1million in Equity!

[jaycee]

New merc would be over $100k (well a really good one anyway)

So you probably wouldnt be buying it anyway if you didnt have enough to buy it, you'd need it for another deposit or something

If you could afford a $100k+ new car would you really want to scrougn around to get it cheaper ? Then agian, for the smae $100k, you ight be able to pick up a more epxensvei $150k new one or something...

hmmm... now Im confused... best I concentrate on trying to make $, I already know plenty ways of to spend them

 

[zed_kid]

Never buy a new car. Wait for the 3 year leases to expire and the prestige cars start flooding the market as the lease holders usually upgrade to new by then.

 

[NOI53Y]

Wow. Finally just finished reading all 17 pages. What an interesting thread

 

[Xenia]

Yes reached it.

 

[Ridin-High]

Try not to focus on others to much, someone will always do it quicker, bigger, better then you.

Can it be done in 3yrs? You bet it can. Have i done it? No.

My tips:

- Educate self as much as you can (networking, reading, experience)
- Build a portfolio of quality diversified assets (property, equities, bonds, metals, cash)
- Learn to minimize risk (Buffers, Insurance)
- Learn to control your emotions (jealousy, fear, greed, envy)
- Open mind.

I've been doing this thing from zero (zero money, education, experience) around 2.4yrs into it 1.33mill portfolio of property/equities/casg with approx 190k equity

And i have certainly made some mistakes along the way

Regards,

RH

 

[Gentle_Chief]

Wow. Finally just finished reading all 17 pages. What an interesting thread

Set your SS page preference to display 40 posts per page, then you will have only 7 pages to read

 

[sash]

For the record...my observation about getting $1m in equity is to based on how large your asset value is and how well you have selected growth properties.

As I have said....you need both growth and income to grow your portfolio.

I started my IP journey in 1999....and achieved $1 net equity after 6 years in 2005. Second mil...I hit in late 2008.... so the time it took was a lot less. Why....because the size of my portfolio had a lot to do with it!

 

[Aaron Sice]

no offence to anyone, but $1mil in equity is just a made up value of $$$. it's a non-sensical value applied to an opinion on what something is worth.

to have $1mil in equity that you can't tap is an even poorer situation to be in.

100 houses of $10,000 equity each would be even worse again.

show me $1mil of contractural value of rent coming in (resi or comm) and then i'll get excited.

 

[sash]

Well....you are kinda a right.....

Equity gives you the means to acquire the cashflow.....and cashflow the ability to hold an asset for building equity. They are both intertwined.

Agree that one hundred houses with 10K in equity is a pain...I tend to hold houses with at least 100k plus in equity.

The other thing is to look at the overall return of your portfolio...if you aren't getting 5% net on your portfolio....(regardless of when you bought the asset) ....then your portfolio is under-utilised. This also means that your ability is build equity is also affected.

For example you might have a $4m portfolio....this means you shoul dbe getting around $200k in rents.

I see plenty of people who have $5m portfolios.....but only bring in about $175k in rent.....about 3.5% of the portfolio. In alot of cases they are still negatively geared despite holding their assets for many years.

no offence to anyone, but $1mil in equity is just a made up value of $$$. it's a non-sensical value applied to an opinion on what something is worth.

to have $1mil in equity that you can't tap is an even poorer situation to be in.

100 houses of $10,000 equity each would be even worse again.

show me $1mil of contractural value of rent coming in (resi or comm) and then i'll get excited.

 

[crc_error]

I see plenty of people who have $5m portfolios.....but only bring in about $175k in rent.....about 3.5% of the portfolio. In alot of cases they are still negatively geared despite holding their assets for many years.

this is the problem I see.. holding property with capital growth means it will be negative geared for a long time.

I think you need to come to a point when you start selling to lower your LVR, or clear the debt all together so you can live off the rent.

 

[jaycee]

yeah I reckon we only mention / "celebrate"this sort of thing as a milestone reached

I didnt know I'd have a couple of IP's. 10 yrs ago I don't think I even entertained the question.

I'm hoping to soon get to a 'milestone' (cause it's a big round figure) of 1M in investment properties, 1m worth of debt won't be a "big deal" for me, in fact almost round the corner so that means it already is..

I'll be happy when I add further to my assets and they also grow hopefully to 2M aswell - just the milestone thing I guess, reminds me I'm heading in the right direction.

But I wouldnt just look at that side of the equation. Of course you'd look at asset / debt / income together...

But every now and then if something stands out and feels like a bit of an acheivement, maybe the term take time to smeell the roses is fitting.

 

[Sunfish]

I think you need to come to a point when you start selling to lower your LVR, or clear the debt all together so you can live off the rent.

Many times here I have tried to put forward the idea of "seasons" of investing.

Possibly the first "Ah Ha" moment I had in investing was when the presenter said that when you are young and starting out, your only option is to leverage your future income stream. Clearly, property is the stand out vehicle to do this. (I do not agree that ANY time is a good time. During times of poor returns, you should stand aside.)

But further on, property may be facing a flat period and learning the ropes with other investment vehicles should be productive. The next property cycle will allow you back. By the end of the second cycle you should be retired, selling down property and investing in the "hands-off" income producing assets you are already versed in.

Things are seldom that easy but a young person starting out could productively use this as a model.

 

[Intrinsic_Value]

can it be done in three years,
quite possible yes, if you time it to a sustainable upswing in the underlying asset price and couple it with debt.

Just check out the increase in 'equity and distributions' of the old Macquarie bank satelite funds. The timing was right, everyone on the band wagon enjoyed the ride whilst it lasted, but only Macquarie was 'smart' enough to know when to get off at the station.

You gotta love those Macquarie boys.

If you are just relying on 'property doubles every 10 years', i would say you are playing with fire.

 

[oracle]

Many times here I have tried to put forward the idea of "seasons" of investing.

Possibly the first "Ah Ha" moment I had in investing was when the presenter said that when you are young and starting out, your only option is to leverage your future income stream. Clearly, property is the stand out vehicle to do this. (I do not agree that ANY time is a good time. During times of poor returns, you should stand aside.)

But further on, property may be facing a flat period and learning the ropes with other investment vehicles should be productive. The next property cycle will allow you back. By the end of the second cycle you should be retired, selling down property and investing in the "hands-off" income producing assets you are already versed in.

Things are seldom that easy but a young person starting out could productively use this as a model.

SF, I mostly agree with your post.

The only dilemma I have is as you wait and wait in hope to time the market but you are not becoming younger by the day and if you have the cashflow now to support a slightly negatively geared property when in the eyes of the bank you are still a good borrower. Wouldn't it make sense to borrow now when the banks will lend you?

You want to get up to a few million dollars worth of assets so that whenever in the next 5-10years things improve and property goes up 15%-20% in one year you are very well placed to benefit from it. Otherwise, how quickly can you acquire a multi-million dollar portfolio in a significant short time when you try to time the market? Will the banks lend you money that quickly?

(PS: I am suggesting here the young investor is buying quality assets and is not speculating and borrowing 95%-105% all the time. Properties are only slightly -ve geared with atleast 5% return + depreciation and is managing the cashflows very well. Basically, I am talking about the old philosophy of time in the market for young investors will make all the difference in the end.)

Cheers,
Oracle.

 

[Sunfish]

The only dilemma I have is as you wait and wait in hope to time the market but you are not becoming younger by the day and if you have the cashflow now to support a slightly negatively geared property when in the eyes of the bank you are still a good borrower. Wouldn't it make sense to borrow now when the banks will lend you?

There is always a bull market somewhere. I have one investment up 2,000% in the time Sydney property has been stagnant. It is a totally hands off investment.

If you limit your interest to any single asset class you have the problem of what to do during the inevitable slumps. There are seasons for property, shares, precious metals, cash. I enjoy doing the reading to get an idea where we are. I accept that if you are working hard with a family, it wouldn't be as straight-forward.

 

[oracle]

There is always a bull market somewhere. I have one investment up 2,000% in the time Sydney property has been stagnant. It is a totally hands off investment.

If you limit your interest to any single asset class you have the problem of what to do during the inevitable slumps. There are seasons for property, shares, precious metals, cash. I enjoy doing the reading to get an idea where we are. I accept that if you are working hard with a family, it wouldn't be as straight-forward.

True. But did you know you will generate 2000% profit? I guess not otherwise you would have poured all you life savings into it and even borrowed some more.

Someone, who bought in Perth during the time Sydney was flat at 90% LVR would have also experienced ROI of around 1500%. So you can always identify isolated examples to prove your point.

My point is when a young investor is out to generate enough wealth for his retirement. Which option is more safer to invest most of your hard earned dollars into property with a 20year timeframe or invest all your hard earned money into startup miners, gold, TD etc?

After 20years what are the odds of succeeding and being able to retire successfully? Again, please do not point isolated examples. These are rare and cannot be accounted for with any certainty. Also, I am not proposing you invest blindly in property and buy any property with awful yields or in the middle of nowhere.

Resi. Property in Australia is an excellent vehicle to create equity. Young investors should use it wisely to their advantage. Once you have equity it is not that difficult to generate cashflow using other investment vehicles. But without equity you need to be extremely skillful to generate cashflow required to retire.

Cheers,
Oracle.

 

[Sunfish]

Oracle, you are welcome to your single focus investments. It isn't for me.

BTW My focus has been on that sector almost exclusively. And note that I have never "Taken profits" because I had faith. I am still holding and expect it to double again. You might call it luck, I don't. And how did you know Perth was going to boom while Syd stagnated? If you went that way were you lucky? The "common wisdom" here on SS did not support that view AT THE TIME.

 

[Ridin-High]

Oracle, you are welcome to your single focus investments. It isn't for me.

BTW My focus has been on that sector almost exclusively. And note that I have never "Taken profits" because I had faith. I am still holding and expect it to double again. You might call it luck, I don't. And how did you know Perth was going to boom while Syd stagnated? If you went that way were you lucky? The "common wisdom" here on SS did not support that view AT THE TIME.

I agree with Sunfish, someone shouldn't limit themself to one asset class.

I was resi property only, then looked into commercial property, now into shares as well. Once my experience grows im sure ill get into other asset classes as well.

 

[jaycee]

Have to agee with sunfish and riding high

Otherwise we are basically saying we hvae foudn the only thing worhty of investing - I dont reckon I either that smart or lucky. Also in all othe areas of life, sticking only to 1 thing isnt the wya to go - take music for example you wanna be a great singer, but you only like to sing the style of songs you like only and dont listen to singers or music of other genres, is that the best way ?

We're investing money, not property..

 

[oracle]

I agree with Sunfish, someone shouldn't limit themself to one asset class.

I was resi property only, then looked into commercial property, now into shares as well. Once my experience grows im sure ill get into other asset classes as well.

Have to agee with sunfish and riding high

Otherwise we are basically saying we hvae foudn the only thing worhty of investing - I dont reckon I either that smart or lucky. Also in all othe areas of life, sticking only to 1 thing isnt the wya to go - take music for example you wanna be a great singer, but you only like to sing the style of songs you like only and dont listen to singers or music of other genres, is that the best way ?

We're investing money, not property..

Ok. Let me be more specific.

It's the strategy that I have decided to adopt which I believe will be best suited to me.

I have 30+ years to go before I retire. Will hit the 30years mark in exactly 3 days time

I have decided to allocate the first 7-8years solely on accumulating assets as fast as I can without over extending. For this I have chosen property to be the main asset vehicle. I will explain why later.

In those 7-8years I do intend to invest small amounts of money in other asset classes. For me it's mainly shares. This is going to be the asset class I will use to generate cashflow to retire. But only once I am done with most of the accumulation phase. Property and shares will be the only two asset classes I will use to build my wealth and ultimately retire. All my time and energy will be spent learning and become better at investing in those two asset classes.

The reason for using property as main asset vehicle during accumulation phase is leverage. Accumulate $5million worth of property and hold on for your life till you experience a boom and prices nearly double. Bang. I have got $3-$3.5million of equity I can use to generate cashflow.

With shares generating 8%-9% gross from dividends in not impossible. You just have to be patient for the right time to enter and there will be plenty of options available. Last few months have been a good time to pick up some bargains with good dividend yields. So 8.5% dividends growing by the year. 4%-5% rental income growing by the year. Interest expenses around 7%. After doing the maths there should be plenty of cashflow to retire from PAYE work. And still holding on to all your assets.

Ofcourse, it is easier said than done. And there will be hiccups on the way but I am fairly determined to reach there in the end. All I need to do is manage my cashflows so I am never forced to sell and keep buying and growing my asset base so that one day even modest 4-5% growth will be big enough.

The other option ofcourse is investing in different asset classes with much lower leverage levels which means I need to be smart enough to generate above average returns (10%+) just to match property returns. For me I work full time and I just don't have the time to do all the research that is needed. Also, you can do all the research you like. But it does require special abilities to constantly generates 10%+ returns. It's all well and good to invest in other asset classes. But to generate decent returns you need to learn about that asset class, invest small amounts of money and develop a winning strategy before you commit large sums of money into it. How quickly can you do that successfully?

Hope that explains things a bit better...

Cheers,
Oracle.