From: Anton Madievski
Hi everyone,
Would like to see a discussion on exit strategies (aka retirement).
I am aware of two basic strategies: cashflow based and value based. The former - I shall call it Somers-Kiyosaki strategy for no apparent reason - goes like that: borrow a million to buy a million dollar property portfolio with rent and depreciation benefits covering interest on the loan. Growing at 10% pa your property portfolio doubles in value in short 7.3 years. At this point you sell half of your portfolio and repay your loan. Now you can retire and live off the rental income from your million dollar debt free property portfolio.
The other strategy - I would like to call it H.Kaye-Investors Club strategy - is to borrow a million to buy a million dollar property portfolio, wait for a year letting the portfolio to appreciate by $100K. Then you can re-borrow extra $90K (or $80K if you want to avoid bank insurance), retire and live on the tax-free $90K repeating the process every year. Of course, interest on only original $1M borrowed is tax deductible, so the more you borrow, the smaller portion of the interest is tax deductible, which would slow the rate of growth of your retirement funds. (Didn't want to call it income for it is not taxable).
Obviously, the second strategy with its ever increasing debt is more aggressive/risky, but, on the other hand, it lets one retire much sooner with more money.
Thoughts? Comments? Ideas?
Cheers,
Anton
Hi everyone,
Would like to see a discussion on exit strategies (aka retirement).
I am aware of two basic strategies: cashflow based and value based. The former - I shall call it Somers-Kiyosaki strategy for no apparent reason - goes like that: borrow a million to buy a million dollar property portfolio with rent and depreciation benefits covering interest on the loan. Growing at 10% pa your property portfolio doubles in value in short 7.3 years. At this point you sell half of your portfolio and repay your loan. Now you can retire and live off the rental income from your million dollar debt free property portfolio.
The other strategy - I would like to call it H.Kaye-Investors Club strategy - is to borrow a million to buy a million dollar property portfolio, wait for a year letting the portfolio to appreciate by $100K. Then you can re-borrow extra $90K (or $80K if you want to avoid bank insurance), retire and live on the tax-free $90K repeating the process every year. Of course, interest on only original $1M borrowed is tax deductible, so the more you borrow, the smaller portion of the interest is tax deductible, which would slow the rate of growth of your retirement funds. (Didn't want to call it income for it is not taxable).
Obviously, the second strategy with its ever increasing debt is more aggressive/risky, but, on the other hand, it lets one retire much sooner with more money.
Thoughts? Comments? Ideas?
Cheers,
Anton
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