Share your investing goal

[Pins]

I am 38, and have been investing for 3 years.

Invested in shares prior to that but sadly bought in only a few months prior to the GFC. It was a good lesson to take control of my own investing (rather than rely on a financial advisor) and diversify into property. I will invest again in shares in the coming year but for now it better suits me to gear up in property as I have a very good income/serviceability but limited equity.

I have 2 x IPs (Sydney, Hunter Valley NSW) and just bought a PPOR in Melbourne. Total value around $1.5M with a 78% LVR.

At this stage my main goal is to build a portfolio valued at $4.5M by the time I am 45. I plan to achieve this through purchase of at least 1 x IP each year around the $250-$350k mark in a mix of city and major regional locations. I plan to add value through cosmetic renovations and purchase at least 2 with a view to developing later on when I have more equity.

As I get closer to my goal, I'll review my situation and plot my next move.

My goal is not to retire by the time I'm 45, but to have the freedom to work less or in a lower paying job or business if I choose to.

 

[devank]

At this stage my main goal is to build a portfolio valued at $4.5M by the time I am 45.

Is that 4.5M in today's $$? If is then 300K a year won't be enough. I'm also same old as you and same plans as you except I'm aiming for only a NPV of 3 mil mark.

 

[Pins]

I'm including my PPOR in the equation

I don't have the figures on me but I think I worked it out based on 1 x IP per year for 7 years averaging 5% growth per year

The figure is obviously gross

 

[Richard Feynman]

I'm 28. Bought PPOR 3 years ago. Shopping for first IP now.

Goal:
Have PPOR paid off and the option to retire by age 40. $35k passive income will be far beyond adequate. More won't hurt.

Method:
Buy and hold good quality properties for CG. Further down the track I aim to acquire places which provide additional options (e.g. future development/subdivision/major room for renos etc).

Status:
$130k+ equity in PPOR. Aiming acquire IP within weeks, thus holding $800k+ of property before the year is out.

My income isn't enormous. I'm single (and remaining so) so my biggest hurdle is going to be serviceability (in the eyes of lenders) and my ability to borrow again for subsequent purchases. I've got a fair challenge ahead of me.

That said, a much more important focus for me is continuing to improve as a human, and to increase my moment-to-moment happiness and wellbeing (both of which I've been fine-tuning, with success, for some time).

Investing is simply somewhere to direct my excess funds in the background while I focus on enjoying each and every fractional moment of existence right now.

 

[DavidG]

enough to retire ?

I've been researching intensively for prospective retirement over the last year or so - here's a few summary points.

do not include your PPOR in your assumed-income-producing assets - unless you want to take in boarders, which is another story and should probably cost you in tax, etc.

spare cash tends to come from unencumbered assets - I have IPs but with mortgages - slightly positive gearing - I could sell one to pay off most of my loans but that would raise my taxable income

long term most say you should expect to draw down no more than 3-4%pa of your capital to allow for growth and not shrink your earning capital long term (if you plan to burn it all up before you turn 65, and then live off the pension, that could be a big drop in prospective lifestyle -$100kpa to $12kpa ?)

so - using 3-4% - if you want $100kpa (per person!? - u must already be in the 0.1%!) then you would need a capital base of $2.5-3.3M - unencumbered - and excluding your PPOR

Many years ago I also read a long term market watcher saying you should expect no more than 4-5% returns over the long term - anything higher and you risk losing big time in a crash

For positive cash-flow property aficionados, my understanding is if you get it wrong you may have long periods of no or negative capital growth

I have also seen folk overextend - buying a dozen properties in a short time - feeling like a king - until the next jump in interest rates forced them to sell the lot at fire-sale prices - and bankrupted them - so don't be too quick to feel smarter than the average bear ...

 

[dajackal]

currently late 20s and settling on IP#3 next week.

my goal is to have PPOR fully paid off and 40-50K in passive income by age 40 and i estimate i'll need about 1.2m in blue chip stocks to achieve this

plan is to continue purchasing IPs and stocks whenever there is value and then sell some IPs to purchase blue chip stocks when reaching retirement (from paid employment)

alternatively i might switch to part-time work within the next couple of years with the tradeoff being having a more traditional retirement age, but at least my day-to-day life will be more enjoyable

i don't hate my job but i wouldn't mind more free time to pursue hobbies and spending time with kids when they arrive

 

[Waldo]

That said, a much more important focus for me is continuing to improve as a human, and to increase my moment-to-moment happiness and wellbeing (both of which I've been fine-tuning, with success, for some time).

Investing is simply somewhere to direct my excess funds in the background while I focus on enjoying each and every fractional moment of existence right now.

Good Stuff. I am in a similar situation were I want to make sure that I'm living for today while still saving a little for later. I'm a big believer in delayed gratification, however there definately needs to be balance (although that balance doesn't nesscarily need to be massive consumerism & spending heaps).

I also like the idea of cutting back to part time & doing the semi-retired thing early in life and working a little longer.

 

[TMNT]

Not a dumb question, a great question in fact.

My plan is to withdraw equity at times when I appears that I can get a better post-tax yield on the equity withdrawn by investing it in high yielding shares.

For example, if I withdraw $100,000, which I then invest in a large bank that provides fully franked dividends, then I might incur 5.5% interest on the equity withdrawn, but make 6% divident (fully franked) on the shares.

Of course, I'll have time on my side, but this will allow me to gradually diversify into blue chip shares and little or no real cost to myself, while maintaining my investment income.

There'll be some cashflow to think about, but I'm fortunate to have a well paying job that largely solves the problem for me.

bringing back an old post,

question: say your yield at day one is 8%for example, say neutral or pos, but assuming you bought BMV or did a reno, and you wnated to pull $$$ out and refinance, your rent will still be the same but once refinancing, your yield will become like 5%, which is severely cashflow negative,'

how do people handle this situation, I am finding that if I dont refinance my position for most Ips is postive, but refinance means a negative of $2-$4k per year, which is almost $100 per week, if you had 10, thats $1k per week, pretty much an entire weeks salary for teh average joe,

(assuming you are using all teh refinance $$$ towards further ips)

 

[jrc77]

bringing back an old post,

question: say your yield at day one is 8%for example, say neutral or pos, but assuming you bought BMV or did a reno, and you wnated to pull $$$ out and refinance, your rent will still be the same but once refinancing, your yield will become like 5%, which is severely cashflow negative,'

how do people handle this situation, I am finding that if I dont refinance my position for most Ips is postive, but refinance means a negative of $2-$4k per year, which is almost $100 per week, if you had 10, thats $1k per week, pretty much an entire weeks salary for teh average joe,
(assuming you are using all teh refinance $$$ towards further ips)

Surely the money you've drawn down on the refinance would be reported against the new IP purchase (for which it was used), not the old one (from which you've drawn it out of). So the old IP is still yielding 8%, and now you have a new IP yielding X%.

And if you bought bought below market value or did reno initially to get the original IP at 8%, wouldn't you do the same to get the next?

Regards,

Jason

 

[TMNT]

Surely the money you've drawn down on the refinance would be reported against the new IP purchase (for which it was used), not the old one (from which you've drawn it out of). So the old IP is still yielding 8%, and now you have a new IP yielding X%.

And if you bought bought below market value or did reno initially to get the original IP at 8%, wouldn't you do the same to get the next?

Regards,

Jason

maybe for others, but certainly not mine,

typical example, buy $140k, Rent $220pw=8.1%, cashflowpositive by $1k per year
spend $15k, new value $200k, new rent $250pw=6.5%, cashflow negative by $3-$4k per year,

if I did that with 7 properties, id be negative by $21-$28k per year,=just under $600 per week!!!

add-i dont think its normal for your rents to go up teh same proportion as your capital improved price, just like higher price =lower yields as a general rule

 

[jrc77]

maybe for others, but certainly not mine,

typical example, buy $140k, Rent $220pw=8.1%, cashflowpositive by $1k per year
spend $15k, new value $200k, new rent $250pw=6.5%, cashflow negative by $3-$4k per year,

if I did that with 7 properties, id be negative by $21-$28k per year,=just under $600 per week!!!

I don't understand your logic. So:

1. You have loan for 140k, property worth $140k. rents 220pw. (ignoring purchase costs)
2. You spend $15k on reno, loan now $155k, rent $250pw. property worth $200k.

Yield (rent compared to current market value) might be 6.5% - but you didn't pay $200k for it - you've only paid $155k. Yield compared to what you've paid is 8.3%.

Regards,

Jason

 

[TMNT]

I don't understand your logic. So:

1. You have loan for 140k, property worth $140k. rents 220pw. (ignoring purchase costs)
2. You spend $15k on reno, loan now $155k, rent $250pw. property worth $200k.

Yield (rent compared to current market value) might be 6.5% - but you didn't pay $200k for it - you've only paid $155k. Yield compared to what you've paid is 8.3%.

Regards,

Jason

I think you're confusing what I wrote/intend to write, its not logic, the figures I quoted are not loan figures,

they are all purchase prices

so starting again, I purcased IP1 for $140k, it rents for $220pw straight off the bat, so 8.1%, Its cashflow positive by $1k in my pocket every year

however, I can manufacture real equity by spending $15k in renos, this increases the rent to $250 per week, since now I have a renovated property, which is worth $200k,

so ive manufactured $45k in equity, but if I withdrew the equity by means of a refinance at $200k,
then my yield is now 6.5%, which gives me $45k cash in hand to do whatever I want with, BUT my cashflow position has gone from $1k positive to $3-$4k per year negative,

so its costing me $60-$80 per week out of my pocket to hold the withdrawn equity,

which doesnt sound like much but x 7, we are talking almost an average entire salary thats negative

 

[devank]

which gives me $45k cash in hand to do whatever I want with, BUT my cashflow position has gone from $1k positive to $3-$4k per year negative,

...

which doesnt sound like much but x 7, we are talking almost an average entire salary thats negative

Well... you can use that 45K to pay that negative cashflow for 10-15 years

 

[Rixter]

Well... you can use that 45K to pay that negative cashflow for 10-15 years

Gotta love LOE

 

[Richard Feynman]

Good Stuff. I am in a similar situation were I want to make sure that I'm living for today while still saving a little for later. I'm a big believer in delayed gratification, however there definately needs to be balance (although that balance doesn't nesscarily need to be massive consumerism & spending heaps).

I also like the idea of cutting back to part time & doing the semi-retired thing early in life and working a little longer.

"Delayed gratification" is an interesting one. Thinking about it, I'd say I'm instead focused on "alternative gratification" ? finding other means of generating equivalent/superior moment-to-moment happiness and well-being. The only delay is in my options, which will accumulate in parallel with wealth/assets.

I'd rather not deprive myself at all, if I can avoid it. That's where the tinkering comes in. "Does doing x" or "Does not doing x" positively, negatively or neutrally affect my happiness/well-being? You'd be surprised how many ways there are to skin a cat.

 

[moyjos]

Age - edging to the 50 mark

Goals: To enjoy life and pay for it without debt.

Status: Doing it
While we have currently made a concious desicision to put our funds into growing biz rather than property for the past 5 years or so, it has proven effective. When I compare the re.com properties that I was looking at back then and look at the picture now.. if we had bought those properties then we would be no better off now ( probably worse given NG) but we have grown income quite a lot in the past 5 years by sinking funds into the businesses.

Hubby and I now only work part-time ( me around 25 hours and him maybe 30 hours) PPOR is "technically" paid off (cash sits in LOC) we do have a small buisness loan which is budgeted to be gone end of 2015.

We dont need a lot to live on and we have found in the past that if our wage gets too high, we tend to eat and drink too much ( eat out cause we can etc ) So I tend to have separate accounts for "projects" that are separate from our day to day living account.

While I LOVE travel, husband is not keen so an OS jaunt for me every 2 years and a couple of good AU breaks every year (Christmas , Easter and long weekends) suits us well.

"Retiring" my husband would be a disaster He is not good at doing "nothing" he enjoys tinkering in the factory ( but not working too hard ) ~2 weeks away from home is about as much as he can handle before he gets "antsy"

I work on the principle of working backwards from a realistic goal and figuring out how to get it. The next 10 years are going to be an interesting mix of property and business, which no doubt you will all hear about as they unfold and I agonise over decisions

My idea of wealth is to have enough money to do "what you want, when you want and how you want" and mostly we are acheiving that now. Long may it continue

 

[Angel]

Hi Moyjos

Have you bought anything in Tassie yet? I am sure glad my hubby did not allow me to buy the block of land I was negotiating in Dover when I wanted to.

 

[moyjos]

Hi Moyjos

Have you bought anything in Tassie yet? I am sure glad my hubby did not allow me to buy the block of land I was negotiating in Dover when I wanted to.

No...we are tossing up some other (closer to home) options Stuck here for a couple more years "til the lease is up on the factory

 

[Singo]

I was a bit reluctant to share our investment goal but let me share it as my 100th post.

Goal: We are into our 30s and our goal is to have a net passive income equivalent to two minimum wages within 10 years (2022). That is $64,708.80 in 2013. At 3% inflation it will be around $ 84,500 in 2022. This goal seems achievable well before 2022. But we want to have kids and buy a house for us. So it will take time. We will revise our goal once we have 2 kids!!

Method: Buying properties where we can increase value by 10% by renovation. We create equity and use that equity to buy next. We look for properties with space to build granny flats. We buy neutrally geared properties. 8 to 10 rentals (houses and GFs) and reducing debt will get us to our goal.

Status: We started investing in 2012 (Ppor but we consider it as investment. The date I joined Somersoft can be considered the day we seriously started towards the above mentioned goal) Bought 2 IPs in 2013. Now we have moved out of our PPOR and are renting. Going to sell former PPOR and buy IP#3. So by early next year, we will have 3 IPs and will try to buy another IP within 2014. Then we will start to save and build GFs to boost cash-flow.

 

[Cargs]

goal: to pay off the PPOR debt by November 2017, achieve a passive income of $100k pa by 40 making work a 'choice' and ensure I don't miss a moment in my children's lives.

I'm yet to start investing and dare say my goal will be adjusted along the way


method: currently putting aside $1200 a week to pay down the PPOR debt and will also use this for holding costs of IPs, looking to buy my first IP using some of the equity in my PPOR as soon as I'm comfortable with my buying strategy/ property identifying ability. The long term strategy is to accumulate IPs with good CG potential until I achieve my desired passive income. I gave up a well paid FIFO job 15 months ago when my son was born and love every moment I get to spend with him, working on convincing the mrs it's time for another!


status: Was on track to have the PPOR paid off by early 2016, my original goal was to do that before I turned 30 (July 2016) but have adjusted the goal to before my better half turns 30 in 2017 allowing us to use some of the PPOR equity to buy an IP now. Will then continue to buy IPs as CGs and equity allow until I achieve my desired PI