How to continually find money for deposits?

G’day and welcome aboard, (note, this reply is long)

Since I’m sitting here at work bored, I’ll tell you what I’m going to do over the next few months. Please note, I’m far from an expert. Being a moderator doesn’t mean I have any great knowledge, but I’m learning more every day.

We have 7 properties… one of which is a negatively geared property near the beach which we’re going to sell to pay out our PPOR mortgage. Fortunately, when we bought it (pre-marriage) we put it in my wife’s name, and didn’t rent it out for 6 months or so… she lived in it as her PPOR while she was studying… she didn’t hold any other properties in her name, so we’ll get the CGT exemption. It’s more than doubled in value from 170k to 360k+ now. Our property, which is in my name, is worth around the 400-450k + mark… we’re finishing off a few things before getting a valuer in. This means we won’t have any payments on the PPOR, while also freeing up the money that was going towards the – geared place. Our other places are all CF+. Since the PPOR is a rural property on 60 acres we’ll only be able to access 70% of its value in equity, which is fine by me, if the valuer says it’s worth 400-450k, that’ll give me 280-300k to play with. As our portfolio grows we might dip into the equity of that as well… I’m not sure that there’s much difference between using equity in your PPOR or IP, as long as you use it for investment to keep it taxdeductible it’s all the same (I’m sure someone else might be able to give you a more emphatic answer)

We’ve also established that we can save around 60k a year between us (70-75k if we really try hard, but I like a few little indulgences) I’d love to go and watch a Test match at Lords during the next Ashes series in England, for example.

We’ll be using a combination of equity in our house, and continued savings, to continue to grow our IP numbers… I’m not as gung ho as a lot of people in that I want to keep my LVR at a comfy level, to keep my wife’s sleep at night factor under control. I’m sure that if we stick to our plan we can get out by our mid to late 30s. We’re both 29 now, and we’re both fortunate in that we really enjoy our jobs. I’m a TV producer, she’s a paramedic.

Don’t know if I answered your query at all, but I think you have to use equity to grow quickly, while also continuing to watch your spending and saving as much as you can… then again, maybe you could write a book, do some seminars and sell some products through a website to generate cash. [] I’m sure there are better ways to do things than how we’re doing it, but I’m happy enough with our plan. Mind you, I’m always adaptable. [8D]
Cheers
r

Howdy Bruce…

I haven’t been into IPs for as long as you, so I guess once the empire builds up I’ll be able to do what you suggest… hopefully it won’t take too long…

Cheers mate
r

have you read the book?

Cheers
r

Hi Happy Bandit,

If you think about it, they had 130 properties between 4 of them really as the book does state that Steve’s wife was still working (don’t know about Dave’s) and so he was living off her income while they invested the acounting monies and monies from wraps. So really this was 130 properties between 2 couples (or 32.5 each). Sounds a bit less daunting that way.

As I’m in WA, wraps isn’t even an option unless you have a credit providers licence so that writes that idea off unless we’re going to go interstate to do them, not as easy to keep an eye on the market and costly to make many trips, so that’s out for us. So from our perspective, we stated by saving the deposit for our current home, once in that we paid as much off as quickly as we could, then we used that equity to purchase the next one (Same as what you have done so far). The next one (first investment porperty)happened to be negative geared (was before we read the book), however, it made good capital gains and we then did the next property in 6 months using the equity in the PPOR and the investment property. The 2nd invesment property happened to be positive cashflow (by accident more than anything, still hadn’t read the book at that stage) and we found that paid the shortfall on the negatively geared one freeing up the cash we had been using, so we could then save that for another deposit. We are now 12 months on from that one and looking for our 3rd investment property and basically it will be positive geared as otherwsie our income no longer meets the requirements (I am no longer working so on one income) and secondly I’ve read the book and it makes sense.

Basically, unless your really aggressive about cutting down expenses (remember Steve rented his own home rather than bought in the begginning) and either saving or paying off your mortgage to be able to access the extra equity or your willing to do extra jobs intitally (remember Dave missed his second childs birth due to working or looking for property) then I don’t think you’ll get there as quickly as they did. I’m comfortable with the fact that our plan will take longer than what theirs did, but we still have some lifestyle along the way (I’d be spitting chips if my husband missed our kids birth). I think it really depends on what you want out of life and how much you want now or how much your willing to forgo now. Only something you can decide.

Have you also read “Creating Wealth from Residential Properties” by Jan Somers. Her portfolio contains negative and positively geared properties and she became financially independent over 10 years. While I like Steve’s thoughts and we are heading the positively geared way now, we aren’t as aggressive and are willing to take longer to get there. This other book as some other interesting points and is also worth a read.

Good Luck.

Hi Purplekiss..

More sandgopers here – nice to see, there’s a few of us gathering now!![^]

Also looking to find 3rd property and a + Geared one at that, in the meantime building equity in the PPOR and cruising along..

Richmond

Congratulations, your doing well.. how’s married life treating you []A TV producer.. $$$

Happybandit

My understanding of the book was that the properties were accquired using wraps to gain income, the positive geared properties also provided an income as well as the 4 people involved participating, deposits saved etc..
A wrap/saved deposit would provide the deposit for the next one etc etc.. tax time would also be fruitfull ( the guy’s are accountants and probally good ones, especially when it comes to thier business and future)

If you didn’t wrap or have partners.. it’s just that bit slower, + geared properties however, makke it easier to accquire more..

REDWING

“The man that thinks at 5o as he did when he was 20 has wasted 30 years of his life”

Happybandit, unless you start purchasing positively geared properties your buying power will quickly fall away.
On the other hand properties that are NOT dependent on capital gain to add to your wealth stream will go on putting food on your table and wine in your belly day in, day out.
Pulling equity out of properties to totally fund more negatively geared properties (assuming the lenders would finance you) is a recipe for sleepless nights and stomach ulcers – especially if the market turns downward and the interest rates rise.
Best wishes, Julian

Hi CheekyOldBat, I find that I often forget there were a few of them involved as well. You think, well he (meaning Steve) has got so many, whey can’t I? But it certainly adds more perspective to see that it’s four times the income supporting thier lives and their investing.

Still, as you say, I’m happy to aim for 30 or 40, and move on from there.[]

Cheers
Mel

Sure SIS, sounds like a plan with no drawbacks – although I’m not an accountant[], and don’t want to write a book. You be the Steve part, and I’ll be the Dave part[] You seem to be far better at finding properties than me anyway, so I’ll work on funding those deposits.

Cheers
Mel

yeah, but about 600 would look like this

[][] ha ha[]

Cheers
Mel