Living off equity (LOE)

[Rixter]

Rixter,

Is the annuity from a bank, life company or somewhere else? What effective IR is it costing you?

Just curious...

TF, I have posted extensively on it in the past and dont wish to hijack this thread.

Do a search on cashbonds and you will find quite a few threads & posts on the topic that will answer all those questions and more.

Here's a couple of cashbond links to get you started.

Link one.

Link two.

If you have any queries please reply in a thread.

Hope this helps.

 

[Token Funder]

TF, I have posted extensively on it in the past and dont wish to hijack this thread.

Do a search on cashbonds and you will find quite a few threads & posts on the topic that will answer all those questions and more.

Here's a couple of cashbond links to get you started.

Link one.

Link two.

If you have any queries please reply in a thread.

Hope this helps.

Yep. Remember those, but what is not clear to me is how you "purchase" an annuity (cash bond) without accessing the equity via a loan? Outside of Reverse Mortgages, are there readily obtainable annuities that are simply secured against property rather than purchased with cash?

If not,then I'm missing something because it looks to me like a circular argument...I can't access my equity because I can't show servicing and cash-out Lo Doc is gone, so I create servicing capacity by purchasing an annuity I buy by accessing equity via loan I can't get because I can't show servicng and cash-out is gone, so I....

 

[Rixter]

If not,then I'm missing something because it looks to me like a circular argument...I can't access my equity because I can't show servicing and cash-out Lo Doc is gone, so I create servicing capacity by purchasing an annuity I buy by accessing equity via loan I can't get because I can't show servicng and cash-out is gone, so I....

Yep, its a common complaint. The key to getting around it is having the foresight to think a head and plan for when the time comes to allow you to continue accessing equity for investment and/or lifestyle purposes. As such, have your LOC/s in place ready for when the time comes to draw down for cashbond purchasing purposes to increase serviceability.

The problem is most people dont have the knowledge, experience or foresight ahead of time to have such a structure set in place for when the time arrives. Before they know it they've hit the wall.

PM if you have any further questions.

Hope this helps.

 

[Peter_Tersteeg]

Thanks PT, Im thinking more pull out 2 or so years worth of equity to pay all bills and live on, so Michael Yardney's 'ultimate strategy' the one we all should be aiming for is not reliable?

If I had 1million dollars in equity I cant really see it being a problem, Im aiming for much more but just a scenario.

A couple of points that should be considered:

1. Michael executes this strategy on a lot more than $1M in equity.

2. Michael has numerous buisness interests which supply substantial cashflow to cover this strategy.

I've seen quite a few people state they'd like to use this strategy when they've managed to obtain 2-3 investment properties. The mentality and experience of someone with 3 IPs and someone with 10+ is stubstantial. There's also a big difference between someone with 10 IPs and someone with 30+.

Concentrate on building a portfolio of properties over time with a view to building long term wealth. Your experience will help you determine which strategy will work for you.

 

[Y33]

PT Bear,

Very well put.

Also like to add one needs to consider what some of these investors had before they started on property investing and how that helped them get where they are today.

 

[Mary-Sue]

The mentality and experience of someone with 3 IPs and someone with 10+ is substantial. There's also a big difference between someone with 10 IPs and someone with 30+.

However, we must be cognisant that not all IPs are equal.

In fact, there are some people with 2 or 3 top notch investment grade IPs who are vastly more experienced and wealthy than others with 50 or even 130 average or standard IPs.

 

[sash]

Sorry...I disagree, I am from the old school....the more IPs you have successfully bought and held over many years is the best teacher.

I can't see anyone getting rich from 3 IPs!....I have been investing for over 10 years and the ones who have done, have over 10 properties.

However, we must be cognisant that not all IPs are equal.

In fact, there are some people with 2 or 3 top notch investment grade IPs who are vastly more experienced and wealthy than others with 50 or even 130 average or standard IPs.

 

[kissfan]

I can't see anyone getting rich from 3 IPs!....I have been investing for over 10 years and the ones who have done, have over 10 properties.

Aahhh........but what if those 3 IP's each bring in megabucks every year. Think commercial or the like

Regards
Marty

 

[Ridin-High]

TF, I have posted extensively on it in the past and dont wish to hijack this thread.

Do a search on cashbonds and you will find quite a few threads & posts on the topic that will answer all those questions and more.

Here's a couple of cashbond links to get you started.

Link one.

Link two.

If you have any queries please reply in a thread.

Hope this helps.

Thanks Rixter i'll read those as well.

Only thing i ever heard about cash bonds was for deposits for house

 

[Y33]

Sash,

It depends on what you determine as being rich.

The person who has been earning 50K per year on salary may consider himself rich if he now has passive income from 3 properties returning 2K each per month, plus the bonus of no debt and owning their own ppor.

Is it not ones lifestyle and what they are happy with that determines whether they are rich and not merely a bank balance?

 

[Rixter]

Thanks Rixter i'll read those as well.

Only thing i ever heard about cash bonds was for deposits for house

Ridin, you are mistaking cashbonds for deposit bonds.

 

[want2bewealthy]

A couple of points that should be considered:

1. Michael executes this strategy on a lot more than $1M in equity.

2. Michael has numerous buisness interests which supply substantial cashflow to cover this strategy.

I've seen quite a few people state they'd like to use this strategy when they've managed to obtain 2-3 investment properties. The mentality and experience of someone with 3 IPs and someone with 10+ is stubstantial. There's also a big difference between someone with 10 IPs and someone with 30+.

Concentrate on building a portfolio of properties over time with a view to building long term wealth. Your experience will help you determine which strategy will work for you.

Yes I know that, I plan on having as many IP's as I can Im only 2 years into my plan so far, well put though.

 

[markpatric]

Easily fixed. Use a cashbond additional to existing rental & any other disposable income. This is what I have done. It converts existing portfolio equity into cash flow income (without the need to sell) to meet the bank/lenders DSR requirements.

Hope this helps.

Famous last words?.

 

[BoatBoy]

Famous last words?.

How positive

Just because you feel it cant work for you, doesn't mean it cant and isn't working for others

Dave

 

[BayView]

Ridin, you are mistaking cashbonds for deposit bonds.

What's a cashbond, Rix?

EDIT: forget it; I saw the earlier pot with the link. Many thanks.

 

[markpatric]

How positive

Just because you feel it cant work for you, doesn't mean it cant and isn't working for others

Dave

Gday Dave, I am sure it would work for a very insignificant number of investors out there but I think that there is too much promoted on this subject as being achievable by the vast majority, or even anyone who "wants it enough".
Reality can be cruel, but it is not until people actually see the "downside" as we are now in that they even remotely acknowledge these things, and even then there are a small number who kid themselves that we can all have everything and not work etc etc.
I think it is important for people to get balanced views and the fact that someone may make a comment like "Napoleon Hill is bogus" may sound negative but it in fact will set many free from the many mind traps that society and especially the gurus can have us believe such things as we must be some form of retard if we cannot amass millions using thier methods in a very short time, if not we must need to buy more books, listen harder to the genius wisdom that they bestow on us mere mortals that we are so completely stupid that we must work for a living!.

 

[Rixter]

Gday Dave, I am sure it would work for a very insignificant number of investors out there but I think that there is too much promoted on this subject as being achievable by the vast majority, or even anyone who "wants it enough".

A CB is merely a tool. One of many tools for many jobs available for investors to utilise. In this case its tool available to increase DSR.

Is this tool right for them? Well that can only be answered by the individual themselves, based upon their circumstances, objectives, time frames and individual personal risk profiles.

The CB / Annuity is just one of many financial products available from many Insurance, Banking and Financial service companies out there.

Just like any form of product or service its up to the investor / consumer to conduct their own due diligence to satisfy themselves on the product/service and the company supplying it before going any further.

Hope this helps.

 

[Token Funder]

A CB is merely a tool. One of many tools for many jobs available for investors to utilise. In this case its tool available to increase DSR.

Is this tool right for them? Well that can only be answered by the individual themselves, based upon their circumstances, objectives, time frames and individual personal risk profiles.

The CB / Annuity is just one of many financial products available from many Insurance, Banking and Financial service companies out there.

Just like any form of product or service its up to the investor / consumer to conduct their own due diligence to satisfy themselves on the product/service and the company supplying it before going any further.

Hope this helps.

Important to note (as I was endeavouring to point out earlier) that in the absence of available capital, they are not a way around the cash-out restrictions returning to the market.

An annuity is a useful tool if you have the lump sum required to purchase it and in some circumstances can provide servicing capacity to enable further leverage.....

 

[Rixter]

An annuity is a useful tool if you have the lump sum required to purchase it and in some circumstances can provide servicing capacity to enable further leverage.....

Yep. Lump sum of your own money or OPM. But why use your own when you can use OPM is my philosophy.

 

[markpatric]

Yep. Lump sum of your own money or OPM. But why use your own when you can use OPM is my philosophy.

That is great Rixter in a perfect world but what it generally amounts to is a Bernard Madoff situation on a far lessor scale of course.
Saying it is one thing, putting it on paper another, you can tell yourself whatever you will but reality is often very different.
When people start to talk about borrowing OPM like it holds no responsibility or is like "free money" it is time to take a break and have a serious rethink.
Just my opinion.