Who here has actually achieved financial freedom from Real Estate alone?

[RumpledElf]

good longterm CG will support LOE indef. 5mill assests going up 1% = 50k, 2% 100k. If you harvest that as a LOC use 30k to cover interest and as buffer much happiness

LOE is kinda useless.

By the middle of next year we will have 'made' $100k in CG from one property but since we Simply Cannot Get a LOE this money is only accessible by selling, which is exactly what we are going to do. If you don't have the income to support a LOE you can't use a LOE as income.

However, you can use the growing equity (cap gain) to expand into other money-making ventures. Such as businesses, or maybe some subdivs and/or developments, or high yield shares.

This is our plan too, although we're not buying an established business like Bayview is doing, we're setting up < more than > one from scratch.

Our goal over the next year or two is to have medicre-good short-term income from two businesses (one of which we started cold on Jan 1 this year with very little research and $800 in startup costs), and then extremely high income long-term from the third. If our base income goes up, around the end of this year we should have a nice new PPoR built for us and will be able to keep the IP as a very high yielding rental and will then be in a position to collect more. In the longer term I want two 1 or 2br apartments or units in the Adelaide CBD so I can send the kiddies off to university and they can rent the units off the trust. Of course that's a fair way in the future ...

 

[sue78]

property can be a bit of a headache. my in law owns several properties outright and lives off the rent and yes after tax, rates, maintenance etc there isn't that much left. But I think they're still rich, can afford to take off any time. When you get to that stage, you have other options. Like sell all the properties and just park your cash at bank earning 7% with no hassle.

They have $2mil invested in property with a return of about $75k p.a plus cash at bank and other properties that aren't rented out and their own ppor. Not 1 cent in debt. I think she only derives about $45k after tax coz she's on a self support retirement visa and has to pay quite a high tax rate.

I don't think we'll ever retire coz we just spend too much money now to live a good life. We still have a long way to go. I watched my friend bought up about $5k in Prada without a blink of an eye. But apparently, it's way cheaper than China. They do business and are very rich but work really hard and ofcourse they have plenty of properties coz they have no where else to put their money.

I think ultimately, if you want to be really wealthy, business is still the way to go.

another relative, quite rich too and can easily retire, also became successful in property through business. Business gives you the cash income that will never be enough in a normal job. She just started a new business in Bris all paid for in cash and it's earning about $2.5k cash a day with about 40% attributed to outgoings, they'll break even in about 6 mths and making a profit by the first year. I guess because they have a business background overseas, it's just so easy for them. You really wonder why they don't just retire already..I think they love working hard and success.

 

[Quasar217]

First, as KYL suggested; remove the "I don't want to be rich" words from the vocab. If you are financially independant then you are rich - compared to most of the Planet. Those words are a "safety-net" mindset - an excuse for not reaching your goals.


Personally, we have used a large chunk of our equity this year to buy existing businesses. Why? Because we could see that the properties we were holding would not allow us to escape from the rat-race anytime soon - even after selling some of them off to pay down the debt. The remaining cashflow would not be enough to live on. We would still need to work. And, we started investing in 2001 with a fully paid for PPoR to use as a springboard, and had the last boom to help us. So for someone starting out, the task is huge. Not saying it can't be done - but let's take off the rose-coloured glasses for a sec.

May I ask how you find time to run the businesses? I've often thought of starting up my own business but my expertise is in a fairly narrow area of work which is mainly done by government. I would've thought if you were buying into an existing business it would be a lot of work and you'd need to have a pretty strong knowledge of the sector - ie. it would need to be based around your existing profession.

 

[chrispy]

We did it on very low wages but kept the debt to a minimum. My husband worked very part time and maintained the properties and I worked full time. I watched the market and just before the last boom bought a number of properties, using debt, with the aim of selling half when the value doubled. Thats what I did and now have all properties debt free.

You don't have to be rich or on high salaries to attain freedom through rents, just have to plan and be prepared for time to take its course.

Chris

 

[BayView]

May I ask how you find time to run the businesses? I've often thought of starting up my own business but my expertise is in a fairly narrow area of work which is mainly done by government. I would've thought if you were buying into an existing business it would be a lot of work and you'd need to have a pretty strong knowledge of the sector - ie. it would need to be based around your existing profession.

My current PAYE job is only around 20-25 hours per week, so I have a good deal of flexibility to do this now. If I was locked into a standard 9-5 40 hour a week job this whole strategy wouldn't happen.

There are two businesses - one is still to be settled and handover won't occur until around March.

I know nothing of either profession really; at least not as a past worker, but I don't care and don't consider that an obstruction. I would certainly not attempt to start up a business in either of these professions without any previous experience, but these are both existing long term businesses.

To many, this is seen as risky. To me it isn't as the businesses are both long term and profitable, and large enough that we can have a manager and still provide me an income after all outgoings and the loan interest have been accounted for. My strength is in running a business, so I'm going to do that role only.

The current business requires around 1-2 hours per day on average from me. Some days I don't go in at all, but give the manager a call. Mainly just book work, banking and liasing with the manager and the staff for things like day-to-day procedures and ordering if required. Otherwise; it's the manger who runs it - that's what he's paid for. I'm also at the end of a phone if really needed, but if the systems are set up within the business then it should run reasonably smooth.

The difficulty for many business owners is to be able to delegate and not be a control freak. I've learned that lesson from running my Proshop in the past -70-80 hour weeks! Never again.

The new business - the auto workshop and tyre centre - will be ostensibly the same. Maybe an hour or so per day. A full-time manager who will run the business and supervise the 2 staff, and I'll be the "back office" bunny - admin stuff, ordering and basically setting the course of action in liason with the manager.

It is important to give the manager their space; they are in charge, and like to be, so the owner needs to get out of their way so to speak. I'm more than happy to do that!

 

[Rixter]

If you don't have the income to support a LOE you can't use a LOE as income.

If you have the required equity and you want to go down the full doc route you can convert equity into income to meet lenders DSR criteria to support LOE.....

and/or

If you have the required equity and you want to go down the lo/no doc route you dont need to substantiate any income at all to support LOE.

Obviously there is no right or wrong options. Just different options on what route or strategy to take based on ones financial position coupled with their personal risk profile.

Hope this helps.

 

[want2bewealthy]

If you have the required equity and you want to go down the full doc route you can convert equity into income to meet lenders DSR criteria to support LOE.....

and/or

If you have the required equity and you want to go down the lo/no doc route you dont need to substantiate any income at all to support LOE.

Obviously there is no right or wrong options. Just different options on what route or strategy to take based on ones financial position coupled with their personal risk profile.

Hope this helps.

Good post, just because one person doesnt have the LOE mindset and goal doesnt mean that someone who planned specifically for it wont succeed, if all else failed in the worst case scenario they could possibly sell a few properties and use rents for some income to lower their debt and then go the LOE route, worst case, that is provided the properties were purchased long ago and or have seen good CG but time should always be an important part of any investors portfolio.

 

[want2bewealthy]

We did it on very low wages but kept the debt to a minimum. My husband worked very part time and maintained the properties and I worked full time. I watched the market and just before the last boom bought a number of properties, using debt, with the aim of selling half when the value doubled. Thats what I did and now have all properties debt free.

You don't have to be rich or on high salaries to attain freedom through rents, just have to plan and be prepared for time to take its course.

Chris

Well said, just goes to show what determination can do when paired with a knowledgable and brave investor, congratulations Krispy, you should be proud of yourselves, I am

 

[evand]

And timing the market cycle. It wouldnt have been possible otherwise. Or maybe would have taken a hell of a long time (10-15+ years). Sort of like if you're buying now.

Well said, just goes to show what determination can do when paired with a knowledgable and brave investor,

 

[VYBerlinaV8]

To my mind, accumulation of property is one phase of the 'Getting Wealthy' plan. I am aiming to accumulate 8 IPs (half way there now) finishing up in about 5-6 years. At the same time I'm also leveraging into shares.

The way I see it, gathering the equity and asset base is the hard work part. Once you have a decent asset base you can think about how you want to 'access' those assets (although you probably need to do at least some of that thinking on the way through).

For me, I suspect I will pay off my 2 high yielding IPs and let rent flow (they are managed as part of a large serviced apartment complex with no costs other than body corporate, land tax and water rates, none of which are particularly high), I will stop reinvesting all my shares portfolio dividends, and I will draw out equity from the other 6 IPs to buy a range of additional shares and managed funds. I may also choose to borrow some $$ against my PPOR, but I'm not sure yet.

I figure on being able to draw a yield stream of 5% on the total portfolio. My target income is $150k per year (in 2005 dollars), which I figure translates roughly to a $5M total asset base (I'd wanted an asset base worth $3M in 2005 dollars) in about 2020. This means a 2020 dollar income of about $250k per year. I expect to pay some tax on this, but not as much as if I'd earnt the $$ working. Also, I figure on spending about 80% of my investment income per year after 2020, the balance being used to build a cash investment portfolio over the remainder of my life to reduce overall portfolio risk.

So... bottom line... get the assets, think about how you want to use them, and while acquiring the assets consider how you want to access them. For me, property is just another asset class to be used to achieve my wider aims.

 

[Aaron Sice]

i am looking very hard for +ve net yields and finding them of late. i feel it is possible to make all your short term monetary requirements with yield and all your long term wealth requirements with CG.

i am starting on my road to not requiring to sell my time to pay people for goods and services i require - so i can't be much help here.

 

[chrispy]

We started in 1962!!! So time in the market does work.

I went up to 16 properties and have sold down to 7 with cash in a term deposit at 8.5%, with an offset account to keep an eye on the market.

When you start it all seems so hard. I am so glad we went down this path, I do what I want, when I want and that includes working part time for company and to keep my brain in gear.

Chris

 

[Lamingtons]

Chrispy.. is it never too late to start?

The last time someone told me that was a managed fund advisor from BT back when their portfolios were returning 35%-50% returns. After that, managed funds crashed.

 

[Mary-Sue]

We started in 1962!!!

That's outstanding Chris - well done. What a life - good on you.


I'm waiting for the naysayers to jump all over you and say -

"Yeah, but you had it easy due to the market over that 46 year period. I bet you couldn't replicate that today. You were just lucky."

 

[Rixter]

You were just lucky.

Yeah I reckon she had a lot of LUCK! Acronym being Labouring Under Correct Knowledge.

Well done Chrispy.

 

[chrispy]

Mary-Sue

The naysayers can say what they like, we had that all the way through with the "Why are you saving and putting up with all the hassles from tenants"

Many said it was too much work for the two of us, working whilst buying, renovating and cleaning up after tenants. It was particularly difficult during the 17.5% phase of interest rates

I only wish my husband had lived long enough to enjoy the fruits of his labour

Chris

 

[Nathan]

chrispy why did you do that for?

you would have earnt more from putting it in the ASX or something like ABC or allco finance...

or putting it in the bank and earning more in interest.

Jokes!

Goodwork buddy, im very envious.

 

[evand]

Of course its a great achievement. that goes without saying. I was referring specifically to this line.

I watched the market and just before the last boom bought a number of properties, using debt, with the aim of selling half when the value doubled.

 

[landlubber]

Yep ..it can be done ...

Daniel G,
Yes, it can be done. We "escaped" in nine years. Bought our first IP in 1997 and I quit my day job 2 years ago in 2006 age 55. Now just LOE and live life as we please. It takes about $70K nett to keep us in beer. Nothing but residential IPs. Mostly houses and units. Never did anything else but invest in and renovate resi property. No shares. No seminars. No developments. No books written. Followed a combo of "the Jan plan" (buy and hold and wait) "the old Spann plan" (buy, renovate & hold and work the banks REAL hard.) We were focussed for those 9 years. No footy. No golf. Renovate and paint on weekends and day-job during the week. I assure you it can be done. We were impatient and I had a goal and I wasn't giving up. I wanted my own freakin' life !!! If you loaf along it could take you "years". ...and my honest opinion ( after 10 years of observation) is most prop. investors will never "escape". They just don't have the hunger.
Read books, be smart but play dumb, and be the one who asks all the stupid questions !
LL

 

[Mary-Sue]

If you're in Melbourne landlubber, my husband and I would love to buy you a coffee and natter away how you did it, without the whole world listening in.