AXJ,

I hope that was tongue in cheek and that you didn’t really pull a post for fear of negative responses…

My suggestion around a Newbie area was to make that daunting first post “less daunting” knowing that its in an area specifically designed for you to get whatever it is off your chest. Some newbies are a bit nervous about posting in areas titled “Developing” or “Finance” or “Help Needed” or some such, but to post in “New to the forum” or “Getting Started” might be a lot less daunting.

It was just a thought, and I’d think that most members of this forum would treat newcomers nicely regardless of where their first post surfaced.

IMHO,
Michael.

Magellan,

Great post and great point!

In some companies, their internet policy explicitly prohibits posting on forums or receiving internet email. Fortunately, my company does not have this strict a policy and so long as I can get my job done I’m free to frequent the forums in between tasks.

But a very good point…

Cheers,
Michael.

Simon,

I didn’t know you were a moderator over here. Good form!!

Particularly liked the content of your last post this thread too. It can be very “daunting” as a newbie, and when you see venomous posts it certainly deters you from posting your thoughts IMHO.

I can see how a newbie board might come across the wrong way too in retrospect. Just stating that for me it wouldn’t have been a deterrant at all and would have actually made me more willing to post knowing I was doing so where newbies are welcomed to do so!

As always, just my 2C,
Michael.

Ausprop,

You need to spread your investments across multiple asset classes to mitigate the risk of any one category stalling. Even if property stalls, you can still make 5% dividend and 5% CG on shares YOY. Steve Navra’s income focussed share fund is a trading fund and makes its money on volatility not on the trend. He makes money even when the trend is backwards, and he consistently outperforms the index.

You also need to make sure you have cash in your structure too. This can take the form of your personal income, or a cash bond if you don’t have the servicability in your own right, but have a lot of spare equity. This is the point about drawing in arrears. If the whole big portfolio underperforms for the year then you don’t draw but live off your own income, if it performs then you draw in arrears to supplement your income.

At some point in time the structure is fat enough that even if you have no capital growth you can still live off your surplus cash flow components such as shares and at this point you no longer require that personal income to supplement the structure.

Cheers,
Michael.

Michael,

Thanks. This is exactly as I thought it would work out. Basically your capital growth exceeds your capital consumption. This being the case you’re still going forwards even though you are now living off your capital. And as you rightly point out you’re doing this in after tax dollars at a cost of only 7% interest on the drawdown.

This is exactly as Steve Navra also described his approach at his structure course yesterday for ultimately funding retirement, but you need to get there first. He also uses cashflow elements in his structure to fund the holding costs of his highly leveraged growth assets. e.g. Shares returning 5% CG and 5% dividend pa to fund borrowings on highly leveraged IPs. His particular fund has an income focus.

Its not too complex, but for a lot of people it is well beyond their current level of thinking and certainly their current comfort zone. This being a +ve CF site you’re more likely to get the view that gearing is a bad thing and leverage is risky. That’s a mindset that a lot of people are locked in to and won’t be easily swayed.

I already have over $500K in net equity and am locking this in with an LOC at present before the market slides further. I’ll then draw it down as deposits on IPs and shares, both leveraged to the max.

Thanks for the clarification.

Regards,
Michael.

PS Markpatrick, Steve Navra advocates spending the equity “after” it is earnt. Basically, draw your gains a year in arrears of their earning. In this way if you have a mediocre year then you draw less, if it was a good one then there’s more to draw. Once your asset base is big enough, there’s always enough to cover living expenses its just some years are really good. [biggrin]

Ajax,

That’s the first rule of marketing isn’t it: STP (Segment, Target and Position). And you position using the 4 P’s of the marketing mix, i.e. product, price, promotion and placement.

In this case the segment is obviously the backpacker set which is youth with fun on their mind. To target this group you position the product to them with the 4 P’s.

Product: Well its the backpackers, but it needs to be geared towards youth with flyers and a kitchen etc etc.
Price: Affordable for the youth.
Promotion: This is where the name is important in establishing what the brand is your trying to sell. People skimming for options might buy just based on the name alone.
Placement: Well that’s just making sure your backpackers is in an area where this sort of set would like to stay.

Unfortunately, some conservative Kiwi feathers would no doubt get a little ruffled if they knew what the backpacker set was really like… [biggrin]

Cheers,
Michael.

PS I’m not in Marketing, so apologise if this is a whole big pile of you-know-what.

Damo,

What you need to do is get a blank piece of paper, write “I quit” on it and then sign and date it and hand it to your boss. That aughta do it I reckon! Gee, and all that other advice so far and noone addressed the actual question! [biggrin]

But seriously, I’m with the posters that advocated sticking with it until you already have the passive income to retire on. Look at it as a target and it will increase your drive to get there. In the meantime you need that income cashflow to help with debt servicing allowing IP leveraging.

Its a game, but there’s rules you need to play by. Map it out and then get on and do it. Your current approach uses minimal leverage IMHO. By renovating your own PPOR selling and repeating, you only ever have one asset working for you. Maybe consider leveraging all the current equity in your PPOR at 80% LVR through an LOC. Put this as 20% down on a string of IPs. If they need some cosmetic touch ups to add value then all the better.

Now you’ve got about 4 times the equity working for you! Sit back, and as Greg suggests, let capital gain do all the hard work for you. Pick your properties well, understand your servicability levels and SANF, then leverage.

If you want out of the 9-5 grind then you need to accelerate that plan a bit.

Just throwing some thoughts out there 4 ya.

Cheers,
Michael.

Ajax,

I here ya!

And although I was mostly trying to be a little witty and clever, I think the concept still has actual merit!!

Backpackers are pitched at a young liberal demographic. You know, the kind of people that also go on Contiki Tours for all the “obvious” benefits of these…

So, to throw a bit of a quirky sexy conotation in to the name will probably make the place seem more edgy and less ma and pa’s lacy B&B. The kids will want something novel and fun with a big bar and lots of other young people.

I recently got back from Africa and stayed in one backpackers which actually had a spa pool in the bar itself. They had lots of nickers and bras nailed to the bar from previous lodgers, who no doubt really enjoyed their stay. [blush2]

Anyway, keep it young and fresh and pitch it at the kiddies is my tip. Rotorua backpackers would not cut it I think. But then again, as old Will himself said “What’s in a name?”

Cheers,
Michael.

mja,

To be honest we haven’t had it valued yet as its our PPOR. I do intend to do this soon though so I can lock in an LOC on a good valuation before prices drop too far through 06/07.

The land cost me $272K and the house was around $350K, so all up it was around $620K. I know that its currently worth around the $700K to $750K mark conservatively so we’re ahead. We could have built cheaper too and have probably over-capitalised a bit but we love those gucci additions like the $7K spa shower from Kohler and the blackbutt flooring throughout.

If I can be of any help please PM me or post again if you think others could benefit from the answers too.

Cheers,
Michael.

mja,

Or you could do what I did and build a pole house?

My block is a 1500m2 block of subtropical rainforest with a 30 degree slope. We opted for a pole house with bearers and joists with weathertex cladding. You gotta watch the costs though as the house component ended up costing us around $350K. But we did build a gucci house with all the latest stainless steel fittings and blackbutt flooring throughout etc… What do you expect, it was our PPOR!!

Cheers,
Michael.

PS. Resi, oh yeah we have water views too [biggrin]