I'd suggest just renting her out...
Target 2020! My retirement goal - some advice please?
- Thread starter ChasingSugar
- Start date
I'd suggest just renting her out...
Hi all,
Thanks for all ths input.
The debt included all debts, so included LOC. My net equity position right now is LVR 84%, with $433K equity accross all properties.
The PPOR went up as we did some upgrades to the property, which also increased the value. New double glazed windows throughout, floating floors, deck area etc.
The properties are performing pretty well. The LOC now covers all shortfall, so I do not have to contribute to the investments at all from my own cash (compounds debt). I have enough LOC to cover me for at least the next 2 or 3 years in terms of this shortfall (will increase the LOC to stretch out if needed). So we can comfortably hold them.
The thoughts purely come from the ability to pay down the PPOR considerably, reducing non-deductible debt to a very managable amount, which then also frees 1K+ for investing elsewhere each month (shares?). I should be able to sell down, lose some to CGT (project $50K), leaving my PPOR debt at projecting150K.
From there options are open, and I could look to purchase more property..... maybe bigger / higher quality. Just not sure if worth it as properties are going ok. They are all in Victoria, and all are flat worst case, or up single digits. The areas I believe are primed for growth: Berwick, Gippsland, Ballarat and Bass Coast.
To answer the finance question, all are owned Tennants in Common, and no crossover (jsut went through a big process to clean this up).
Thanks for taking the time to review and provide input!
Thanks for all ths input.
The debt included all debts, so included LOC. My net equity position right now is LVR 84%, with $433K equity accross all properties.
The PPOR went up as we did some upgrades to the property, which also increased the value. New double glazed windows throughout, floating floors, deck area etc.
The properties are performing pretty well. The LOC now covers all shortfall, so I do not have to contribute to the investments at all from my own cash (compounds debt). I have enough LOC to cover me for at least the next 2 or 3 years in terms of this shortfall (will increase the LOC to stretch out if needed). So we can comfortably hold them.
The thoughts purely come from the ability to pay down the PPOR considerably, reducing non-deductible debt to a very managable amount, which then also frees 1K+ for investing elsewhere each month (shares?). I should be able to sell down, lose some to CGT (project $50K), leaving my PPOR debt at projecting150K.
From there options are open, and I could look to purchase more property..... maybe bigger / higher quality. Just not sure if worth it as properties are going ok. They are all in Victoria, and all are flat worst case, or up single digits. The areas I believe are primed for growth: Berwick, Gippsland, Ballarat and Bass Coast.
To answer the finance question, all are owned Tennants in Common, and no crossover (jsut went through a big process to clean this up).
Thanks for taking the time to review and provide input!
see Rolfs comments above about debt recycling. Investigate it thoroughly. It would seem to have the desired effect (pay out PPOR sooner) as selling without the transaction costs.
Briefly, debt recycling is using your LOC to pay either the shortfall between the rent and the costs, or the full costs related to property investments. This leaves all your PAYG income or perhaps also the gross rents to pay down the PPOR mortgage.
It means your deductable debt increases while your non deductable decreases. Its suggested to get a private ruling prior to starting something like this, and as said before, investigating thoroughly.
Briefly, debt recycling is using your LOC to pay either the shortfall between the rent and the costs, or the full costs related to property investments. This leaves all your PAYG income or perhaps also the gross rents to pay down the PPOR mortgage.
It means your deductable debt increases while your non deductable decreases. Its suggested to get a private ruling prior to starting something like this, and as said before, investigating thoroughly.
depending - on where your properties are - i would personally sell down to reduce debt unless rentals are super good.
Thanks for the free pass on the numbers.
The 2012 numbers were differently structured, I had all 7 investments and the PPOR there in the 8 properties. So that was 2.4 value, 1.8 owed.
So like for like, I now have 9 properties, value 2.7, 2.3 owed.
The value impacted by new property, and conservative bank valuations vs last time, and the owed up from purchase, a Reno to PPOR and the new LOC picking up any investment shortfall.
Hope that works out/translates a,
Ta!
The 2012 numbers were differently structured, I had all 7 investments and the PPOR there in the 8 properties. So that was 2.4 value, 1.8 owed.
So like for like, I now have 9 properties, value 2.7, 2.3 owed.
The value impacted by new property, and conservative bank valuations vs last time, and the owed up from purchase, a Reno to PPOR and the new LOC picking up any investment shortfall.
Hope that works out/translates a,
Ta!
Yep, makes sense CS.
Question ; are all properties in Vic? Sorry if this was mentioned in your previous post but i couldn't see it
Yep, Vic.
Will look at spousal sale, thanks Terry.
I think consensus seems to be hang on to them?
Will look at spousal sale, thanks Terry.
I think consensus seems to be hang on to them?
Hi all,
It has been 2.5 years since my first post, and much has happened. I'm sitting down reviewing my portfolio, and was hoping for some ideas on a way to keep pushing for my goal of 2020!
In short, as an update, I'm now 34, have 3 kids and 8 investment properties! I may have a problem (the investments - not the kids!)
I had some valuations completed 2 months ago through my banks, and the portfolio and values now look like this:
PPOR: Value $503K Owe $428K
Investment Properties (8): Value $2.2Mill Owe $1.9Mill
Superannuation (Combined): $100K (invested in sharemarket - moving soon to SMSF for property+).
Taking a different tact, I am wondering if I should consider selling down a few properties in order to pay off my PPOR sooner.
Breaking down my investment properties (Year Purchased/Purchase Price/Bank Value Now):
IP 1 - 2005/265K/390K
IP 2 - 2007/110K/190K
IP 3 - 2008/255K/307K
IP 4 - 2009/150K/190K
PPOR - 2009/365K/503K
IP 5 - 2010/225K/265K
IP 6 - 2010/230K/260K
IP 7 - 2011/147K/175K
IP 8 - 2012/352K/355K
We also have some debt for investment expenses (buying/rennovating/costs of running), totaling around 195K. This is in a compounding LOC.
The bank valuations I believe are conservative on a few of the properties. And some of the numbers above are rounded/slightly different. Don't hang me up to dry if the numbers aren't spot on collectively!
I am considering selling Investment Properties 1, 2, 3 and 4 to help pay down our PPOR. This would basically reduce the PPOR mortgage down to around $150K, freeing up considerable cashflow for other investments (Shares?).
It would leave me with a heap of eqiuty in the PPOR and 4 investment properties. I think I would then have considerable scope to buy elsewhere.
Is this a solid plan or should I just let it roll into 2020 as is, working on paying down the PPOR 'old school'.
Thanks in advance!
Hi Chasing Sugar,
Seems as though you may be questioning your initial decision to accumulate ips? Perhaps do up an excel spread sheet which compares as best you can the various scenarios you out line above.
(ie - what will your cashflow and equity look like in 2020 if you keep things as they are?, What would it look like if you sell down and invest in shares or sell down to pay down the PPOR? Which scenario is likely to lead you closer to your goals?)
Hope this helps a little.
Regards Jason.
Thanks Jason, I have run the scenarios. Just a lot of pressure at home to eliminate the PPOR debt. i think i have convinced her now. With the help of the folks above, and with just a 3% growth per annum over 7 years the portfolio far outstrips any short term savings by selling and eliminating PPOR debt. Especially when you factor in we might not even stay here in 7 years.
Thanks all for your input. Will update down the track.
I'm investigating SMSF.So I've been off to see (and pay) the experts. I thought I might give an update for those playing along at home! Thanks all for the input through to now.
In short, PPOR Vs Investments has been put to rest. I am going to keep on doing interest only for the PPOR, and any cash surplus will go into investments. This will either be through improvements to force capital growth on my existing portfolio, or buying new investments to increase my asset pool looking for capital growth.
I met with my accountant and finance team, and laid out my goal of Target 2020. I shared all I had in a presentation (I'm a sales guy!), my planning, my calculations, key milestones etc. This was well recieved 'We've never seen anything like this before'. I must reccomend this if you are going to see a professional (especilaly if you are paying for the privelage): Put all your plans, goals and steps in a presentation, have an agenda, and send it prior to your meeting. It meant I got a good hour of discussing the intricacies, and not spending time getting the plan I had in my mind accross in a meeting meant for developing and tweeking the plan with their input.
So:
I'm moving into an acceleration phase for my portfolio. What this means is I have got my base behind me now, and it is time to buy some blue chip growth stocks. I will now add 2 properties, each year, through to 2018. I'll then let the portfolio sit for 2 years through to 2020, and at that point I will look at how I can achieve my goal of 'Retirement'. 'Retirement' means doing something I want to do, not somehting I have to do in this case.
The accountant recognised I wanted $100K in todays money on retirement. we worked this out to be circa $200K upon 2020 in tomorrows money, and to achieve it we would need a net worth position of some $3-4 Million. Today our networth is $550K, so there is some work to be done in the next 7-8 years!
NEXT STEPS:
- I'm having our PPOR revauled to try to squeeze another $50K in equity (Just had him through then - looks good for 30-50K rise based on our open conversation. He's done this place before a few years back)
- I'm having our first investment properties revalued to try to squeeze another $50K there.
- I'm rennovating the bathroom and kitchen at our latest property to try to squeeze another $50K from there.
All in all, this will give me the buying power for another property this year, circa $500K. It will also give my LOC a boost, from which I draw any shortfall or costs of holding the investment portfolio.
In addition, I've got the SMSF being set up right now, and I have the green light to go and buy a property circa $460K. This needs to be a blue chip capital growth purchase, so will be posting on that one next in the where to buy section!
That'll cover me for 2013. Fingers crossed!
In short, PPOR Vs Investments has been put to rest. I am going to keep on doing interest only for the PPOR, and any cash surplus will go into investments. This will either be through improvements to force capital growth on my existing portfolio, or buying new investments to increase my asset pool looking for capital growth.
I met with my accountant and finance team, and laid out my goal of Target 2020. I shared all I had in a presentation (I'm a sales guy!), my planning, my calculations, key milestones etc. This was well recieved 'We've never seen anything like this before'. I must reccomend this if you are going to see a professional (especilaly if you are paying for the privelage): Put all your plans, goals and steps in a presentation, have an agenda, and send it prior to your meeting. It meant I got a good hour of discussing the intricacies, and not spending time getting the plan I had in my mind accross in a meeting meant for developing and tweeking the plan with their input.
So:
I'm moving into an acceleration phase for my portfolio. What this means is I have got my base behind me now, and it is time to buy some blue chip growth stocks. I will now add 2 properties, each year, through to 2018. I'll then let the portfolio sit for 2 years through to 2020, and at that point I will look at how I can achieve my goal of 'Retirement'. 'Retirement' means doing something I want to do, not somehting I have to do in this case.
The accountant recognised I wanted $100K in todays money on retirement. we worked this out to be circa $200K upon 2020 in tomorrows money, and to achieve it we would need a net worth position of some $3-4 Million. Today our networth is $550K, so there is some work to be done in the next 7-8 years!
NEXT STEPS:
- I'm having our PPOR revauled to try to squeeze another $50K in equity (Just had him through then - looks good for 30-50K rise based on our open conversation. He's done this place before a few years back)
- I'm having our first investment properties revalued to try to squeeze another $50K there.
- I'm rennovating the bathroom and kitchen at our latest property to try to squeeze another $50K from there.
All in all, this will give me the buying power for another property this year, circa $500K. It will also give my LOC a boost, from which I draw any shortfall or costs of holding the investment portfolio.
In addition, I've got the SMSF being set up right now, and I have the green light to go and buy a property circa $460K. This needs to be a blue chip capital growth purchase, so will be posting on that one next in the where to buy section!
That'll cover me for 2013. Fingers crossed!
Well done, Chasing Sugar, it's great to have a plan in place which has been thoroughly thought through.
Just wondering how you will be able to fund the deposits on all the new purchases and service the debt? Will the new props be -ve geared?
Will land tax become an issue(although I noticed that you will be buying in trust structures, so I guess not?
Last question, how large is your buffer, and have you an exit plan in case your family or work circumstances change?
I have enjoyed reading your achievements to date. I love reading other people's plans and strategies.
Well done on all you have achieved so far.
Regards Jason
Just wondering how you will be able to fund the deposits on all the new purchases and service the debt? Will the new props be -ve geared?
Will land tax become an issue(although I noticed that you will be buying in trust structures, so I guess not?
Last question, how large is your buffer, and have you an exit plan in case your family or work circumstances change?
I have enjoyed reading your achievements to date. I love reading other people's plans and strategies.
Well done on all you have achieved so far.
Regards Jason
How did they figure this, that's like c. 10% inflation!! I'd rerun this.
Also, when 2020 rolls around how will you make your 140k pa or so? I couldn't see a strategy in there for this bit. Will you sell down pay off debt and live off rent? Or something else? How do the shares fit into this? I wouldn't wait til 2020 to figure this bit out
Did I miss something? We are in 2013 now, no? Makes 7 yrs til 2020.
