Define LOE please

[LJ]

Hi Guys,

I've heard a term being thrown around a lot lately. Can someone please define LOE and show me some real world examples using numbers?

Cheers,

SL.

 

[datto]

Hi Guys,

I've heard a term being thrown around a lot lately. Can someone please define LOE and show me some real world examples using numbers?

Cheers,

SL.

OK

You've an IP worth , say, 1mil with no mortgage

You borrow say 75%, that's 750K. The rent should just about cover the repayments. But lets just say you're short say 15K pa. allup.

You can LOE for 8 years. (750/10 =75K pa to live off, less 15K for shortfall in maintaining property leaves you with 60K pa tax free to live a reasonable existance ). At year 8 you need to look for a job so that by year 10 you can approach the bank for another equity loan.

 

[Rixter]

At year 8 you need to look for a job so that by year 10 you can approach the bank for another equity loan.

..How come?

 

[Terry_w]

You live off rents instead.

Borrow to fund interest and costs and live off the rent - which should be increasing year by year. Interest on the loan can be deductible if you do it right.

 

[datto]

..How come?

I think that when you approach a bank for more money you can't just walk in and say "hey bud, I've been LOE for the last 10 years doing sweet FA, can you swing me some more cash?... my IP is worth x, my rent is y and I already owe you xyz!" Anyway, working 2 years out of 10 aint bad.

 

[LJ]

..How come?

Hi Rixter,

I'm really keen to know more. Can you please elaborate on this and how you would perpetually LOE?

 

[Rixter]

I think that when you approach a bank for more money you can't just walk in and say "hey bud, I've been LOE for the last 10 years doing sweet FA, can you swing me some more cash?... my IP is worth x, my rent is y and I already owe you xyz!" Anyway, working 2 years out of 10 aint bad.

What if you have the income so you didnt have to work at all?

 

[datto]

What if you have the income so you didnt have to work at all?

You mean, rental income?

So to go back to my example, You have a 1 mil property, say it grosses 40K pa rent, less taxes and outgoings etc you'd be lucky to see 20K. Can't live off 20K pa. Nah, doesn't work that way.

 

[Rixter]

You mean, rental income?

So to go back to my example, You have a 1 mil property, say it grosses 40K pa rent, less taxes and outgoings etc you'd be lucky to see 20K. Can't live off 20K pa. Nah, doesn't work that way.

You could always purchase a CB with the equity to provide enough income to allow to keep borrowing. Search for cashbonds threads.. ive posted extensively on it.

 

[datto]

You could always purchase a CB with the equity to provide enough income to allow to keep borrowing. Search for cashbonds threads.. ive posted extensively on it.

Cheers. I suppose there are alot of things that you could do with the money eg high dividend shares, a business perhaps or another IP.