My Plans for Feedback/Criticism

Firstly, thanks in advance for taking the time to read this post and I would be greatful for your feedback.

I'll start with our current position then tell you my plan for this year in an effort to gain feedback to act as food for thought. I'll be honest in saying that unless a hurdle comes up, I am convinced this is feasible and will be setting up a meeting with my mortgage broker over the next week or two to get the ball rolling.

NOW:
- PPOR worth approx $320K of which we live of a line of credit and we currently owe about $20K.
- We have a managed fund worth around $30K which I will not include in the calculations for IP purposes.
- 1 IP worth about $520K (townhouse in Bentleigh) which should go up by about $20-$30K shortly once we convert the study area into a 3rd bedroom.
- Salary $100K plus Super and my wife does not work (1 dependant)
- Assets total $840K with Loans of $450K which includes our $20K owing on the line of credit
- I calculate our equity at approx $390K plus the managed funds.
- Both my wife and I are 30 years old so we still have many investing years ahead of us.

OBJECTIVE
By age 45-50, I would like enough equity in property to be able to live of the equity, ie. draw off the equity to fund a reasonable lifestyle - perhaps around $100k per annum in today's money.

PLAN
- we would like to sell our PPOR and move into a new house which we estimate would mean we need to borrow $150K in order to move into a house we would be happy with for at least 10-15 years (although hopefully longer).
- I would also like to purchase another IP this year for say $300K around the Narre Warren/Berwick/Endeavour Hills area.
- in 2-3 years, the equity should be sufficient to fund the next IP purchase

FINANCE
- for the 2 IPs, I would like to set up a loan for each plus a line of credit for each so we can add the shortfall to each loan. The purpose being to put our extra funds into the $150K PPOR loan in order to reduce the non-tax deductible loan as a priority.
- I would also have a LOC on our PPOR of say $200K (which would include the $150K loan we need to move) to live off in the event we need to access funds in an emergency.

RATIONALE
- we would not be saving any money during the next 2-3 years however we would expect a conservative increase in equity of around $100K - $150K.
- By proceeding with our plan it sets us up for additional properties in 2-3 years and then more frequently from there.
- I calculate our current LVR at approx 53% and if we proceed with our plan, our LVR would increase to approx 70%.

In light of all the above, what are your thoughts of my plan? Would you do it? Do you think I am being too ambitious for 2008?

Thanks again for your feedback!
 
No offense but what you're suggesting isn't exactly groundbreaking. Your LVR is conservative, and you're not really planning on buying THAT much new property in 08. Selling the PPOR may make sense given that you have no loans against the currnt PPOR.

As for living off equity at 45-50, cross that bridge when you get to it. I'd reassess after a few years.
Alex
 
What rate of interest are you expecting, and will this be adequately covered by the CG in the areas?

Cheers,

The Y-man
 
FINANCE
- for the 2 IPs, I would like to set up a loan for each plus a line of credit for each so we can add the shortfall to each loan. The purpose being to put our extra funds into the $150K PPOR loan in order to reduce the non-tax deductible loan as a priority.
- I would also have a LOC on our PPOR of say $200K (which would include the $150K loan we need to move) to live off in the event we need to access funds in an emergency.



Thanks again for your feedback!


This, in my opinion, is the only way to get ahead....I'm going to try it next year...I see nothing wrong with this strategy.
 
Firstly, thanks in advance for taking the time to read this post and I would be greatful for your feedback.

........

In light of all the above, what are your thoughts of my plan? Would you do it? Do you think I am being too ambitious for 2008?

Thanks again for your feedback!


Hello "In the red",

Looks from the responses that the old maxim of "There's only one person really interested in looking after your money.....and that's YOU."

Anyway, I've read your position and have the following comments ;

1. As you are both only 30, I think you can be going alot harder than you are.
2. The targets you have set yourself are not ambitious, on the contrary - pretty soft.
3. Well done on achieving a nearly fully paid PPoR. Great start.
4. Not so well done on wanted to hock yourself up again to upgrade the PPoR & lifestyle at this early stage.


My humble suggestion is to go in the exact opposite direction as to which you propose. What you propose is exactly what everyone else is doing. Do the opposite and you may get a different result from the average schmo.

That is, why not keep your PPoR and rent it out as an IP, and downgrade to an absolute hovel somewhere cheap and nasty for 150K, or even rent somewhere cheap and let an investor like these guys on this forum pick up all of the council bills and maintenance.

Put in the hard yards for 3 or 4 years, investing like the "billy-o" during that time into absolutely topline investments that pay a decent sustainable yield.

4 years is a very long time, and the opportunities you come across in that time will astound you if you go hard. Grit your teeth and get knuckled down.

Totally up to you of course, but what I have suggested is massively unpopular especially with the Jones (and most others) in this modern world....and the best thing is most of your friends will disassociate themselves from you during this time. It's normally very unpopular with the females, and takes a special woman to come on the journey with you.

It's what we chose to do when we were younger and it worked a treat. One day everyone is looking down their noses at you saying things like "wouldn't be seen dead over their place"....and then the next day they are scratching their heads saying "how on earth can you afford to live in a house in this suburb ?" :cool:

Totally up to you chief. The path you choose will probably dictate where you end up, and your objective of living off equity with 100K p.a. may be a piddling ambition compared with what you are capable of achieving. If you go hard, you may find you are generating three times that amount or more off free cashflow without having to chip away at your equity.

However, what I suggest is not easy, it's not fun, and hence why most people avoid it like the plague. In fact, about 92 or 93% of folks won't make it.

How badly do you really want it ??
 
Thanks for all the replies.

Dazzling - if I weren't married this is exactly what I would do - actually, I would probably go one better and move back in with my parents for a few years to help get ahead. But given I have to keep my CEO happy, I think we will be moving this year. It also gets us in a position to keep us in the same house for the long term and avoid a PPOR slowing us down again.

Next step for me is the mortgage broker.

Cheers.
 
Hello "In the red",

Looks from the responses that the old maxim of "There's only one person really interested in looking after your money.....and that's YOU."

However, what I suggest is not easy, it's not fun, and hence why most people avoid it like the plague. In fact, about 92 or 93% of folks won't make it.

How badly do you really want it ??

G'Day Daz

Gee, what a great post!

I read this about five times, grinning away to myself. Never mind that it 'takes a special woman to come on the journey with you' - perhaps that is where I went wrong! I have Mike on the journey with me, and he has been a very unwilling participant in the journey, still is.

Without sidetracking Red's thread, but I asked Mike yesterday 'Who do you know who bought an investment property in 2007?' 'Who do you know who bought any property - or sold any property - in 2007?'

He couldn't think of anyone. Actually, he thinks we are 'normal', that everyone else has the same antlers on the wall that we do.


The bottom line is, what Red is suggesting is fine. In fact, it is more than fine. It is significantly more than what 95% of the population will ever aspire to or achieve. However, Red, if your goal of $100,000 income represents 5% gross yield then you will need about $2,000,000 in equity to produce your required income.

This is not $2,000,000 in equity per se. It is $2m in equity producing 5% gross yield.

You could achieve this by holding $2m in fully paid income producing assets, be they property or shares or whatever, and $2m in 15 years is relatively easy - if you are really 'into' doing it. But a sizeable portion of that $2m will probably be in your home, which doesn't produce income.

So, how to do this?

I would take a slightly more strategic approach and go for the high yield properties, of which there are many but, as Dazz says, no-one you know would be 'seen dead' at any of them. However, I can't remember the last time I put a friend in the car and gave them a scenic tour of my properties, so big deal about the status of what you are buying.

I have sat on dog haired couches all over Melbourne for more than 30 years, and let me tell you, 'where there's muck, there's brass'.

One of the major problems with property as an investment is that you can't just sell off the bathroom. Sink $300,000 into one property and you may very well find yourself sunk!

Think, really think, about what you are trying to achieve. Be careful what you wish for as you will achieve it. So think small, achieve small. Think big, ditto. Daz has thought a lot bigger than most and has achieved the most humungous shed I have ever seen!

But if you say 'I want' .... but .... 'gotta keep the missus happy' then you are sending out mixed messages. Hey, I could have not done a lot of things to keep Mike 'happy' - to use him as an excuse.

Are you sure that this (your plan) is what you - you, not 'the missus' - really wants to do?

If so, then get on with it.

If not, release it and let it go. Have a nice home, be proud of the investment property in Bentleigh, enjoy yourself and have done with it.

Success is not a half measure. It is not a half full or a half empty glass. Success is an absolute. If you want to be successful then you will have to be absolutely committed to it.

Good luck!

Kristine
 
Thanks for your thoughts Kristine.

I hear what you are saying and to shed some more light on my/our scenario, I should clarify that I realise that property is a long term investment so we am prepared to set goals which don't put too much of a strain on ourselves. We have both worked hard in the past which put us in a position where my wife was able to stop working when our little one was born 3 years ago.

I realise that by taking the conservative and easier approach it will take longer to achieve our goals however we are prepared to wait if it makes us feel more comfortable along the way. We would prefer to do it easier and for the process to take us say 15 - 20 years rather than stop living the life we lead now (which is still far from extravagant) to bring the time frame forward by say 5 years. Here today... gone tomorrow sort of thing.

Funny thing is that after speaking with our mortgage broker (who is more conservative than the Reserve Bank) we have prioritised our 2008 plans into moving first and then buying IP2 once we have settled on our new PPOR which should occur later this year, early next.

Regards.
 
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