20properties20years

[Blair007]

Good point Rolf.

Blair, I was once like you and buying a property per year, all was going good and I was getting rich! But.. After the 4th one a few years back, I'm out of finance options. I could sell it and lose my stamp duty and government charges and maybe break even but that kinda defeats the purpose because I still have to pay it again if reinvested so thats a waste of $60k or so.

One pointer for you: Look for capital growth AND cashflow properties (props that offer both) and don't purchase if it does not meet you criterea. Simple.

If I'd done this myself I would have more free cash, work less, be wealthier and less stressed, with the ability to add more property and wealth to tghe portfoio. Thats the greatest thing I've learned in 10 years of investing. I still love my tax returns but that doesn't meet my goal of being financially free just yet, put it that way.. I now have changed plans and have a further 4 years or so before I feel like we've achieved what we're looking for.

Hey yeh, hopefully as each year goes by i learn more, get more contacts etc so i,ll be able to find those properties with better growth and yield.
i sort of used the 250000 property 6% yield as a bench mark but ideally i would like to do more developments, ill have better yields, fast equity gain and will be able to use equity to fund any shortfalls in my property expenses ( seems like my expense estimates are a bit short )

Why would you want a LOC for private expenses? Borrowing to buy items which won't be deductible may not be a good idea. I would stick to the cash in the offset account for this and use a LOC to borrow solely for investment expenses.

Thanks terry, good advice.

I like your spreadsheet. I have done up one for myself quite similar (increasing from 3 IPs to 8 IPs over the next 5 years) and also used 4% growth for rent & capital gains. The government appears to target ~3% for inflation, so if rents increase inline with inflation it just means slightly longer to retirement / semi-retirement.

I have based my costs for rentals currently at 6% interest (probably a bit low i think) plus $3.5k per property (increase at 4%pa) to cover rates, insurance etc (I manage the properties myself).

Nice VaSSagO, it keeps me motivated when i see what the long term results are. I might adjust my rents then and also have a flat figure for each properties expenses per year like you (increasing with inflation). might make things a bit tougher but i think i can get better buys than what i have stated with higher yields and better growth so if i take into account that aswell i think i can still reach my target. how long have you been investing for, are you IPs in perth?

 

[Blair007]

Can a married couple have 2 seperate ppors in there own names?
And would this be a good future plan to have that option of selling down one or both with CGT exemption to reduce debt and increase cashflow for retirement?

 

[mumbai]

Can a married couple have 2 seperate ppors in there own names?

NO ...
and the 10 characters!!!

 

[Bigtone]

i did a very similar plan when i started 10 years ago, my plan was only over a 10 year period and and was much more aggressive in first 4 -5 years (in terms of number of purchases) and then more conservative after that.

The numbers looked so big and completely unachievable to a couple of people i showed and to myself to be honest, especially when first 2 purchases were under $100k mark and my financial status at the time ( low income, low asset base)

After nearly ten years and the completion of the plan it is very interesting for me to look back at it now. To be honest the ease of credit especially low docs made it easier for me than what it will be going forward in our nanny state.

Good luck with your plan!

 

[VaSSagO]

Nice VaSSagO, it keeps me motivated when i see what the long term results are. I might adjust my rents then and also have a flat figure for each properties expenses per year like you (increasing with inflation). might make things a bit tougher but i think i can get better buys than what i have stated with higher yields and better growth so if i take into account that aswell i think i can still reach my target. how long have you been investing for, are you IPs in perth?

I have only really started this year (only had 1 IP before this which was our PPOR) and have 3IPs in Perth and hoping to put an offer on IP4&5 in the next couple of weeks.

 

[redwing]

There will be years where your Capital Growth is flat or even retreats and other years where it bounds ahead

 

[Deltaberry]

If you have $6m equity and make $35k net cashflows, it's a pretty bad investment strategy.

 

[jingo]

Hi Blair,

Congratulations on the forward planning. You may tweak your investment plans as you go along. At some point, it may be worthwhile jumping into other asset classes including shares and commercial property for the higher yields they generate.

You could use your residential investments to leverage into these other asset classes.

Check out some of the old threads by KeithJ. He leveraged into the share market using his ips as security and was able to retire within a fairly short period of time.

You may find maintaining 20 residential properties will drain your cash flow with repairs, etc, etc. Jumping into other asset classes after you have between 4-6 residential ips may be something to consider.

All the best with it.

Regards Jason.

 

[scha9799]

It's a good starting point.

Factor in the life curve. ( Marriage, Kids, Career or business change...)

You will face some crisis during the coming 20 years.

One thing I learn in GFC is cash/cashflow is the king.


Good luck.

 

[Rolf Latham]

good post...........i bet this is overlooked by many

lack of structured finance/credit planning is why most people will only ever buy one or investment properties.

I know there is another thread running at the moment with all sorts of "excuses' ofand logic and emotional reasonings, but I reckon from what I can see in most cases it just gets "too hard", and to get much beyond two you need to take it seriously as a business and "not dabble".

to then move forward significant change is required, and us humans are not good at fundamental change.

As a sales person you try as much as possible to tweak and make small incremental changes to people finance situation over time, but in many cases that is not possible, and the house of cards needs to be disassembled, and rebuilt with some decent glue and a front and back wall. most folks are not willing to undergo the "inconvenience" of doing that

Doing things in bits is doing an injustice to those people, the band aid solution often just making things worse in the long-term.

ta

rolf

 

[Oscar]

What I learnt from property investing over the last decade is that I needed to take the emotion out of holding properties and if that meant selling off property to move forward so be it, replacing negatively geared properties with cashflow, or a mix and also learning different skills to build equity.

Its never too late to change your strategy, "if you are caught between and rock and a hard place" then the sooner the better.

So my point is if you can no longer invest due to finance, then I would be looking at what needs to go, or how you can increase cashflow from current properties so you can continue to invest and then look at cashflow properties moving forward.

Great point MTR. 15 years of investing has taught me a thing or two. I was buying beautiful properties I was emotionally attached to, most of which happened to do well in times of incredible capital growth. I am now in the process of selling some of these "beautiful" properties to buy cash cows I may not even get to see in my life time as they are located "overseas". Nothing like watching your bank balance balloon with every purchase rather than deal with a negatively geared loss. There are opportunities everywhere when you start looking outside your backyard.

 

[Blair007]

lack of structured finance/credit planning is why most people will only ever buy one or investment properties.

I know there is another thread running at the moment with all sorts of "excuses' ofand logic and emotional reasonings, but I reckon from what I can see in most cases it just gets "too hard", and to get much beyond two you need to take it seriously as a business and "not dabble".

to then move forward significant change is required, and us humans are not good at fundamental change.

As a sales person you try as much as possible to tweak and make small incremental changes to people finance situation over time, but in many cases that is not possible, and the house of cards needs to be disassembled, and rebuilt with some decent glue and a front and back wall. most folks are not willing to undergo the "inconvenience" of doing that

Doing things in bits is doing an injustice to those people, the band aid solution often just making things worse in the long-term.

ta

rolf

Do you recommend any IP specialist Accountants in Perth that i might be able to talk to about getting my structure in place before i get ahead of myself?

cheers

 

[Bhp19]

i did a very similar plan when i started 10 years ago, my plan was only over a 10 year period and and was much more aggressive in first 4 -5 years (in terms of number of purchases) and then more conservative after that.

The numbers looked so big and completely unachievable to a couple of people i showed and to myself to be honest, especially when first 2 purchases were under $100k mark and my financial status at the time ( low income, low asset base)

After nearly ten years and the completion of the plan it is very interesting for me to look back at it now. To be honest the ease of credit especially low docs made it easier for me than what it will be going forward in our nanny state.

Good luck with your plan!

Did your investment strategy work out as planned Bigtone?

 

[ok180]

Did your investment strategy work out as planned Bigtone?

Im guessing it did!

http://somersoft.com/forums/showthread.php?t=80542

 

[Ed Barton]

I think the plan's success comes down to luck in the first few years, at least to some extent.

If everything goes your way in the first few years and IRs stay low, rents rise more than forecast, you have no nasty maintenance, few vacancies, no damages etc. then you will be able to grow the portfolio quicker than anticipated.

But if IRs rise, rents stagnate, your first few purchases all require expensive maintenance, you have a string of six month tenancies with a few weeks vacancy in between, tenants who skip owing rent & doing damage etc. your plans will be set back by many years.

 

[Liberator]

Simple vs compound interest

Surely when for the last several decades people have always said property prices double every 7-10years it would be safe to assume a 40% growth over a 10year period?

Higher growth via active investment methods. Also that is 2% on a leveraged amount so it is more like 20% growth on actual invested amount, and that is simple not compounded interest.

Blair, 4% per year is 40% after 10 years on simple interest. If you are looking at 4% capital growth per year then because of compounding gains after 10 years it will be very slightly over 48% total growth over that time. Not necessarily saying this isn't achievable of course but just in terms of your mindset that 40% is 'safe to assume' - do you also think 48% is 'safe to assume'?

FYI 40% total growth after 10 years would be a compound interest rate of between 3.4% and 3.5% per annum.

Regardless though your overall plans seem very impressive. All the best with them!