I plan to have a 1 million in debt by the time I'm 25.
Just over 600K now with just over a year to go till I'm 25!
I bet you $400,000 I can help you with your problem.
Do you have a formal investment strategy
- Thread starter eggnog
- Start date
I bet you $400,000 I can help you with your problem.
Does anyone else think that this crowd sounds like a development crowd marketing their properties to investors?
Antennae went up straight away as I read it.
Hey,
Well if you have any high-yield, high capital growth, low cost properties you want to sell for $400,000, I'll be happy to settle unconditionally.
P.S.....This offer will expire in 24 hours!
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I have devised my own plan The Lazy Persons Guide to Property Investing http://property.theweb.net.au
So far being lazy has worked for me.
So far being lazy has worked for me.
This is a recent post that describes my investment strategy that involves Villas & Townhouses. It may be of interest to you.
I have personally built a Multi $Million Property Portfolio spread across Australia from the following formula.
The capital growth averaging (CGA) strategy I employ utilises a regular purchasing cycle similar to what Dollar Cost Averaging is to the sharemarket. The major underlying principle to its success is it relies on your "time in" the market, NOT "timing" the market, and never never sell. So in other words it does not matter whether you buy at the top of a boom or at the bottom, just so long as you purchase good quality, well located property in high density areas ( metro area capital cities), at or below fair market value, on a regular basis. I've been purchasing IP per year and currently into year 6 of this 10 year plan.
I've been purchasing new or near new property over older style property for several reasons, the main ones being (in no particular order) -
1/ To maximise my Non-Cash deductions
2/ To minimise my maintenance & repair costs
3/ More modern & Attractive to tenants - thereby minimising potential
vacancy rates
4/ Ask a higher rent - thereby Maximising yields
Without getting into the "which is better debate, houses or Units??", I preferr to purchase Townhouses & Villas with a 30% or greater land component thereby eliminating multi story units or high rise apartments, for several reasons. The mains ones being (in no particular order) -
1/ lower maintenance & upkeep for the tenant
2/ lower purchase or entry level into a Higher capital growth suburb area
3/ rapidly growing marketplace (starting both now & into the future) wanting these type properties. This is due the largest group of people to ever be born (being the Babyboomers and Empty nesters) starting to come into their retirement years. They will be wanting to downsize for the following main reasons - lifestyle & economic.
4/ greater tax advantages & effectiveness thus maximises cashflow.
5/ able to hold more individual properties spread across your portfolio - thereby minimising area over exposure risks by not holding all your eggs in only a few baskets, so to speak
I look to buy in areas with a historic Cap growth of 7%pa and/or are under gentrification. I look to where the Govt, Commercial, Retail, private sectors are injecting money. This ultimately beautifies the area and people like the looks so move in creating demand.
I have found this works well if you are looking for short to medium term capital growth so as to leverage against and build your portfolio faster.
Getting back to CGA, as the name suggests it averages out the capital growth achieved on individual properties with your portfolio throughout an entire property cycle, taking into account that property doubles in value every 7 - 10 years. Thats 7%pa compounding.
The easiest way to explain what Im meaning by this is to provide a basic example taking into account that all your portfolio cashflow will be serviced via Rental income, the Tax man, an LOC and/or Cashbond structure.
For ease of calculation lets say we buy a property for $250k, so in 10 years its now worth $500k. Now lets say we do that each year for the next 7-10 years. Now you can quit the rat race.
So in year 11 ( 10 years since your 1st Ip) you have 250K equity in IP1 you can draw out (up to 80%) Tax free to fund your lifestyle or invest with. In year 12 you do exactly the same but instead of drawing it from IP1 you draw it from IP2. In year 13 you do the same to IP3, in year 14 to IP4, etc etc etc. You systmatically go right through your portfolio year by year until you have redrawn from each property up to year 20.
So what do you do after you get year 20 I hear you say ?? hmmm..well thats where it all falls into a deep hole - You have to go get a JOB - nope only joking!
You simply go back to that first IP you purchased as its been 10 years since you drew upon it first time around and its now doubled in value ($1M) yet again - so you complete the entire cycle once again. Infact chances are you never drew each property up 80% lvr max , so not only have you got entire property cycle of growth to spend you still have what you left in it first time round that compounded big time. Now you wealth is compounding faster than you can spend it! What a problem to have
Getting back to what I said in my opening paragraph about it does not matter where you buy within a property cycle just so long as you do buy, This is because you will not be wanting to draw upon it until 10 years later after its achieved a complete cycle of growth.
Well thats the Basic Big Picture of CGA. Once its set up its a self perpetuating, TAX FREE Income Money Machine.
I hope this helps.
That's a good website you have there. I like it.
I get Step 1. Buy a property.
But I'm not quite getting Year 15. Buy property and sell one for same amount.
This is a simple tool I showed Blue Card where by you can use it to increase your rental yield.
It involves putting a clause in your offer whereby the vendor pays you the sum of $X amount cash back at settlement.
You then use this cash to supplement on top of the existing rent collected from the tenant to increase your overall rental yield.
I have used this tool quite effectively to increase my yield and cashflow.
I hope this helps.
What does selling one and buying another of the same value give you that borrowing against the property would not ? Obviously if you did not sell you would not insure purchasing and selling costs.
How is this straegy better than say selling a couple of properties to pay down some debt and live off the rents?
Is there a reason why properties are only bought every three years given the equity would be increasing at a faster and faster rate and allow you to therefore buy at a faster rate? Why not buy 10 properties rather than 5 over the 15 years, sell 5 and pay down the debt on the other 5 and either live off rent and/or equity?
How is this straegy better than say selling a couple of properties to pay down some debt and live off the rents?
Is there a reason why properties are only bought every three years given the equity would be increasing at a faster and faster rate and allow you to therefore buy at a faster rate? Why not buy 10 properties rather than 5 over the 15 years, sell 5 and pay down the debt on the other 5 and either live off rent and/or equity?
Great post Rixter!
I shortened your quote so as not to take up too much space with my short-ish reply.
Just out of interest, do you have a criteria for the % of rental yield you must have if the property is to qualify as a possible?
Is it a certain % below or above the current interest rate, or no set %?
Sorry it might just be me but I still don't get it. Why would the vendor give you cash at settlement.
The purchase price would obviously be increased by, say, $20K and then the vendor pays you $20K cash at settlement, so it works out equal.
I can't see the difference between this strategy, and simply paying the market price for the property and then borrowing the $20K from the bank.
Under the first strategy, I wouldn't have thought the extra $20K would properly form part of the cost base.
I can't see the difference between this strategy, and simply paying the market price for the property and then borrowing the $20K from the bank.
Under the first strategy, I wouldn't have thought the extra $20K would properly form part of the cost base.
My benchmark minimums - areas with a historical CG of 7% or better with a rental yield of 5.5%-6% current or manufactured from value adding.
Hope this helps.
Some do some dont. Depends on their motivation to sell level.
What extra taxes? Hows that deceptive towards the bank?
How do you mean?
maybe you can clarify?
Rick,
I'm as confused as everyone else about this .. I think?
What I've understood you mean is:
a) inflating the contract price by $Xk
b) having finance provided on valuation at contract price
c) having the vendor return $Xk in cash after settlement
Which would be unethical at the minimum? I've obviously missed something basic!
Can you clarify exactly how the "cash back" process you are talking about works?
Rick,
I'm as confused as everyone else about this .. I think?
What I've understood you mean is:
a) inflating the contract price by $Xk
b) having finance provided on valuation at contract price
c) having the vendor return $Xk in cash after settlement
Which would be unethical at the minimum? I've obviously missed something basic!
Can you clarify exactly how the "cash back" process you are talking about works?
If you purchase a property for a contract price of $500k on an LVR of 90% (loan $450k) and have a side deal with the vendor that the vendor repays you 100k (the net purchase price being $400k) then if your bank finds out about it they are not required to provide you with funds to settle (because you have misled them about the purchase price) and I think you will not get finance with that lender ever again.
Its certainly a breach of your loan covenants and may constitute fraud - obtaining funds under false pretences.
