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Adelaide oenologist and mechanical engineer Radek Petlak “stumbled into” property investment after he bought his first house in South Australia’s Riverland region in the early noughties, a time when it was cheaper to buy than to rent.
His unexpected journey began when an offhand conversation with a friend led him to discover that property values in his area had gone significantly up and his house’s worth had doubled. Petlak used his house as equity to borrow enough money to acquire a second property.
He applied the same process for his third property and would have likely continued doing it if he and his wife Emma had not met When KnowHow Property Finance founder and published author Bushy Martin to help them iron out a right strategy.
One of the first lessons the couple learned under Martin’s guidance is that cross-collateralisation is “a big no-no”.
“We thought it was very smart, but banks don’t look after you super well when you have lots of loans with them; they start to get nervous and say you can’t get more loans with them anymore,” Petlak said.
“Bushy came in and untangled the loans, so we had one loan per property we owned. It helped us understand that we need a stand-alone loan for every property — that’s really the only way to manage your properties and move forward in this current environment.”
Martin also helped the couple understand which properties were best suited for their needs and budget.
What eight years can do
By embracing Martin’s wealth stealth strategy, which focuses on reducing risk while increasing one’s purchasing capacity by eliminating cross-collateralisation, taking on multiple lenders and diversifying property types and locations, the couple was able to build a multimillion-dollar portfolio and accumulate a huge personal savings in just eight years. The strategy is elaborated in Martin’s book The Freedom Formula, released mid-2017.
Today, the couple have a 12-property portfolio worth more than $3m, generating a rental income of a little over $180k per year. Martin’s strategy has also allowed the couple to completely pay off their personal mortgage, accumulate over $130,000 in savings and have a steady cash flow that can cover their holidays and other luxuries.
“Our aim was always to have the rental income the same as our regular income — the idea was that when we do retire, the property will bring in the same amount of cash we were used to when we were working,” Petlak said.
“That was the plan, and we’ve got there now. We’re earning the same from the properties as we do from our day jobs.”
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