Getting through the ‘consolidation phase’ of your journey

As impressive as this sounds, until all of his debts are paid, he will only benefit from his properties’ capital gains instead of their income. Which is why, according to him, his end goal is to pay off all the debts on all of his properties.

He said: “The income from that portfolio is predominantly going to the bank. You're not really benefiting from the income of those properties. You're benefiting from the capital gain.”

“As an investor, what I want to do is have a portfolio that's debt-free and live off the income from those properties,” the investor added.

As he decided to enter the consolidation phase, he aims to have debt-free portfolio worth around $3 million to $4 million, which will provide him at least $150,000 worth of income every year. Once he successfully goes through the consolidation phase and retires all of his debts, the income generated by his properties, except for those that he spends for operational costs and taxes, will go straight into his pocket.

“That's when your portfolio pays you a wage essentially. It's giving you the income to live and, basically, have the choice to do whatever it is you want to do with your time,” he highlighted.

Consolidation tips

In order to reach his end goal, Mr Newbery’s strategy involves maintaining the balance in his portfolio by selling some of his properties and utilising the equity in them to continue acquiring assets and keep his yields and cash flow at a good rate.

Consolidation team

The investor admits that his strategy could get quite complicated, which is why he leans on the right professionals to help him.

While he continues to work with the usual members of his financial team with whom he manages his portfolio, he highlighted the importance of his accountants and property strategists at this point in his journey.

According to him: “I spoke to my accountant and strategist about it beforehand and told him what my plan was and why.”

“They helped to consolidate—pick which property I was going to do and why that was probably the best one,” he added.

Timing and research

When it comes to selling his properties, Mr Newbery found that timing and knowledge usually dictate the difference between a stellar sale and an underwhelming sale.

Aside from being updated about market movements, he also advised his fellow investors to be tax-efficient because a wrong step might lead to a big cut from your profit.

The investor said: “Obviously, you've got to pay capital gains tax, which is a nice big slug on the profit.”

“Be tax-efficient and make sure that you're selling right,” he highlighted.

If for some reason, you plan on getting through the consolidation phase without selling, then you will not have to worry about capital gains tax, which is why passing down properties from generation to generation is also recommended.

Utility of money

Finally, according to Mr Newbery, the consolidation phase of your journey may be hard to get through if you don’t learn to take advantage of the utility of your money right from the beginning.

According to him, you have to be able to put your money in the right investments if you want it to work hard for you.

Essentially, if your end goal is a debt-free portfolio, your money must always be in markets with a good potential for growth so you can continuously pay down your debts.

Mr Newbery explained further: “If you want to try to consolidate the debt, you need properties that are growing in value because that's what is going to allow you to pay off the debt.”

Tune in to Glenn Newbery’s episode  on The Smart Property Investment Show to know more about the concept of debt consolidation and how it can help you towards being financially free.