Paul Wright, Founder of Profit Club and An Allied Health Business Coach, Interviews Me
On this week’s episode, I’m on the other side of the questions. Paul Wright, a Physiotherapist, business coach and mentor, and best selling author, interviews me on all things alternative investing.
What I love about this interview is that Paul explores my outside of the box thinking. We cover:
– how I got into alternative investing;
– the seven major mistakes business owners make in wealth-building;
– my thoughts on diversification; and
– more on the Freedom Warrior method.
Connect with Paul:
00:00:00 – Intro
00:03:16 – How Salena Got into Alternate Property
00:04:41 – Salena on Accountants Managing MoneyRead More
00:05:20 – The Transition from Accountant to Alternate Property Expert
00:07:14 – A Typical Week in Salena’s Life
00:07:51 – Health Professionals Vs Accountants: Do They Hold the Same Knowledge?
00:11:03 – Are Building Wealth and Earning Money That Different?
00:11:55 – Why Businesses Aren’t Growing Wealth in Each Generation
00:12:05 – The Concept of Intergenerational Wealth
00:15:24 – The 7 Major Mistakes Business Owners Make in Wealth Building
00:27:10 – Salena on Diversification
00:28:11 – Salena’s Freedom Warrior Method
00:33:38 – Salena on Leading Opportunities
00:35:50 – Salena on Brokering Deals
00:37:05 – Salena on Joint Ventures
00:39:38 – Difference Between Buying Shares VS Salena’s Method
00:40:09 – Salena on Superannuation
00:42:46 – How to Build Wealth to Last 100 Years
00:45:51 – Salena on her book The Freedom Warrior: How to Build A Bigger Life Through Alternative Property Investment Strategies
00:47:69 – Salena’s Biggest Business Mistake
00:49:18 – Strategies to Deal with Losing Invested Money
00:49:54 – Salena’s Happiest Deal
00:50:53 – Outro
Q: How did you get involved in accounting/finance then into alternate property?
Q: So did you then give up your day-to-day accounting job – when did this transition happen, or what led to the transition from managing your own portfolio to writing in a book and teaching it?
- I had already come out of pure accounting and, at that point, was doing management consulting.
- I had also set up a few businesses and sold them off – so I was floating around a bit looking for my next move.
- Investing was just something I was doing in the background, but the creative space really fascinated me.
- So, eventually, I started, within property, to try different things. I found things that worked, but the pursuit of “what else” was far more interesting to me than just that straight line to the highest net worth – it was more the play that I enjoyed.
- I started doing developments, working for developers and just tried every possible strategy to see what I could do.
- What happened was people just started to ask me how I did that and how I could help them. So, from that, I found that I could have the most significant impact by helping get the strategy piece right – so I think I’m a strategist at heart.
Q: So what’s a typical week for you now? You’re managing your properties; you’re teaching, you’re lecturing, what’s the mix?
- The latest evolution that I’m doing with the Mastermind has been very much a lifestyle design business.
- I try to work between 10 am and 3 pm, four days per week, and I’m really striving for balance. I want to work for pleasure, not because I have to.
- So, this is a new phase for me: time for friends, exercise, yoga and reflection – all that good stuff.
Q: What have you seen in the health professional space in their knowledge of business and money? Is it the same as accountants?
- It’s a particularly tough gig for people in the health space. Apart from it being saturated, it’s pretty competitive: you’re trying to be an excellent practitioner and run a business.
- Most of the time, people are comfortable with one hat or the other but not both.
- I’ve witnessed with John, my husband, a natural evolution in maturity in how he tackles business.
- He is very methodical and doesn’t chase shiny objects.
- The one thing he has always done is invest heavily in coaching and finding the people out there who have the results that he wants instead of trying to reinvent the wheel – and he has done really well.
- So, for people in that space, my advice is not to try and reinvent the wheel and instead find people who can help shortcut your journey.
Q: Why are Australians and health professionals around the world not getting wealthier with each generation?
- I came to Australia from the UK – we migrated when I was about nine years old, and I remember wishing that we had our family around us so that we could have the assurance of being financially set up well – it’s that concept of intergenerational wealth.
- Having been around thousands of investors over the years, I’ve realised that that’s not true.
- The reason I think that we don’t do very well with building intergenerational wealth is because we put ourselves in a situation where we generate income, we do the right thing, and we invest in asset – but then after a couple of decades, we get to the point where we don’t want to work as hard or want to step off.
- So, we end up selling off those assets to fund retirement, and the next generation has to start again from scratch.
Q: When you’re saying intergenerational wealth, you’re saying you are setting up your family and your family’s family? So you’re trying to set up generations of assets or revenue or money that will serve them and their children down the track?
- In the simplest terms, when we’re talking about intergenerational wealth, it’s about influence.
- How do you influence the financial outcomes for people who come after you?
- So, it’s not necessarily about the fancy cars and the private schools – it’s much bigger than that.
- In my experience, when people had a lot of wealth that they should have passed on and haven’t, it’s because they’ve ended up selling those assets to fund their retirement.
- On the other hand, some do manage to pass on large asset bases to their kids successfully, but then the kids can’t afford to hold them, so they end up selling them off to enjoy the fruits of those assets.
Q: Why do most business owners fail to build wealth effectively?
- I think many business owners are trying to do the right things: they’re trying to optimise their business, create a cash cow as much as possible and eventually do one of two things.
- Either they leverage themselves out of the business so that annuity continues, or they end up hoping for a big-ticket sale – which is the most common of the two.
- So, what I see many business owners do is, invest their time and energy primarily into the business and building wealth outside of the business goes onto the back burner.
- So, they’re banking on the one big-ticket sale and hoping that one day someone will come in and take it off their hands.
- If you’re serious about building wealth, you’ve got to take the job of building wealth outside your business just as seriously.
Q: You say there are seven major mistakes that business owners make in their wealth building. Can you go over those seven and how to avoid them as smart profit club members?
- The first mistake is that people confuse high net income with wealth. I’ve witnessed too many people who have had high net incomes, that have had some fracture or disruption to that income and then there’s really nothing much to support them when that happens.
- Income and wealth are not the same things – just because you have a high income doesn’t mean you’re wealthy.
- The second mistake is thinking that high net worth is the ultimate goal. Many people are just fixated on getting to a particular level of net worth and building a certain asset base.
- But again, I’ve witnessed people with significant net-worths who still end up being crippled by either carrying the cost of that asset base or the complete inability to step away from the business.
- So, net worth is a goal, but I think you need to be careful about looking at it in isolation.
- The third thing I often see is this concept of abdicating. There’s a whole industry of people who want you to think that building wealth is highly complex – because it’s in their interest. But in my world, after being on both ends, I can say that building wealth is certainly not rocket science.
- And abdicating – where you hand your money to somebody else – is just not wise. It’s not necessarily that you’ll lose money, but you’re definitely diluting your capacity to optimise and build wealth effectively by abdicating.
- I call mistake number four “tolerating big fat lazy pandas.” I’ve seen so many instances where people carry assets in their portfolio that’s not giving them income and not growing in value. Or they’re consuming a lot of time, energy and resources, but they keep them anyway.
- Mistake number five is fishing from a small pond. My experience with investors is that they have a perception that what they know is what is safe – anything unfamiliar to them is risky.
- I’ve spent the last 12 years looking for out of the box investments, and I realised that if you can bring fresh eyes and an open mind to your investing, you can find opportunities that sit right outside of the mainstream but that are lucrative and have very low risk.
- Those are the playground, in my opinion, of the ultra-wealthy.
- Mistake number six is not valuing the “who.” Figuring it out on your own is the hard way. I’ve realised that building a network of people can help me navigate turbulence and uncertainty and give me access to investment opportunities and deal flow well ahead of everyone else.
- So you’re retaining control (you’re not abdicating), but you’re getting help to fast-track and avoid the landmines.
- Lastly, mistake number seven is not diversifying. Diversification is about far more than location – it’s about geography, liquidity, deal makers, committing capital, and cash flow.
- So, the mistake is twofold – people don’t understand how to diversify, or they’re not diversifying at all.
Q: What does diversification mean for someone who’s got it right?
- Diversification done mindfully is about recognising that different assets have different upsides and different vulnerabilities.
- As we can see right now, some assets have a high degree of influence from what’s happening economically. Others will basically trend entirely in the opposite direction to what’s happening economically.
- So, we’re talking about diversifying across different geographies, asset classes, deal makers, liquidity, purpose and exposure to market conditions.
- Let’s say you’re all in on one local market. If something goes wrong with that market, the whole portfolio goes down the gurgler.
- Whereas if you’re diversified into different geographies, across different strategies with different deal makers, you start to see that you’re creating a bit of a safety net for insulating yourself against things that could go wrong.
- This is where having a really good plan is so important. People are happy to accept that they need a good business plan but don’t do the same when it comes to building their wealth. It just sits on the back burner for a lot of people.
- Diversification is also about recognising that you need a plan for how you’re going to optimise the asset base you have and be effective at amplifying the income you put into your investing from your business.
Q: What is a good plan? What are you advocating? What’s the Selena Freedom Warrior Method?
- The way that I try to explain this to people is that you’ve got to imagine that there are three parts to the wealth game.
- The first part is getting out into the world, setting up your business and making it viable – and at some point, that will start generating surplus income or dividends.
- And then it’s your job to take that and use it to amplify and build capital.
- You can’t create wealth without building a baseline level of assets – there’s no getting around it.
- But then, at some point in the future, when you’ve got your baseline assets, the second part of the game is about figuring out how to take that capital and get it to perform better? That might involve taking a small percentage of your portfolio and putting it into asset classes that actually give solid, consistent and predictable income, such as lending opportunities where you act as the bank, joint ventures, property syndication, private funds and direct property.
- I call these my five buckets of alternative investment strategies. Within each bucket, you can have multiple strategies, such as looking at the global market.
Q: If we’re talking about leading opportunities, [talking about the first bucket], you’re saying we become the bank for someone else in some way, shape, or form. Is that to buy a business? Is that to buy a property, or could it be anything?
- All of those things exist. But I’m looking for lending deals secured by real property.
- If you think about how a typical bank works, they’re going to do their due diligence on the person looking to fund an investment. They’re going to look at you and want to know your personal financial situation. They are going to look at the deal and see how much leverage is on the deal.
- The US market lends itself to these opportunities really well. For example, our average property price is pushing a million dollars. But over there, I can do deals where I’m only committing $50,000 to $70,000.
- There are lending deals where I can just put in $5,000 or $10,000 because I’m going to do it with some other investors.
- But the whole idea that you can trade debt as an asset doesn’t exist here in Australia because the legal system doesn’t allow for it.
- Being able to trade debt as an asset opens up a whole range of different ways that you can, creatively, structure deals.
- For example, I find a homeowner who wants to buy a property, but they’re not palatable to the traditional banks even though they can bring 40% to the table. I’m only going to be asked to fund 60%. If I create a 30-year annuity at 8%, some other investor will buy that off me in a heartbeat if I wanted to sell. So, what’s interesting is it’s a very liquid market.
Q: Is there a broker? Are there people that deal in this, or do you broke the deals?
- I’m squarely in the space of being an educator, so I don’t broker any deals.
- Look, the thing about real estate is that there are probably ten times as many dodge people as there are good people.
- So part of the journey that you have to commit to when you’re thinking about building wealth is finding the right people.
- I’ve had many cuts and bruises along the way, and luckily my husband is very tolerant of all of that – but it’s because he knows that I’m getting more wins than I am losses.
Q: Can you give us an example – you said joint ventures in another bucket; are we talking about a joint venture in a business as someone who wants to open a new business – are you going into some capacity of that, or what are we joint venturing in?
- I’ll give you a couple of examples – I did four of these over the last year.
- So, my trusted advisor will find a piece of real estate and secure it – he doesn’t need money from me for that.
- Then I put $20,000 in, and that money is specifically for renovating – minor renovations. And what happens is we’ll do the renovations within 12 months, and the deal maker gives me 11% on my money plus 10% profit.
- During COVID-19, I was getting around 17% – 19% return on the last couple of deals.
- I’m not banking on huge appreciation; all I want is cash flow. And this plain and boring investment strategy gives me that because it never changes – it’s highly stable markets.
Q: Would some people say, ‘oh well, she’s effectively just buying shares’? What’s different from me putting my money in the share market of BHP or some other property investment company than what you’re doing? Are there any other advantages, or would I just increase the share portfolio?
- I have been an avid share trader in the past and a purchaser of shares, but I like predictability.
- And even if you’re an epic share trader, ultimately, you’re building capital; you’re not building income.
- So, for me, the space of alternative investing is about generating income. I might only expose 20% of my portfolio to the alternative space, but that 20% will 10X the income I’m generating from the rest of my portfolio.
- I don’t have any biases to any type of investments; I want to be agnostic. And if you invest in shares and it gives you what you want from a goal perspective, then by all means – invest in shares.
- But for me, it’s about establishing how to blend the best of what’s available in the share market with property and with the alternative so that I can 5X or 10X my results and get to where I want to go in less than five years rather than 40 years.
- So, that’s the game I’m playing now.
Q: So, is superannuation too slow for you?
- Super is important!
- The reason superannuations were introduced was that the government realised that people weren’t doing a very good job at planning for retirement.
- But, unfortunately, it’s become accepted as the only way to build wealth for retirement.
- At the end of the day, people spend a lot of time focusing on super, and to be honest with you, it’s just a tax-effective vehicle for building wealth for later.
- My plan A is my wealth-building through alternative investments. Plan B is my Australian property portfolio, and plan C is maybe my super.
- It’s about having multiple plans, and I think the problem that most business owners face is they’ve got a plan A, which is to build the business and do well in the business. But there is no plan B, C, D and E.
- So, yeah, I do put money into super, but can I be really frank? It doesn’t excite me because I can’t play with it.
Q: How do we build wealth using this model? How do we build wealth that’ll last us 100 years?
- So, one of the things that I’m really passionate about is this concept of building wealth that will endure.
- One of the reasons people come to me is because they like the idea of building wealth for themselves and the idea of having the freedom to choose whether they work or don’t work. But ultimately, it’s about trying to use their wealth to influence and support their kids.
- I spend a lot of time around education on what you have to do to earn a dollar today and still have it working for your family in a hundred years.
- This is why there’s no hard or fast formula. But there are some frameworks that you can put in place to stack the odds in your favour. /li>
- The number one thing that’s going to end up creating the influence isn’t the money – it’s the education!
- There’s a story of two brothers. One goes on to build a lot of wealth, and the other doesn’t – he’s a school teacher. But the one that builds a lot of wealth leaves $10 million to his three kids, and in a decade, it’s gone. The brother that was a school teacher, leaves behind a $30,000 annuity, but with lots of wisdom around stewardship and how to look after it – and it sets them up for a successful financial future.
- So, it’s not how much you leave behind; it’s how you leave it behind.
Q: Tell us about the [your] book Salena, was that kind of the culmination of your philosophies? So the idea of writing the book was to share this strategy with a bigger audience? Was that where it kind of all came from?
- If there’s anything I’ve learnt, it’s that business is hard!
- So, the writing of the book was a gentle approach to showing people that it doesn’t have to be all about the business – you don’t have to put all your money on that.
- There are also other ways to build wealth where you don’t need to struggle to save $100,000 – $150,000 for a deposit for one property, and then the next property and so on.
- The days are long gone where you could build a massive property portfolio just from ratcheting one lot of equity into the next – the banks are all over that now.
- So, my book focuses on building wealth rapidly through alternative investments.
Q: Give us your biggest business or investment mistake.
- The biggest mistake we made was investing in a deal, which effectively ended up being a fraudulent investment, and we lost hundreds of thousands of dollars.
- At the time, it really hurt us.
- I’ve coached and counselled many people around having lost money, and I can speak from experience now that the most significant thing around losing money is digesting the pain of the loss. It’s not the actual impact but more the psychological impact that was most challenging.
- I mean, it was a deal where we did all the right things – we had lawyers, we did the due diligence, but there was just no accounting for underhanded fraudulent behaviour.
- Loss is always a possibility, but now I’m much wiser to the checks and balances that need to be in place, and I’m much slower to trust. I am also much more vigorous in my due diligence.
- So, what I’m trying to do in my community is to help people understand what due diligence is and how to discern the difference between a good deal and a bad deal.
- But, then I’m also shortcutting the extent of the due diligence by letting them connect to my network.
Q: For those out there who have invested and lost money or had a shocker, and it affects them personally, is there any digestion strategies? How do they deal with it? How do they get on with it?
- The first thing to do is find the lesson in that mistake and make sure you don’t make it again.
- We made the biggest mistake, hands down, but there were lessons in that mistake. And actually, the fury in that sparked me to move in another direction – none of that would have happened if I didn’t learn from that mistake.
Q: What’s the deal that you’ve high-fived about? Is there a win that sticks out in your mind?
- I know it sounds kind of funny – but it’s the smaller deals that stick out in my mind.
- If I can make a 15% return without having to do anything for – that’s always a win.
- When I’m investing, I’m not just looking at the ROI; I’m looking at how much energy I have to put in and how much due diligence I have to do. And how is that relative to the returns?
- You have to be thinking like a professional investor if you want to make the wins.
- For me, if I can make a good enough return without having to pick up a paintbrush – that’s gold.
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