Straw Poll: How much do you need to live on?
- Thread starter Harriet
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TomL said:
Because if you dont pay down the loan, the income from the assets goes to paying the interest payments on the loan. If you can achieve $500k passive income after interest payments on the loans, youl'll need a lot more than $10 million in assets. Probably circa $20-$30 million. Good Luck
I know what you are saying likewow. I used to think this way too.
But .. for the next hour or so, do some numbers.
Make a model, play with assumtions. Go outside of your current thinking, and dare to dream ....
What happens if your portfolio is making 10%, 15%
What happens if you keep you IP LVR at 70%, you share LVR at 40%
Instead of arguing your point, try and find some positives - I know its hard at first, but when you start trying to look for positives in what someone is saying, little lights turn on, little bells go *ding*. A great tool for this is cashflow 101 from R.K.
I wont post the spreadsheet I use to calculate this sort of stuff - I think the learning experience in putting one together is worth more to anyone that can actually be bothered trying to plan out their theoretical future.
edit - oh - and read lots of books.
T.
But .. for the next hour or so, do some numbers.
Make a model, play with assumtions. Go outside of your current thinking, and dare to dream ....
What happens if your portfolio is making 10%, 15%
What happens if you keep you IP LVR at 70%, you share LVR at 40%
Instead of arguing your point, try and find some positives - I know its hard at first, but when you start trying to look for positives in what someone is saying, little lights turn on, little bells go *ding*. A great tool for this is cashflow 101 from R.K.
I wont post the spreadsheet I use to calculate this sort of stuff - I think the learning experience in putting one together is worth more to anyone that can actually be bothered trying to plan out their theoretical future.
edit - oh - and read lots of books.
T.
Tom,
Thanks for your advice but i think doing it on a spreadsheet and acheiving it in reality over a long time are two very different things. Who can achieve nett property returns of 10-15% over extended periods and across a large and varied portfolio? Very difficult.
For the next few years investors will be lucky to achieve an IRR of 15% (passively) and thats growth and income, and thats gross.
Also dont forget people need money to live on, especially when you have a family to support, so all your return cant go in to paying down the loans again its the theory V reality thing.
The ratio of paid/unpaid loans doesnt matter you still need a certain amount of assets to achieve a certain return and over long periods 5% nett is indicative.
Im a realist, its about the numbers mate dont worry about the 'positives'.
edit: I have read enough books but again, reading and acheiving are two very different things. Im out there doing it and have been for a long time. But good luck on your journey and i really hope you acheive what you want.
Thanks for your advice but i think doing it on a spreadsheet and acheiving it in reality over a long time are two very different things. Who can achieve nett property returns of 10-15% over extended periods and across a large and varied portfolio? Very difficult.
For the next few years investors will be lucky to achieve an IRR of 15% (passively) and thats growth and income, and thats gross.
Also dont forget people need money to live on, especially when you have a family to support, so all your return cant go in to paying down the loans again its the theory V reality thing.
The ratio of paid/unpaid loans doesnt matter you still need a certain amount of assets to achieve a certain return and over long periods 5% nett is indicative.
Im a realist, its about the numbers mate dont worry about the 'positives'.
edit: I have read enough books but again, reading and acheiving are two very different things. Im out there doing it and have been for a long time. But good luck on your journey and i really hope you acheive what you want.
Now you are getting into the nitty grittys - this is where the rules to your own game start coming into play.
By portfolio I dont mean property. I do not limit myself in this way.
My portfolio WILL return an avg of 15% year in year out. Sorry.
I too am a realist. I dont know everything, I continually learn.
T.
By portfolio I dont mean property. I do not limit myself in this way.
My portfolio WILL return an avg of 15% year in year out. Sorry.
I too am a realist. I dont know everything, I continually learn.
T.
Good luck Tom, youre going to need it. Because you will be outperforming all except the top 4-5 managed funds in Australia. (performance last 5 years) and you'll be ahead of hundreds and hundreds of others.
http://moneymanager.smh.com.au/tools/compare/findamanagedfund.html
They have the best, well paid investors with all sorts of degrees and financial qualifications, not to mention years and years of experience. They are also constantly juggling their portfolio for maximum return and risk mitigation.
You could either start your own fund or sell your secret and get extremely rich that way
By the way, the major difference here is that youre saying what you will do and im saying what ive done. Regardless, all the best and again, good luck on your financial journey.
http://moneymanager.smh.com.au/tools/compare/findamanagedfund.html
They have the best, well paid investors with all sorts of degrees and financial qualifications, not to mention years and years of experience. They are also constantly juggling their portfolio for maximum return and risk mitigation.
You could either start your own fund or sell your secret and get extremely rich that way
By the way, the major difference here is that youre saying what you will do and im saying what ive done. Regardless, all the best and again, good luck on your financial journey.
Sim
Administrator
Sarcasm isn't useful here likewow.
The problem with large managed funds is that they are very limited in what they can invest in, and usually have very little option to add value to their investment portfolio.
You're putting someone down for aiming to be better than the average - just because you cannot get returns of that level doesn't mean someone else can't. Once you get to a certain level, aiming for "average" returns is selling yourself way short - returns on investment of 20-100%+ is actually what should be aimed for. Note that this is not "mum and dad" investing here, this is sophisticated investing. Don't put someone down just because you don't know the difference.
An example for you... who do you think typically makes more money from their investment ? The people investing into the managed fund, or the people who OWN the fund manager ? Think about it.
The problem with large managed funds is that they are very limited in what they can invest in, and usually have very little option to add value to their investment portfolio.
You're putting someone down for aiming to be better than the average - just because you cannot get returns of that level doesn't mean someone else can't. Once you get to a certain level, aiming for "average" returns is selling yourself way short - returns on investment of 20-100%+ is actually what should be aimed for. Note that this is not "mum and dad" investing here, this is sophisticated investing. Don't put someone down just because you don't know the difference.
An example for you... who do you think typically makes more money from their investment ? The people investing into the managed fund, or the people who OWN the fund manager ? Think about it.
The problem with most fund managers is that they are restricted to a particular segment of the market. As a private investor, you have a much wider range of investments to choose from and can out perform the funds. It's really not that hard to do if you are prepared to put the time and effort into it.
I aim for a 15%-20%pa return on my portfolio (note, this has comprised of property, stocks, funds & private equity placements) and over the years it has achieved that.
I aim for a 15%-20%pa return on my portfolio (note, this has comprised of property, stocks, funds & private equity placements) and over the years it has achieved that.
Sim,
Wheres the sarcasm, please point it out.
I do know the difference between mum & dad and professional investing. If you read my first post you'll see that. To acheive those returns from a passive investment of that size and maintain a degree of risk minimisation (diversifivcation) is very difficult for even the best investors with a PASSIVE portfolio. But going back to my original post of 5% nett from $10 million unencunbered debt is very difficult and TomL was making out it is easy. Easy in theory, thats all.
Back to the funds. You can invest in aggressive funds with high returns and the risk of huge negative returns or conservative funds. Horses for courses.
But we are talking about 15% return every year from a passive portfolio, again very difficult. The list i gave is all funds and their returns for 5 years.
Wheres the sarcasm, please point it out.
I do know the difference between mum & dad and professional investing. If you read my first post you'll see that. To acheive those returns from a passive investment of that size and maintain a degree of risk minimisation (diversifivcation) is very difficult for even the best investors with a PASSIVE portfolio. But going back to my original post of 5% nett from $10 million unencunbered debt is very difficult and TomL was making out it is easy. Easy in theory, thats all.
Back to the funds. You can invest in aggressive funds with high returns and the risk of huge negative returns or conservative funds. Horses for courses.
But we are talking about 15% return every year from a passive portfolio, again very difficult. The list i gave is all funds and their returns for 5 years.
likewow said:
Assume you have $300K in equity today - buy $3M of property at 90% LVR today.
Pay interest only for 20 yrs
Assume property values double every 10 years, so in 20yrs it'll be worth $12M & you'll still have a loan of $2.7M.
That's how to get $9.3M of unencumbered property in 20yrs.
This scenario makes a lot of assumptions - however, $500K pa passive income isn't beyond the reach of many serious investors.
KJ
keithj said:
Thats all true Keith and does make a lot of assumptions. Id like to do a poll on here to see how many forumites (or members of the public in general) can lay down a $300k deposit today and borrow $2.7 million AND service that $2.7 million loan ($175 500 pa IO paymenst) on current yields relative for that sort of capital growth. And which lender would lend that amount @ 90% LVR in the current market?
Extrremely serious investors only need apply.
I don't think any of the assumptions are unreasonable. My spreadsheet tells me my passive income will be in excess of $500K within the next 20 yrs.likewow said:
You can start your own poll easily enough when you start a New Thread. Although maybe you should structure the question a bit differently - leave out the words currentlyand today. Make one of the options 'who has laid down >$300K in equity over the last 5 years and purchased property with it and is servicing the loans.likewow said:
Less than 10 years ago I was just a member of the general public, then I decided to invest a little, and a bit more, today I just invest. I didn't wake up one day & decide to apply to be a serious invester, instead I got a bit of education, a positive attitude and took a few small risks and waited 10 yrs.likewow said:
This thread started with a question about goals. np2003 said his goal was $500K pa. I know that is acheivable.
Your question was
likewow said:
My response demonstrated that you don't have a $10M loan to pay off. Maybe you should get a spreadsheet and plug a few figures in as another poster suggested, or buy one of Jan Somers books. Remember Einstein said the 8th wonder of the world is compound interest.
KJ
Hi likewow !
(sorry I did not read all the other responses yet)
Pessimism or negative thoughts are almost always disguised as "realistic".
According to R.K. to make it to the top 5% of income you must be on the right quadrants, Investment or Business. I assume most here know that and are on that track already.
Yet what will put your income on the map is leverage, that is multiply your effort. If you have a business as you well point out you are taking advantage of such principle through your employees, wholesalers or retailers of your product. Invent and patent something, Write books or songs and you will be on your way. Investing in properties if you can do it over and over and never reach a ceiling, can get you there. I chose network marketing as a leverage method and properties as an investment strategy. when I am far from $500k a year, others that started two years before me are already there, so...
THINK BIG, it helps...
(sorry I did not read all the other responses yet)
Pessimism or negative thoughts are almost always disguised as "realistic".
According to R.K. to make it to the top 5% of income you must be on the right quadrants, Investment or Business. I assume most here know that and are on that track already.
Yet what will put your income on the map is leverage, that is multiply your effort. If you have a business as you well point out you are taking advantage of such principle through your employees, wholesalers or retailers of your product. Invent and patent something, Write books or songs and you will be on your way. Investing in properties if you can do it over and over and never reach a ceiling, can get you there. I chose network marketing as a leverage method and properties as an investment strategy. when I am far from $500k a year, others that started two years before me are already there, so...
THINK BIG, it helps...
keithj said:
I included the word 'today' because you used it in your original post and i used the word 'current' because you have to begin servicing the loan now using current yields.
And this scenario
'who has laid down >$300K in equity over the last 5 years and purchased property with it and is servicing the loans'
is a completely different proposition to your original proposal of outlaying $300k as deposit and borrowing $2.7 million. So if i did post a poll i would put it exactly as you orginally stated and that is
'Assume you have $300K in equity today - buy $3M of property at 90% LVR today'
and id ask 'who could do this today'?
I agree its acheivable, but as i stated in my original post,only for the top say 0.1 % of investors.
and guys, remember we are talking about $500pa passive income.
marc1 said:Hi likewow !
(sorry I did not read all the other responses yet)
Pessimism or negative thoughts are almost always disguised as "realistic".
According to R.K. to make it to the top 5% of income you must be on the right quadrants, Investment or Business. I assume most here know that and are on that track already.
Yet what will put your income on the map is leverage, that is multiply your effort. If you have a business as you well point out you are taking advantage of such principle through your employees, wholesalers or retailers of your product. Invent and patent something, Write books or songs and you will be on your way. Investing in properties if you can do it over and over and never reach a ceiling, can get you there. I chose network marketing as a leverage method and properties as an investment strategy. when I am far from $500k a year, others that started two years before me are already there, so...
THINK BIG, it helps...
Thanks for the advice to think big. But ive been doing this stuff for a long time now and without going into detail, ive done pretty well thank. I lean more toward business than investing but i use each to complement the other. Whos RK?
Dont take this the wrong way guys but there seems to be a lot of theory in this thread and not a lot of practice,a lot of reading books and doing spreadsheets. Theres a big leap from 'i will do this' to 'i have done this' and being realistic comes from years at the coalface of business and investing with all its ups and downs and has nothing to do with negativity. But the downs make the ups seem so much higher
Maybe the answer is something like this
$10m equity in property draw down $2.3m and then get a margin loan to 60% giving a total investment of $6m. Leaves $7.7m of equity untouched.
Cost of money 6.6% return from moderate fund (like Navra) 15+% so clear return of 9% (passive) or about $540k
On top of your return from fund the rental return is 5% of $10m or $500k gross less about 30% for expenses, thus $350k
So overall on initial investment of $10m return is about the $890k mark, before tax.
Advantage to this method is that the property is still making capital gains over time and you can do what you will with the $890k income.
We are currently doing something along these lines
Cheers
$10m equity in property draw down $2.3m and then get a margin loan to 60% giving a total investment of $6m. Leaves $7.7m of equity untouched.
Cost of money 6.6% return from moderate fund (like Navra) 15+% so clear return of 9% (passive) or about $540k
On top of your return from fund the rental return is 5% of $10m or $500k gross less about 30% for expenses, thus $350k
So overall on initial investment of $10m return is about the $890k mark, before tax.
Advantage to this method is that the property is still making capital gains over time and you can do what you will with the $890k income.
We are currently doing something along these lines
Cheers
