My friend sold his house to create a passive income stream
Passive income is key to Financial Freedom! It’s money that keeps coming while you sleep.
We have heard it and love the idea, yet only a few take the steps to make it happen.
Why is that? Because the journey to financial freedom takes courage, discipline, commitment, self-control and enormous effort.
But do just that and be rewarded with financial happiness that reduces the dependency on your job to fund the things you really love to do.
As COVID brought the world to a grinding halt, it also presented some investment opportunities to those who were looking.
Here’s a story of my friend who used this opportunity and is well on his way to achieve financial freedom. Although it’s his story, there are lessons for many of us to learn.
Recognising the Opportunity
As work from home became the new normal and allowed people to live away from the work, in places they always wanted to live. It changed the migration pattern in Australia and perhaps everywhere else. More people moved from cities to regional areas during this time than probably any other time looking for a better lifestyle in a fraction of cost. Data suggests around 31,000 people migrated to Queensland in 12 months during 2020–21
My friend, who lived in Sydney, where the house prices had skyrocketed at this time, was switched on to cash-in. The plan required him to sell his Sydney home which was at the peak of its price and move to Brisbane where he could buy a much cheaper house and invest the rest of the profit in acquiring cash flow positive properties to build a passive income stream.
Often to achieve results which average people can’t, you need to make decision which average people don’t.
Here are the steps that he took
Evaluating the situation
The math was great, but it seemed an outlandish idea to change states on a whim leaving behind the comfort zone of familiarity. He was warned against it by the close friends. This can all be very overwhelming and can cloud anyone’s judgement.
In such cases an absolute clarity of your goal helps you to clear the noise and empower you to take a decision aligned to the future goals by taking emotions out of the equation.
Couple of such things are
Impact on family and work
Reality is for most, moving a house is not just financial decision it can have an emotional impact on entire family. It can influence child behaviour and their performance. Moreover, it can be stressful for kids to leave behind old friends and make new friends in new city. My friend and his wife made every possible effort to ensure that there is no impact on kid’s education and behaviour.
Luckily, my friend and his spouse could both work from anywhere is Australia, so that part was taken care of.
Effort vs Rewards
Moving require huge efforts, so it was important make it worth. A quick glance into few things. 1) He knew that by selling his property in Sydney he can pay off all the loan on the Primary property he would buy in Brisbane. 2) He could afford a much better house than the Sydney house in half the price, in fact he bought it a few minutes’ drive to the beach, a luxury for which you have to pay a fortune in Sydney and 3) after all of that he had enough of equity left to build an investment portfolio.
Preparing the plan
Once decision looked sound, he put an effective plan to avoid the most common investment pitfalls and maximise the benefits
Downsizing vs relocating
He rejected the idea of downsizing within Sydney very early on as it meant moving to a smaller house and away from useful amenities. By relocating to Brisbane he didn’t have to compromise on that and still would be better off financially, so he can invest more in creating a passive income stream.
Buying before selling
Finding a property in a hot market is never easy. He decided to buy a property before he could sell his own as that way he was not at the left stranded without a property. It took him 3 months to secure a property before his put his own on sale.
Renovating the property before selling
Renovation is an area which is often neglected by many, but if done correctly can add so much to the perceived value of your house. But like anything else, it is important to not get carried away and overspend. He did general repairs, improved the entry way, a fresh neutral colour paint, you can never go wrong with that, and this helped him sell that property fast and fetch him price above his expectations.
Sticking to a budget
Moving to a cheaper destination results in higher purchasing power and can easily tempt you to buy more desirable house then you need. Setting a budget is critical in this situation, so that you don’t get carried away. He set a strict budget to ensure that he can have two houses in Brisbane equal to the price of one in Sydney.
Finding the right location
With so many options, it could be overwhelming to find your sweet spot. But my friend was clear on his priorities, he wanted to live in a suburb which is not expensive yet ideal for raising a young family, with a good school, parks, and access to public transport.
Executing the plan
I keep hearing an idea can change your life, but I always feel that Idea is overrated, execution is the key. My friend was determined to move ahead with his plans and did everything to make it work despite numerous challenges.
Reaping the rewards
Relocation is mammoth task, so it is important to have significant gains which can make such an effort worthwhile. With more money comes more responsibility. Although, with all the marketing companies convincing you that “living it big” and keeping up with the Joneses, it is easy to spend beyond your means, buy high status items, live in lavish houses you can’t afford. This can all give you a temporary high, but this high consumption behaviour often brings a world of pain later for so many people who aren’t financially educated.
To reap the reward fully — Spend your money wisely and Invest in passive income stream. It will make you financially free.
And As I read in a book by Steve McKnight
“Being financially free itself won’t make you happier but it will empower you with the time and money to be able to pursue the activities and causes you are most passionate about”
