Recently i went to a family gathering, in which after a few beers with my uncle i asked him how he could of retired under the age of fifty with a normal job and a family, he told me the secret to his early retirment was the he gained the full title to his prime residence (mother died when he was 20). He told me he had paid of his loan to his house by the age of 22 and had it re valued and brought his first investment property later that year. Now this is where it get interesting. He said no matter what come up he would put 25% of the house holds weekly income (both he and his wifes)into their rental property aswell as reinvesting the income from the rental property back into the loan. It took 7 years to pay the loan out. Once again he brought another investment property this time he had three incomes reducing the loan (his wage,income from investment property 1 and investment property 2).Today he has 19 rental properties ranging in value from 74k to 420k and estamates the properties are valued between 3.5mil to 4 million dollars with income of over $2000 per week after allcosts, his last property took under a year to pay off.
These are the main things he told me.
1) Get the title to your house(it can be a unit to the value of 50k it doesnt matter)just pay it off.
2) Dont buy your next property untill the others are payed off.
3) Set aside a % of your wage and stick to it.
4) Use your income plus your investment income to pay the next property off.
5) Be patient the first property can take up to 8 years to pay off.
6) Live within your means, if you have to borrow to buy it ask your self one question is it a liabilty!
7) And the thing he drummed into me the most is write your goals down! He did thirty years ago.Hi Tails277,
Your uncle is a wise man, who had the ability to stick to his gunns.I wonder who put him on the path out of the rat race?
Ross.
“The greatest power that a persn possesses is the power to choose”
Hi,
I’m very impressed with your Uncle. Do you think there is room in the family for me? Just kidding. I wish my parents had been investment Savvy with my siblings and I. I hope to teach my children the right way.
I hope you listen to your Uncle.
Cheers
Sooshie [
]There are no problems, only solutions!
Tails,
Your uncle was well ahead of his time. In most families of that era (mine included), money was not openly discussed. Good for him & I trust that you’ve learned his lesson well…
Good to hear also of a quick reality check: I took your uncle 28 years to build his portfolio to where it is today & enable him to retire. There was nothing glamourous about it, just time & discapline.
Michael [
]Hello Tails
I was interested to hear your Uncle’s story. However there is one point, and that is the starting point, that really worries me. He advised to pay off your PPOR fully first? If I do that I will be here till doomsday. My partner earns a great salary, but on the downside we have a substantial mortgage. If we can service a loan for an IP why not start now? Do you think his method was too conservative for todays era? Isn’t it a case of the sooner you start the better? Any investment debt is not bad debt? If you have a +ve cashflow property, surely this will help pay off your PPOR quicker? Does anyone agree?
Ally[
]Hi Ally,I’m with you .I don’t see anything wrong with the original version,heck the proof is in the pudding,but if you have the equity to start now then do it.Put in context,his 1st house cost maybe $20000 and your’s maybe $300000!The clock is ticking.Remember,you only have to please yourself.There is no right or wrong,just different ways.All the best to everyone,Mick.
Great post! The main point is to stick to your goals. Your success is measured by these. If paying out your PPOR before you get your 1st investment property is one of them, then so be it. Personaly, if an investment is going to pay for itself, and you dont have to put any money down, then why not purchase it? Keep on paying out your PPOR. Once you have paid one out, move on to the next. Stick to your goals. Once again, great post.[
]Thanks Mike, for giving me some confidence. We saw an accountant who said he would prefer to see us pay off $100K from our PPOR loan before we buy an IP and his suggestion was to spend say $500K in the inner city area of Sydney? I was really down after seeing him, but I think now he was a very conservative person, and possibly not the best accountant to use when we purchase our first IP. Why am I saying conservative – $500K loan for one property !!! That seems in total conflict to all advice I have read on this forum.
Ally
Hi Ally,
It may appear that your accountant’s thinking is not in line with your own. Your plan is designed by you and for you to achieve your own goals. Just be mindful if he starts explaining the ‘benefits’ of negative gearing
Cheers,
Matt.
Ally
your accountant can give you great accounting advice, as I am sure that it is her/his area of expertise.
However, unless she/he is also a succesful property investor the advice they give you about property investments may not be as well founded [
]Ultimately whatever advice you take, you have the responsibility of making the final decision, even if it includes discarding some of the advice you sought.
Why not start a thread on the forum and put the question out for comment and get a few ideas from all of your investment family here ??
cheers,
the Bruce
Hi Bruce
I may take your advice and begin a thread to see if my gut instinct is right, and jump right in with both feet, or if I should wait until the time is right.
I appreciate you taking the time to reply. The accountant, who was recommended to us, doesn’t even own their own home, but prefers to rent? He also recommended to my newlywed cousin to save more and not purchase their first home with only a 10% deposit, despite their good incomes. I think living in Sydney you need to get into the market as soon as you can. His advice is that it will soon become a buyer’s market, especially if interest rates go up, and some peope find themselves in over their head.
More food for thought.
Ally
Ally
sounds like you are not only on the right track, you are cruising along it [
]There may well be good reasons why they offered you that advice, i.e. leverage in with small deposit, don’t buy your own home and invest instead.
If you get a chance why not cross examine her/him a little and see what come out of it?
Remember, in life experiences are neutral, we decide if they are positive or negative….
TTFN
Bruce
Mornin’ Ally
I have just re-read the last bit of your post and realised that I missed one point.
If the accountant advised saving for a large deposit they were offering safe advice in that it should cost you less overall for your loan if price in the future is relatively the same as today. This is not imposible especially as there is current “opinion” (nb: NOT fact) that the boom will bust soon. As all previous booms in human history have busted, or at least cooled down, it is most likely this one will too. As to when….? Ah, that is the question. Certainly factors affecting it are scarcity of properties, interest rates (affordability), greed and fear.
However, your call on “get into the market now” may be quite appropriate, if your research shows that in the area that you area interested in it is unlikely even a slowing or drop in the market will affect growth and returns due to the special “it” that the particular area/place has.
eg absolute waterfront, bridge views, opera house in your front garden…..
bye bye
Bruce (non sleeeping variety thereof)
In a sense, I agree with the view of the Accountant to have a sizable deposit before you buy for yourself. Considering if you borrow 300k for your 360K purchase, you are losting to bank close to 18K interest for the first few years year. Also, you have that 60K+ opportunity cost have to bring into the picture as well! However, a 360K place should only rent you at most net 300 per week with no add-on cost of property ownership. That why a smart person should only buy when he/she can really afford house ownership!
Such everyone should rent from people who target only capital gain and have them to pay for your lifestyle while they work harder.
For me, I started with nothing and have my investment life started early and made enough money so that I can just buy my place with cash. Now, I shall leverage my LOC to make some serious money down the road.
Hiu
I agree with the comments regarding changing times and many different approaches.
I have recently had the opportunity to interview many investors on what it is they have done.
Two different investors, two different strategies.
1) Investor in Surfers Paradise told me how he purchased 2 apartments in the Versace Resort ‘off the plan’ for $600k each on deposit bonds of 10%. He was fortunate enough to have these properties double in value before completion and sold these for a $1.2 million profit! Cash into the deal was around $10k to secure the deposit bonds.
2) Investor in Warrnambool told me how he purchased 10 ex-commission homes at around $100k each several years ago (all + cashflow). In the last 3 years these have also doubled in value meaning he has an increase of $1 million in equity. Now, he mentioned he could sell 5, pay off the mortgage on the other 5 and retire on the cashflow from those remaining… but do you think he has!!
There are many strategies out there and from what I have found in my personal research it’s a matter of
a) establishing where you are now and what YOUR finances will allow (if you have a limited finance capacity you may set about obtaining the knowledge to attract OP’s money!)
b) setting your own goals to where you want to be, and when you want to be there
c) realising a way in which you can achieve these goals
d) put your plan to work
e) stick to your path (unless for the better!)Happy investing [
]Hey Leigh
can you share with us any trends you gleaned from the meetings with other investors?
Bruce
Hey Bruce, in reply to your request ‘trends from other investors’ I think the most significant similarities that were showing up were mainly concerning the individual, and their approach to investing.
Firstly, most of the people I have been in contact with who are successful investors have known from an early point in their investing what they wanted to achieve. There were some that do not follow a written plan, however it became obvious those who have. Most seemed to me to be conservative sorts of people, which was a bit of a surprise as some of their most recent projects didn’t look that conservative! They all emphasised to begin small though.
Knowing the market your investing in was another key point which came across in all of their high recommendations. Of course, they said the only way to do this was to actually be out there as much as possible.
Investing for the ‘long term’ was another similarity between them all. They all started with small, secure growth assets, and although that’s not what they primarily deal in now, it seemed a key factor in building the foundations. Most of them started with positive cash flow properties, and roughly half of them still only invest in positives. None of them said they got into property with the idea that they would make their millions overnight, they all had that long term focus, yet they all seemed to snowball their investments after a couple years when they knew what they were doing.
The trend in what they are doing now – ‘what they enjoy’. This seemed to be the only trend which attributed to their current success. I went looking for a sure-fire way to wealth through real estate and this seems be it. There was no exact way of investing which any of these investors had in common, rather they had all discovered their own way of doing things, and they all said ‘I (develop, Wrap, trade, renovate etc.) because that’s what I love doing’.
Great site guys [
]Leigh,
Thank you for that – it would seem that the fruit of your enquiries is: “Attitude is Everything”! [
]Kindest Regards
Jason S
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