turning equity into income?

[brains]

hi all,

This may seem like a pretty basic question to some, but i cant seem to get my head around the concept of turning the equity in your IPs into income. I have an idea that it involves a line of credit loan but thats as far as i understand it.

The reason i am asking is because sometime in the next few years i plan on selling my business and relying on my IPs for income. (or attempting to As well as maybe doing a reno or two per year and maybe some share/options trading and whatever else pops up.

I see it as a much less stressful way of living (and earning income)
than running a business/working. (Ive had enough stress to last me a lifetime

Its going to seriously effect my serviceability of future loans but i will find some way to get around that with the help of a creative accountant/mortgage broker.

If anyone on the forum can explain the concept or has done this sort of thing already id love to have a chat.

Thanks

 

[Jas]

There are two ways of living off your IPs. The first is just living off the rent they generate. The second is living off the capital growth they generate.

The problems with the second are twofold. Firstly, you don't know how much they will grow year on year. Secondly, you can't use the equity to expand your portfolio as you are eating it.

the way around the first is to only live on a year behind's growth. This is a good strategy as when you goto the bank, you still have a healthy margin, and its a definite figure you want to borrow.

Now all you have to do it make sure that the place never goes down in value. The place you are eating equity should be in a good location, near the city eg- a high quality place. These are the ones that go up (provided you bought well in the first place).

As your borrowing increase every year, serviceability will become an issue, but as you say a creative mortgage broker should be able to help you.

Jas

 

[brains]

thanks jas

I really need to know the nuts & bolts of how to do it. Like how to convert the cap. gain into weekly/monthly income?

 

[beech]

an Annuity turns equity into passive income via Steve Navras methods.
Having been to his weekend of info,i suggest you do the same and you will have a totally different perspective on passive income than you may now have.
Search his posts and you will find his website.


Darren

 

[beech]

Also forgot to mention serviceability problems will be no longer be an issue once this system is off and running.

Darren