Different Implementations of the LOE

[grossreal]

hi all
mine I would say is a mix of 2 and 4 except I won't use managed funds not high enough returns.
I use the cash money in the short term money market and use cash to generate cash,
Have moved a little into shares but investing in cfd's and seeding floats.
my structure is long haul with a mix of lend loans and linked off set accounts with multi lenders(no cross collat) and using the offsets to get cash flow for short term investments on short term money markets one on one trading very similar to I give you 30 bucks to go to the pub and you give me back 30 bucks and 10 for helping out relatively simple and is what is called one on one trading.
alot of these types of deals are not for bulliten boards and are to be looked at as general information only and reference material only.

 

[johnnyb]

hi all
mine I would say is a mix of 2 and 4 except I won't use managed funds not high enough returns.
I use the cash money in the short term money market and use cash to generate cash,
Have moved a little into shares but investing in cfd's and seeding floats.
my structure is long haul with a mix of lend loans and linked off set accounts with multi lenders(no cross collat) and using the offsets to get cash flow for short term investments on short term money markets one on one trading very similar to I give you 30 bucks to go to the pub and you give me back 30 bucks and 10 for helping out relatively simple and is what is called one on one trading.
alot of these types of deals are not for bulliten boards and are to be looked at as general information only and reference material only.

Hi gr,

You obviously give a very simplied view of the one on one trading that you do, so I'm not really sure what it is you're doing, but how do you deal with credit risk in these sorts of deals?

John.

 

[grossreal]

hi johnnyb
credit risk is a term that credit controllers and bank managers use.
its more risk against return is what I use and I look at it as mitigated risk.
I caveat if the loan is relatively high, over 10k
under 10 and will lend if the lendee is some one that has lent from other lenders that do the same as me
which is the case with one I did last week.
some solicitors that I know do not any longer practise and only do this type of lending its more profitable.
as for simplified lend it is very simple, I (or we) fill a market hole and get paid well for it.
go to the web and do a google search on caveat lending and you will find maybe 70 pages on sites that do this type of lending. have a read and understand what it is and then when people mention mezzanine finance, bridging finance,caveat lending, you will understand what these terms are.
Thats not to sound like I know more then you or put you down its just to explain.
I accept from my group money at 3% per month and I relend out to my lendees at 4% per month only on commercial or investment projects.
and use this money on lots of different types of projects.
this is unregulated lending.
As I have posted before and you can't get on the site so don't try.
I own caveatlending.com and do this type of lending as part of my structure and you can't get on the site or even get involved in my group of merry men or women unless asked( it makes it nice and simple and we don't have to explain who and why our people are sophisticated investors per asic).
hope this explains it a little better as I said I can explain most of this except will put an ops can't tell you that if it get a little sensitive.

 

[D.T.]

Blast from the past - how many are now doing a variation of this and if so, which variation?

In the other thread which is about KeithJ's story, he mentions having a baseline income coming in then drawing extra out from his margin loan as needed. Anyone still do a variation of this or have all the rules changed?

 

[Willowtree]

Blast from the past - how many are now doing a variation of this and if so, which variation?

In the other thread which is about KeithJ's story, he mentions having a baseline income coming in then drawing extra out from his margin loan as needed. Anyone still do a variation of this or have all the rules changed?

Does a lack of replies on this indicate that the LOE strategy is a false economy and the posters ended up going broke?

 

[Deltaberry]

If an investor can live off equity, he can probably live of rent. Because the equity must've grown a lot and if the investor sold his properties, it would probably just fund a good cashflow stream at 5-10% pa.

 

[sash]

As I have said previously.....LOE is not a viable stategy as it is hard to predict future growth.

Taking 80% of currrent net income (after all expenses) is the best predictor of what you can expect.

The LOE strategy is risk at best....a for the fool hardy. Know some people who are back in crappy jobs....when the endless Tim Tim box ran out...my belief is that is is like the pot of gold at the end of the rainbow

Would love to hear from people who have been doing this for 10-20 plus years (one to two property cycles)

Does a lack of replies on this indicate that the LOE strategy is a false economy and the posters ended up going broke?

 

[MTR]

I know someone who tried this and lost their family home.

They did not have enough assets in the first instance, the property market did not boom every 7 years as he predicted, did not diversify, bank policy changed, good bye no doc/lo doc, how do you access equity?????

Compounding debt will not make a fun time in retirement.

Interesting how all the property gurus promoting this strategy are no longer promoting this or they are just around anymore, because what they were promoting just did not work as I mentioned bank policy changes and also the impact of GFC

Fellow SS member landlubber?? not sure is this is correct name, anyway he posted on this as he was LOE lots of properties and explained how difficult it has been and he has had to tweak this strategy to make it work.

MTR

 

[DEC]

Change the E to an R

 

[redwing]

I think KeithJ is still using his version?

 

[MTR]

Change the E to an R

That makes sense

 

[MTR]

I think KeithJ is still using his version?

Hi RW
Keithj is around but he discussed/shared this strategy prior to GFC and in the early stages when he implemented this strategy, its been a long time between drinks. Does it still work?

Cheers
MTR

 

[keithj]

I think KeithJ is still using his version?

Hi redwing,

Sure am. I stand by what I said in post #1 back in 2006 - pure LOE is v. risky. The version that I structured survived the GFC. It had a degree of risk attached back then, but with sufficient base income from rent & dividends, and sensible draw-downs it survived what back then was unthinkable to many.

I can say retiring & being able to help the kids grow up (now 13 & 15) was the best move for me - I don't regret any of it, although in 2007/8 things were looking a bit grim. One of my fallback plans was go back to work.

Back then I never had any desire for $100K+ passive income initially. I knew that it would come in due course, and also that it would be impossible for me to go from a make things happen sort of person to someone who just holidayed and spent discretionary income. I continued to 'do stuff' that generated income or capital gains. I've set up businesses for myself & jointly (some survived), had a few great holidays, found some new passions, and acquired a completely different set of goals.

For me, LOE enabled an early retirement at an age when I could best enjoy it, knowing that my income stream would continually increase.

Cheers,

Keith

 

[Willowtree]

Hi redwing,

Sure am. I stand by what I said in post #1 back in 2006 - pure LOE is v. risky. The version that I structured survived the GFC. It had a degree of risk attached back then, but with sufficient base income from rent & dividends, and sensible draw-downs it survived what back then was unthinkable to many.

I can say retiring & being able to help the kids grow up (now 13 & 15) was the best move for me - I don't regret any of it, although in 2007/8 things were looking a bit grim. One of my fallback plans was go back to work.

Back then I never had any desire for $100K+ passive income initially. I knew that it would come in due course, and also that it would be impossible for me to go from a make things happen sort of person to someone who just holidayed and spent discretionary income. I continued to 'do stuff' that generated income or capital gains. I've set up businesses for myself & jointly (some survived), had a few great holidays, found some new passions, and acquired a completely different set of goals.

For me, LOE enabled an early retirement at an age when I could best enjoy it, knowing that my income stream would continually increase.

Cheers,

Keith

Keith,

Can I ask at what age you decided to retire and what was you asset allocation?
How much equity
Roughly speaking of course and no numbers unless your comfortable with that.
Thanks for the update.


WT

 

[keithj]

Can I ask at what age you decided to retire and what was you asset allocation?

age similar to you. Asset alloc - probably more IP than shares - can't really remember a lot of detail.

How much equity

Can't remember. You would do well to do a lot more reading of SS - start with the 5 star threads & interviews ?

 

[Willowtree]

age similar to you. Asset alloc - probably more IP than shares - can't really remember a lot of detail.
Can't remember. You would do well to do a lot more reading of SS - start with the 5 star threads & interviews ?

Read it all or at least most of it in some rat bag 3 star resort in Fiji over the past 24 hours. Cold beer so I can't complain

Ok so what now for me?

Even though I feel we are on the right track I think I got so much more to learn.
I seem to be looking for IP in one area for an hour a day and when I see something I focus and a couple of months later I own a new IP.
But at 1.9m with nearly 1.2 debt over three properties I'm not sure if we are on the right track (not diversified) that being said not sure if this a bad thing at this stage of our asset accumulation stage of 38 and 36.

So I need a plan for the next 3 to 5 years.
One one hand I could use our loc (200k)to purchase an index fund and over the proposed period add nearly one of our wages (dollar cost average) and see how it all ads up then. Every couple of years revalue, top up the LOC and diversify into index funds.

I could use that 200k to further purchase 800k of property and ride it out for the next five years. Doing reno's and revaluing along the way. Putting any capital appreciation into a offset so at some stage in the future we can put a large chunk of it into equities for yield and diversification.

The prop ties I currently hold cover themselves and more so its costing us nothing to hold.

So looking for a little suggestions, not advise on if either of he two are a good option or perhaps I'm still not seeing the bigger picture still?

Great to read your threads Keith! And all the other contributors! I like to think I'm a pretty savvy property investor but when I read these threads I realise I got so much more to learn!

Thanks again

WT