An interesting metric . Income vs equity growth

[see_change]

We started our property investing process around about 2000.

We hit another equity milestone this year on the back of the sydney boom this year and while thinking about this I made an interesting observation .

This is a back on the envelope calculation , not audited .

Our increase in equity over this period is roughly equivalent to our total gross income over the same period . I think we have been fairly conservative in our investing in terms of our LVR / serviceability , but it's interesting to see what can be achieved.

Cliff

 

[D.T.]

I'm not sure I follow, are you saying from 2000 -> 2014, your gross salary x 14 and your gross capital gain has been roughly equal to each other?

 

[RetireRich101]

The total gross income we can easily calculate.
How do you approx your increase in equity over this period?
Are you basing off bank valuation or your experience in the current market to make this valuation determination?

 

[tess85]

I sort of get what Cliff is trying to say... active vs passive income I guess?

It's like the fact that my PPOR earns more than me, just sitting there, being a blob, even when I put in the hard yards at work and bust a gut with overtime etc.

Wish I could just sit there like a blob and rake in the $

(hope I didn't mis-interpret?)

 

[see_change]

I'm not sure I follow, are you saying from 2000 -> 2014, your gross salary x 14 and your gross capital gain has been roughly equal to each other?

Yep

Cliff

 

[Peter_Tersteeg]

Thinking about it, looking at my first property back in 2000, I can probably say a similar thing.

My employment circumstances have changed significantly though and there's been times where my income was significantly reduced even though my properties increased in value.

Also looking at some of the income documents I see from clients, I don't think this is a universal rule, more like a coincidence.

 

[S.T]

Guess this means you could look at living off the equity and maintaining the same lifestyle, very powerful!

 

[see_change]

Guess this means you could look at living off the equity and maintaining the same lifestyle, very powerful!

Not a fan of living off equity . The increase in equity has not been a smooth upward curve with two jumps timing with the two booms we've invested through.

Our aim is to have a portfolio of fully paid off IP's and live off rent . An index income stream . That should start coming on line in The next year or so .

Cliff

 

[see_change]

Also looking at some of the income documents I see from clients, I don't think this is a universal rule, more like a coincidence.

Peter , out of interest , are they generally doing better or worse ?

Cliff

 

[starter]

Hi Cliff, do you mind sharing approx size of port folio and how much cash that you've had to tip in to achieve that equity gain.

 

[Brady]

Don't think you can look at increase in equity as that could arise from reduction in debt (paid down by your salary).

Would only be looking at CG v Income.

 

[MJD]

My portfolio achieved very similar result, 7 years investing , capital gain is 8.5 years of our annual wages

 

[Peter_Tersteeg]

Guess this means you could look at living off the equity and maintaining the same lifestyle, very powerful!

Assuming you can borrow money based on equity alone (which you can't) and assuming that the ever increasing repayments didn't bankrupt you.

Living Off Equity is not a viable strategy.

 

[D.T.]

Assuming you can borrow money based on equity alone (which you can't) and assuming that the ever increasing repayments didn't bankrupt you.

Living Off Equity is not a viable strategy.

Really? Let me copy and paste my strategy for the 100th time

 

[redwing]

Assuming you can borrow money based on equity alone (which you can't) and assuming that the ever increasing repayments didn't bankrupt you.

Living Off Equity is not a viable strategy.

If had two blocks of farming land valued at $1M each and both bringing in some income, could I set up a LOC against one of them and live off the equity

Being equity or asset rich in today's environment would seem to be beneficial

The Bank always wants what you have

 

[D.T.]

If had two blocks of farming land valued at $1M each and both bringing in some income, could I set up a LOC against one of them and live off the equity

Being equity or asset rich in today's environment would seem to be beneficial

The Bank always wants what you have

What sort of lvr could you get? Lets say you pull 600k. That might last your family 6 years. Then what:
Return to work?
Get another 600 against another place? (With the bank calculating the existing 600 against your serviceability)
Assume the original place has gone up further and top that up more?
Assume a relative will leave an inheritance?
Sell assets?

I was all for this idea when a seminar presenter told us about it. Times have changed. Most banks want to know the purpose of cash outs. Nccp regs changed some things.

Anyone contemplating that is either still working to subsidise it (which defeats the purpose?) Or are in fairy land. Happy to be shown otherwise with ccurrent day numbers.

 

[see_change]

Don't think you can look at increase in equity as that could arise from reduction in debt (paid down by your salary).

Would only be looking at CG v Income.

We haven't saved any money from our income at any stage and have only had interest only loans. We have paid down debt by selling properties. On a couple of occasions we have used profits from selling IP's to pay for school fees and holidays .

Cliff

 

[knightm]

This is fun to do. Im roughly 1 to 1.

 

[skater]

I remember several years ago, when Hubby was earning much less, I wasn't working & our expenses were high, telling Hubby that in reality I had earnt double his income. My reasoning was that I was the main one sourcing property & there was a heap of equity sitting there.

 

[MTR]

What sort of lvr could you get? Lets say you pull 600k. That might last your family 6 years. Then what:
Return to work?
Get another 600 against another place? (With the bank calculating the existing 600 against your serviceability)
Assume the original place has gone up further and top that up more?
Assume a relative will leave an inheritance?
Sell assets?

I was all for this idea when a seminar presenter told us about it. Times have changed. Most banks want to know the purpose of cash outs. Nccp regs changed some things.

Anyone contemplating that is either still working to subsidise it (which defeats the purpose?) Or are in fairy land. Happy to be shown otherwise with ccurrent day numbers.

Yes, that old chestnut, serviceability????

Shame those damn LOE gurus they told me property went up 10% every year, but it aint so..... sometimes it goes backwards..... then what