1million in Equity!

[Rixter]

To draw on the equity will cost you 8%+ of whatever you are drawing. Add this to negative gearing costs, rising interest rates and no or low cap growth going forward its obvious not many people can LOE.

Unless they bought properties on great yields before or early in the 2000 - 2006? property boom.

CGA Strategy is a 7-10 year plan to financial independence.

You are not redrawing against any property for lifestyle funding until 7-10 years (the following property cycle) from when you originally purchased the property. In this time is basically doubled in value and has a complete property cycle of equity growth.

Hope this helps.

 

[Rixter]

Evand, I can only see LOE been sustainable when you have a LVR of 50%. Then your rental yield of 4.5% gives you 9% return covering your 8.5% PA interest.

Correct, sub 50 LVR is ideal.

 

[Rixter]

Thats true but that 50% equity for 50% LVR takes years to achieve even in a growth market. Unless of course you're putting in 50% deposit but if you can do that why bother with LOE.

Correct it takes years. 7-10 year or a complete cycle of growth.

Tho I dont sugggest putting in 50% of your own funds as deposits. That shoots your ROI down quick smart.

 

[crc_error]

Correct, sub 50 LVR is ideal.

If this is the case, then why now use shares to achieve the same result? You can gear shares allot easier than property, cheaper to purchase and maintain, and gets the same result.

Property I can see would only have a benefit due to its higher leverage, and if you can't achieve this, then you may as well use shares.

 

[Rixter]

so how many IP's do you have? Whats your over all LVR?

We have a Multi $Million property portfolio Australia wide. Current overall portfolio LVR is 54%.

What is yours crc?

Hope this helps

 

[Rixter]

If this is the case, then why now use shares to achieve the same result? You can gear shares allot easier than property, cheaper to purchase and maintain, and gets the same result.

Property I can see would only have a benefit due to its higher leverage, and if you can't achieve this, then you may as well use shares.

Hmmmmm now why didn't I think of this

Thanks for the tip

 

[Ausprop]

but Rixter why wouldn't you just buy shares that yield higher, on average grow stronger and have less headaches and favourable tax treatment? do you believe the cap growth is higher, or just like to be able to touch your investment? or prefer the lesser volatility? or?

 

[crc_error]

but Rixter why wouldn't you just buy shares that yield higher, on average grow stronger and have less headaches and favourable tax treatment? do you believe the cap growth is higher, or just like to be able to touch your investment? or prefer the lesser volatility? or?

this is my exact point. I personally think your first one or two investments should be IP, due to 90% gearing, but then your better off redrawing equity to invest into higher yielding shares..

this will give you better diversification, yet achieve the same result, prehaps quick as you don't have the stamp duty expenses with shares like IP.

 

[Rixter]

but Rixter why wouldn't you just buy shares that yield higher, on average grow stronger and have less headaches and favourable tax treatment? do you believe the cap growth is higher, or just like to be able to touch your investment? or prefer the lesser volatility? or?

You can leverage residential harder starting out, less volatile and income is tax free.

Once your asset base is built you can put your lazy portfolio equity into the stock market invested for income to reduce your LVR.

Thereby optimising your portfolio investment structure across asset classes.

Hope this helps.

 

[crc_error]

We have a Multi $Million property portfolio Australia wide. Current overall portfolio LVR is 54%.

What is yours crc?

Hope this helps

only 1 IP purchased recently.. I did have 3 IP's a few years ago which I sold in 2005.

 

[crc_error]

You can leverage residential harder starting out, less volatile and income is tax free.

yes, this is what I suggested, so I think you can start out with IP, but then move to shares when higher leverage isn't possible.

Income from IP isn't tax free, rent it taxable like like dividends with shares.

if your reffering to LOE, LOE from shares would also not be taxable.

 

[Rixter]

if your reffering to LOE, LOE from shares would also not be taxable.

Correct but you can't leverage shares like you can property

So your SANF buffer isnt as great.

But you can optimise the two.

Hope this helps

 

[crc_error]

no you can't, so whilst its economical to use higher leverage, use property, but when servacilibity becomes a problem, use shares/margin lending.

 

[jingo]

when servacilibity becomes a problem, use shares/margin lending.

Margin loans can be the devil in disguise! Just ask Eddy Groves!!

 

[Rixter]

no you can't, so whilst its economical to use higher leverage, use property, but when servacilibity becomes a problem, use shares/margin lending.

Theres no servicability issues when you have substantial equity behind. I can borrow 80% without income , assets or liability proof. Ive been pure equity lending for a while now.

I dont use shares to increase servicability. I'm using them to reduce LVR and increase SANF buffer.

 

[crc_error]

Rixter, it may not be a servacibility issue from the banks point of view, but your going to run out of cash soon enough.. you can't continue to service a unlimited amount of IP's at 80% LVR

 

[kph]

Rixter, it may not be a servacibility issue from the banks point of view, but your going to run out of cash soon enough.. you can't continue to service a unlimited amount of IP's at 80% LVR

Ummmm.. you can if the rent return is high enough, as in greater than your costs.
And yes, its still possible to find property that you can do this with.

kp

 

[Rixter]

Rixter, it may not be a servacibility issue from the banks point of view, but your going to run out of cash soon enough.. you can't continue to service a unlimited amount of IP's at 80% LVR

IMHO yes you can if you are structured well enough to do so with equity & a growing portfolio behind you.

Your knowledge & belief system just isn't at a level for you to comprehend otherwise.

Dont get me wrong here mate. Im not having a go or questioning your beliefs - you just havent been exposed to it before to gain this knowledge otherwise.

I know it can be done because Ive been shown how to by others who are doing it.

Just because someone says something cant be done does not mean it cant be done.

Those people are purely commenting based around their own individual knowledge, experience & beliefs systems.

I would have stopped building my portfolio years ago if I took any notice of others saying something cant be done.

Success is 80% mindset & 20% strategy.

Hope this helps.

 

[crc_error]

I'm not saying it can't be done.. I'm just saying you need enough rent to cover your interest, and if your not getting enough, you need to wait till you are. But if rent is 4%, interest i 8%, then LVR must be 50% for this to happen.

Unless you can increase rent abnormally somehow.

 

[Rixter]

I'm not saying it can't be done.

No, you said this

but your going to run out of cash soon enough.. you can't continue to service a unlimited amount of IP's at 80% LVR

....and this is where I did not agree. I believe yes you can continue.

Hope this helps.