How I got from just a PPOR to multi millionaire retiree in 5 years using only OPM.

[D Money]

Hi handyandy,

I pay $300pa for the commbank wealth package which gives me a discounted IR, no $600 loan application fees & no monthly fees. The only bank fees I pay are for my trustee cpy ($5pm) - personal & trust a/cs are fee free.

Cheers Keith

Hi Keith,

I am assuming that you have a company which acts as the trustee for the DT and that the assets are held in the DT, not the Company itself?

What are the advantages of this arrangement over say a person (not a company) being the trustee

thanks

 

[Rixter]

Hi Keith,

I am assuming that you have a company which acts as the trustee for the DT and that the assets are held in the DT, not the Company itself?

What are the advantages of this arrangement over say a person (not a company) being the trustee

thanks

If someone is suing and you personally are trustee for the trust and have assets in your own name then you are exposed to losing them.

If a $2 shelf company is trustee then there is nothing to go after.

 

[D Money]

If someone is suing and you personally are trustee for the trust and have assets in your own name then you are exposed to losing them.

If a $2 shelf company is trustee then there is nothing to go after.

thanks for this, this makes sense

 

[FrankGrimes]

I haven't asked them to recently. If you re-read (again) the strategy is to borrow against my shares (a margin loan) for extra living expenses. It takes about 6 mouse clicks & hitting exactly 5 keys on NetBank to transfer $$$ from the margin account to my personal account - no forms to fill in, no bankers to kow tow to. One of the major risks of LOE that I identified a long time ago, was banks not lending against res IP if you can't prove servicability - using a margin loan avoids that.

I haven't been on SS much lately, but couldn't help re-reading this thread to check on any updates that have come through. When drawing down on the Margin loan for your living expenses, aren't you mixing up your deductable and non-deductable debt?

 

[keithj]

Just out of interest, how many hours a week would you say that you need to spend on admin and managing your share portfolio (eg Trust book keeping etc)?

ie is this minimal say a few hours per week, 1 hour per day or is it more substantial ?

Minimal.... divs arrive in a/c twice a year from 50+ companies. Rent arrives 12 times a year.

What are the advantages of this arrangement over say a person (not a company) being the trustee

What Rixter said.

When drawing down on the Margin loan for your living expenses, aren't you mixing up your deductable and non-deductable debt?

I've previously lent the trust cash that I've already paid tax on. So it is just returning it to me on demand. It's all deductible.

 

[crc_error]

Minimal.... divs arrive in a/c twice a year from 50+ companies. Rent arrives 12 times a year.

50 companies? why so many? thats a pretty diluted portfolio. You may as well invest into a index fund.

do you still own these? These included 4banks, LPTs, PPT, QBE, ASX, WES, HIL, ALS, ORI, MBL, BHP, AFI, ARG.

Can you please elaborate on your stock selection criteria. Do you also invest in managed funds? Do you invest in ASIA etc?

 

[redwing]

Here's AFIC's (AFI) top 25 holdings, the 50 would not all be direct holdings CRC (I'm presuming )

A list of AFIC’s 25 largest holdings as at 31 March 2010 is set out in the following table.

Clicky Link

 

[keithj]

50 companies? why so many? thats a pretty diluted portfolio. You may as well invest into a index fund.

Only if I had index fund weightings in all of them.

I hold $500 of many cpys, for 3(4?) reasons.

• If I buy them & I previously had no holdings then I have to fill in the paperwork all over again - PITA.
• Some of them regularly have discounted share purchase plans I can buy $15K of discounted shares pa.
• Some occasionally need to raise $$$ at a big discount (especially recently)
• Some offer shareholder benefits - cheap wine, holidays, hotels, theme parks, etc.

do you still own these? These included 4banks, LPTs, PPT, QBE, ASX, WES, HIL, ALS, ORI, MBL, BHP, AFI, ARG.

Yes, but some would only be $500 worth.

Can you please elaborate on your stock selection criteria. Do you also invest in managed funds? Do you invest in ASIA etc?

No managed funds (they have 2%+MERs ), although I hold the ETFs you mentioned. Nothing in Asia.

 

[crc_error]

Thanks for that Keith.

So what is your selection critera for your core share holdings?

 

[wassie]

I’ll second that! Like many here, I’ve read great publications by the likes of McKnight, Doige, Eslick, Spann, Yardney, Lomas, Chan, Melvin, Somers, Wemyss, Whittaker, Hartman and others. But none have Inspired me to THINK for myself quite as much as Keith’s Somersoft interview and this thread.

+1

Im just the latest in a long line of SSers to discover this thread & its the first one Ive ever subscribed to. Reading this last night, I had my "Ah-ha" moment & now suffering from that crazy feeling of excitement & anticipation.

But before I carry on, kudos to you Keith firstly for sharing and secondly for continuing to give - amazing such a small gesture can be so inspirational to so many. This is as good as any book Ive read, but is so much juicier..... and thank you to everyone else who has shared. I love the fact that not only the technical aspects are questioned, but also the method/philosophy in a critical yet constructive & respectful fashion.

After all my reading & research, I have found something that addresses many of my questions, doubts & fears. I rejected diversification as a concept sometime ago, thinking I needed to specialise to create wealth to achieve my goals in the time fame I wanted. Wrong - I need both! Dealing with risk knowing I will soon have a young family has been a difficult one - I am quite comfortable with risk, but having mouths to feed will be game changer. And the value of equity vs. family time....no brainer.

Finally I now have ideas on how to move forward and take massive action. I have set myself up with a good base equity position, but in hindsight this was a combination of good choices based on sound fundamentals, 'luck' and inexperience. I made the decision (not wishing) that I wanted to be financially free in late 2008. I commenced on a course of self education & learning over last 18 months and deliberately not investing. I was starting to doubt my chosen path a few months ago and was becoming more confused as to where to start. But now I know in my heart I made the right choice. Last night that chapter came to an end.

I believe it has been important to get the head right, get the knowledge and get the structure first. Apply what I have learnt (and will continue to learn) with what resources I have and learn to be focused, responsive, adaptive and positive. It is liberating to feel as though I can finally see a way forward and there is a LOT of hard work, pain and sacrifice ahead. BUT Im motivated. Whilst Keith’s strategy to me is a light bulb moment, its the 'Lessons learned' that are the little precious gems.


Today is Day 1.

 

[redwing]

Just having a look at some of the reported income dividends coming up and wondering how your portfolio and stragey is currently travelling Keith?

• Milton Corporation 36c
• Argo 13c
• AFIC 13c
• Navitas Limited 10.7c
• Westfield Group 32c

 

[zed_kid]

Subscribed to this so I can read it later. Is LOE the same LOC? As in line of credit?

 

[D.T.]

Subscribed to this so I can read it later. Is LOE the same LOC? As in line of credit?

Not at all. LOE stands for living off (on?) equity, meaning retiring from full time work with enough equity (in your houses or shares) to theoretically sustain yourself forever assuming some capital growth in the assets. There are lots of posts on the forum about this and a couple of links in the original post of this thread.

 

[zed_kid]

Not at all. LOE stands for living off (on?) equity, meaning retiring from full time work with enough equity (in your houses or shares) to theoretically sustain yourself forever assuming some capital growth in the assets. There are lots of posts on the forum about this and a couple of links in the original post of this thread.

ah, thank you. i guess i was off hey.

 

[zed_kid]

Hi Keith,

You say you only invest in to an asset class if you see value. So how do you identify value? Is it some kind of ROI or IRR calculation or just as simple as yield vs the price of the asset? Also are you foreseeing a bull run on the share market now that the property market is coming off the boil?


Cheers

 

[keithj]

Just having a look at some of the reported income dividends coming up and wondering how your portfolio and stragey is currently travelling Keith?

Hi Redwing,

Sorry to report it's all v. boring. Rents continue to be paid on time & in full, dividends continue to be paid - last month it was the banks, this month will be the LICs. I recently asked property managers for approx valuations of IPs - they are all up 7-15% on last year - not that I (currently) have much interest in either drawing down equity or paying down debt. Share portfolio is doing what it always has - up & down. Some down days are good for buying, up days are good for holding.

You say you only invest in to an asset class if you see value. So how do you identify value? Is it some kind of ROI or IRR calculation or just as simple as yield vs the price of the asset? Also are you foreseeing a bull run on the share market now that the property market is coming off the boil?

Hi zed_kid,

Have you read the whole thread yet ? there must be something about value in there somewhere ? I buy what works for me - blue chip property or shares that I can borrow against, that provide a good income, with the probability of good growth preferably in the short & long term. ROI & IRR depend on good forecasting - too hard for me. And I foresee a bull run in both shares & property - just not sure when it's going to start though , or what's going to happen before they do start. The lead indicators for property are pretty poor ATM, for shares they are better. However, left field events still dominate the global economy - a China slowdown may be the next reason for a sell-down here.

And finally, as I have said previously, I continue to think that it's unlikely that the world is about to end, and that in the medium & long term sensible investing in good value shares & property will work out fine.

Cheers Keith

 

[zed_kid]

Hi Keith,

No I haven’t read the whole thread yet as it’s pretty large and has a lot of links to other interesting threads but will do that soon. I just wanted to know what you define as value as I hear a lot of people talk about value but its such an arbitrary term and every one has a different perspective on what constitutes value for them, I guess I just want a scientific answer, like yield is x% of price of asset there fore value!... type thing.

Anyway I think I’m getting too analytical here, I’m a firm believer that time in the market is > timing the market but I’m yet to take the plunge in to shares as honestly I’m scared... I have no problem signing on the dotted line for a 500k property at 80%LVR but I’m scared to commit 10k to shares, I feel like a fish out of water in the equities game I guess.

Hoping to change my mentality regarding share investing by next year, so I can draw down some equity in IP and put some of it in to growth / income share portfolio and basically follow your structure that you posted in the original post as it makes a lot of sense to me. I want to be close to investing and for it to be part of my life but also keep it at an arms length so to speak, as I don’t want to become one of ‘those’ people... you know those people that are so in to the market that they can’t talk or think about anything else

Cheers

 

[keithj]

I just wanted to know what you define as value as I hear a lot of people talk about value but its such an arbitrary term and every one has a different perspective on what constitutes value for them, I guess I just want a scientific answer, like yield is x% of price of asset there fore value!... type thing.

Impossible... you've got to work out what you think is good value. You can't think the same as me..... if everyone did that, then we'd all be on the same side of the trade. You've got to try different stuff, get some experience, see what you're good at & see what works for you, and then you'll find out what you think is good value.

Anyway I think I’m getting too analytical here, I’m a firm believer that time in the market is > timing the market but I’m yet to take the plunge in to shares as honestly I’m scared... I have no problem signing on the dotted line for a 500k property at 80%LVR but I’m scared to commit 10k to shares, I feel like a fish out of water in the equities game I guess.

One good thing about shares (as opposed to property) is that you can buy just a tiny fraction of a business - say $2K of BHP or CBA, instead of having to commit to a whole house.... good luck.

 

[redwing]

Hi Redwing,

Sorry to report it's all v. boring. Rents continue to be paid on time & in full, dividends continue to be paid - last month it was the banks, this month will be the LICs. I recently asked property managers for approx valuations of IPs - they are all up 7-15% on last year - not that I (currently) have much interest in either drawing down equity or paying down debt. Share portfolio is doing what it always has - up & down. Some down days are good for buying, up days are good for holding.

Hi zed_kid,

Have you read the whole thread yet ? there must be something about value in there somewhere ? I buy what works for me - blue chip property or shares that I can borrow against, that provide a good income, with the probability of good growth preferably in the short & long term. ROI & IRR depend on good forecasting - too hard for me. And I foresee a bull run in both shares & property - just not sure when it's going to start though , or what's going to happen before they do start. The lead indicators for property are pretty poor ATM, for shares they are better. However, left field events still dominate the global economy - a China slowdown may be the next reason for a sell-down here.

And finally, as I have said previously, I continue to think that it's unlikely that the world is about to end, and that in the medium & long term sensible investing in good value shares & property will work out fine.

Cheers Keith

Hi Keith,

Sounds good to me, boring keeps the grey hairs and stress away, the GFC must've been interesting times for you

Great that you've picked up additional growth in the IP's also of late

 

[zed_kid]

I have a question about this structure. So by implementing this constant ‘LVR top up’ you’ll never be debt free right? I have no problem with ‘good debt’ but just want to know if that’s the case with this structure. Also is it better to have a Trust before trying to replicate this? And buying assets in the Trusts name?