. Instead they convert their capital into cashflow and live of the fruits of their money tree.

3. They are financially fluent 

Smart investors recognise it’s not how much money they make that matters, it’s how hard their money works for them and how much they keep that counts. So they learn how the finance, tax and legal systems work and how they favour investors who treat their properties like a business. 

The wealthy understand the language of accounting and know how to read balance sheets and income statements, understand how to calculate the internal rate of return on their investments and how to assess their different investment options. 

4. They understand the importance of building a great team around them

Savvy investors know they can’t do it alone; so they recruit, direct and refine a team of finance, tax, legal and property professionals. They know that if they’re the smartest person in their team they’re in trouble.

As CEO of their property investment businesses, the wealthy don’t abdicate control of their money to others. Instead they set up systems to evaluate the performance of their investments and their advisers.