I was wondeinrg if anyone can give me feedback and insight onto my path to being successfully free.
In another 12 months I will have about $500,000 of after-tax savings. My plan is to basically purchase a few average homes ($250k-300k) and rent them out. Given another 12mo there will probably be more properties on sale and at more 'realistic' prices. The bank has told me they can lend me up to $1mill.
Now the plan is to buy up to $1mill worth of properties and take out 30-year loans on each one. The repayment on these loans would total about $76k per year, however I assume the rent on these homes will make the loan repayments lower. But considering council rates, water supply, etc would bring it back up to around that figure. This is with the CURRENT interest rates, if interest peaked to 10% then it would be around $106k per year in loan repayments. (still managable).
Now is it true that houses generally grow at say 10-13% per year? If so, that means $1mill worth of debt would be gaining $100K CG value per year? BUT at the same time, rents will rise and over-time the loan repayments I pay each year will end up being less than how much I earn from rents, etc?
Furthermore since I have $500K in the bank, should I use this money as backup, considering it will only cost me $76K per year to service the loans. I could use the $500K as a bank reserve in case something happens, I would have 4 years of money reserves to fund the loan (e.g. in case of job, interest rate, government policy changes). OR I could technically borrow MORE.
$1MILL loan = $76k loan repayments+council rates after rent deducation
$2MILL loan = $152k loan repayments+council rates after rent deducation
$3MILL loan = $228k " "
In a nutshell, if I had say $3mill all put into properties, my asset base would grow at $300k per year?
Servicing a $3mill loan for $228K per year seems workable. Would you do this, please help me out.
In another 12 months I will have about $500,000 of after-tax savings. My plan is to basically purchase a few average homes ($250k-300k) and rent them out. Given another 12mo there will probably be more properties on sale and at more 'realistic' prices. The bank has told me they can lend me up to $1mill.
Now the plan is to buy up to $1mill worth of properties and take out 30-year loans on each one. The repayment on these loans would total about $76k per year, however I assume the rent on these homes will make the loan repayments lower. But considering council rates, water supply, etc would bring it back up to around that figure. This is with the CURRENT interest rates, if interest peaked to 10% then it would be around $106k per year in loan repayments. (still managable).
Now is it true that houses generally grow at say 10-13% per year? If so, that means $1mill worth of debt would be gaining $100K CG value per year? BUT at the same time, rents will rise and over-time the loan repayments I pay each year will end up being less than how much I earn from rents, etc?
Furthermore since I have $500K in the bank, should I use this money as backup, considering it will only cost me $76K per year to service the loans. I could use the $500K as a bank reserve in case something happens, I would have 4 years of money reserves to fund the loan (e.g. in case of job, interest rate, government policy changes). OR I could technically borrow MORE.
$1MILL loan = $76k loan repayments+council rates after rent deducation
$2MILL loan = $152k loan repayments+council rates after rent deducation
$3MILL loan = $228k " "
In a nutshell, if I had say $3mill all put into properties, my asset base would grow at $300k per year?
Servicing a $3mill loan for $228K per year seems workable. Would you do this, please help me out.