Hi! I'm new here, my situation

[josko]

Good, my plan looks to be quite solid

Thank you everyone for throwing your thoughts in.

I see LOE gets some funny looks around here I have a few friends that have been living on equity for many years, and they are doing well so got me jumping on the bandwagon also.

I never will sell any of my assets, as the cost of buying is high enough, let alone selling.. I don't understand this, and think that only those who don't fully understand property kill the goose who continually lays golden eggs, AND get charged by the Government by doing so

Rob, I like the way you think. You got style and thanks for your input.

Hi there again,

How many properties and how much debt have your friends that use LOE got?

My strategy WAS LOE. Then the recession that didn't happen set in.

I was sitting on 8 IP's with just under 3 mil in debt. Mortgage payments can bite hard at 10% interest rates. Try refinancing in a severely declining property market when all asset classes are crashing in world markets.

Experience speaks for itself. Life throws us little tests and I am happy to say I passed but I learned the hard way.


I hope you are diversifying your properties and I would highly recommend buying in different states if LOE is your strategy. I am planning to buy again at LVR's of 60% on current IP's and 80% for new.

I'll use the equity in IP's to purchase but will make sure my whole portfolio is not at 80% again.

I didn't know this forum existed until two years ago. You are off to a great start and can benefit from learning from the mistakes of others. Well, those of us who are brave enough to admit them.

Regards JO

 

[investor2009]

Try doing the sums on selling to buy another 'asset' then get back to me James. I appreciate your open mind though and its a good idea in theory.

 

[josko]

Hey Investor,


James is right.

I sold a 3 BR Villa to buy the next door property of an IP I owned. Both blocks were approved for three storey units and I had DA approval for both blocks.

Sometimes there are just bigger fish to fry.

I understand your mindset though, but sometimes things aren't as black and white as they seem.

Regards JO

 

[JIT]

Thanks JIT!

I'm humbled by your words.

I saved one deposit, and borrowed against the rest. Nothing special but its nice when others say differently so thanks.

I've always earned a low income, was earning around 36k after tax when I saved for the only deposit. (no/1) Now I don't even think about cash. Only investment equity.

No problems!

That's what I've done too, saved up deposit + costs on my first RIP which went up hugely over 18 mths time and I then leveraged off this for the next 4 x RIPs, but did use some cash savings too in the last one I bought at lower LVR (90%).

How are you managing the interest rate risk on that $1MM debt?

Are you on variable and/or fixed?

Are you capitalising interest or the -ve geared shortfall at present?

Thanks.

 

[JamesGG]

Try doing the sums on selling to buy another 'asset' then get back to me James. I appreciate your open mind though and its a good idea in theory.

A large part of my daily work is doing those type of sums.

Like you, I'm in my mid-20's and have much bigger dreams than working for another forty years. That part of your mindset, I can certainly understand!
I've written on this forum before about how I'm not as patient as most people (this may have been apparent in my replies to you already... ); waiting for average returns doesn't appeal to me when my wealth can be moved and invested for much higher returns, much quicker.

The way that I see it, 5% in and another 5% out is simply a (relatively) small cost of doing business.

There are many, many ways to skin the proverbial and keeping an open mind to these allows for more opportunities to present themselves.
Whatever your strategy, mate, it's a damn good start and good to see. Best of luck with it.

 

[yadreamin]

as every day goes by I become more of a CF investor. I am actually starting to question the value of big numbers onthe balance sheet that yield stuff all. a proiperty with a value of $1 that puts money in my pocket is probably more valuable to me personally than a negative geared cash drain that has equity of $100k

Yep ,l too have jumped the fence, and agree with you Ausprop.
Everything changes when the property wave turns to a servere undercurrent.
I should live long enough to see CF+ from my IPs
cheers
yadreamin

 

[crc_error]

Thanks JIT!

I'm humbled by your words.

I saved one deposit, and borrowed against the rest. Nothing special but its nice when others say differently so thanks.

well done buddy!

Can you tell us what sort of IP's you buy/hold? where did you buy them?

Did you buy new or did you renovate?

What about your parents? what have they said ?

 

[crc_error]

Yep ,l too have jumped the fence, and agree with you Ausprop.
Everything changes when the property wave turns to a servere undercurrent.
I should live long enough to see CF+ from my IPs
cheers
yadreamin

this is the problem I see.. buying in growth areas, means CF-

and CF- limits how many IP's you can buy.. and the more you buy, the more you have to work!!

buying CF+ IP's means little growth.. you may as well buy shares.. at leasts the buy sell costs are nothing to compare.. and you get regular dividends.. and cost nothing to hold

 

[jingo]

Hi there!

A little about myself.

I'm still quite young at 25 years, I own 4x interest only properties at a value of $1.5million with a total debt of $1.1 million.

I've been investing for roughly 2 years so far..

Congratulations investor 2009. That is a fantastic portfolio to have accumulated in such a short time.

I'm looking to add to the portfolio slowly, maybe 1 or two properties per year from here on in and my main goal is to live off equity once rents are equal to all repayments. (I'm around 12k out before tax atm).

Great plan. To my way of thinking adding 1 or 2 properties to your portfolio each year is making very rapid progress!

I'm crystal balling by adding 7% to my total portfolio per annum, and in a few years if all goes right (3 years or so) I can quit my job and go travelling like I've always wanted...

My wife and I aim to do something similar. Take some time to travel and then return to work part time

I plan to take a 240k LOC and use 60k per annum for four years.

I calculate (if all goes well) that I will have more equity than I originally started with after this time-frame and will take it from there.

Problem is. It seems too good to be true, am I missing something here?..

As long as you can cover your holding costs for the duration of the time that you are away, and have allowed for the unexpected (long vacancy periods, repairs etc) then your plan should work.

The only 'flaw' I can see would be 'if' property did not do much within that period. Causing me to have to get another job at the end of my four year trip.

This would only be a flaw if you were relying on property prices rising while you were away to cover holding costs when you returned. If you can cover 4 yrs worth of expenses from the initial LOC (set up before you leave) plus a buffer to cover any unexpected expenses, then even a period of stagnant property prices shouldn't be a problem.

Great plan! Wish I had such a portfolio when I was 25!! Well done!

Regards Jason.

 

[investor2009]

Wow, thank you Jingo!

And again for the good advice and break down of paragraph.
Its good to hear you plan on doing the same for a while.

 

[Ausprop]

this is the problem I see.. buying in growth areas, means CF-

and CF- limits how many IP's you can buy.. and the more you buy, the more you have to work!!

buying CF+ IP's means little growth.. you may as well buy shares.. at leasts the buy sell costs are nothing to compare.. and you get regular dividends.. and cost nothing to hold

I think a lot of us on here tho have had a double whammy...our CF- growth assets have been declining in value!

the shares argument is fair enough except I am a big big fan of creating the purchase equity. unless you are very skilled and devoted creating value from shares and business it's a whole new ball game.

 

[Aaron Sice]

this is the problem I see.. buying in growth areas, means CF-

and CF- limits how many IP's you can buy.. and the more you buy, the more you have to work!!

buying CF+ IP's means little growth.. you may as well buy shares.. at leasts the buy sell costs are nothing to compare.. and you get regular dividends.. and cost nothing to hold

or like i keep saying

x-col one CF+ and one CF- property together.

you hold one for cashflow and to the service the other higher growth asset.

problem solved, really.

 

[jingo]

the shares argument is fair enough except I am a big big fan of creating the purchase equity. unless you are very skilled and devoted creating value from shares and business it's a whole new ball game.

I agree. Personally, I don't have the skills to create enough equity from shares. Property has given me equity that I can now use to purchase income producing shares. Ala Keithj. (And many others on here).

Regards Jason.

 

[crc_error]

x-col one CF+ and one CF- property together.

you hold one for cashflow and to the service the other higher growth asset.

problem solved, really.

not really, cause then you need twice the deposit, and twice the debt..

you may as well just buy a CF neutral IP instead!

now thats simple really!

 

[Bill.L]

Hi all,

I hate to be the party pooper, but there are a few things here that ring alarm bells with me.

All the following from Investor2009,

I've been investing for roughly 2 years so far.

I've always earned a low income, was earning around 36k after tax when I saved for the only deposit.

I own 4x interest only properties at a value of $1.5million with a total debt of $1.1 million.

That's 73.3% lvr. One small deposit means growth of ~35% in the value of the entire portfolio in 2 years. So the newest additions probably a bit less and the older ones a bit more. Anyone else had growth of 35% in the last 2 years???

add to the portfolio slowly, maybe 1 or two properties per year

Different definition to 'slow' than I have, especially at 73% lvr.

I'm around 12k out before tax atm

On a low income with record low IR at present. A 2% increase in interest rates will cost an extra $22,000 a year. If you are on a low income, added to the $12k you are already out of pocket gives you a negative cashflow of $34k pa. Assuming zero vacancy gives you $2k to live on.

Any intention to add property (if anyone/bank were stupid enough to lend you any more money) at 1-2 per year is just asking for disaster to strike.

I cant actually believe that you would have been able to build this portfolio in the last 2 years of the GFC while the lending institutions were tightening their requirements, on a low income. Especially if the properties were "growth" and the cashflow only slightly negative.

Could you please forward any further information if you really want a serious comment on your plans.
Things like...

How did you get the loans with a low income without lying on the application forms??

Where were you able to buy properties that had 35% growth in the last 2 years, especially with no previous experience??

bye

 

[JIT]

Hi all,

I hate to be the party pooper, but there are a few things here that ring alarm bells with me.

...

investor2009, are you able to answer the questions in my last post?

Here they are again...

How are you managing the interest rate risk on that $1MM debt?

Are you on variable and/or fixed?

Are you capitalising interest on the -ve geared shortfall at present?

 

[battle on]

Totally agree with you Bill.L.

How can someone possibly have 4 properties, get this amount of growth and equity at 25yrs old on a low income, without a tremendous amount of help financially. Geez there are are PM fees, insurance, land tax etc which all add up to about 20% plus of costs then loans, accountant fees, tennants not paying rent (insurance does not cover 100% of this, there is an excess!! if they pay).

Then theres the banks!!! Which bank is going to lend a 25yr old this much money on a low income!!!!

I smell a Rat??

 

[battler]

Totally agree with you Bill.L.


I smell a Rat??

And if it sounds too good to be true....................

 

[JamesGG]

I smell a Rat??

I don't.

I had two properties at 20 years old, purchased with incomes of $23k and $34k at the time, respectively. That was then; I'm now 24 and come a long way since.

His back-story is feasible. I still see many like it on a regular basis.

 

[investor2009]

Well I'll take that as a compliment

I have fixed 50% of my loans, one at 7% and one at 6.8%

I'm variable with the rest.

35% growth, maybe I got 'lucky' I don't see it that way though.
Please don't insult me.. I may just be 'wiser' than you. It does not matter how many years I've been investing. I've spent many years learning and most of my spare time.

I'm going to start capitalising interest soon, as I have some grand plans for for my private residence.

My deals were quite hard to get through, but I never say die. I'm tough. Where theres a will, theres a way.

Low interest rates have been my saviour so far in terms of loans.

Anyhow. Thanks for the replies but the doom n gloom brigade are ******* me off now and I know better than to hand around clowns