De Ja (how do you spell it?) Vou
I take your point that $10 million in property seems like a lot to most people but the point of the book is to point out that in reality it isn’t and is achievable by just about anyone. Maybe I didn’t make my point well enough (suffering failure as an author syndrome with you!).
I do not believe I have lost touch – our clients (who I work with every day) fit your profile exactly - in fact many of my clients seem to be doing far MORE than I ever did at their stages which should lead them to becoming even more successful than me.
You also have to take my strategies in context that I do not only advocate property. We have our clients invest in a multitude of different asset classes and vehicles to “speed” their wealth creation.
I understand many of your points but don’t think it’s necessary to respond to them line by line (unless you really want me to). People do a lot of silly things to themselves out of fear but I can only address them by encouraging them to take action. And then if they don’t get it right take more action until they do.
Continuous forward movement – momentum – is critical to me. Momentum with a good strategy will inevitably lead to success, and at least if you are going to fail momentum will tell you sooner so you are not waiting your time on a loser strategy.
But if your question is what I think it is, ie how do I create an income stream of $50,000 PA in 20 years time – that’s easy (if a little under ambitious)...
To do that you need $500,000 in today’s money or about $1.5million in 20 years.
As you point out most people already have equity in their home and they are determined to pay it off. Personally I don’t know why you’d bother – seems lot of work to me but if they do that’s OK – in 20 years they’ll own their home outright, but that’s not going to get them far.
The strategy I would use is exactly as I have laid out in my book.
Use that equity to buy a property or two. Wait until the equity in it grows. Doesn’t matter if that is next week (as it has been over the last few years) or next year or in a few years (as it probably will be over the next few). When the equity goes up draw down again to buy more.
Subsidise the cash flow negative part (if you are following my strategies) by cash flow positive investments such as Commercial Property Trusts so the servicing costs are zero. If you prefer to follow Steve’s cash flow positive route that’s fine too. I think my strategy would get you there quicker, many would argue that the CF+ route would get you there easier – you choose.
Property grows at about 8% PA on average but does not grow consistently (that is pointed out in the book) like some people would have you believe.
Let’s say their house is worth $400,000.
Most of our clients can afford 3 (negatively geared) $250,000 to $300,000 investment properties straight off. Let’s make that $1,000,000 flat.
8% PA means a doubling every ten years or so. That’s $2,000,000 after 10 years, $4,000,000 after 20 years for the investment properties.
Yee Ha! $3,000,000 worth of equity. Sell it all up, pay back the loans (including the $400,000 for the house and you have $2,600,000 to invest. The house is now worth $1,600,000 and you own it outright. Beautiful.
Take the $2,600,000 and invest it in a diversified portfolio of higher yield investments like shares, managed funds, commercial property trusts and so on through a tax protected vehicle. Let’s say all that averages 9% yield (higher during the share and cash cycles, a bit lower during the property cycles). That’s $234,000 in cash rolling in PA. Tax on that would be 30% in today’s laws, so you’d have $163,800 net, so we are in front of our target.
Once of the best exercises I get my clients to do is just to sit down and project out into the future what their current assets would be worth in 10, 20 or 30 years, just based on averages. Most of the time it makes them much calmer about their future and less worried.
And a not worried client is not a greedy client. And when they aren’t being greedy they don’t do stupid things.
Greed to me is simply doing too much, too soon with too little skill in an effort to get too much money.
Other than that – why not go for it?
Mmm, this question seems strangely familiar…bonecrusher said:
I take your point that $10 million in property seems like a lot to most people but the point of the book is to point out that in reality it isn’t and is achievable by just about anyone. Maybe I didn’t make my point well enough (suffering failure as an author syndrome with you!).
I do not believe I have lost touch – our clients (who I work with every day) fit your profile exactly - in fact many of my clients seem to be doing far MORE than I ever did at their stages which should lead them to becoming even more successful than me.
You also have to take my strategies in context that I do not only advocate property. We have our clients invest in a multitude of different asset classes and vehicles to “speed” their wealth creation.
I understand many of your points but don’t think it’s necessary to respond to them line by line (unless you really want me to). People do a lot of silly things to themselves out of fear but I can only address them by encouraging them to take action. And then if they don’t get it right take more action until they do.
Continuous forward movement – momentum – is critical to me. Momentum with a good strategy will inevitably lead to success, and at least if you are going to fail momentum will tell you sooner so you are not waiting your time on a loser strategy.
But if your question is what I think it is, ie how do I create an income stream of $50,000 PA in 20 years time – that’s easy (if a little under ambitious)...
To do that you need $500,000 in today’s money or about $1.5million in 20 years.
As you point out most people already have equity in their home and they are determined to pay it off. Personally I don’t know why you’d bother – seems lot of work to me but if they do that’s OK – in 20 years they’ll own their home outright, but that’s not going to get them far.
The strategy I would use is exactly as I have laid out in my book.
Use that equity to buy a property or two. Wait until the equity in it grows. Doesn’t matter if that is next week (as it has been over the last few years) or next year or in a few years (as it probably will be over the next few). When the equity goes up draw down again to buy more.
Subsidise the cash flow negative part (if you are following my strategies) by cash flow positive investments such as Commercial Property Trusts so the servicing costs are zero. If you prefer to follow Steve’s cash flow positive route that’s fine too. I think my strategy would get you there quicker, many would argue that the CF+ route would get you there easier – you choose.
Property grows at about 8% PA on average but does not grow consistently (that is pointed out in the book) like some people would have you believe.
Let’s say their house is worth $400,000.
Most of our clients can afford 3 (negatively geared) $250,000 to $300,000 investment properties straight off. Let’s make that $1,000,000 flat.
8% PA means a doubling every ten years or so. That’s $2,000,000 after 10 years, $4,000,000 after 20 years for the investment properties.
Yee Ha! $3,000,000 worth of equity. Sell it all up, pay back the loans (including the $400,000 for the house and you have $2,600,000 to invest. The house is now worth $1,600,000 and you own it outright. Beautiful.
Take the $2,600,000 and invest it in a diversified portfolio of higher yield investments like shares, managed funds, commercial property trusts and so on through a tax protected vehicle. Let’s say all that averages 9% yield (higher during the share and cash cycles, a bit lower during the property cycles). That’s $234,000 in cash rolling in PA. Tax on that would be 30% in today’s laws, so you’d have $163,800 net, so we are in front of our target.
Once of the best exercises I get my clients to do is just to sit down and project out into the future what their current assets would be worth in 10, 20 or 30 years, just based on averages. Most of the time it makes them much calmer about their future and less worried.
And a not worried client is not a greedy client. And when they aren’t being greedy they don’t do stupid things.
Greed to me is simply doing too much, too soon with too little skill in an effort to get too much money.
Other than that – why not go for it?
