Newbie - Looking for input.

[Adundance]

Hi all, after months of reading thru all the valuable info on this site I have decided to finally register, open up and share some details about my current financial situation.

Not sure if I have posted this thread in correct place or not but here goes.

The objective is to have others provide me with some feedback on things perhaps they would do differently from a wealth creation/ lifestyle point of view.

It's my view that in order to grow it's important to be open to new ideas and thinking.

So ... here goes...

Current State of Play -
Age : 40
Am I married ? Yes - Married with 2 small kids just starting school
Do I work - Yes I am a Senior Executive in the Corporate World. Stable job.
Income - $250K Base + Super
Wife - Does not work ... she is a full time Mom.

Assets -
** PPOR - In Sydney's Hills District. Approx value 1.1 Milllion.
** PPOR Loan - $425K.
** Love Hills Area, schools, etc... and moving out of the area is not an option.
** 2 Japanese cars - Both valued at approx $33K (own both outright. No expensive leases. Been there done that and paid fortunes when I look back )
** Nothing else. (We owned an IP in Brisbane but had to sell to help family financially)

Financial Goal -
Build a large enough asset base to be able to retire from the workforce full time at age 60 with approx. $75K net p/annum in today's money.
Ideally the above can/will be achieved via property investing or other vehicles.

Current thinking.
** Pay off PPOR completely (approx. 5 years time) for peace of mind.
** I do not wish to risk the family home and re-draw equity at this stage.
** Not sure unless Cashflow + there is any other way to fund IP aside from big deposit or tapping into equity.
** Begin purchasing of IP's with the view to renovate and build capital post complete payment of PPOR (a la Nathan Birch style).
** Seeing a Financial Planner is out of the question (too many of my close friends have lost their shirts on their back during GFC).

So there you go ... my financial summary above. So I will now open it up to others to comment and/or provide ideas as to what you would do differentl today moving forward to get to financial goal.

Please be gentle with me ... it's my first post with many more to come

 

[grantwhit]

What's your monthly cash flow look like at the moment?

How much spare time do you have being a senior exec?

 

[Rolf Latham]

** I do not wish to risk the family home and re-draw equity at this stage.

Welcome

And that risk is ??

In General, using equity while retaining equivalent cash in offset against non deductible debt is a MUCH lower risk proposition than using cash for deposits

Typically, but not always your concerns can be addressed with some structured credit planning so you get an emotional understanding of where your thinking is actually rooted.

Sit with a decent accountant and broker to work through your concerns and get the right structure for you for the right reasons and model where you want to go.


ta
rolf

 

[Shahin_Afarin]

You have $425k in equity against your PPOR to draw upon for the next IP purchase. Idea is good. Start small but have a strategy (not just short term but long term) and work backwards.

Are you much of a renovator or hands on?

If you are going to outsource the renovation then prices tend to increase dramatically.

Regards

Shahin

 

[Adundance]

What's your monthly cash flow look like at the moment?

How much spare time do you have being a senior exec?

Saving approx. 8K to 9K p/month that is going straight to PPOR Home Loan.

Lots of spare time at the office !

 

[Adundance]

Are you much of a renovator or hands on?

Shahin

I can tackle minor handyman projects (ie - painting, stripping, replacing taps, locks, etc...)

 

[Adundance]

Welcome

And that risk is ??

LOSING OUR PPOR !

In General, using equity while retaining equivalent cash in offset against non deductible debt is a MUCH lower risk proposition than using cash for deposits

Can you pls explain this ?

Typically, but not always your concerns can be addressed with some structured credit planning so you get an emotional understanding of where your thinking is actually rooted.

This is interesting ... can you please expand on this more ?

 

[The Y-man]

Lots of spare time at the office !

Hey don't say that! Could be someone in your office checking!!

The Y-man

 

[devank]

Am I married ? Yes - Married with 2 small kids just starting school
Do I work - Yes I am a Senior Executive in the Corporate World. Stable job.
Income - $250K Base + Super

Are you much of a renovator or hands on?

Somehow I don't think it would be worth for a person on that income/job with young kids to spend their time on renovation by themselves!

I'm not a financial planner or broker like others. This is what I would do if I'm in your shoes (I need to double my salary for that ).

Equity = 1.1 Mil * 80% - 425K = 455K
Potentially that is enough deposit for 1.8 Mil IPs (455K / 25%).

1. Take out LOC(or investment loan) from your current bank. You have enough mortgages with them.

2. Use that LOC to buy
a. One capital growth property under your name. Since you are paying high tax negative gearing can work.
b. One cash flow positive property under your wife's name to balance the overall cash flow.

3. Get good broker and buyers agents' service

Say you used up about 800K on both IPs. You should be able to repeat the same for next two years. That will be about 2.5 Mil of assets and you will still have one or two property cycles left.

I created a Excel sheet to work out how much we need to retire. Hopefully you will find it useful. Based on my dealings with 'Senior Executives', I think you will have trouble interpreting that excel... sorry I couldn't help

 

[Rolf Latham]

Welcome


LOSING OUR PPOR !


Can you pls explain this ?


This is interesting ... can you please expand on this more ?

say you spend 100 k of your cash on an IP

that 100 k is gone and not accessible to you

If instead you borrow the 100k, and hold back your 100 cash, you have money for challenge or opportunity..............

Properly risk managed the risk of loss of PPOR using this idealogy is lower than that where you use the majority of your cash.


ta
rolf

 

[Rolf Latham]

This is interesting ... can you please expand on this more ?

Risk mindset often comes from a lack of clear understanding or quantifying what the risks are and how to modify or mitigate them, and indeed to see if they are "real" or if its some scar we are carrying ..........

Understand this goes both ways, works the same for risk averse folks, and she'll be right irresponsible debt management.

This is EXACTLY why your friends that used traditional financial planners got fleeced during the GFC, no one bothered to look at the identification and mitigation of the risk of the strategy.

Dont for one minute think that doing nothing or excessively mitigating "false" risk is much better than "putting it all on red"

The risk of not achieving your goals due to washy mindset is much higher than you think.

Having said all this, for some people borrowing of any sort is a catastrophic no no, and thats ok, we are all different, I just believe its good to know why we think what we do.

We all think we make daily decisions with our lives.............reality formost of us is that 90 % or more is pre determined by our previous experience and conditioning, and we hardly question it until we are forced to.



ta
rolf

 

[grantwhit]

Saving approx. 8K to 9K p/month that is going straight to PPOR Home Loan.

Lots of spare time at the office !

haha so that's what it's like at the top! I meant spare time outside of work if you were looking at reno's. I see the big wigs at work in at 7am and not leaving before 6pm, not much time for anything else I would have thought

probably best to start putting that cash into offset acc as Rolf mentioned re having cash for emergency/opportunity. that would be a good start

you may also want to look at using a smsf to buy through too. I'd assume you would have a sizeable balance in there. you are probably almost making the max contributions on your salary. you could build your asset base there as well and have access only 5 years after your 60yo goal originally mentioned

 

[Rolf Latham]

you could build your asset base there as well and have access only 5 years after your 60yo goal originally mentioned

you can bet that for anyone under 35 that the preservation age will not be 60..........try 70

come back to me in 35 years and let me know how I went : )

ta
rolf

 

[Brady]

For now as suggest put all extra funds into an offset account rather than paying off the prinipal, it will work for you in the same way by reducing the interest charged but give you future flexibility.


You have good income and equity available, servicing isn't going to be the issue.



It's going to be emotional, you need to look at what you are wanting to do, where you would like to be and work back from there, from your original post it sounds like you have already got that.

$75,000 a year in passive income / 52 = $1442.28 p/w

There are many different ways you could get to the point of that figure per week, you need to find one that is going to suit you.



eg. 4 house @ $400k each, rent $380p/w

4 seperate loans @ 80% Loan to Value Ratio $320k @ 5.5% over 20years = $2200 p/m thats P&I
Seperate Equity loan draw against your house $400k @ 5.5% over 20years = $2750 p/m thats P&I

total investment loan repayments per month $11,550
$380 p/w x 80% (management/costs) x 52/12 = $1317 x 4houses = $5269p/m

so would be $6281 p/m for you to pay off 4 houses.

In that time hopefully rent increases, captial growth (if purchased in good areas), income increases with a few good bonuses

This doesn't include any tax benefits as well (speak to an accountant)

You could look to continue the process.


(my maths could be out its late, this isn't personal advise just a senario, please speak to a professional)

 

[Adundance]

Thank you to all who have contributed.

Brady -You are assuming 5.5% Interest Rate p/a in your post over 20 years correct ?

 

[Brady]

Thank you to all who have contributed.

Brady -You are assuming 5.5% Interest Rate p/a in your post over 20 years correct ?

Correct 5.5% over 20years (to meet your 60yo in your original post) repayments were principal and interest.

 

[savoys]

The objective is to have others provide me with some feedback on things perhaps they would do differently from a wealth creation/ lifestyle point of view.

Hi Adundance, or is it abundance? you are certainly on a great salary and sounds like you have a very comfortable lifestyle. Is your wife interested in property/ renovating etc now that the kids are starting school,? it does help to have a partner with the same goals too.

 

[MTR]

Hi all, after months of reading thru all the valuable info on this site I have decided to finally register, open up and share some details about my current financial situation.

Not sure if I have posted this thread in correct place or not but here goes.

The objective is to have others provide me with some feedback on things perhaps they would do differently from a wealth creation/ lifestyle point of view.

It's my view that in order to grow it's important to be open to new ideas and thinking.

So ... here goes...

Current State of Play -
Age : 40
Am I married ? Yes - Married with 2 small kids just starting school
Do I work - Yes I am a Senior Executive in the Corporate World. Stable job.
Income - $250K Base + Super
Wife - Does not work ... she is a full time Mom.

Assets -
** PPOR - In Sydney's Hills District. Approx value 1.1 Milllion.
** PPOR Loan - $425K.
** Love Hills Area, schools, etc... and moving out of the area is not an option.
** 2 Japanese cars - Both valued at approx $33K (own both outright. No expensive leases. Been there done that and paid fortunes when I look back )
** Nothing else. (We owned an IP in Brisbane but had to sell to help family financially)

Financial Goal -
Build a large enough asset base to be able to retire from the workforce full time at age 60 with approx. $75K net p/annum in today's money.
Ideally the above can/will be achieved via property investing or other vehicles.

Current thinking.
** Pay off PPOR completely (approx. 5 years time) for peace of mind.
** I do not wish to risk the family home and re-draw equity at this stage.
** Not sure unless Cashflow + there is any other way to fund IP aside from big deposit or tapping into equity.
** Begin purchasing of IP's with the view to renovate and build capital post complete payment of PPOR (a la Nathan Birch style).
** Seeing a Financial Planner is out of the question (too many of my close friends have lost their shirts on their back during GFC).

So there you go ... my financial summary above. So I will now open it up to others to comment and/or provide ideas as to what you would do differentl today moving forward to get to financial goal.

Please be gentle with me ... it's my first post with many more to come

Hi Abundance

I would be accessing equity from PPOR, fastest way to move forward IMO.

As far as renos go, you mentioned "Nathan Birch" style, will you also target similar areas??

Cheers MTR

 

[grantwhit]

just thought with all your spare time at work u could day trade shares or forex