What's your 'cash' goal?

[MJK]

This got me thinking..heres my situation,

Figures fictional but represent a real situation

Income

162k in MF distributions
102K in rent

Expenses

106k interest (margin loan capitalised)
123K interest (property loans not capitalised IO)

Taxable income is 264 - 229 = 35k

Taking into account that margin loan interest is capitalised means that cash in hand is 264 - 123 = 141K to live on of which 35k is taxable.

Assets grow at a greater rate than capitalised interest.

I have turned some low yeild assets into high yeild assets by selling some property and buying managed funds etc...

So I suppose I'm saying I concentrate on income, cashflow and capital/capital growth.

MJK

 

[Debt Junkie]

I told my friend 'you know real investors would never really think like that.

And with that comment, I think you've just answered your own (initial) question.

Your friend isn't an investor, that's why he's dealing with hypotheticals that are so simplistic that you, as an experienced investor don't see the point.

Maybe when you were very young, or had no education in investment, you thought in cash terms. But then it moved to debt, cashflow, yield, non-cash deductions, net asset position, growth etc ... all those things that come naturally to you now, but which aren't included in your friends' hypothetical example because he doesn't understand what is important and what is not. But he knows cash!

DJ

 

[warrioress]

I have had similar conversations with friends with large amounts in the bank but no investments. They think I'm far less well off because I have a couple IPs, and have to fund a small shortfall each week.

Fair enough, I'm at the start of my investing career, and don't have a huge amount of savings anymore, but I wish they were more forward thinking.

 

[gooram]

I used to fantasise about what I would do if i won the lottery.

 

[quoll]

I used to fantasise about what I would do if i won the lottery.

Do you even bother to buy a ticket anymore?
If so weekly all the time?
or
Every now and then on a big one?

cheers
quoll

 

[lizzie]

okay - i'll be the first to put a figure on it ... today i am aiming for debt free property asset of at least $3.5mil, in today's terms, returning at least 5% (more would be nice ) - excluding ppor.

but that is just today's thought - tomorrow might be something else again ...

 

[Dazz]

Now you're talking like a wealthy person lizzie....175K is a chunk of change to spend every year. 3.5 clear, is that the same position as 10 with a 6.5 debt ??

alex, last time I had a chat like that was to an English guy who was 46, working in the Middle east with me who didn't have two cents to rub together. He also spoke about "yeah, but what about actual cash in the bank, everything else is irrelevant".

It's as Rixter says, that's just how the non-wealthy think.

 

[natmarie73]

Maybe your friend was referring to superannuation that he would cash out come retirement. I assume that is how most people think - put all their money into super and cash it out at the end.

Average Joe probably dosn't view property or shares as a vehicle to an income after retirement. He believes that any assets he does accumulate needs to be sold and reverted to cash. He asks Himself "How on earth can I possibly pay off X properties before I retire?" because having any debt at all once he is retired is inconceivable to him. Of course this means that he is not increasing his asset base once he finishes work as he won't hold any growth assets. Unfortunately many financial planners also operate with this mindset which dosn't help Average Joe a whole lot at all when he plans for retirement.

 

[beachgurl]

Our IPs generate 76K a year. At the moment we still have big mortgages on all of them, but we aim to pay them off in the next 10-15 yrs. By then I expect we would earn at least 100K from them. I think we could have a pretty good life living off 100K rental income.

 

[luce.rocks]

I know plenty of people who, in answer to the question "what would you do if you won lotto", would reply something like "go on a holiday, buy my mum a nice house, and put the rest in the bank and live off the interest". It's the same sort of mentality.

It's the same as some of my doctor and lawyer friends who park the leftovers of their enviable salaries into high interest savings accounts.

Until you invest it's hard to think of money as having a value greater than its dollar value, i.e. the value of opportunity, and until you know that, it's hard to imagine anything else you could 'do' with money other than put it in the bank.

 

[pendo]

I know plenty of people who, in answer to the question "what would you do if you won lotto", would reply something like "go on a holiday, buy my mum a nice house, and put the rest in the bank and live off the interest". It's the same sort of mentality.

As a former newsagent, we had the annoying drone of 'you've gotta be in it to win it', from customers. It works the other way too. 'you've gotta be in it to lose it'. We had plenty of winners over the years. Never saw most of them again when they won. Mind you, it was easy money for us. 6% on $3.5million pa. Big pensioner area. You soon get over feeling sorry for the bulk of them. For some it was just tragic. We used to call it voluntary taxation.
The reality is that they blow it as quick as they get it out of the bank on pension day. We had one woman blow $1.25 million in less than a year. Put it all back through the pokies, keno and the TAB.

Personally I was conditioned, from an early age by my brother, to favour the growing asset base. I buy property, like most here, because of leverage. What do I care if property goes up or down. I've been doing it for 30 years, and still adding each year. Never lost any money, only opportunity, when the family company had joint ownership of a couple of commercial sites. Capital, not cash is the real King. And why stop, or pay any of it off. That would be boring!

 

[luce.rocks]

We had one woman blow $1.25 million in less than a year. Put it all back through the pokies, keno and the TAB.QUOTE]

That's horrifying.

 

[lizzie]

We had one woman blow $1.25 million in less than a year. Put it all back through the pokies, keno and the TAB.

according to stats (oh no, that words) 90% of big lottery winners are back where they started - if not worse off - within 5 years.

but apparently that marries nicely with the general financial ability of the whole population - 10% of the population owns/controls 90% of the wealth.

 

[Belu]

pendo thats a great return - sounds like your bread and butter!

my parents are unfortunetly on the "how much can I generate by having my money in the bank?" school of thought. They will retire on a nice $70k/year at 55 which they are happy with.

I guess my aim would be to be able to retire on about $150k/year min in todays terms. The real aim is to get to a passive income of abou $100k/year within the next 10 years so i can retire from the mainstream workforce and go into business for myself. This may have to be in the area of LOE though as I will be starting from scratch in Feb/March!

 

[lizzie]

I used to fantasise about what I would do if i won the lottery.

i still do - all those ip deposits !!!

 

[BayView]

My goal is to generate as much passive income as I possibly can, with a healthy LVR with a redraw.
This means continuing to accumulate more and more income producing assets that also continue to grow in value.
This will be both properties and businesses.
I don't want to have to work; but work for the enjoyment of it and to be active, but more than anything to be free to choose.

Anything over and above that will be used for charitable purposes. I'm thinking along the lines of help (a foundation) for the homeless and homeless/troubled youth particularly.

I believe that the rich can do far more good for the world than the poor (sorry to get melodramatic here), so if you want to make a difference you need a lot. Has to be in the millions to do it well. Someone like Bill Gates can fix an awful lot of problems. Rich people can and do fix things; poor people can only sit and watch.

For me personally; a couple of grand per week to spend after expenses. That sort of money is really FUN. Being first to shout, going out on a whim, not asking how much that shirt costs, lots of golf and short holidays on the spur of the moment etc. Nothing too extravagant like 10 cars in the garage; a pretty normal life with a bit more wiggle room.

 

[The Y-man]

Exactly. Most people think 'net worth' (though usually non-property-investors don't tack too much debt into that analysis). We think net assets, gross assets (because that's where the growth comes off), AND cashflow. I don't really understand why you would aim for a 'cash' goal without having any plan on how to get there.
Alex

I suppose nevertheless, you could give them an "equivalent cash value"

I figure I would need approx $167m (today' money) cash in bank to generate the sort of cashflow I will need to retire on (since I tell people I am aiming for about $10m pa).

Cheers,

The Y-man

 

[alexlee]

I suppose nevertheless, you could give them an "equivalent cash value"

I figure I would need approx $167m (today' money) cash in bank to generate the sort of cashflow I will need to retire on (since I tell people I am aiming for about $10m pa).

I'm not as ambitious. I'm only aiming for $1m after tax income in today's dollars. So about $20m cash in the bank will do for me (though if the portfolio includes property I'll need more than $20m net since the rental yield is lower than interest rates).
Alex

 

[Kenster]

I want 10% of income for family and the rest for philanthropy work, therefore, 1m pa is about there

 

[AYB]

I'm not as ambitious. I'm only aiming for $1m after tax income in today's dollars. So about $20m cash in the bank will do for me (though if the portfolio includes property I'll need more than $20m net since the rental yield is lower than interest rates).
Alex

hey alex

do you think that is feasible with buy & hold passive investing, or do you plan on being more active doing developments and such?