Forum Replies Created
Better than losing your PPOR because some tradie fell off you PI roof…
Hello Jenny,
Just saw this thread and will have my bum in a seat next week
Kevin
I think the point is that Bill would have 10 units and Ted would have 10 units, being a unit trust, and that any profit or debt would be split based on the split of units.
Well thats disapointing!
Just found this from Richard in another thread.
"Just note that setting up multiple Trusts will not increase your capacity to borrow."
Any ideas then on what Steve is talking about in the book, will have to have another read when I get home. As I said it was eluded to not put forward in detail.
+1 with Richard, I painted my place as it was going to rental but was living in it at the time and accountant tells me it has to be available for rent at the time you incurred the expense in order to be a tax deduction. Jipped!
Might be a stupid question but how does the bank know whether you live there or not? Could there not be a reason that you had intended to move in there but it becomes unfeasible and you dont?
Do the other 3 majors still accept 95% + LMI?
It makes sense in my head, I'll try and explain.
Your wealth (Just in terms of property) = Equity + Cash (+ Debtors but we don't need to complicate it with them).
Now lets assume I have 2mil in property 1mil equity and CF of 100k pa. (Actual figures dont matter just an eg)
Also ignoring CG on the PI and Int earned on cash for now.Day 0 I have 1mil equity, Total Wealth = 1 000 000
Day 28 I have 1mil equity, with $7692 Cash, Total Wealth = 1 007 692
Day 365 I have 1mil equity, with $100k Cash, Total Wealth = 1 100 000Now If I am living off purely the CF then there is almost zero possibility of running into Neg Equi or CF because I should always have that 1mil equity or more as time goes on. However by using that CF on living expenses you are still spending your total wealth.
This 100k could have gone into another property and then be looked at as equity. Cash is merely unrealized equity. So by spending only the Cash Flow you will be safe into retirement but at the same time you are realistically still living off your equity, just unrealized equity. By Drawing into that 1mil you have saved up there is then less and less buffer zone to counter market swings IR rises etc but as I said, no difference between drawing into LOE or LOCF except that you have a more guaranteed risk management if you only ever LOCF.
Hope this makes more sense
Qlds007 wrote:Sure whatever.Personally i have my portfolio structured that i can live of the rents for the rest of my live and have no need to ever draw on the equity. With a LVR now at 13% over 30+ properties i expect to have the entire debt paid off in 18 months.
Everyone to their own i guess but LOE is not for me.
As time goes by i will merely start to sell off a property here and there and roll the funds into my SMSF.
I think we all hope to get here Richard, I know I do. A few people are saying that the original posters theory depends on continued capital growth but isn't that how you got where you are Richard? Your properties would not have been worth as much 10 years ago and your rents would have been alot lower. But because of the capital growth of your properties your rents have increased and increased your CF. I think the original poster is just accessing his wealth earlier in his wealth cycle than you are Richard and because of this he will need to draw into the equity rather than drawing into the CF. I know it doesn't seem like "drawing into the CF" because it is cash and you don't draw back but realistically every one of those dollars could go into another IP and be creating more wealth. There really is no difference between LOE or LOCF except that with LOE you are moving closer to the line of creating more debt than wealth.
Thanks guys, I do agree with you Ryan to aim for 80% or lower to ensure a positive return but at this stage I am 23 and working full time so I would prefer the properties to run slightly negative if it allows me to obtain more sooner and look to lowering the debt %'s a bit later when life becomes a bit more uncertain and I would benefit more from the added security.
Provide a means to lock up the bins giving the tenants the key to their bin.
I would also like some advice here, I understand that you are increasing the possibility of negative equity in the short term but as long as you are able to service the debt then wouldn't you be shortening your time in between purchases by looking at 95% + LMI.
