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

I have a question about this structure. So by implementing this constant ‘LVR top up’ you’ll never be debt free right?
My spreadsheet tells me that my passive income is expected to increase faster than my personal expenses, so excess cashflow will be directed towards one or more of
  • higher personal expenses
  • paying down debt
  • servicing more investments
I'd expect that my tolerance for risk will continue to fall, so the 2nd option is more likely. The kids will leave home within 8-10 years, so personal expenses will fall by ~30%. My LVR is continuing to fall, as debt remain steady & assets increase.

I expect that in 10 years time my current debt will seem trivial, just the same as the debt on my 1st IP from 10 years ago appears trivial today.

And I may choose to sell assets to pay down debt.

So in answer to your question... NO I expect to be debt free at various times. The strategy is dynamic & subject to change as circumstances change.

Also is it better to have a Trust before trying to replicate this? And buying assets in the Trusts name?
I think buying share assets in the Trust name is better for well documented reasons. Buying IP in trust is a much weaker case - because of Land Tax in some states. If I was starting again, I'd use up all my personal land tax thresholds & more before buying in trust. Of course, get professional advice.

Cheers,

Keith
 
Thanks Keith. I already have a trust set up so will get shares under that, my IP is currently in my name (if they ever build it that is, but that’s another story)

Can you explain why you don’t pay interest on margin loan? You say that its because its all capitalised but I don’t get that bit...
 
Can you explain why you don’t pay interest on margin loan? You say that its because its all capitalised but I don’t get that bit...

Interest is still charged to the loan, but so long as the loan balance is less than the allowable LVR, the interest can simply be added to the loan balance rather than taken out of you bank account, and so doesn't affect your cashflow.

Example:

Portfolio: $200k
Loan: $100k
LVR: 50%
Max. LVR: 70%

Month's interest is $1k.

New loan balance: $101k
New LVR: 50.5%

In this case, you can keep capitalising the interest (i.e. adding it to the loan balance) until the LVR reaches the max, then you would need to start paying it. Remember though that the portfolio may increase (or decrease) in value, so even though your loan balance increases, your LVR might not, for example, if it increases at the same rate as your loan balance is increasing.
 
Hey Keith

Wow,
you certainly have achieved a lot. I got a lot from your events. May I ask a question.

I have just started my investment plan.
Would you have any suggestions for good areas to buy for capital growth close to brisbane? Would you be reccomending resource stocks as good investment atm.

kind regards

Nathan
 
Hey Keith,

Very inspirational thread, and congratulations and many thanks for sharing. Looks like you have really changed the line of thinking, and therefore the long-term path of many people's lives on here.

My philosophy has been reasonably similar, but am still quite new to it all.

Am looking at it from a diversification and risk (almost business) viewpoint, where I am setting up five main sources of income for the future.

Should 1-2 struggle, the others should pick up the slack.

Similar to a business that relies on several products / services rather than having all eggs in one basket.

Five sources for me would be:

- IP - residential for now
- Direct Shares including Super funds
- Cash investments / IBD
- Own small business - p/t
- A job (as you state - retirement can lack challenges!)

Growing all at the moment, with the small business in planning mode.

Job to be replaced with another income stream in about 5 years - just waiting a year of two for the bull runs to start up again!

One quick question - could you please provide an indication of some of your main share holdings in respect to your original purchase prices, and what they are now sitting at? Interesting to see what the GFC and bounce back did to the yields.

Cheers.
 
somehow I dont know that his strategy would have worked over the decade.. the shares he purchased today are all dropping like a lead ball, so there would not have been any equity he could live from.. ALS QBE etc put the margin lending and the losses would have been magnified.
 
Well aren't you a little ray of sunshine.. :)
You're correct, and I doubt wise Keith would have adopted the same strategy within the past 10 years, he has the ability to change with the times and is a very successful investor in my eyes. Lesson: You really have to change your plans with the times. Not everything that worked in the past will work the same today.

somehow I dont know that his strategy would have worked over the decade.. the shares he purchased today are all dropping like a lead ball, so there would not have been any equity he could live from.. ALS QBE etc put the margin lending and the losses would have been magnified.
 
somehow I dont know that his strategy would have worked over the decade.. the shares he purchased today are all dropping like a lead ball, so there would not have been any equity he could live from.. ALS QBE etc put the margin lending and the losses would have been magnified.

Lesson: You really have to change your plans with the times. Not everything that worked in the past will work the same today.


Too right. QBE dropped to under $10 last week and was back over $11.20 within a day; so on 50% LVR, we made ~24% in 24 hours. I wouldn't want to have been holding those on margin prior to their announcement last week, though.

Different strategies for different times, indeed.
 
Well aren't you a little ray of sunshine.. :)
You're correct, and I doubt wise Keith would have adopted the same strategy within the past 10 years, he has the ability to change with the times and is a very successful investor in my eyes. Lesson: You really have to change your plans with the times. Not everything that worked in the past will work the same today.

so your telling me Keith would have known what the market was in for and exited his position? Why didn't he make a announcement here to save others of pain as well then since he is gifted with seeing the future?

Point is no one knew what would happen, and since he clearly stated in his strategy he doesn't trade, and that he is a buy and hold investor, we can safely assume he would still be holding his loss making trades.. Thats providing he was somehow able to keep on funding his lifestyle for the last 5 years, and paying the interest only IP loans, and his margin loan...
 
Too right. QBE dropped to under $10 last week and was back over $11.20 within a day; so on 50% LVR, we made ~24% in 24 hours. I wouldn't want to have been holding those on margin prior to their announcement last week, though.

Different strategies for different times, indeed.

if you were holding QBE over the last 12 months, you would have seen a 50% drop in the share price.. so with 50% margin you would have been wiped out..

Just goes to show how volatile share investing is, and for the sake for a few extra percent return, you risk losing 1/2 your investment..
 
Hey CRC! No, I'm not 'telling' you, I'm assuming. Personally, I'd never trade, or even buy and hold shares. They're just way too risky for my liking and I hear nothing but horror atories about the market. One guy I work with had his whole retirement fund in the market before the GCF when he was set for retirement. He lost $300k.. So I would never keep my money in it.

Either way I know Keith had good property holdings anyway so it's not like he would be doing it too tough.

so your telling me Keith would have known what the market was in for and exited his position? Why didn't he make a announcement here to save others of pain as well then since he is gifted with seeing the future?

Point is no one knew what would happen, and since he clearly stated in his strategy he doesn't trade, and that he is a buy and hold investor, we can safely assume he would still be holding his loss making trades.. Thats providing he was somehow able to keep on funding his lifestyle for the last 5 years, and paying the interest only IP loans, and his margin loan...
 
ouch thats nasty, unfortunately the stock market carries a high risk, and really isnt a serious investment tool. if you consider the few percentage points extra return you get long term from shares over say bonds, is it really worth risking losing 1/2 your investment?
 
Point is no one knew what would happen, and since he clearly stated in his strategy he doesn't trade, and that he is a buy and hold investor, we can safely assume he would still be holding his loss making trades.. Thats providing he was somehow able to keep on funding his lifestyle for the last 5 years, and paying the interest only IP loans, and his margin loan...

Of course people knew, most people just didn't want to hear it.
I think he went back to a job.
Maybe he posts over in the other forum where the vested interests migrated to.

I know he still lurks and deletes my posts he does'nt like... hello Keiff :rolleyes:
 
My philosophy
  • I don't invest in asset classes blindly, I only invest if they're good value.... IP was in 2001, ASX shares were in 2003, IP will be soon.
  • I concentrate on historical trends when deciding what to buy, I concentrate on forcasts when deciding when to buy.
  • I will never sell quality assets.

Is this reproducable?
Yes. Buy good value IPs first. Wait for the rising tide. Draw down equity. Invest in the next good value asset class - it may be shares, china, resources. Convert the equity into c/f using LOE. The key is to create equity safely & fast using IP, then invest generated equity in c/f assets or LOE.

The bottom line
In 2001 I had a vague plan about creating wealth using IPs a la Somers. The wealth creation bit worked, but I realised it needed modifying to provide me with income for an early retirement. By incorporating LOE the direction changed. And in 2003 the economic cycle dictated that shares were the asset class of choice.

Looks to me like this person understands trends and that all asset classes become undervalued, overvalued and revert to its mean. No one asset class performs on its high.
I had some success with this approach too generating about $3.5 mill in equity so I wouldn't mock this approach.
Most comments above assume that this person was a passive investor, well from property perspecive maybe so, but certainly active in changing the asset classes along. I am sure that stop losses took him out of the stock market and then the money was allocated somewhere else.
That's what I did too, sold out of shares, purchased PPOR, IPs, physical commodities, IPOs, etc...
If you can really understand which asset class, based on past history trends, becomes undervalued, and switch to make gains, then you are a truley great investor.
 
Hey CRC! No, I'm not 'telling' you, I'm assuming. Personally, I'd never trade, or even buy and hold shares. They're just way too risky for my liking and I hear nothing but horror atories about the market. One guy I work with had his whole retirement fund in the market before the GCF when he was set for retirement. He lost $300k.. So I would never keep my money in it.

Either way I know Keith had good property holdings anyway so it's not like he would be doing it too tough.

Did this guy have total control over his portfolio or was someone else in control? I am just wondering as I sold shares that increased 30 times the value.
I do feel sorry though for many, many people out there that don't have or don't know how to manage their investments as yes they would have lost a fair bit though.
It's like with anything if you don't know what you are doing then don't do it, and if someone else has control, well....
I am just letting you know that people do make money in various asset classes, but they must be active investors and understand what they are doing, so education is the key.
 
Keithj

Read your thread with extreme interest.

We are at a point where we have a reasonable amount of equity and have been trying to work out what the next steps are.

I have really enjoyed reading your thread and have had a number of lightbulb moments.

I have been investing in shares for a fair while - however have focused on minimising interest (ie. have a margin loan, however have been drawing out of property LoC to pay for shares) - but can see the potential/benefit of the strategy you have outlined.

Thank you very much for sharing.

Matto
 
so your telling me Keith would have known what the market was in for and exited his position? Why didn't he make a announcement here to save others of pain as well then since he is gifted with seeing the future?

Point is no one knew what would happen, and since he clearly stated in his strategy he doesn't trade, and that he is a buy and hold investor, we can safely assume he would still be holding his loss making trades.. Thats providing he was somehow able to keep on funding his lifestyle for the last 5 years, and paying the interest only IP loans, and his margin loan...

read the whole thread, Keith DID mention that he had to adapt to the circumstances.

By the way oneway who puts all their money in a single share keeps it as a 'buy and hold' and then puts a margin loan against it is a bit of a ding bat.

This thread by Keith enabled me to achieve financial freedom.
Did i copy him exactly no, but neither did he copy some other guy mentioned that gave him the inspiration.

Lucky for me i used Keith's strategy during the GFC, and i have adapted it with Evan's strategy.
 
any tips on how to identify when a particular asset class is undervalued?
i'd be keen to branch out beyond IPs if there are better opportunities available. (less downside risk)

the only things i can think of are:
IPs: gross yields & interest rates
Equities: forward PE ratio of ASX200??? <-- a wild guess

If so, equities seem like better value than IPs in the current market...any thoughts?


links on forward PE ratios:
http://www.thebull.com.au/articles/a/22728-the-coming-bull-market---how-soon.html

http://afr.com/p/personal_finance/p..._stay_lower_for_longer_UI5bOUhwdFQPX6Rj5xKGPK
 
IV - i have tried to find a thread with Evan's strategy - which you highlight in the previous post.

Are you able to elaborate?

Thanks.
 
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