Not in the slightest.
Even if this is the case in a decade, holding a few $mil of property creates a lot of other options.
Plus, I'll have ample rent as a fallback income stream. My living costs are very low.
How will you retire on property? - POLL
- Thread starter impala67
- Start date
Not in the slightest.
Even if this is the case in a decade, holding a few $mil of property creates a lot of other options.
Plus, I'll have ample rent as a fallback income stream. My living costs are very low.
+1.
If the equity is large and the portfolio too then why sell...that's our plan! But not many will feel comfortable with it judging by the poll percentage, right?
Not planning......livin' it.
Owning moderately large industrial properties is pleasant.
We've stepped in some potholes, but then, nothing is perfect. You learn, adapt, overcome and grow.
Next week will be 5 years since the pin was pulled permanently. I'd say the strategy of living off rent from our commercial holdings has proved itself in the medium term so far.
Owning moderately large industrial properties is pleasant.
We've stepped in some potholes, but then, nothing is perfect. You learn, adapt, overcome and grow.
Next week will be 5 years since the pin was pulled permanently. I'd say the strategy of living off rent from our commercial holdings has proved itself in the medium term so far.
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Right now just thinking of the simple strategy, i.e.
- Live off rent (residential), pay down the properties either by working or selling some.
- Might want to do simple dev in the future if ever possible, or touch commercial when I am more familiar with it
Stumbled across this in a Lomas book last night, thought I'd share - last paragraph in particular:
What if one's portfolio is built substantially in size & structured in such a way that potential down turns are minimised so as not to affect portfolio growth & LOE funding in the long term?
From an LOE cash flow perspective, what if you fund your lifestyle from the portfolio rental income collected & capitalise your portfolio holding expenses to the same value or less than your lifestyle funding?
All the capitalisation also becomes tax deductible and your gross rental income becomes net income in the hand.
Would your after tax income from shares double this if both our asset bases remain equal?
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depends how much your spending each year and the total value of your portfolio. 50k a year living expenses isn't going to eat into a large portfolio in a hurry.
Yeah with a big enough portfolio and low living expenses it might work but for most people increasing debt during retirement is asking for trouble. When property prices decrease and/or interest rates go up significantly they don't have any income to fall back on so become forced sellers in a weak market.
The additional capitalization is still costing money even if not directly used to fund lifestyle, but yeah this might improve the comparison a little but rental income would still fall well short of shares.
It's the imputation credits (i.e. less tax) and lack of overhead costs (at least 1.5% off the gross) that do it for me.
Agreed - two extremely attractive income differences that most residential property cannot exhibit.
The answer is never so simple.
I don't have Dazz's skill in commercial property, but I am quite happy investing in the stock market.
So I have a two pronged strategy:
residential property and shares.
Both have done well.
Commercial property in the right hands is a good money spinner, but it is MUCH HIGHER RISK, regardless of what anyone on this forum tells you.
And any asset class with higher risk, involves a higher skill level to manage it.
I am on the opposite side of a little commercial property at the moment.
Its my oldest business and unforuntately its time has come to an end. I don't have time to focus on it any more. Back in its day, in the late 1990's, I set up this business at the age of 24. It used to make me the same money as a national partner in a big for accounting firm, but not anymore.
Anyway the lease for the business has been on the same premises for 16 odd years.
A few years ago, realising business was deterioriating, I was contemplating a major re-fit. Approached the landlord to get 12 years of additional option leases.
Her lawyer must have heard of Dazz, because the lawyer started demanding all sought of things which if I agreed became into effect immediately:
*personal guarantee in addition to the existing rent guarantee (3 months)
*immediate additional rent increase (after having just done a market review several months ago)
*minimum rent increases of 4% a year.
All this for a set of options that back then wouldn't have kicked in for an additional 8 years (ie existing total lease + options was 8 years).
Stuff it, just bleed the business.
So fast forward 4 years, and the business has deteriorated much further. No longer making money, and I am never there.
Market review + final option was executed last year. Said yeah I will execute the option but never signed the new lease.
Suddenly her lawyers going into overdrive, one letter saying I have no lease, the next saying I agreed in writing to the new lease, and therefore its effectively in force.
My counter:
Do nothing, no correspondence, no communication.
Landlord starts coming to the shop every day, but I am never there.
Get a call from my friendly bank manager who's bank is also the lender on the property. Hey buddy, your bank guarantee expires end of feb.
Thanks mate I wont be renewing it. Done he says with a smile.
Suddenly the landlord is in do do, no signed lease, no bank guarantee after feb, and unlike residential property, commecerial property needs to be refinanced every so often years. And guess what:
Its refinance time!!!!!
Anyway ive got someone who wants to take over the lease. So I go to the landlord, you have this opportunity, take it or leave it. What can you do to me?
I told you several years ago, that your expectations were unreasonable, I was prepared to reinvest capital in the business, but not on the extortionary terms your lawyer was demanding, but all I heard back was the lawyers demands.
From my point of view:
yes I don't walk away with much on the final exit price for the business, but I don't care. This was my first business, made my money back many times over.
Most importantly my staff who have been with me many years all have perminant residency (they were on a mixture of work visas and student visas).
So the important assets, my staff, have all been taken care off and are very happy with me.
If this deal with the landlord and the new potential tenant doesn't go through, she will be in trouble.
So the motto of the story:
commercial property has its risks as well. The two previous landlords under my lease hold (especially the first one) did very well. The last one, not (partly because she also overpaid for the property)
I don't have Dazz's skill in commercial property, but I am quite happy investing in the stock market.
So I have a two pronged strategy:
residential property and shares.
Both have done well.
Commercial property in the right hands is a good money spinner, but it is MUCH HIGHER RISK, regardless of what anyone on this forum tells you.
And any asset class with higher risk, involves a higher skill level to manage it.
I am on the opposite side of a little commercial property at the moment.
Its my oldest business and unforuntately its time has come to an end. I don't have time to focus on it any more. Back in its day, in the late 1990's, I set up this business at the age of 24. It used to make me the same money as a national partner in a big for accounting firm, but not anymore.
Anyway the lease for the business has been on the same premises for 16 odd years.
A few years ago, realising business was deterioriating, I was contemplating a major re-fit. Approached the landlord to get 12 years of additional option leases.
Her lawyer must have heard of Dazz, because the lawyer started demanding all sought of things which if I agreed became into effect immediately:
*personal guarantee in addition to the existing rent guarantee (3 months)
*immediate additional rent increase (after having just done a market review several months ago)
*minimum rent increases of 4% a year.
All this for a set of options that back then wouldn't have kicked in for an additional 8 years (ie existing total lease + options was 8 years).
Stuff it, just bleed the business.
So fast forward 4 years, and the business has deteriorated much further. No longer making money, and I am never there.
Market review + final option was executed last year. Said yeah I will execute the option but never signed the new lease.
Suddenly her lawyers going into overdrive, one letter saying I have no lease, the next saying I agreed in writing to the new lease, and therefore its effectively in force.
My counter:
Do nothing, no correspondence, no communication.
Landlord starts coming to the shop every day, but I am never there.
Get a call from my friendly bank manager who's bank is also the lender on the property. Hey buddy, your bank guarantee expires end of feb.
Thanks mate I wont be renewing it. Done he says with a smile.
Suddenly the landlord is in do do, no signed lease, no bank guarantee after feb, and unlike residential property, commecerial property needs to be refinanced every so often years. And guess what:
Its refinance time!!!!!
Anyway ive got someone who wants to take over the lease. So I go to the landlord, you have this opportunity, take it or leave it. What can you do to me?
I told you several years ago, that your expectations were unreasonable, I was prepared to reinvest capital in the business, but not on the extortionary terms your lawyer was demanding, but all I heard back was the lawyers demands.
From my point of view:
yes I don't walk away with much on the final exit price for the business, but I don't care. This was my first business, made my money back many times over.
Most importantly my staff who have been with me many years all have perminant residency (they were on a mixture of work visas and student visas).
So the important assets, my staff, have all been taken care off and are very happy with me.
If this deal with the landlord and the new potential tenant doesn't go through, she will be in trouble.
So the motto of the story:
commercial property has its risks as well. The two previous landlords under my lease hold (especially the first one) did very well. The last one, not (partly because she also overpaid for the property)
There is more than one way to live off equity
Buy a property every 2 years.
After 16 years you will have 8 properties.
Then sell IP1 and buy IP9
Continue selling and buying a property every 2 years.
This gives you 16 years growth every 2 years which should be enough to live comfortably on.
Here is the math:-
Buy IP1 for $300 in 2014
Sell IP1 conservatively for $687k (5% PA Growth) in 2030
Gross profit $$387k
Less selling costs say $20k
Less CGT say $60k
Net after tax $307k
Allowing for 3% inflation that gives an after tax income of about $100k PA in todays money.
Buy buying an annuity with that money, the banks will accept it as income allowing you to buy next property.
In year 16, why would you sell an IP just to buy another one back again?
Same as year 18, 20 and so on.
This recycling of properties is simply losing money due to entry and exit fees.
Am I missing something?
Why wouldn't you just keep your existing properties and avoid these costs, unless you believe you can somehow outperform the market by buying better, but the first 8 should have been good purchases already.
I think this was assuming that you wouldn't be able to redraw equity.
So yes, you'd have a number of additional costs that you wouldn't otherwise, that's true.
It's a way to get the money out.
If you re-draw, the new loan will not be tax deductable, however if you sell and buy again, all the loan is deductable.
You have to pay CGT if you sell, but by re-drawing you are not eliminating the tax, just postponing it. So not really any extra cost.
The only extra cost is the the stamp duty and selling costs, but worth it to get the money out, as you have made so much more.
If you re-draw, the new loan will not be tax deductable, however if you sell and buy again, all the loan is deductable.
You have to pay CGT if you sell, but by re-drawing you are not eliminating the tax, just postponing it. So not really any extra cost.
The only extra cost is the the stamp duty and selling costs, but worth it to get the money out, as you have made so much more.
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