Living off Equity - is this still an option?
- Thread starter Panic
- Start date
Rixter said:
Awww shucks Rix I didn't disappear, just busy helping to mend some of society's battered and bruised. When you focus on others, your own war wounds don't seem anywhere near as bad.
This forum is a rich and vibrant place in itself, one that gives so much and asks so little in return, except maybe to be mindful of others feelings. And as for those that keep we contributors on our best behaviour, well what can I say??? They do an awesome job!!!
Thank you,
Jo
simonjulie said:Hi Simon and Monopoly
So does that mean you would settle for the LVR of 50% of the 2mil asset base?
Isn't the alternative strength of the 10mil asset base with a 3mill equity ratio comfort enough especialy when previous equity grabs are still liquid in offset accounts. I could quite easily sleep at night with the knowledge that I would have a number of escape plans/safety nets before I would have to sell or go back to work.
Simon
I thought it was simple maths a 1m equity mate or a 3m equity mate.
I'll take the 3m equity mate,mate. And bugga everyone else.
Or have I missed something?
Hi Monopoly
Thankyou for your background post. It obiously has inspired others
Now I believe I understand why you hold such conservative views on investing.
Kind regards
Simon
Thankyou for your background post. It obiously has inspired others
Now I believe I understand why you hold such conservative views on investing.
Kind regards
Simon
Hi Markpmarkp said:
Nope, It was not a trick just a simple question.
The trick is getting from 1mil equity to 3mil but that is up to the reader to work out for themselves.
There have been a number of structures and strategies discussed in this and other threads with varying degrees of effort and risk involved.
Kind regards
Simon
Perhaps.simonjulie said:Hi Monopoly
Thankyou for your background post. It obiously has inspired others
Now I believe I understand why you hold such conservative views on investing.
For those that don't, allow me to spell it out....I've worked my ass off to get to where I am; I've had good and bad luck with boom and bust cycles, I've lost a little, gained a little more, but mostly I've created a level of financial freedom for myself (and my children) that funds the kind of lifestyle I choose to live and give to them. That being said, why in heaven's name would I want to jeopardise all of that?? We are not wanting for anything, so at the end of the day, "when is enough, enough??" or more to the point, "when do you actually sit back and ENJOY what you have, rather than kill yourself to have more??" My portfolio creates the opportunity to make more long term, and that for me is enough, without struggling to find a better way of making it grow faster.Oh and for the record....(and I've said this more times than I care to) I'm not looking to inspire anyone, however, if by the simple act of answering a few chosen questions helps to foster confidence in people enough to believe that it can be done, then I guess my ramblings have served a higher purpose.
Thanks for the opportunity Simon.
Jo
For me, that is the crux of any (permanent) retirement strategy - it must be extremely low in risk. And LOE isn't extremely low risk. I think many people here are in the position of wanting to take relatively big risks to achieve equity (this is goodMonopoly said:Perhaps.
), but look at it from the other side of the retirement fence. If you retired, continued to take big risks & failed, then it would take another 20+(?) years to get back to where you started. Go & read your answers to Monopolys 'Let Pretend' thread & imagine having it all snatched away.I already don't know what do with myself.
I imagine I will always have as high an LVR as possible; even if the actual debt on which I'm paying interest is a lowish LVR - say 30% to 40%. And there is a "shipload" of other funds undrawn.
I've enough assets already and it will grow of itself with time. I'm focussing now on other things - "life" things. My simple financial requirements are acheived.
regards,
I imagine I will always have as high an LVR as possible; even if the actual debt on which I'm paying interest is a lowish LVR - say 30% to 40%. And there is a "shipload" of other funds undrawn.
I've enough assets already and it will grow of itself with time. I'm focussing now on other things - "life" things. My simple financial requirements are acheived.
regards,
keithj said:For me, that is the crux of any (permanent) retirement strategy - it must be extremely low in risk. And LOE isn't extremely low risk. I think many people here are in the position of wanting to take relatively big risks to achieve equity (this is good
Hi Keith
I hope you don't think I am rude Keith but can I ask are you retired?
Regards
Mark P.
LVR = 0%
Well if congratulations is in order then "Congratulations Jo"
But is this smart?
I do understand from what I have read that Monopoly has fulfilled her life needs and so can appreciate that she is not inclined to take on any risk that might alter the status quo . . . however:
To reach this position Monopoly, as stated did take on some risk.
In order to build a portfolio one does need to take on debt. Imagine trying to buy a home/ investment property or other assets with an LVR = 0%
It would take huge resources and for most will take an inordinate amount of time to save up / accrue the amount of money needed.
Clearly 99% of the Australian population would never achieve even one property with an LVR = 0%
Most people will buy a home with a 10% (or slightly more) deposit. They might then rely on CG over the long term and regular capital payments to reduce the outstanding debt.
Everyone seems happy with this level of debt and the risks associated with taking on that debt.
The next step might be to simultaneously acquire investment property/s as a means to gaining more CG through gearing. Once again borrowed money and greater risk is required.
The next step might be to diversify and extend the portfolio into shares, with or without debt depending on SANF and the investors 'risk profile'.
Eventually over time and through CG there might be sufficient equity to pay down the all the debt . . . yes you might need to sell some assets to do this.
This might then result in LVR =0% and sufficient income from the remaining assets to fund the required lifestyle. Simultaneously, on this basis there should still be continuing CG on the asset base in the future years.
From what I have read, this seems to be similar to Jo's situation with an LVR = 0%.
Most investors come to me with a specific goal and time frame in mind. They request $XYZ per year net by a certain age, or within a certain time period.
Also they have finite resources to employ to achieve the result.
A realistic plan within various risk profiles will achieve the result. Each individual investor will choose the plan (AND Risk Profile / SANF) that fits their individual requirement.
LOE is just one of the plans that might be suitable.
This entire debate seems to be about many individuals stating their level of comfort about whether a certain risk profile is valid or not.
Mainly these in the building stage are saying that they see a need for debt / leverage / risk profiling to achieve their result within a time frame.
Then there are these that might over time already acquired a reasonable portfolio and or in fact be retired. Their attitude is why risk what you have already worked so hard to achieve. (Forgetting perhaps the leverage it took to get them there in the first instance.)
And then there are the actual retirees who are comfortable with their level of income, (Especially now in times of low inflation) and might then advocate a zero or very low risk strategy. (Yes all the way to LVR = 0%)
Each person, preferably after educating themselves will choose an appropriate strategy . . . it is not really appropriate for anyone to impose their belief systems which are based on their own circumstances / wants and desires on anyone else.
Is LOE still an applicable strategy? Yes of course it is . . . for these who might desire a certain result.
Is LVR = 0% smart?
Aside from paying more tax than is necessary and aside from the wastage of what the LAZY $$$$$$ could do, yes it is very applicable to these that choose to live according to that result.
Perhaps the real questions might be:
1) What are the risks associated with employing a LOE strategy.
2) What are the risks associated by NOT employing a LOE strategy.
Somewhere I think there is half a book written on these
Steve
Well if congratulations is in order then "Congratulations Jo"
But is this smart?
I do understand from what I have read that Monopoly has fulfilled her life needs and so can appreciate that she is not inclined to take on any risk that might alter the status quo . . . however:
To reach this position Monopoly, as stated did take on some risk.
In order to build a portfolio one does need to take on debt. Imagine trying to buy a home/ investment property or other assets with an LVR = 0%
It would take huge resources and for most will take an inordinate amount of time to save up / accrue the amount of money needed.
Clearly 99% of the Australian population would never achieve even one property with an LVR = 0%
Most people will buy a home with a 10% (or slightly more) deposit. They might then rely on CG over the long term and regular capital payments to reduce the outstanding debt.
Everyone seems happy with this level of debt and the risks associated with taking on that debt.
The next step might be to simultaneously acquire investment property/s as a means to gaining more CG through gearing. Once again borrowed money and greater risk is required.
The next step might be to diversify and extend the portfolio into shares, with or without debt depending on SANF and the investors 'risk profile'.
Eventually over time and through CG there might be sufficient equity to pay down the all the debt . . . yes you might need to sell some assets to do this.
This might then result in LVR =0% and sufficient income from the remaining assets to fund the required lifestyle. Simultaneously, on this basis there should still be continuing CG on the asset base in the future years.
From what I have read, this seems to be similar to Jo's situation with an LVR = 0%.
Most investors come to me with a specific goal and time frame in mind. They request $XYZ per year net by a certain age, or within a certain time period.
Also they have finite resources to employ to achieve the result.
A realistic plan within various risk profiles will achieve the result. Each individual investor will choose the plan (AND Risk Profile / SANF) that fits their individual requirement.
LOE is just one of the plans that might be suitable.
This entire debate seems to be about many individuals stating their level of comfort about whether a certain risk profile is valid or not.
Mainly these in the building stage are saying that they see a need for debt / leverage / risk profiling to achieve their result within a time frame.
Then there are these that might over time already acquired a reasonable portfolio and or in fact be retired. Their attitude is why risk what you have already worked so hard to achieve. (Forgetting perhaps the leverage it took to get them there in the first instance.)
And then there are the actual retirees who are comfortable with their level of income, (Especially now in times of low inflation) and might then advocate a zero or very low risk strategy. (Yes all the way to LVR = 0%)
Each person, preferably after educating themselves will choose an appropriate strategy . . . it is not really appropriate for anyone to impose their belief systems which are based on their own circumstances / wants and desires on anyone else.
Is LOE still an applicable strategy? Yes of course it is . . . for these who might desire a certain result.
Is LVR = 0% smart?
Aside from paying more tax than is necessary and aside from the wastage of what the LAZY $$$$$$ could do, yes it is very applicable to these that choose to live according to that result.
Perhaps the real questions might be:
1) What are the risks associated with employing a LOE strategy.
2) What are the risks associated by NOT employing a LOE strategy.
Somewhere I think there is half a book written on these
Steve
