Forum Replies Created
Read Chris Grays book the Empire (free to download on his website) once you have enough capital growth in the properties you have, and determined how much you would like to retire on, i.e. $100k year, lets say you have as little as 5 properties purchased for $500k each and they appreciate at conservatively 5% year, this would give you (initially) anyway $125,000 capital growth
If you want say $100k P/A to live off you will have a $25k buffer to start with and could look at setting up a reverse mortgage on your loans (i.e. make no more payments on the properties the same as retirees do with their own home and rely on the capital growth to continue upwards, which it should (statistically speaking property values double every 7 to 10 years based on the last 100 years of property values)). The value of your properties will keep rising at a rate exceeding that of your debt. Instead of needing to earn $100k to have say $50k round figures after tax to spend you can actually redraw from your loans tax free.
You should take into account your personal circumstances when considering this and consult your accountant but read the Empire to get more of a feel for what you could do.
if you have more properties the compounding and leveraging effect of these properties will give you a bigger buffer combined if you are less risk averse than others. Or you could do as you say and pay them off which is fine but don't forget you will pay tax on the rent you earn from the properties once paid off.
Don't forget though that your capital growth comes from the land value not the building which depreciates, so it is important to determine the land value of any property before purchasing and look at buying properties with a at least a 40% land value to total purchase price ratio.
You are in a great position for a 34 y.o i am sure you will do what is right for you, again consult your accountant or financial advisor to determine whether or not this is right for you.
Look into establishing a Unit Trust with your accountant, you should find that if set up correctly the losses will not be trapped iin the trust and your deductibility will still be there.
Look at purchasing the property in the trust name and financing in your name. Again talk to your accountant for more info regarding structure, benefits etc.
You will need to find a bank that will accept this structure, but they are out there.
Jared,
If you are serious about investing in property and want to build a substantial portfolio you will need first and formost to ensure that you a) find the right accountant and b) structure your finance correctly to ensure that you can leverage yourself into your next property and you don't hit a wall through your lending capacity due to your finance being structured wrong.
Finance structure is paramount to your success.
You might like to enlist the help of a broker to source the right package initially (but do your own homework first regarding the structure) and once you are confident enough with what you need to do take over the reigns yourself from there.
