I've got the portfolio concept but not the cashflow.... you too?

[wish-ga]

Lots of forumites share inspiring stories of achieving things faster than they ever anticipated (5 properties in 2 years). Great to read about those successes! But I'm in the opposite situation. I anticipated buying my second property within 18 months of my first (12 if I am honest!) because I know others have achieved this and more!

Building equity is hard going on a pretty average income (found there's a ceiling on what I can forgo day to day)...... although I have the concept of what is needed to build a portfolio my $dollars$ don't allow me to move beyond just the ppor I'm paying on my own............would love to hear from others with the willingness and focus but kneecapped by their income and can't move up yet (yet!)

Surely I am not the only one?
Love to hear from those in a similar situation.... this thread is to give each other support (or pm if you prefer).

 

[wylie]

I feel the same way as you do. In my case, it was a lifestyle choice that I didn't want to go to work while the children were young (though I did work for two years after our first baby). Now the youngest is 11 I am loving the "me" time that I have but if I got a job we could certainly buy more.

It is a balance we have chosen but the downside is moving forward at a slower pace. We are still doing okay but I get the itch to turn another sow's ear into a silk purse, but right now, cannot afford to buy.

Wylie

 

[caz]

We are much the same. We have 3 IPs and although we have the equity we can't really afford to negative gear any more property. We don't want to have too many obligations and end up with no lifestyle now or in a crisis if the rates hike or hubby's income decreases. We also want to enjoy ourselves now and acheive what we want long term a little slower but enjoy the journey more.

We are investing as much as we can into other asset classes that don't require such a long term committment to negative cashflow as property, or that can be sold off quickly if need be.
Like Wylie I don't want to work while my kids are young and this really affects our cashflow.
Although the way the government charges childcare and gives FTB I would actually be worse off unless I work for 3 or more days a week. I find this the most annoying thing but that is an entirely different matter.

 

[Bantam Roosta]

Building equity is hard going on a pretty average income (found there's a ceiling on what I can forgo day to day)...... although I have the concept of what is needed to build a portfolio my $dollars$ don't allow me to move forward ............would love to know I am not the only one with the willingness and focus but not the funding to move along yet (yet!)

Yep, I'm in the club. One child, stay at home mum (not me!). We have owned our one and only IP for 2 years. LVR is down to ~85%, so no equity to access yet, and still negative. We just can't afford another one yet without sacrificing our already mediocre life style. We just need to wait for the wife to go back to work (5+ years). Until then things will go slowly but I have no doubt that I will achieve what I want to. I'll still be retired by 40, although I would like to be retired by 30 I know it isn't going to happen.

BR

 

[Rixter]

We have 3 IPs and although we have the equity we can't really afford to negative gear any more property.

Caz, are you aware you can convert your equity to cashflow to service your out of pocket portfolio holding expenses and keep growing your portfolio asset base? You dont need to purely use cash flow to fund it.

The poor & middle class think "cash flow", while the rich & wealth think "capital".

Its a complete paradigm shift in thinking.

 

[Dazz]

Its a complete paradymn shift in thinking.

...and that'd be a complete paradigm shift in spelling.....

 

[Rixter]

...and that'd be a complete paradigm shift in spelling.....

Are you sure about that?

 

[caz]

Hi Rixter,
We have been thinking of being more creative/ aggressive but I keep getting nervous.
We don't feel comfortable capitalising our interest but we have money in an offset account asking to be invested. I'm just not sure what to do with it as shares and real estate aren't particularly good value.
I would love some suggestions tho.

caz

 

[Rixter]

We don't feel comfortable capitalising our interest but we have money in an offset account asking to be invested.

Caz, when your money is sitting in your offset account (as it is now) its called cash savings. If you took that cash and placed it in a loan (be it a LOC or a loan with a redraw facility) its now called equity.

If you then with drew that equity, the lender now calls it a liability or debt. But if you then used it as a deposit on another IP the lender now calls it capital.

My point is its all one in the same.

Some food for thought.

 

[nomadic]

Caz, when your money is sitting in your offset account (as it is now) its called cash savings. If you took that cash and placed it in a loan (be it a LOC or a loan with a redraw facility) its now called equity.

I know you're a fan of cashbonds Rixter but how does this work in practise? I am in a similar position as others here with lots of equity but have hit the serviceability wall. I spoke to my loan manager at CBA who told me they don't accept cashbonds or annuities as income because they know it is only good for the term of the cashbond, i.e. 1 year.

 

[Rixter]

I know you're a fan of cashbonds Rixter but how does this work in practise? I am in a similar position as others here with lots of equity but have hit the serviceability wall. I spoke to my loan manager at CBA who told me they don't accept cashbonds or annuities as income because they know it is only good for the term of the cashbond, i.e. 1 year.

A CB would need to go for more than 1 year to be accepted by lenders...minimum 5 years for starters.

If you have sufficient equity why dont you go for a pure equity lend via a No Doc. Its alot cheaper than a CB these days, you dont have to lock your equity away for the term of the CB, and you do not have to provide your income, your assets , or your liabilities.

Simply use a LOC to fund your 20% deposit plus purchasing costs and fund the remaining 80% from the No Doc.

You can find No Doc these days cheaper than conventional lenders standard variable rates.

This is what I am currently doing.

Hope this helps.

 

[sailor]

Simply use a LOC to fund your 20% deposit plus purchasing costs and fund the remaining 80% from the No Doc.

You can find No Doc these days cheaper than conventional lenders standard variable rates.

This is what I am currently doing.

Hope this helps.

Me too...tis good stuff!

 

[nomadic]

A CB would need to go for more than 1 year to be accepted by lenders...minimum 5 years for starters.

Ok, so then maybe the CBA tell me it's only good for 5 years so they decline the loan because ther loan term is longer than 5 years. I wonder if that happens?

If you have sufficient equity why dont you go for a pure equity lend via a No Doc. Its alot cheaper than a CB these days, you dont have to lock your equity away for the term of the CB, and you do not have to provide your income, your assets , or your liabilities.

What do you mean by a pure equity lend? Are you saying just apply for a no-doc loan?

Simply use a LOC to fund your 20% deposit plus purchasing costs and fund the remaining 80% from the No Doc.

This is what i did for the last loan but now i'm trying to increase my viridian by $60-$80k and they don't want to play. Actually the first CBA loan manager told me this so then i rang another CBA branch and the loan officer there tells me that they do viridian lo-doc at the same rates as a full doc. I'm sure there must be some fine print to this, i'll find out next week when i see him.

 

[Rixter]

Ok, so then maybe the CBA tell me it's only good for 5 years so they decline the loan because ther loan term is longer than 5 years. I wonder if that happens?

WBC accepted my 5 Year term. Cant answer if they or anyone else will these days.

What do you mean by a pure equity lend? Are you saying just apply for a no-doc loan?

What I mean by a pure equity lend is me putting 20% of my equity into the deal and the lender supplying the other 80% without me having to provide any personal documentation as is the case with a full doc..

This is what i did for the last loan but now i'm trying to increase my viridian by $60-$80k and they don't want to play.

Have you considered refinancing a property or two across to another lender and setting up a LOC (full or lo doc) secured by those property/s?

 

[poyner]

Simply use a LOC to fund your 20% deposit plus purchasing costs and fund the remaining 80% from the No Doc.

This might work fine for actually getting the loan.... but what about servicing it? Capitalise the interest? or only go for positive cash flow properties? Wouldnt' positive cash flow be more difficult with the (generally) higher interest rates of a no doc loan?

 

[Rixter]

This might work fine for actually getting the loan.... but what about servicing it? Capitalise the interest? or only go for positive cash flow properties? Wouldnt' positive cash flow be more difficult with the (generally) higher interest rates of a no doc loan?

You service the loan same as any other type loan - from wages, rents, investments, and any other disposable income.

If you dont have the disposable income convert existing portfolio equity into cash flow and use that and/or capitalize a portion or all your out of pocket expenses.

There are as many ways as you can create.

Hope this helps.

 

[geoffw]

...and that'd be a complete paradigm shift in spelling.....

Are you sure about that?

I remember Peter Spann telling the story about having gone to a seminar in the US... at the end of the seminar, he told his friend, "Do you realise that they pronounce 'paradiggem' as 'paradime' in the US?"

He was quite surprised to be told that it was the same thing in Australia.

 

[Ricardo29]

wish-ga....
can i throw some simple thoughts in......
perhaps try forget the end goal, and focus on the crux of it: income.
disregard property from thoughts for a minute.
income is the most underrated and overlooked thing imo. rich people are rich, they earn a bucketload from their work, and they have income. its that income that allows them to buy property to become rich. its dreamworld to think battlers become rich by sticking to property principles and all that jazz....a bloke on 200k will wipe the floor with any person on 50k, anyday of the week, if he chose to follow the same principles. yes, can do all the right things on a lesser income to become wealthy, but just imagine you did all the right things on a higher income...look out world!!
why be poor when you can be rich???
if you have to go to work, why not go where you earn most???
its simple maths....income is key, greed is good
(sayings....not necessarily addressing you, just highlighting a point)

best way to increase it?
ask.
ask again. suggest youre moving/are worth more/need more.
move.
reinvent work/roles/career etc.
do more work etc.
there's lots of ways to increase it without doing anything extra or taking second jobs and all that silly stuff....why work harder when you can simply ask for more, or work smarter??

more income = more opportunities. propertys to follow. over!!

 

[alexlee]

I agree with Ricardo on this one. A high income doesn't guarantee financial success, of course, but all other things (especially mindset, discipline, strategies, etc) being equal, the higher the income, the greater your success.

It's supposed to be a great job market out there, wishga. Go out there and get it! I got a job offer after just one interview. It took them about a week to make the offer, and that was only because I was away for a few days.

The jobs are out there. Otherwise go West to Perth or overseas or change jobs or whatever. Sure you can buy shares to get dividends and so on, but if you're spending 10 hours a day at work anyway, wouldn't that be the best place to try to maximise your pay? Go talk to a job agent and ask around. You might be surprised.
Alex

 

[wish-ga]

Thank you Ricardo & Alexlee

its dreamworld to think battlers become rich by sticking to property principles and all that jazz....a bloke on 200k will wipe the floor with any person on 50k, anyday of the week, if he chose to follow the same principles. yes, can do all the right things on a lesser income to become wealthy, but just imagine you did all the right things on a higher income...look out world!!

I am working on the 'income' situation..... short and mid term. Short is to get a new job.... mid term is to finish my study...... long term is to invest well.

Because I am choosing to studying p/t while working f/t it adds another dimension to the search. The study is the mid-range goal to getting more rewarding (& better paying) work........ which of course will allow me to reach my investing goals and hang onto my ppor. (not to say study is the sole path to earning but I have committed to do my study and want to achieve it for reasons I won't list here)

It's an emotional drain and a financial struggle but getting a new job that ticks all the boxes isn't coming up trumps yet. Won't bore you with the details on my ongoing job searches.

You are so right that the principles are all well and good but if you earn >100k you can apply those principles so much more easily than <50k........ there was a thread around here where people posted their household incomes, no wonder I am not anywhere near the achievements of you guys on the income I have. It is pure math that your dollar, no matter how carefully spent, only goes so far doesn't it?.... guess I will have to just get me some more dollars in my pay packet.

Thanks for listening