Since I moved to Australia almost 20 years ago, I have made plenty of friends. But not many close friends. You know, sometimes you meet really nice people at work and immediately hit it off with them. But once you move the jobs, the friendship wanes and you lose another nice person from your life. Tell me about it! I am missing dozens of nice people since I have moved away from my country.
Anyway, this guy, I will call him Pete to protect his privacy (though most of people who know me will recognize who he is), was working in the same electronics department as I was. Six or seven years older than me, he was about 35 when I met him. I worked in the there to support myself while I was completing my degree at the university. He was already there when I have arrived performing duties of supervisor. Unofficial supervisor, because he did not want to commit to the full time roaster.
He was very nice to me. He taught me lots of things about TVs, radios, amps, speakers, cameras etc. I was always interested in the gadgets, so that was pretty easy to pick up this skills. He was also great salesman, chatty, genuine and positive. Well I tried to pick up even these soft skills.
Now back to the how he became millionaire and how you can become millionaire too
I was bit surprised he has been working only part time. At 35 part time job as a sales assistant did not look like extremely successful career. But I have asked a lot of questions to find out about his personal life and he was always very generous to share his experiences and give the best advice or even offer a help to anyone.
He said he doesn’t want to work full time because he wants to focus on the business of flipping properties. Properties you say? In the high end suburbs? I had almost finished my third finance and economics degrees at the University but I knew about property exactly ZERO. Please tell me more, I have asked him.
Property investment is actually very popular past time of many Australians. He said at that point he was on his 5th or 6th flip. Bought apartment, held it for few months (sometimes couple of years), painted, fixed it up, changed kitchen or put in new bathroom, floor covering and put it back on market. As he did most of the work himself, plus Sydney property market grows well most of the time, he has done OK from these flips.
Previously he used to work for a large company as a traveling sales man. Extremely busy, stressful and he was never at home. When one day he got close to the nervous break down, he has decided it is time for change. At that point he already had couple of property flips under his belt. So he decided he will make it his side hustle, and to put a bread on the table he took the job in the electronics department where I have met him. He wanted to work only part time so he had time to concentrate on his property flips. One unexpected thing he has picked up while flipping houses, was that he has learned some incredible skills. As he has done quite a few jobs few years later, I can confirm that his work quality exceeds many professional tradies I have met. Painting, tiling, kitchen and bathroom installation, stud walls, doors, plastering. Very impressive in my view as he is fully self-taught.
So how he became a millionaire?
Savings
He is very modest and always lives under his means. Even before his house flipping side hustle took off, he has done very well even on the modest salary. He is now in his fifties worth over $2m (in my view), but he has never bought a new car (so far as I know).
House flipping
When you become an expert on property in your area, you can pick one which is now undervalued, fix it up and sell with profit. I have now same side hustle and I can confirm that it is possible but definitely not simple. Government tax, agent fees, legal, interest, admin fees eat most of your profit. Depends how you do the house flipping but normally you achieve profit from few different sources. Hopefully you managed to buy slightly under the market price due to your skill to pick undervalued property. You add value by some non-structural improvement which you do while keeping wishes of potential buyers in your mind. If you hold property for bit longer time (usually over a year), you might pick a bit of general growth which the property market could have done in your area. Also there can be bit of rental income, if you decide to rent out the place before you find a buyer.
House hacks
I call house hacks any changes in standard behaviour which will cut your housing costs or gain extra income from your house. So Pete actually gave me one of the best ideas which I got on my way to financial independence. You can get to financial independence by being brilliant (inventor, scientist), extremely hardworking (many CEO’s, lawyers, business owners) or just being quite average but smart and consistent. Pete has bought a house in quite good area, quiet spot but close to transport, CBD, beach and mall. House was quite a lot bigger than necessary for a single man. Main magic of the house was the layout. It was over 2 levels where internal door completely separated the levels. External doors allowed access independently to the each level. On the top of it, though it was older property in need of update, it was brick house, which made the noise transfer quite low.
So my friend Pete set it up as duplex. He has renovated both levels and made them great for living. He has well over 100sqm of living area for himself upstairs with 2 bedrooms, living room, laundry, balcony and large kitchen dining. Lower level includes the same. He has put in new galley kitchen and updated the bathroom downstairs so the lower level was fully self-contained with separate entrance. It rents extremely well. Did I mention the garage? At the bottom of the house was large single garage with small space for workshop. It already had a toilet. Pete has updated the toilet and put in another galley kitchen. That made it very quiet and private studio. There you go another couple of hundred bucks per week. Time to time he rents out even spare bedroom on his level when he feels like he might use some extra income or he doesn’t mind another house mate.
Pete is very nice quy and looks after his housemates. All maintenance issues are addressed in timely manner and place is being permanently updated to keep it fresh. He has never shortage of potential housemates. Some were with him over a decade, and many over 5 years.
Such an additional income from the above house hacks is not small. Especially when you do it over few decades.
Main residence capital growth
As Pete has bought in excellent area, property value increased about 8x over last 2 decades. Part of it can be of course attributed to his great renovation skills. He has renovated the house completely inside, partially outside and he has also done a lots of work on the landscaping.
Doing lots of side jobs
Due to wide range and great depth of Pete’s renovating skills, he is in high demand. Once he commits to do some reno for anyone, he always finishes it and does a great job. But as HE is the master of his own time, he likes to take frequent holidays, doesn’t work much in hot Australian summer (because he doesn’t need to) and takes only the jobs he likes with people he likes. His financial freedom gave him all this choices. I love it.
When you add all this ways of making money, which I have mentioned above, Pete is a millionaire though he hasn’t held a job for 15 years. Working on his own properties taught him home improvement skills and confidence, and now he is using it when he does regular odd jobs for others. He has done many kitchen, bathroom, landscaping and other jobs for me and I can confirm there is a long waiting list for his services.
I knew that when finally I made it on his list, I still will have to wait for another couple of months to get the job done. Pay off was that his prices are reasonable, he is very nice to deal with, his job is always done professionally, he has great ideas for further improvements and I can often work with him. That cuts my costs and I learn something useful.
Well I am very lucky I have met him. I am also lucky I have listened to him. There were many other young guys in the department where we worked but I believe I was the only one listening to him and who followed in his foot steps. My early retirement at 43 with family of 4 is largely thanks to having these chats with him at the electronics department.
