Excel sheet for investing with equity

[Blurbman]

Hi Everyone,

I am trying to prepare my future investment strategy so that i know where the goalpost are and what i am investing for. On the basis of continued purchasing using the existing equity in investments i have prepared a spreadsheet for the next 10 years.

I know there are a lot of factors which could be added which would alter the outcome (depreciation, wage increases etc), but have gone for a basic plan.

I have adopted capital gains at 3% but the spreadsheet allows for playing with various rates. Is 3% reasonable as a safe assumption?

I have also adopted rent increases at 3% as well but again it can be altered.

Can i get peoples thoughts as to whether there are any major errors in assumptions? Is it essentially correct? Is my understanding of the concept of borrowing against equity correct?

For the spreadsheet please assume the following:

- At the moment i own the PPOR, and investment 1.
- The future is based on being slightly negatively geared. I would of course aim for positive but as a worst case scenario have adopted negative.
- The loan repayments are taken from one of the online mortgage calculators, and based on a 6.25% interest rate.
- There is no allowance for depreciation as this would be adopted as a 'bonus' at tax time.
- I am able to carry with my wages the negative gearing for all years as i am on a high income.
- I have not factored in additional payments off the principal of any investment(even when PPOR paid off) which would obviously increase net equity.
- Obviously any investment portfolio would not only contain property but would also include shares, bond, cash etc.

Given that i am currently 33, and have plenty of time to increase my asset base before retirement (i even like my job so no rush to retire) i think it should all work out.

Any thoughts/criticisms?

Cheers

 

[Peterw]

It took me awhile, for my old accounting brain to kick in, as I looked at the spreadsheet. I think you will get a lot of comment on your assumtions, so mine are that you may be a bit conservative on rent and CG. CPI should be under 3, however Councils etc dont follow CPI. It looks like a good plan, so monitor it regularly, and take out income insurance, as it seems to be relyant on your income. I look forward to hearing your progress, and I wll share it with my children hoping it will give them inspiration, above expectation of inheritance.

 

[luckyone]

Seeing as you still have a fair bit of equity available now (around $50,000 as I see it at 80% lvr), why don't you just borrow slightly more than 80% and bring you next investment forward to now. Or just buy a cheaper one? Or finance the next $400,000 at 90% lvr and pay mortgage insurance on that one?

Personally I can't see the point in using 20% equity + another 5% for stamp duty etc for each property. To me it's far more effective to use 10% + another 5% for stamp duty + another 1% for lmi so that you can accelerate your plan faster. Especially seeing as you obviously have the income to support it.

Note: I'm not a financial advisor, just an IT nerd.

 

[BayView]

I don't know what your income is, but based on all the projected purchase prices and projected rents, and the fact that you re borrowing 105% on each, and assuming about 15-20% of rent goes up in flames each year due to expenses, I don't know how far you'll get past about property no.3 before you start to run out of serviceability (in the Bank's eyes)?

Why are all the properties targeted at the ~$450k range as well, and all heavily neg geared?

You can buy pretty good cashflow places for well below this - and get growth.

 

[matto_]

the spreadsheet certainly has some good logic etc.

Agreed with other concepts. Each of the prop's you have outlined (with the exception of no. 1 + granny) are -ve.abit more focus on cashflow will allow you journey to continue.