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

[landlubber]

If we have a repeat of the stagnant decade of the 90s growth wise (as property prices had to catch its breath after the late 80s boom and i can see that being the case again) you might have to work for more than a couple of years.

No doubt we are currently (Melbourne) in a period of stagnation and HEY, these times aren't all bad. (1) You can pick the eyes out of the market and walk away so easy and go on to the next deal. (2) Rents are rising like crazy so IPs are easier to hold. ( We passed an "open" today and there had to be 20 couples outside waiting to inspect a unit on CanterburyRd.) (3) and IRs are coming down. Don't wait for the boom to get going. Next few years is the time to educate yourself and prepare for the next cycle. And sooner or later all those guys get sick of losing money in the share market and "who they gunna call "?
LL

 

[landlubber]

I'm aiming to retire by 40, which is 13 years away now, using the LOE strategy. Mg gf and I now have two IPs, and are buying the 3rd in the next two months, and will be buying more and more as our growing equity allows us.

Hi Witzl, An admirable goal ! (Don't forget to get yourself a "why". Make it a journey, rather than a destination.)

I do have a question though: You mentioned that you think we are in the "early 1990s" when compared to the previous boom.... is that with a melbourne centric view, or a general overall view?

Mainly Melbourne. Our IPs are all in Melbourne and around Brisbane. I'm not a Sydney expert, but the fundamenatals for Sydney would seem to make it a good bet. Nobody can "time the cycle" so just make sure you can comfortably hold your IPs for when the cycle hits...then enjoy the ride !!
I am very fortunate to have wife who shares the journey. If your gf also enjoys the property game, then you're super-charged and don't know it. BTW...it's not called female instinct for nothing. "Go with it" if she feels good about the deal. And run-a-mile if she doesn't. I will NOT do the deal if the cheese&kisses doesn't have the "good vibrations" about it !!
LL

 

[The_Bludger]

Some great info and well done to all. I have 2 IP's and looking for no# 3 this year. I haven't really thought about an exit strategy, mindset is to just accumulate at this stage. I have a question.

What happens if interest rates hit 10%+ for a while, rents fall and let's say property prices fall by 20-30% and this then lasts for 5-10 years? The bank won't give you money to support your LOE strategy, as the value of your assets would fall and then you'd be stuffed right? Do you have some sort of buffer to ride this sort of scenario out, and if so, what is it?

And worse case scenario, what if prop prices fall for a very long time and do nothing for years and years? Sell some prop's and then live off rents?

Essentially, you're putting a lot of faith in this sort of strategy, especially if you keep borrowing over a 10 year period and then you have a crash somewhere along the line. It's a bit scary to be honest, but exciting also!

 

[want2bewealthy]

Some great info and well done to all. I have 2 IP's and looking for no# 3 this year. I haven't really thought about an exit strategy, mindset is to just accumulate at this stage. I have a question.

What happens if interest rates hit 10%+ for a while, rents fall and let's say property prices fall by 20-30% and this then lasts for 5-10 years? The bank won't give you money to support your LOE strategy, as the value of your assets would fall and then you'd be stuffed right? Do you have some sort of buffer to ride this sort of scenario out, and if so, what is it?

And worse case scenario, what if prop prices fall for a very long time and do nothing for years and years? Sell some prop's and then live off rents?

Essentially, you're putting a lot of faith in this sort of strategy, especially if you keep borrowing over a 10 year period and then you have a crash somewhere along the line. It's a bit scary to be honest, but exciting also!

If your ultimate goal is to LOE then you should have sufficient equity in your properties at all times and watch the market carefully, there are always going to be bad times aswell as very good times, you have to be prepared for the worst and plan for the best.

If all else goes pair shaped you can always sell a few if you absolutely have to.

 

[landlubber]

What happens if interest rates hit 10%+ for a while, rents fall and let's say property prices fall by 20-30% and this then lasts for 5-10 years?

That's what I looove about the IP business. It compensates. If IRs hit 10%, which they nearly did recently, rents DON'T fall. Investors leave, or don't enter the market, rents RISE, as they are doing right now. On the other side of the coin, when rents are stable, investors are entering the market and VALUES are then rising. ....and, to your question, nothing but nothing lasts for 5-10 years. We have elections every 3 years, things get too bad, we change gov. Remember, 70% of the players are OO who, unlike the stock market, DON'T get margin calls, so they don't HAVE to sell. More than any other factor, that stabilises IP prices.

The bank won't give you money to support your LOE strategy, as the value of your assets would fall and then you'd be stuffed right? Do you have some sort of buffer to ride this sort of scenario out, and if so, what is it?

Yep. Two BIG buffers. Currently own seven IPs free and clear that I can sell tomorrow without reference to any lender. Also, see above post on LVRs. That's our "day to day" buffer. Your point is valid though. You DO need enough equity to ride out the slumps. But I don't think the slumps are as bad as you make out. (Bought first PPOR 35 years ago, and been serious IP for 11 years so ....)

And worse case scenario, what if prop prices fall for a very long time and do nothing for years and years? Sell some prop's and then live off rents?

See comment above. But if prop prices fall rents will rise MARKEDLY and IRs will fall (this is hapening NOW as I type) so holding on is comparitively easy. (You'd think I was bragging if I told you how much each one % IR drop saves us.) We've NEVER sold an IP. Despite what other forumites say about "chopping and changing" once we've done the hard yards to get 'em in the flock, we never plan to sell. Kids would kill me !!

Essentially, you're putting a lot of faith in this sort of strategy, especially if you keep borrowing over a 10 year period and then you have a crash somewhere along the line. It's a bit scary to be honest, but exciting also!

But aren't YOU Mr. Bludger, also putting faith in the SAME "growth" strategy to grow your portfolio ? If you don't believe in it, why the heck are you doing it? If you don't think IPs are going to grow in value why the heck are you planning to accumulate more? What, then you think you "retire" and the game just stops ????? Why ??

All comments made in good nature! "Peace" man !!
LL

 

[handyandy]

Well done LL and Chrispy. I can appreciate the hard slog that both of you would have had to put in to achieve those levels solely from using property as the springboard. As per Evand we have built a Ip portfolio paid for by business earnings.

Like LL we have allways aimed to replace an ever increasing regular level of income with an alternate (investment based) income. Didn't have the note in my wallet but allways in the back of my mind.

For us the LOE was going to be the worst case scenario based on little or no returns from share market and insufficient funds from rental income.

Unfortunately the share market meltdown has now meant that there is little or certainly insufficient funds from this quarter and with the lumpy rental income (or more to the point lumpy expenses) I am now having to dip in saved funds (akin to equity) to pay the upcoming land tax bill.

I am trying to live within the rental income and theoretically it is sufficient to fund the four of us but the LOC is ready and willing.

Cheers

 

[The_Bludger]

But aren't YOU Mr. Bludger, also putting faith in the SAME "growth" strategy to grow your portfolio ? If you don't believe in it, why the heck are you doing it? If you don't think IPs are going to grow in value why the heck are you planning to accumulate more? What, then you think you "retire" and the game just stops ????? Why ??

All comments made in good nature! "Peace" man !!
LL

Too true, ahh, the uncertainties of a newbie.

 

[landlubber]

We're all newbies Mr. Bludger, even us oldies, and not only that, we're all still learning ! Welcome to the game! Nobody gets out of here alive !
LL

 

[Player]

We're all newbies Mr. Bludger, even us oldies, and not only that, we're all still learning ! Welcome to the game! Nobody gets out of here alive !
LL

Exactly, no one is that educated that they know it all. We are all still learning. Whilst we are green (and constantly learning) we are growing when we stop, we rot.

All is play.

 

[landlubber]

As per Evand we have built a Ip portfolio paid for by business earnings.

Doesn't matter how you do it h-a, as long as you do it. I understand from your previous posts your Sydney IP flock is quite substantial. Well done & belated congratulations!

Unfortunately the share market meltdown has now meant that there is little or certainly insufficient funds from this quarter and with the lumpy rental income (or more to the point lumpy expenses) I am now having to dip in saved funds (akin to equity) to pay the upcoming land tax bill.

I honestly don't know how "Joe Average with a family" makes real dough in the share market. Sooner or later, unless you have a real exit strategy, you wake up one morning and 30-40% of your assets are just "gone". To minimise land tax bills you must use different entities ( names) and buy IPs in different states.

I am trying to live within the rental income and theoretically it is sufficient to fund the four of us but the LOC is ready and willing.

Gross yields are still TOO low, even with the rent increases we have had. Put your rents up !! ..and more IR falls are on the way !! Sure hope you're not fixed. Good luck.
LL

 

[landlubber]

All is play.

Well said Player... two things it took me so, so long to learn.
1) it's all a game.
2) money is merely a man-made concept.

Sounds like you're onto it !!
LL