Spreadsheet on financing a Buy-Hold portfolio. Comments plz

Hi Ladies/Gents,

Been reading property books/forum, and have gone through many debates about what property to purchase (Growth vs CF) for a buy-hold strategy. I feel these arguments are based on belief more than based on figures. I'm a number cruncher for living, so I don't find myself totally convinced.

To validate the concept, I have built a spreadsheet to emulate the portfolio evolution subject to yield/growth characteristics. This helps me profile what's the right property for a sustainable portfolio and maximize final wealth (better be self-sustainable).

This spreadsheet is not based on personal goals (only growth, no consolidation stage), but to shoot for the stars. Of course, it's a simplified paradigm using homogeneous property (my own spec is 500k currently yielding at 5%). It tells you how many of these homogeneous property you can buy if you continue reinvesting your equity. It doesn't consider limitation on borrowing power, interest rate curve, land tax and progressive marginal tax, but I think it gives an intuitive picture of what you can achieve if you spare some cash (at beginning and/or continuously) and re-invest equity.

These are some observations I find fascinating myself. One of my own discovery is despite common belief, a portfolio with rental yield equity to interest cost will not eventually turn into cash flow positive portfolio if you continue building it. The running cost (rate, insurance and PM fees) will grow faster than the net rental income does. But equity growth will allow it to capitalize. To return to net positive net cash position, will require rental yield a notch higher than interest cost.

I haven't built it to personal situation such as your income(and hence your margin tax rate) or investment horizon, but you should be able to custom build it according to your own situation.
 

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  • Property Portfolio Planner.xlsx
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