Journey so far - $75k salary (average), 5 years, 10 properties

I assume your lending for IPs3-10 is largely with Macq, NAB, AMP, Adelaide, etc. Given the changes that have happened of late, it may be very difficult for you to extend I/O terms if they fall due now. It will also be difficult to release equity too, at least with these lenders. Given the aggressive accumulation strategy, i assume LMI would have been a good friend to you.

Hypothetically speaking, if lending market conditions remain like this for the next 2-3 years, 2-2.5m in debt rolling over to P/I. That'd be a $4,500 increase in monthly expenses, which is your entire post tax income. That ends up being close to your entire yearly post tax salary, and if conditions continued for another 2-3 years, it would impact the other 1-2ish mill in your portfolio...

Hi Redom and other brokers

Have you been seeing many IO extension requests being knocked back? I would have thiought If banks (especially the big ones) start knocking back IO extension requests for investors, it will require a massive rethink of strategies for a great majority of the 1.8 million property investors in Australia.

Has it already begun or is that a possibility (at this stage) if APRA decide to tighten the screws further?
 
Hi Redom and other brokers

Have you been seeing many IO extension requests being knocked back? I would have thiought If banks (especially the big ones) start knocking back IO extension requests for investors, it will require a massive rethink of strategies for a great majority of the 1.8 million property investors in Australia.

Has it already begun or is that a possibility (at this stage) if APRA decide to tighten the screws further?

Its not a rejection based on I/O or P/I per se. Process below:

To renew an I/O term with MOST of the investment lenders that one would have used to grow a massive portfolio on 75k (NAB, Macq, AMP, etc), the lender would do a full reassessment of your financial position. That is, they'll test your serviceability again and ask for docs - just like applying for a loan.

Now with all these changes, there is no way that servicing will work with these lenders with their new calculators.

Therefore, there won't be the option to extend I/O terms.

This is not for everyone, but it is relevant for those who had very aggressive investment strategies and built their portfolios by sequencing/ordering investment lenders. CBA/Westpac still do pretty easy tick and flicks/phone calls - but the lenders chosen for this strategy wouldn't have been CBA/Westpac beyond IP6-8 (servicing would run out with them).

Given changes have only been in place for a matter of weeks (or in NABs case, in 1 hour and 10 minutes time!) - i haven't seen this yet. But last month (prior to changes) i did do a whole lot of equity releases/interest only extensions to clients who had similar investment goals to Simon to extend out the issue as far as possible.

Cheers,
Redom
 
Enjoyed reading this post.
What kind of trades people do you use, and how did you find good ones?

Mainly cleaner, electrician, plumber, painter, and general tradesperson.

Your property manager will be a good place to start as they will have likely sourced some fairly good value/quality ones. Their trades can often refer other trades and so on.

Otherwise, do a search on the forums of other members who are investing in your area and simply ask!

There will be plenty of opportunities to work out who is good and who isn't :)
 
Very good posts. I especially liked the end tips. I think big ones people should really take is:

- Capital gains is what we're all in for. If I was simply chasing dismal 7% gross yields, I would've bought Telstra at 10% net yield during the GFC (and doubled my equity by now)

- Don't over-analyse and fret on the small numbers. If you think a property is good, how is paying $900k different to paying $950k? The place will either go up $500k or it won't

- Don't listen to anyone. Over the years 50% of my friends would tell me what a terrible time I'm buying in the market. Well guess what? They're all trying to get in to Syd/Melb at the peak now in 2015.

- Lastly agree with Redom. Once you've built a portfolio, keeping it is important. Tinkler built $1 billion and lost it all. Finance helps you punt. My caution on that would be, finance can also be what destroys a rich man. Once you're rich, be careful. Can you afford P&I at 8% interest rates? If not, start selling soon.
 
Thanks for sharing simon amazing post! love inspirational reads like this :D what are you plans from here?
will you be purchasing any more places in logan or are you looking at diversify into other states ?
what is your end goal?
 
Hi Simon

A huge congrats for your journey and portfolio so far! I think you are particularly inspiring material for those young people who haven't yet begun working on the property ladder and kudos to you for taking early action. So many people become caught up in the "what if" brigade and fail to make a start, waiting for that elusive "right time" to purchase. You've obviously worked hard, made informed decisions and created a fairly balanced portfolio. Ensuring you have a buffer for hard times, can liquidate assets quickly if required and still maintain a healthy balance is all important and I wish you every future success. Thankyou so much for sharing :)
 
Well done Simon!! And thank you for sharing your story with us, very inspirational!

Was great to meet you on last SS meeting and looking forward to the next one!
 
Has WBC or CBA changed their IO renewal process?

I dont believe either will yet change the process, Id expect there is more concern about new lending and immediate headline numbers and results to worry about the pool of IO stuff thats currently there, so expect a servicing floor.

CBA may make an independent move on their tick and flick IO process based on noises from the powers that be

ta
rolf
 
Thanks for sharing. Very inspiring stuff!

It's always awesome to read these stories, and that's a whopping effort to accumulate an average of 4x your current salary in equity PER YEAR for half a decade.

My question: what's your after-tax cashflow, roughly, from the portfolio? I imagine it'd be well clear of a minimum wage already.
 
Thanks for sharing, OP. I really enjoy reading your post and your journey and congrats on achieving this.

At a glance all your properties have a vary good return rate, may i ask if they have generated enough passive income that you don't need your daily job?
 
Thanks for all the thanks all, especially from some of the more senior members of the forum - means a lot considering I was reading and learning from your posts years ago :)

Technically I can probably quit today and generate a minimum wage through passive income in the current economic/financial state - even if it meant selling down 1 or 2 properties. That said, the transition and growth has been so gradual that when you do get to a milestone, you naturally don't think much of it want the next step.

At this stage, my 9-5 is very cruisey and the PAYG helps for tax purposes...will likely re-evaluate after the financial year amongst things like APRA and market changes in Sydney/Brisbane.
 
If your 9-5 if cruisey stick with it! You need pay slips to keep banks happy for future loans plus use the time to keep researching, learning and buying more ips! Take advantage of a cruisey job! Get the work done to meet your role them go shopping online!
you gotta milk it !
 
Thanks for all the thanks all, especially from some of the more senior members of the forum - means a lot considering I was reading and learning from your posts years ago :)

Technically I can probably quit today and generate a minimum wage through passive income in the current economic/financial state - even if it meant selling down 1 or 2 properties. That said, the transition and growth has been so gradual that when you do get to a milestone, you naturally don't think much of it want the next step.

At this stage, my 9-5 is very cruisey and the PAYG helps for tax purposes...will likely re-evaluate after the financial year amongst things like APRA and market changes in Sydney/Brisbane.

Well done it is interesting what can be done if you stick to a strategy and your mindset is right on it, right? As some suggested have a buffer in place for the bumps, for the up and downs in the long term....
Always be proactive and finance is very important aspect of the strategy. For that reason I have just released a great amount so I can be ready when changes occur or for opportunities arising.
I am a believer that the first 10 years we invest and learn then the next few years we undo our mistakes, if we learned from them, and then we fix and accumulate, so in about 3 cycles, we can truly be financially independent,
Every stage requires a strategy, whether growing your portfolio to $5mill, $10mill or $15mill, or more so keep on learning....
 
Great point.....but also people overestimate what can be achieved in 1-3 years but underestimate what can be done in 15 years of investing....

It is definitely possible to hit $5m+ worth of property in less than 10-15 years and $10m in 20 years. By this I also mean a decent chunk of equity also...like a LVR of about 50%...as time drives growth.

I see a lot of people with $4m portfolios....but they will be hamstrung if they just buy and hold as most will only have 700k-1M in equity or a $75-80% LVR. With time it will do much better as equity grows.

I give up a JOB...you need to have an LVR more like 25-40% on a decent portfolio of over $5m....for most people. This will give you about 50k income....on $10m it will give you about $100-120k on an LVR of about 25-40%. Many factors for the continuity of the income.


Well done it is interesting what can be done if you stick to a strategy and your mindset is right on it, right? As some suggested have a buffer in place for the bumps, for the up and downs in the long term....
Always be proactive and finance is very important aspect of the strategy. For that reason I have just released a great amount so I can be ready when changes occur or for opportunities arising.
I am a believer that the first 10 years we invest and learn then the next few years we undo our mistakes, if we learned from them, and then we fix and accumulate, so in about 3 cycles, we can truly be financially independent,
Every stage requires a strategy, whether growing your portfolio to $5mill, $10mill or $15mill, or more so keep on learning....
 
Great point.....but also people overestimate what can be achieved in 1-3 years but underestimate what can be done in 15 years of investing....

It is definitely possible to hit $5m+ worth of property in less than 10-15 years and $10m in 20 years. By this I also mean a decent chunk of equity also...like a LVR of about 50%...as time drives growth.

I see a lot of people with $4m portfolios....but they will be hamstrung if they just buy and hold as most will only have 700k-1M in equity or a $75-80% LVR. With time it will do much better as equity grows.

I give up a JOB...you need to have an LVR more like 25-40% on a decent portfolio of over $5m....for most people. This will give you about 50k income....on $10m it will give you about $100-120k on an LVR of about 25-40%. Many factors for the continuity of the income.
One of my mentors early in life posed that question? Why do people lose their money, their fortune, their businesses, etc...? Then he said for two reasons, FEAR or GREED.
So a fine balance is required in the wealth building journey, where the equity creation and protection would be the key (having lower LVRs and money buffers is vital there!).
Yes, I agree Sash, so for me I prefer to play a bit of Monopoly game, where I bought anything first (limited knowledge but wished to accumulate), then I sold and adjusted few (the few lemons which did not perform well say in the 7 years - doing it now), then bought few premium (put on few hotels in better areas with renovations).
I find I can deal with paperwork better, have less IPs now but more worthwhile, adding value, or being able to redevelop, or just help family members to invest, or add more by being really picky!
Also, I prefer to deal with less insurance claims, not that I had any (fingers crossed) as mentioned by the thread person above (I admire these young guns being able to deal with so many challenges and such high LVRs).
But you are right, I am so risk adverse, as my LVRs makes me sleep comfortably at night...., perhaps it's just me, I could never bring myself to such exposure?
I agree with your calculations, they are quite close to our situation, yet we still wish to continue to work (well, we work for profit not a job), why retire, if we like what we do, right????
Have been approved just recently for $millions to draw down, yet I am unsure at this stage how I will progress? I think I will start one child off (has a deposit, works and studies so may loan some amount). In addition, I am unsure whether to invest further into SMSF, as the uncertainty remains there, so perhaps just cleaning and adding to portfolio, will be the way to go?
Having IPs in number of entities, with lower LVRs, permits those choices now!
I know I need to revisit the estate planning of things, so thus so many things to do, right, the more we have the more work there is (I am not complaining actually I realise how fortunate I am having those choices in life!).
So I just hope those young ones add the finance and equity creation and time to their strategy, as capital protection should be the key (as you pointed out many have millions invested with huge LVRs so I hope they have buffers in place and can sleep well at night???).
 
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