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PRODEV
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June 16, 2007 - 7:13 am
Hi Carpe,
Have you ever looked into borrowing against your existing equity and simply spending it on yourself? You should get the advice of an accountant to determine how much to borrow to ensure that you don't overextend yourself. Providing that you don't borrow more than your portfolio rises in value each year, including compounding interest costs on the borrowings, you will be ok. ITcomes down to knowing how to do your sums and keep tabs on your portfolio's value every 6 months or so.
I prepared a spreadsheet to use as a guide in determining how much one can borrow against equity to live off. Click on this link Equity Harvesting and read chapter 12 to get an understanding of the concept to see if it may be of any help to you. Note that this is not to be construed as financial advice.
PRODEV
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May 28, 2007 - 12:20 pm
millions wrote:
By the way, I attended a Seminar on Friday at The Property Expo where Michael Yardney was a speaker. I think his advice was good and he was an honest character.
I was there on Friday also Linda and thought Michael presented well. He is a wealth of knowledge.
PRODEV
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May 28, 2007 - 12:15 pm
millions wrote:
Hi Brad, I'm hoping to start on a project of 8-12 townhouses in about 3 years time on a block I already have. My bank manager said to give him a call when I'm ready, finance won't be a problem, and I'll have to sell them off-the-plan. I would like to sell 1/2 and keep the rest. Using your spreadsheet I worked out it can be done. Do you think selling off-the-plan is a good option, I'm not that keen on the idea of a JV. Regards, Linda
Hi Linda,
Why 8-12 t/houses? Are you saying that the sites size, zoning and plot ratio will allow you to have 12 t/houses, but 8 larger ones will possibly be a more viable solution? You say you aren't that keen on a JV but to maximise your return it may end up being the best way to go should you not be able to raise enough capital to fund the entire project.
In regards to selling half of the t/houses off-the-plan, you will more than likely find that the lender will make it a condition that you have to sell a certain percentage (probably 50%) off-the-plan in order to gain complete funding of the project, unless you have plenty of equity in the site and/or elsewhere. You may choose to sell everything off-the-plan but you then stand to loose out on any potential growth of the properties during the projects construction. You also have no buffer should you end up having a large blow out on building/marketing costs during the construction phase. You need to be confident of the market and use reliable builders to give your project every chance of success. This is where a JV using an experienced developer/builder is worthwhile.
PRODEV
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@prodev
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Post Count: 12
May 28, 2007 - 12:05 pm
redwing wrote:
Hi Brad,
You have the term EQUITY HARVESTING as a trademark on your site?
Thanks for the link to your site, having a browse now
Equity Harvesting Google results:
http://www.google.com.au/search?sourceid=navclient&ie=UTF-8&rls=GGLR,GGLR:2006-40,GGLR:en&q=equity+harvesting
Hi Redwing – yes I do have a chapter under the Investors section of ProDev dedicated to Equity Harvesting and there is a spreadsheet available to download to enter your portfolio info into and see how the results may affect your borrowing capacity. I placed a TM symbol next to the name with the intention of trademarking the name, not realising how many others are actually using it!! I think I will need to rename it to make it slightly different (aka – catchy ) I put up the harvesting concept to many users of another forum about 5-6 years ago and about 90% of them shot me down in flames with their comments. How shortsighted they were!
Cheers
Brad Samers
ProDev Network
http://www.prodev.com.au
PRODEV
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May 23, 2007 - 9:23 am
Hi Foundation – in response to your comment above I began with that concept (Equity Harvesting) about 5 years ago and presented it as an option to various forum debates, I think the posts were on the somersoft forum. Most people shot the theory down in flames but I can tell you it works. You have to be able to manage your own money though and not let the LVR get out of control – not for everybody !! not sure how it relates to the farming industry though.
PRODEV
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May 22, 2007 - 2:12 pm
I am amazed as to the responses that this post has received in relation to property development and seminars on the subject. There are some very harsh comments, all of which are more than likely unjustified. I don't know Mike Yardney, nor have I attended his seminars but if you think spending $3500 on comprehensive information on prop development is a waste of money then you shouldn't even contemplate property development. You will spend at least that much getting a lawyer to read through a JV document should you end up performing a development with partners.
My intention here is not to be read to previous posts but to make you must realise that property development entails many risks and requires a lot of knowledge of many factors to aim to control the problems that arise during a development. You can read books and get advice from individuals in forums but you will only learn by actually doing it. I would highly recommend anybody contemplating becoming involved in a development to undertake the services of a business such as Metropole's. You will be able to learn a lot from the process and see how problems are managed. And if you want to undertake a development of more than three units or villas for the first time I doubt there will be any bank in Australia that will lend you the money unless you have a 50% deposit. Banks want equity plus project experience before they lend.
When done properly property development will provide you with IP's at wholesale prices, giving you instant equity or a cash gain at sale. If the market falls during the timeframe of a development it will assist in buffering your negative equity or possible allow you to break even. Just remember that no one can guarantee the success of a development due to so many external factors and influences. You make a decision on the path you wish to follow and take responsibility for it.
In response to the previous thread, there is an Equity Harvesting spreadsheet on chapter 12 of the ProDev Network website (under the Investors link). Have a read and follow the spreadsheets through to see what the power of compound growth can do!
PRODEV
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May 22, 2007 - 12:30 pm
They are horrible figures Foundation and I hope someone made a mistake in their averages but I have sighted separate documents from AMP and Boeing showing very similar numbers. The Boeing survey quoted in my previous post was published in an Investor's Club newsletter. I don't have the AMP document anymore.
My neighbour retired about 18 months ago at age 60 and died 8 months later of a heart attack. Not much we can do about it, just try and make the journey interesting.
PRODEV
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May 18, 2007 - 2:16 pm
Capital growth, rent returns and interest rates all go hand in hand. They are all relative to one another. i.e – property prices become unaffordable, investors stop buying due to poor returns, rental shortages occur, rents go higher, investors re-enter the market…… What will change the balance is if a large amount of land is released to the masses by the govt, which will not happen in the next few years. They have proved they can't handle the current market situation with issuing titles and managing infrastructure growth so I don't see it as an iminent concern.
The economic conditions of this country are still robust thanks to China and other nations buying our raw products – and with India now becoming a world player. Price growth may slow due to affordability issues but we are now in the grip of a rental supply crisis which will keep up demand for rental props. With the current interest rates and inflation, so long as you can achieve around 8% p/a growth on your portfolio, you can make a LOT of money from property investing – thanks to leverage and compounding.
PRODEV
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May 18, 2007 - 2:05 pm
The day you can stop working, or work part time in a job you enjoy, and utilise the equity in your IP's to fund a modest lifestyle and your costs of living is the day you become your own boss. You then decide what you will do when you get out of bed each day.
Equity Harvesting™ will change the way you think about work and money for the rest of your life !
PRODEV
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May 18, 2007 - 1:49 pm
Putting your cash into an 'Offset Account' is the only way to go – assuming you have a loan on your PPR. Doing this will save you about 7.5% on the funds being offset (based on average variable rates at the moment). If you invest your cash into an online saver account paying 6.3% you will end up with about 4.76% in your hand after loosing 30% in tax as it's classed as income earned.
PRODEV
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May 18, 2007 - 1:33 pm
The property market is forever changing, prices going high and becoming unaffordable, then rents rise to make the returns more viable again. The only option the majority of us have is to buy what we can afford, as soon as we can afford it. Don't waste time timing the markets – you'll get bogged down in numbers and miss the opportunities. If you are at the bottom end of the affordability scale then you'll have to buy the cheapest unit or apartment you can find in an outlying suburb. Rent it out and then as soon as you've got some extra equity borrow against it to renovate it. This should further increase the value of the property and hopefully increase the rent at the same time. You'll be amazed at how little it will cost you thanks to the depreciation you get on the reno costs and a little extra rent.
Another option is to get some like minded friends together and invest your dollars into a property syndicate. They do come with some risks but the returns can be outstanding – risk vs reward.
If you invest your money into managed funds and fixed term bank accounts like the average person does then you can only ever be average!
PRODEV
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May 18, 2007 - 1:12 pm
Super is necessary as a great number of Australians are financially iliterate. It is a form of forced saving and if invested wisely can compound into a reasonable sum, but for most will be a nice bit of spending money at retirement. I believe the govt are trying to push the retirment age beyond the age of 65 for two reasons –
1. Because with current population growth vs death rate their isn't going to be enough tax payers to retirees in the coming years and hence they need to keep citizens paying tax and not spending.
2. Statistics show that the later that people retire, the more likely they are to die shortly after retirement. The correlation between retirement age vs death age is exponential as the years go on. A survey I have seen from Boeing Aerospace (USA) and AMP (AUS) both show similar numbers to the effect that retirement at age 50 has an expected death age of 86 – whereas retirement at 65 has a corresponding death age of 67. These numbers are averages based on their extensive workforces from over the years.
Those of us interested (enlightened) in property investment can be assured that if done properly we can retire at a reasonable age – depending on when we start investing of course. We will also be able to retire on a handsome income from our property portfolio. Many people believe that they have to sell down properties for retirement income which to me doesn't make sense. Selling properties means paying CGT whereas if we cleverly utilise our equity we can borrow against the increasing (compounding) amount to fund our retirement or semi-retirement lifestyle – all CGT free!
I have created a spreadsheet on chapter 12 of the Investor section of prodev.com.au so that you can see how it can be done. It's best to read chapter 12 before opening the spreadsheet via the Equity Harvesting calculator hyperlink.
I firmly believe that property investing and Equity Harvesting will secure my financial future – its how the majority of wealthy individuals do business. Become educated in the use of good debt and prosper!!
Brad Samers

ProDev Network