How I got from just a PPOR to multi millionaire retiree in 5 years using only OPM.
- Thread starter keithj
- Start date
What is luck ?
I've had good 'luck' & bad 'luck'. I'm sure I've mentioned that in order for 'luck' to happen to you, you've got to try stuff.
A general strategy of mine is buying income streams that are 'good value', it's worked for me - it's impossible for me to say how much is luck & how much is smarts.
Some think the structure I use is smart - it's worked for me so far.
You'll have noticed that reducing risk has been a theme towards the latter part of the accumulation process. Reducing risk is essentially making me luckier, or more correctly, reducing the probability of bad luck. But it takes knowledge, analysis & experience of my situation to make those decisions to reduce the risks that I perceive.
Labouring Under Correct Knowledge = LUCK
Great to see this thread still has legs as it's a favourite of mine also, how is the portfolio currently standing Keith?
Also, how is the three - six months off looking?
Hi Keith.
Still following this fantastic thread. Definitely one of the best on the forum...
Seeing as you're a value investor and in the past have bought at the bottom of the market, how do you see the RE market at the moment (macro)?
Was recently reading the 2010 Demographia International Housing Affordability Survey where, as you're prob aware, Aust cities occupy 6 of the top 10 most unaffordable housing markets.
If you were starting out today, do you feel there's still value to be had or would you be sitting on the sidelines at the moment?
Thanks again
Rory
Still following this fantastic thread. Definitely one of the best on the forum...
Seeing as you're a value investor and in the past have bought at the bottom of the market, how do you see the RE market at the moment (macro)?
Was recently reading the 2010 Demographia International Housing Affordability Survey where, as you're prob aware, Aust cities occupy 6 of the top 10 most unaffordable housing markets.
If you were starting out today, do you feel there's still value to be had or would you be sitting on the sidelines at the moment?
Thanks again
Rory
keithJ
Great read, my wife and I are a similar path and have traded creature comforts for fin security.
But I must say I have no problem using a "put" when anymore.
All the best.
Great read, my wife and I are a similar path and have traded creature comforts for fin security.
But I must say I have no problem using a "put" when anymore.
All the best.
Glenn Stevens is ignorant, a shill, or both.
Most of that was forseeable an posted about.
Sure nobody can't predict exactly what happens on a day by day basis
here it's about years. The only less predictable event was that the gov would go on a communistic illusion and hock taxpayers knakers to throw away money.
But for those who lowered their LVRs (this also can take years), opportunities have been around.
Yeah right "unforseeable" my A$$. It ended up being less than a "few years" but they mostly have happened for same underlying reasons over the last few hundred years, why would it be different this time?
Glenn is either misleading deliberately or hopelessly inadequate in his job.
Just as most other heads of reserve banks around the world.
But over those few hundred years the reserve bank club has never lost out and only grown stronger.
26-08-2006, 06:08 PM
There is still too much liquidity imho for a prolonged recession, but that liquidity does'nt seem headed for the RE market, instead I would say it's going to the share market for the next 3-4 years.
If that liquidity ends, we may be in for a stock market crash, followed by a *real* recession for a few more years.
By then interest rates may be 12-13%, metro RE rental yields 9%, inflation 6%, un-employement 9%, petrol $2 ltr, bread & milk $5.
We will reminisce about the "good ol days" when we could borrow @ 6%, houses were affordable, petrol was $1 ltr, and credit was easy.
By that time the baby boomers will mostly be inactive (or in hell for their 60's sexual revolution) the economy will have slowed down, inflation & interest even higher, and 12% seemed a good rate.
Then ...when night seems darkest, morning begins...again.
Now back to enjoying the good life while I still can.
Now there's a magic word "liquidity".
So who was following liquidity back in '06,'07 & '08? (other than me?)
Sure the numbers predicted are guestimates at best, but the sequence has always been the same.
The gov or the RBA can't suspend economic fundamentals forever (look at Japan & USA, Greece and a few others will follow), only delay them.
Now was it really that hard?
Of course the "gurus" were selling blue skies.
As I read somewhere "it pays to build Arks, not just predict rain".
It seems the wise Willair was also on the same page as where a few others.
"damn - sold bhp at $10/share to fund an ip deposit (didn't see the resource boom coming)"
gotta love BHP...
I'm a member of another site that gives buy/sell/hold recommendations on shares...got the buy email sat $9.20 - and sell at $30 - wish i'd bought a hell of a lot more
Which share recommendation site are you using?
How has it performed? Cheers mate
If that's all you can get from reading this thread, then you'll most likely lose your money like the other sheep to the slaughter did.
"Bulls make money, bears make money, pigs get slaughtered".
Good luck, your sure gonna need it. Though I hope i'm on the opposite side of your transactions.
I always enjoy re-reading your story Keith! thank-you
I had a re-read and found some figures there which today simply are not possible. It seems to me like your entry involved 'luck'
Firstly I dont see how property doubles every 5 years. this is a big ask. property normally doubles every 7-12 years. Average would be 7.2% PA growth which = double in 10 years.
Second you locked rates for 5.95% for 5 years. This is certainly not possible. Even with the CFG rates didnt go that low for so long.
So this in turn doesn't allow you to buy shares which are cash flow positive. Since your buying ASX200, the yield at present is 4.3%. Thats about 6% if you count the franking. So with todays variable rates, these shares would be at best cash flow neutral. But with another 1% interest rate rise expected, these will quickly turn negating.
So to me, you did in fact have some 'luck' on your side to time your entries well, and achieve your story in 5 years time.
Also how do you find your $2mil property since your not working? Do the banks just keep on lending you $$$? With a job?
Your strategy does work, from what I can see, but I think it will take much longer than 5 years to achieve. As it seemed like you purchased bargin property and bargin shares!
I had a re-read and found some figures there which today simply are not possible. It seems to me like your entry involved 'luck'
Firstly I dont see how property doubles every 5 years. this is a big ask. property normally doubles every 7-12 years. Average would be 7.2% PA growth which = double in 10 years.
Second you locked rates for 5.95% for 5 years. This is certainly not possible. Even with the CFG rates didnt go that low for so long.
So this in turn doesn't allow you to buy shares which are cash flow positive. Since your buying ASX200, the yield at present is 4.3%. Thats about 6% if you count the franking. So with todays variable rates, these shares would be at best cash flow neutral. But with another 1% interest rate rise expected, these will quickly turn negating.
So to me, you did in fact have some 'luck' on your side to time your entries well, and achieve your story in 5 years time.
Also how do you find your $2mil property since your not working? Do the banks just keep on lending you $$$? With a job?
Your strategy does work, from what I can see, but I think it will take much longer than 5 years to achieve. As it seemed like you purchased bargin property and bargin shares!
Due to Keith's knowledge of market cycles, he invested in assets at the correct time in the cycle. Some of the techniques may not literally work 'today', but there will be times in the cycle when they will. I guess the trick is to be able to identify where the market is up to at any given point in time and which techniques to employ. As an example, using equity from a property portfolio to buy blue chip shares after the market crashed in 2008 would have worked. Anyone who employed this technique then would be wealthier today, owning shares that are producing a growing income stream.
Not sure where Keith mentions that property doubles every 5 yrs? But I think Keith invested before/ or during the time of the last property boom (1997-2003). Property certainly rose in value substantially during this time frame. In Melbourne between 2001 - 2010, property in many areas has tripled in value - so it is possible. (Although not to be relied on!).
Westpac was offering fixed rates of around 4.99% (from memory) during 2008-2009 or so. Jit had the following thread going which tracked this.
http://www.somersoft.com/forums/showthread.php?t=47795
The key is "the yield at present......." Keith bought the shares many years ago. The dividends would be returning higher returns now - especially considering that many companies are increasing their dividend yields by 10% or more over the coming year.
Luck or knowledge followed by action??
Does Keith need to keep borrowing? I think he is living off the dividends and rent now?
Or, more accurately, through a knowledge and understanding of market cycles Keith bought the real estate and share assets at the correct time in the cycle, allowing him to retire within 5 yrs.
Regards Jason.
CRC, as Jingo said - Keith isn't claiming that this can all be done right now in the current market. It's just what he did over the first few years of his investing life which in turn allowed him to develop a passive income and in turn 'retire'.
No, right now you can't get dividends higher than the lending rates (generally) - but you could have last year. In 08/09 you could have bought the big 4 banks on almost 10% yields (before franking credits) and borrowed against residential at what, say around 5.5-6%. Even margin loan rates were only mid 7% when these 9% yields were on offer.
And then yes, not all properties will go up as quickly as others, but again, that's why Keith often talks about timing the markets ie. chosing the right time (in his/your opinion) to be buying the right property in the right area. Who knows, while some say there's no point in buying now - who's to say there aren't people like Keith buying up in Sydney right now at only 5% yields which in about 18-24 months time will have gone up 40% in value and rents have risen to make it a yield of 7%? Just this week we've been given an example by new member 'Bigtone' who's done pretty much this in the last 2yrs - how many people would have told him 'that's not possible' during that time?
No, right now you can't get dividends higher than the lending rates (generally) - but you could have last year. In 08/09 you could have bought the big 4 banks on almost 10% yields (before franking credits) and borrowed against residential at what, say around 5.5-6%. Even margin loan rates were only mid 7% when these 9% yields were on offer.
And then yes, not all properties will go up as quickly as others, but again, that's why Keith often talks about timing the markets ie. chosing the right time (in his/your opinion) to be buying the right property in the right area. Who knows, while some say there's no point in buying now - who's to say there aren't people like Keith buying up in Sydney right now at only 5% yields which in about 18-24 months time will have gone up 40% in value and rents have risen to make it a yield of 7%? Just this week we've been given an example by new member 'Bigtone' who's done pretty much this in the last 2yrs - how many people would have told him 'that's not possible' during that time?
so basically keith is on the look out for opportunities and when the figures ad up, he takes advantage of them?
so what would keith be doing now? buying shares since they are cheap still, probably not buying property due to the large growth spirt over the last 12 months and raising rates which will probably dampen the mood?
so what would keith be doing now? buying shares since they are cheap still, probably not buying property due to the large growth spirt over the last 12 months and raising rates which will probably dampen the mood?
I'd reckon he's off enjoying a well deserved lifestyle he has created for himself.
Not trying to speak for Keith, but based on his previous comments here over time, I'd say that'd be about right. Everyone has their own criteria for investments, and when a possible investment fits the criteria, then yes perhaps it's time to buy.
Not going to guess what Keith is doing now. Remember though, with your property example - not all property has had s growth spurt over the last 12 months, many markets may have their own rises over the next 12 months. Same way that while ANZ for example may only be on a 5% yield now (vs the 9% it was last year) and you nay not be interested in buying it, there's another company out there yielding 10% which you would consider a good investment now.
Jason & Steve (and Rick) have given some excellent answers - thanks.
To clarify, I think I said equity doubles every 5 yrs, not property. eg Cash deposit of $100K on a $400K house which doubles in 10 yrs, means that I get $500K equity in 10 yrs - a five fold increase. Being conservative, that's a doubling in equity every 5 yrs.
I agree not today, but I did fix ~80% at 6.19% for 5 yrs back in April 2009 - see Fix Now or Wait.
I haven't bought the index for a while, though I have some AFI & ARG, and of course a few other stocks. I bought some more (although not enough
) last year when they were cheap & some were c/f +ve - I think I posted about that above. And as Jason mentioned the earning cycle has turned up.Sure, I had good luck... I also had bad luck - I think I've explained about that above. My attitude was try stuff - if it works keep doing it, if it doesn't try something different. Is that luck ?, is it perseverance ? is it experience ? is it smart investing ? is it managing downside ? is it stacking the odds in your favour ? is it merely turning up ? You can call it whatever you like.
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. When lending against IP gets easier, I'll draw down equity in the IPs and top up the margin loan and buy more IP or shares - it's cheaper & lower risk.
Purchasing bargain property & bargain shares is all in the timing for me. I'm not much good at searching for bargains on the net, so I let the Rising Tide do the work for me. I'm a value investor, in a nutshell, I buy quality stuff that's cheap & offers a reasonable return, wait till it goes up, then draw down equity & repeat.
Yes. As opposed to a momentum investor, who only buys because everyone else is buying, and consequently prices are rising.
He'd be just back from a long holiday... and wondering what to do next
.He was buying shares & fixing IRs last year, he continues 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.
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I'd reckon he's off enjoying a well deserved lifestyle he has created for himself.
He'd be just back from a long holiday.
Snap.........
Great post again Keith.
For the record, it was this post that changed my life, it really was a 'lightbulb' experience.
The only comments i want to add are those that i posted under 'Strategic Investments 2010'.
There is no disputing the fact that we are currently in a cyclical bull market.
This should continue through the remainder of 2010 as economic yoy comparisons will be against the 2009 economic low.
However its the continuation of the secular bull market that is required for a passive buy and hold and its this issue that needs to be confirmed.
For the record, it was this post that changed my life, it really was a 'lightbulb' experience.
The only comments i want to add are those that i posted under 'Strategic Investments 2010'.
There is no disputing the fact that we are currently in a cyclical bull market.
This should continue through the remainder of 2010 as economic yoy comparisons will be against the 2009 economic low.
However its the continuation of the secular bull market that is required for a passive buy and hold and its this issue that needs to be confirmed.
Hi Keith, thank-you for taking the time to answer my questions. You have cleared up some things for me
Just one question re margin loan. Do you still keep it at 30% LVR? I'm kinda scared to use margin now as it wiped my shares out during the crash!
Also when you redraw new equity from margin loan, does this debt become non-tax deductable?
Just one question re margin loan. Do you still keep it at 30% LVR? I'm kinda scared to use margin now as it wiped my shares out during the crash!
Also when you redraw new equity from margin loan, does this debt become non-tax deductable?
Living the dream...
Keith,
Congratulations to you, you are officially "living the dream". Your out of the rat race and you have 40+ more hours per week free to spend however you choose.
I am also hoping to do something similar fairly soon with a similar structure.
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 ?
I am trying to gauge how much effort is required to maintain the investments and whether this makes taking extended leave from your home base difficult.
Ie is backpacking around Europe or going on a 3 month trek in the wilderness feasible or do you need to constantly monitor and manage the portfolio?
thanks
Keith,
Congratulations to you, you are officially "living the dream". Your out of the rat race and you have 40+ more hours per week free to spend however you choose.
I am also hoping to do something similar fairly soon with a similar structure.
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 ?
I am trying to gauge how much effort is required to maintain the investments and whether this makes taking extended leave from your home base difficult.
Ie is backpacking around Europe or going on a 3 month trek in the wilderness feasible or do you need to constantly monitor and manage the portfolio?
thanks
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