In general Does 1 Million dollars of IP portfolio increase by 100k a year?

O

outbackjack

Hi all,


As above in general if I have 1 million dollars of IP's would I get 100k increase in equity a year??

I know there is holding costs, property expenses etc. However say over 5 to 10 years I am right to think that my IP portfolio will increase 100k a year on average?

I am thinking if that is the case I am considering in around 6 months to start structoring my portfolio a little better.

At the moment everything is X-Coll. I would also like to get more shares, perhaps by a managed business etc to spread the risk around.


BTW have moved to Mackay now with new job. New property settles on 24th August.

I will post pictures up later. I want to change kitchen at minimal cost.

Cheers
 
only if the properties average 10% capital growth

would also depend on valuations if you planned to drawn down the extra equity... so if you have a quiet period with little market proof of price increases, valuers may not be willing to value as highly.
 
Understood.

I guess I should quantify a while being over a 5 to 10 year period.

I also understand that it depends on the market location.

My 4 properties are all X-coll, so I am hoping to untie that mess in the next 6 to 12 months.
 
outbackjack said:
Hi all,


As above in general if I have 1 million dollars of IP's would I get 100k increase in equity a year??

I know there is holding costs, property expenses etc. However say over 5 to 10 years I am right to think that my IP portfolio will increase 100k a year on average?

I am thinking if that is the case I am considering in around 6 months to start structoring my portfolio a little better.

At the moment everything is X-Coll. I would also like to get more shares, perhaps by a managed business etc to spread the risk around.


BTW have moved to Mackay now with new job. New property settles on 24th August.

I will post pictures up later. I want to change kitchen at minimal cost.

Cheers
Click to expand...

Most property syndicate (ACR, Westpoint, Fincorp and more to come) gone bust promising people 8-9% yield and cant deliver, your 10% figure is in the high range.
10% is probably a good target in low interest and high employment environment.. comes credit crunch and people out of a job who knows.

Japan property market hasnt recover to their early years and the NIKKEI index has been in the lala land for the last 15 years since 1990... it's still trade around 16000-17000 but it was 30,000 - 40,000 15 years ago.
 
Taking a 5 year view, the portfolio does not need 10% a year growth but 8.5% each year over the first 5 years to achieve a net gain of $500k added equity for $1mill of portfolio..

8.5% isnt far fetched considering most metro suburbs across the east coast have been averaging 9% each year for the past 25 years.

Harris


HeXa said:
only if the properties average 10% capital growth

would also depend on valuations if you planned to drawn down the extra equity... so if you have a quiet period with little market proof of price increases, valuers may not be willing to value as highly.
Click to expand...
 
OK thanks,

I was thinking compounding, I have heard about this little wonder since a boy, however I never manage to see it work yet.

I have always been impaitant, or a x partner has taking the equity away.


Cheers

Please explain, just so I got it clear
 
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G'day Outbackjack,

Maybe try Google-ing "the Rule of 72" as this is what compounding is all about.

In short, though, if an asset grows at 10%, then by dividing 72 by 10, this says that it will double in 7.2 years (thanks to compound Interest).

And the reason for this is (using a 10% growth) is:-

Year 1 - $1m asset grows to $1.1m
Year 2 - $1.1m asset grows to $1.21m
Year 3 - $1.21m asset grows to $1.331m
Year 4 - $1.331m asset grows to $1.464m
Year 5 - $1.464m asset grows to $1.61m
Year 6 - $1.61m asset grows to $1.771m
Year 7 - $1.771m asset grows to $1.948m
and 0.2 years later (couple of months) it has doubled.

The eighth wonder of the world - compound interest.

Regards,
 
Answer this....

Would you prefer $1 Million cash in hand now or

1 cent doubled for the next 30 days?

Thats the magic of compounding....

Cheers
watto
 
watto said:
Would you prefer $1 Million cash in hand now or

1 cent doubled for the next 30 days?
Click to expand...

Depends watto on a whole bunch of things.....

1. You haven't stated how often it doubles.....that's the biggest thing
1a. If it doubles every 2 days during the 30 day period, give me the million every time.
1b. If it doubles every day during the 30 day period, which I think is what you are getting at but didn't specifically say, then at 10.7 Mill, yeah, take the cent option.

2. The cash in hand now option can be very attractive indeed, depending on what you do with it. That's called compounding dependence. If you took the mill. and chucked it all on # 17 on the roulette wheel, and she comes in, then definitely take the first option.

3. Depends on the attitude and power of the person giving you the doubling cent option.
3a. There was a similar story about a nice chap back in tribal Arabia who did a fantastic deed for the King at the time. As a reward, the King asked him if 1,000 tonnes of grain would be an adequate reward. Instead, he asked if the King knew how to play chess. The King said "too right cobber". The young bloke then whipped out a chess board and asked if he could have one grain on the first square, two on the second, four on the third etc.
3b. The King readily agreed not knowing about compounding, but discovered to his horror that square # 37 had more on it than his entire kingdom had, let alone square 64.
3c. With his Kingdom's wealth challenged, the King ordered the nice chap to be dragged outside and executed.

4. Depends if lawyers, barristers, solicitors and Judges get involved and agree in principal with the arrangement, especially if the other party has deeper pockets. The Court can strike out any written agreement if they deem it denies one grieved party any "natural justice".

5. "That'll do piggy...that'll do". ;)
 
Daz,

Nice reply.

It was just a general question. I would love to buy a boat now I am in Mackay, However think it is a few years off yet.

I need to set myself up. Like have about 50k in the bank, this would do me for about a year with out a wage/salary.

I also want to continue with buying IP's and shares. Only have 2k of shares at the moment.(AFI).

I also need to plan when my flatmate(the girlfriend) leaves. We have a child so it will be a costly exit. She is long over me, however stays with me because of our child. But one day I will get sick of sleeping on the lounge or she will find something better.


I have only been back in Oz about a year and halve. I am trying to get set up so I can one day go back OS.

Cheers
 
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