Does this strategy work?

[arg821]

G'day guys,

Can I refer you all to Aug-06 API magazine, page 52 under the "Plan of Attack" section.

He mentions that he has taken his strategy to many "experts" and they cannot pick fault with it. Can anyone on here? I cannot see how he can get ahead, not without paying down debt...shifting it around I can't see how this helps?

Would be interested to hear some comments on this...

Andrew.

 

[JumpinJack]

I don't have the magazine with me but I think I can remember the article.

Is he not relying on capital gains and refinancing every couple of years and using the equity to finance his debts and purchase more property?

Be in a bit of trouble if the market slumps, depending on how highly geared he is.

Cheers.

 

[Twitch]

I think I remember the article; was it the one about the guy who bought houses and used the growth to finance the shortfall as well as deposits on new IPs. After a period the IPs start to become unencumbered as he borrows against the growth in some IPs to pay out the early ones ("using the banks money to pay back the bank" was the kind of term they used). His debt continues to grow over time but his equity also grows.

It is a strategy that is reliant on good and consistant CG, particularly in the early years.

 

[Peter_Tersteeg]

As others said it's heavily reliant on capital gains which is where the potential risk is.

Most of the risk is in the beginning. Historically property does continue to grow, but the risk is if there's a long flat or negative period, you could get into trouble.

As such, this probably isn't a strategy most people could put into place when they start their portfolio, it's really better suited to someone who has a well established portfolio with plenty of equity to see yourself through the flat periods.