Forum Replies Created
- Originally posted by TMA:
Wizard, you make it sound sooooo easy!
Also, how would your example stand up with a 20% drop in property value for a couple of years and interest rates trending upwards???Also, the 10 year doubling average is across the country. Specific areas move up and down. In any case, historical returns do not guarantee future returns.
I think Michaels comments there are the most balanced I have seen here.
Let me say I am not trying to convince anyone of anything, I just find it unfortunate that when people preach doom and gloom based on emotions not facts, it scares people off considering real alternatives to an important life skills: wealth creation for retirement.Take the quote here, obviously lacking any knowledge of the facts in residential property growth in Australia…The 10 year doubling average is a very conservative figure the more close figure in capital cities is 7 years and of course recently it has been doing far better than that. So look at the median house price growth from REIA over the past 80-90 years you will see the evidence. Ofcourse it doesn’t predict the future, what a nonsensical argument.
20% drop in value would be a result of poor planning of a portfolio and may happen in some bizzare circumstances but if your LVR is targeted at 50% or lower, you may still have a solution, but i also like Michaels approach of balance with cashflow options. Any smart investor is going to include say Perth, Brisbane and maybe even darwin property in a portfolio to offset situation like is happening in Sydney. Brisbane and perth are still growing while Melb Syd goes backwards.Likewise you wouldn’t invest all your money on one share in the stock market.
In regards to the question about how people get funds to draw down in periods of zero growth, surely people here have heard of lo-doc loans or asset lends. Farmers have been using this strategy for many years. As michael says if you over spend the growth and CPI rates you will eventually hit the wall, that is why it is important to get your asset base high enough (over 1.3 mill) and give some time to have your LVR get down to a comfortable level. But when doing this base it on facts and numbers not hype and emotion.
People need to make judgements of the best strategies and long term trends is one of the best fact based methodologies, rather than emotive hype based on dogma.
Thanks for your interest in my opinion. It is just that.creating wealth with property
Steve
By the looks of your comments in the newsletter you really haven’t run the numbers properly to give a balanced view of how to use equity for retirement, you have just used the throw away line to build some hype and stuck together some loose facts to try an prop it up. Maybe if you got someone to help you run the numbers you might give a more balanced view to your readers rather than a silly cooked goose analogy.
For sure in the scenario where a person only invests in one property and does this just before retirement you are in a pickle, but the same is true if you were trying to rely on a positive cashflow.
I can’t imagine anyone reading your newsletter would be aiming at anything less than a portfolio of property to retire on over a number of years well before retiring. Given that assumption you must surely realise that with the benefit of great leverage the benefits of capital growth far outweigh paying for the loss of tax deductions in retirement. This is not even factoring in the growth of rent in the portfolio that bring the cashflow back closer to neutral.
Lets take a quick snapshot, assume over 7 years you have acquired a $1mill portfolio. If your porfolio is growing at 7% (10 year doubling average) then it will grow by $70k say you have to pay $20k to cover the neg cashflow in the portfolio (no tax rebate) and you drew down $50k to live on you have a neutral equity position. Ofcourse you LVR needs to be below 70% hence ensuring that people don’t leave this strategy too late.
$50k is also post tax dollars so equivalent to $70k if you earned that in rent or other taxable income.
Because of the size of the asset the growth in equity is going to far outstrip the growth of the non-deductable debt. So why mislead people like this?creating wealth with property
