Hi all,
I’ve been getting all excited about building a big portfolio so I can retire early, and then I get to the point where I realise I don’t have a retirement strategy and my delusions of grandeur are nipped in the bud. Just hoping anyone can critique mine or tell me if it’s possible, or if anyone wants to share theirs feel free…..
My goal is to have 10 IPs in 5 yrs time and then retire (with my aggressive accumulation strategy, my portfolio will most likely still be negatively geared with total LVR about 70% LVR)
Obviously repayments still need to be made on the loans and if I retire, I have no cashflow to pay them as my income no longer exists and the IPs are negatively geared. Apart from the obvious ‘sell a few to pay down the other debts’, are there any other alternatives?
Is it possible to use an LOC to make the repayments on each of the 10 loans? My plan is to use an LOC to provide my income and make all the loan repayments, while at the same time, all 10 properties (hopefully) are going up in value far more than what I’m spending with the LOC.
Your thoughts anyone……………
have you thought about trying to balance your portfolio by having some cashflow positive properties with some negatively geared. Also if you buy well, the negatively geared properties may become positive in a short period of time. If they are able to have regular rental increases then this will help upi to reach your goals.
oops should have said you, not 'upi' typing and watching tv at the same time LOL
Hi PaperChaser
I've got to agree with sonyasal and like you, we believe our long term wealth is measured by the amout of equity we have in property. To accomplish this we use both +cf and -cf.
Our +cf properties are properties we buy and on-sell with vendor finance and our -cf properties are the properties we plan to hold forever
Our +cf properties maintain our lifestyle and support the -cf on our long term buy and holds.We've bought and sold heaps of our +cf properties but not sold any of our buy and holds. They're our long term wealth. The +cf properties, for us, are just a cash flow business, just like any other business you might own.
Using vendor finance to help our portfolio building works for us.
Cheers, Paul
Paul Dobson | Vendor Finance Institute
http://www.vendorfinanceinstitute.com.au
Email Me | Phone MeAn alternative way to finance your home.
PaperChaser wrote:Hi all, I've been getting all excited about building a big portfolio so I can retire early, and then I get to the point where I realise I don't have a retirement strategy and my delusions of grandeur are nipped in the bud. Just hoping anyone can critique mine or tell me if it's possible, or if anyone wants to share theirs feel free….. My goal is to have 10 IPs in 5 yrs time and then retire (with my aggressive accumulation strategy, my portfolio will most likely still be negatively geared with total LVR about 70% LVR) Obviously repayments still need to be made on the loans and if I retire, I have no cashflow to pay them as my income no longer exists and the IPs are negatively geared. Apart from the obvious 'sell a few to pay down the other debts', are there any other alternatives? Is it possible to use an LOC to make the repayments on each of the 10 loans? My plan is to use an LOC to provide my income and make all the loan repayments, while at the same time, all 10 properties (hopefully) are going up in value far more than what I'm spending with the LOC. Your thoughts anyone……………You could do that in theory, but problems will arise in practice as it may be very hard to get a LOC if you do not have the income to support it and the interest on the LOC used for personal expenses may not be deductible.
A variation is to use the equity to purchase shares a margin loan with a low LVR. You can then live on the dividends and capitalise the interest. There is a very good posting on somersoft forums by Keithj about this.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
What if I set the LOC up while I still have an income, have the interest capitalised, and then retire?
Would the bank or the ATO find out somehow? and would they castrate me for doing it?btw thanks for all the suggestions, it makes me learn new concepts and ideas
PaperChaser wrote:What if I set the LOC up while I still have an income, have the interest capitalised, and then retire?
Would the bank or the ATO find out somehow? and would they castrate me for doing it?btw thanks for all the suggestions, it makes me learn new concepts and ideas
The ATO will allow the claiming of capitalised interest if the original borrowings were for investment purposes, TD 2008/27, but if you are borrowing to living on then the interest won't be deductible – so live on your rents.
Bank wouldn't mind too much, although many LOC can be recalled at short notice.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Our +cf properties maintain our lifestyle and support the -cf on our long term buy and holds.
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