Hi GoAnna,
I learnt a long time ago now to stop listening to the gurus and just watch/listen to my mentors and people whom I admire and try and emulate what they do. No point in trying to re-invent the wheel. Gurus say what they say in order to sell books and seminars.
Mark
I am not big on what gurus have to say either
But I do find that I learn a lot when I stop and question any assumptions I come up against. Now that I think on it I have a very simplistic way of looking at it. I just ask myself two questions - is it helping my plan along? Is it helping me build the life I want to live?
For me an asset assists me in creating the life I want. A liability does the opposite.
I presume those that see a PPOR as a liability or discretionary income obviously do not share the same life plan as me. (which is fine!)
My PPOR was our second purchase (I did live in my first property but this was due to bank requirements attached to a bank loan) at the age of 26. It was an unrenovated run down version of my dream home. . I don't mean the waterfront mansion with the yacht moored out the front. I mean a big old rambling house with large mature garden, two separate buildings, easy location to the city, and access to parklands based in a community that shares my values.
I did however select and purchase it with an investor’s head. We found a sleeper suburb, at a time when property values had dropped (not unlike current times) and purchased well under market at a mortgagee auction. Within a year the bank valuation showed a 38% increase. Had we any knowledge on using equity for investments our investment journey would have begun then, as it was it took a further 6 years before I obtained the information. Even so I would guestimate that the PPOR has contributed at least 2 million net to our portfolio as it was the basis for most of our further investments.
I know others here feel that the cash flow going to the PPOR is holding back the investment plan. We focused on cash flow positive ips so the investments were self supporting. At the same time equity was essential for purchases. This combination allowed us to quite aggressively accumulate properties and only recent interest rate increases has slowed us down.
In pure economic terms our home has provided us with:
Certainty in terms of decisions based on work, investment and family;
Equity of around a million dollars which has provided us with the basis for our investment portfolio;
Currently cheaper and more flexible housing. If we had borrowed 80% of the purchase price and did not pay a cent off the interest bill would be about $260 per week. Renting an equivalent property would be I estimate $800 per week. We currently have some-one sharing our home for $275 per week which more than covers the estimated interest bill.
Josko’s situation made me reflect on the fact that had we delayed purchasing our PPOR until now have to fork out $8,500 per month assuming an interest only loan and an 80% loan. This would be not be possible unless I sold off a number of ips and put my retirement plan back around 5 years.
