We've done it!

[jweg]

PLanning for Success

Hi there... Congrats - sounds like things are really going well for you. Do you work in the industry (i.e.- RE agent or solicitor or spruiker etc) or just been in the game for 12 years and going well?

How many years have you been cashflow neutral/positive ??

Also - have you ever sold assets earlier than planned to consolidate debt or re-invest? (i.e.- selling for a loss, or nil CG) ?

Thanks for the thread - interesting reading

 

[Rixter]

Jweg, A part from already having purchased my first ppor 7 years earlier, we started actively investing in property in 2000. We are not employed in any property associated industry.

Over the following decade built our property portfolio, averaging an IP per annum. Some years we bought 2, some years none.

Today we control a multi $million portfolio spread across Australia.

Our earlier purchases are positive geared, which offset our later negative geared property. Portfolio is basically cash flow neutral.

We have not sold any properties along the journey a part from our first PPOR and upgraded into our current PPOR back in 2003.

I hope this helps.

 

[jweg]

Cut & Run?

OK... question of opinion...

4 of our 6 properties are serial under-performers in terms of Capital Gain...

I have identified that if I sold the 4 off (might take a year or two to get prices that are satisfactory) we would reduce our assett base --- but would be positively geared. We would then have maybe 400K in equity & a mortgage of 220K rather than current mortgage of $1M.

We don't have huge incomes anymore - so neg gearing is not as attractive as it used to be.

ONly other thought... they are in areas that could benefit from future mining developments --- or they could not... very hard to predict unfortunately.

Thoughts??

 

[Rixter]

Thoughts??

Seem like you're stuck on Decision making. A FOUR-POINT PROCESS

Here are four questions I use and I would recommend you begin using whenever a major decision must be made:

1. DO I WANT TO be, do or have this?

2. Will being, doing or having this MOVE ME IN THE DIRECTION OF MY GOAL?

3. Is being, doing or having this IN HARMONY WITH GOD’S LAWS OR THE LAWS OF THE UNIVERSE?

4. Will being, doing or having this VIOLATE THE RIGHTS OF OTHERS?

If the answer to the first three questions is YES, and the answer to the last question is NO, make the decision and get moving.

I hope this helps.

 

[Michael.Knight]

Rixter could you recommend a property manager in Perth that you're using?

Also did you look to concentrate the bulk of your portfolio in one state, or was the plan to always have the portfolio spread across many states?

 

[Rixter]

Rixter could you recommend a property manager in Perth that you're using?

Also did you look to concentrate the bulk of your portfolio in one state, or was the plan to always have the portfolio spread across many states?

MK, I use more than one PM in Perth..I look to employ a PM thats located in the catchment area of where my IP's are. Where in Perth is your IP/s?

Yes my big portfolio picture was to accumulate IP's located across many states.. for portfolio diversification and land tax minimisation.

 

[Michael.Knight]

Thanks R!

I'm looking to buy on the far eastern side of Perth next year in the Midland area. Can you recommend a PM there?

Also now that you've finished with the accumulation stage, are you just concentrating on paying down the debt now?

 

[Rixter]

Thanks R!

I'm looking to buy on the far eastern side of Perth next year in the Midland area. Can you recommend a PM there?

Also now that you've finished with the accumulation stage, are you just concentrating on paying down the debt now?

MK,

You're in luck. I also have IP located in Midland. Its a satellite cbd, only 17km from the Perth city CBD and is the north eastern gateway to the Perth metro area.

My property manager there is Sean Toner from Real Estate Plus and I'm very happy with them.

From a portfolio perspective we have recently set up a Self Managed Super Fund, rolled our existing supers into it and purchased some land banking land within the fund.

The land is currently zoned rural and is being rezoned to residential. The time frame for this to happen & developed into residential lots is 3-5 years. That's when the titles will be produced so no holding costs/outgoings until then either.

In relation to the rest of our portfolio we are purely in care taker mode. Apart from any repairs/maintenance that crop up now and then we just renew leases & increasing rents as they fall due. No real priority in reducing debt as income offsets holding & lifestyle costs.

That's an advantage of LOE some people don't realise. Once you're financially structured correctly you only need sufficient income to cover your interest component on lifestyle & portfolio holding expenses - not your actual lifestyle & portfolio expenses themselves.

Its a totally different paradigm that most of society is accustomed to. The poor/middle class are raised within a cash for income paradigm, where the wealthy are raised within a capital for income paradigm.

I hope this helps

 

[Michael.Knight]

Yeah LOE is a paradigm shift and solid strategy...

I asked a Q a few months ago about body corporates and you mentioned that their fees are more a form of insurance and maintenance. So when you're looking at a townhouse or villa to buy, what due diligence do you do in regards to the body corporate?

From what I understand there's a yearly fee, but also a sinking fund (for emergencies)? What criteria do you look at to determine if a body corporate is being reasonable or if they're being unreasonable with their fees? And is it possible in the future for a body corporate to be "greedy" and demand excess fees which may not be necessary?

Sorry for all these Qs. It's just that I love your '10 in 10' strategy and want to emulate it. Except I've only bought houses - never bought a townhouse, unit before...

 

[Rixter]

Check out the past minutes of the body corporate AGM.

Check to see if any special meetings have been called, what issues are outstanding or coming up etc.

You are looking to see if any special levies for any unexpected work that needs attention as well as what maintenance is scheduled to take place .

If there is any money owing anywhere and how much money is in the kitty.

I hope this helps.

 

[Jamieb]

Hi Rixter

I've just finished reading this whole post and am likeing this strategy, I'm just starting out in my investement career and am trying to decide on what strategy suits me best, Just a few questions about where you will go with your portfolio now

Now that you have accumalated the propertys and living off LOC, eventually you will have to sell won't you to pay the bank back, or are you planning on continueing your 10 year cycle for ever, I figure as time goes buy CG should make it that you will have access to more equity than you can spend am I thinking right there?

also congratulations on what you have acheived and thanks in advance for your response.

 

[Rixter]

Jamieb, the idea is for the cycle to continue indefinitely. You can pass it onto your beneficiaries through your estate planning. So not only have you set up your financial future but also that of your beneficiary/family too.

What they choose to do with it after your no longer around is entirely up to them but I would be teaching them how to continue on same as you had been doing.

You are correct. As long as you are not drawing down more than your portfolio's CG is appreciating then your net worth/wealth continues to grow.

In 2010 I also added another property to the portfolio. Here's the thread.

I hope this helps.

 

[Dazz]

Yeah LOE is a paradigm shift and solid strategy..

You may wish to fully retire and try living off your equity for say 10 years before you pronounce it to be a solid strategy.

I gather you've done neither, and neither has Rixter according to this thread, so perhaps stating that L.O.E. is a solid strategy might be viewed by some as a tad premature at this stage in your investing career.

 

[Rixter]

You may wish to fully retire and try living off your equity for say 10 years before you pronounce it to be a solid strategy.

I agree Dazz. I recommend anyone exploring the LOE option to consider accumulating at least 10 years worth of lifestyle costs in approved available funds at ones disposal before fully exiting the rat race.

You should always have & leave a healthy buffer at your disposal.

You need to allow the property cycle time to turn so as to accumulate further portfolio equity from compounding capital growth and repeat the harvest phase once more.

 

[MTR]

I agree Dazz. I recommend anyone exploring the LOE option to consider accumulating at least 10 years worth of lifestyle costs in approved available funds at ones disposal before fully exiting the rat race.

You should always have & leave a healthy buffer at your disposal.

You need to allow the property cycle time to turn so as to accumulate further portfolio equity from compounding capital growth and repeat the harvest phase once more.

Hi Rixter
With tightening of bank finance, no more lo docs etc, how will you access equity once retired. The playing field has changed dramatically.

Cheers. MTR

 

[Rixter]

Hi Rixter
With tightening of bank finance, no more lo docs etc, how will you access equity once retired. The playing field has changed dramatically.

Cheers. MTR

Hi MTR, by the providing the required documentation the bank/lenders need to see so they can tick the loan application boxes stating it complies with their bank policy/lending criteria.

 

[MTR]

Hi MTR, by the providing the required documentation the bank/lenders need to see so they can tick the loan application boxes stating it complies with their bank policy/lending criteria.

Hiya
OK, I assumed it would get tough to service as you are increasing debt, retired, so income from rents would need to cover debt.

From someone who used nothing but lo docs (oh yes the good ol' days) to now full doc, its been an experience. i guess when you have a gun MB could make massive difference moving forward.

Cheer. Mtr

 

[Rixter]

Hiya
OK, I assumed it would get tough to service as you are increasing debt, retired, so income from rents would need to cover debt.

From someone who used nothing but lo docs (oh yes the good ol' days) to now full doc, its been an experience. i guess when you have a gun MB could make massive difference moving forward.

Cheer. Mtr

Ive said it before and I'll say it again - Property investing is not about property - its about finance!

Property is merely the tool banks love to take hold of as security for supplying the finance.

Structuring oneself correctly so as to be in a position of being able to continually access it when ever you want is vital. Whether it be for investment/business and/or lifestyle.

Cashbond Structures are an excellent tool for those in a position to possibly use this option. But you must plan & structure well ahead of time before hitting the dreaded DSR wall. Otherwise you'll find you've painted yourself into a corner - catch 22 situation.

I hope this helps.

 

[MTR]

Ive said it before and I'll say it again - Property investing is not about property - its about finance!

Property is merely the tool banks love to take hold of as security for supplying the finance.

Structuring oneself correctly so as to be in a position of being able to continually access it when ever you want is vital. Whether it be for investment/business and/or lifestyle.

Cashbond Structures are an excellent tool for those in a position to possibly use this option. But you must plan & structure well ahead of time before hitting the dreaded DSR wall. Otherwise you'll find you've painted yourself into a corner - catch 22 situation.

I hope this helps.

Yes, ooops should have read back, cash bonds, basically giving yourself an income to meet servicability. Thanx

MTR

 

[el caballo]

http://www.yourinvestmentpropertymag.com.au/article/how-to-retire-on-property-117917.aspx

Rixter,

I thought of you when reading the link above - it essentially describes your strategy?

Cheers,
Greg