What’s rich??

What's rich?
I think its pretty hard to define in a definite number as the goalposts are constantly moving (inflation, interest rates etc.).

IMHO the answer therefore would need to be somehow more philosophical on the lines which others here have already suggested ie. Being free to do whatever I want whenever I feel like it without even thinking about any kind of financial consequences.

Not sure if that make sense to anybody else tho

Cheers
dk 

This is where Re-Financing comes into the picture.
If you have a portfolio that is worth U$1mill. and it is growing at say 15% per annum (A conservative estimate here in sunny South Africa at the moment) then you effectively have  U$120 000 to use at the end of the year (80%x15%xU$1mill)! This excludes any positive cahflow from the rental income stream which you may have.
As long as you are educated in how to handle this cash, you are generating an income, WITHOUT having to sell the properties to achieve an income stream.
AND THE BEST PART!!!!!! At the end of the following year it ALL happens again!

Investment Property Portfolio

That's correct.

Basically, the portfolio keeps going up in value each year more than you can spend the equity.
From the lender's point of view, your nett worth, or your LVR (Loan to Value Ratio) is still healthy, so you can spend the money and they won't ask questions.
But as Investment Prop says; you have to be a bit careful how you handle this as properties don't go up the same amount each year.

Hi Dan,

The right type of loan set up is needed first, so that you can easily make redraws, or use an offset account etc.

We gain equity in 3 ways; we pay down the principal using personal income, cap growth and tax returns re-invested back into the loans. The combination of all 3 makes it easier to keep ahead of the LVR when and if the cap growth slows down. our current LVR is at 58%. Plenty of room for more investment, or personal use as is required. I try to not go over 60% for safety – I like my sleep.
Our PPoR is fully owned which really helps – all the debt is against the I.P's, but overall we own just under half.
Also; not all our lifestyle is funded by the equity. My wife and I still work part-time, but the difference is it is a choice; not a daily grind.
I would say that half our lifestyle is funded through the equity at this point in time.

In our case, we have a Line of Credit with 2 accounts, secured by our PPoR and I.P's; we have only one loan to cover all properties (cross-collateralised which is frowned upon by some; works fine for us; a low LVR is adviseable).
Account 1 is the Personal account – all rent, personal income, tax returns are paid in here. It has a borrowing limit which is adjustable, and we also pay all expenses out of this account.
Account 2 is the Investment account – all the interest for the loan portion on the I.P's is in this account. Also has a borrowing limit. At regular intervals we transfer excess cash from the Personal Account across to this Account, and all tax returns are transferred straight into this Account from the Personal Account after they are deposited.

Both accounts are well under the borrowing limits, so if we need emergency money it is there and easily accessed.

We can alter the account limits between each account with a phone call to the Bank; if we need more personal funds we simply lower the upper limit on the Investment Account and raise the upper limit on the Personal Account. Each year we get our portfolio revalued, and the Bank makes an adjustment to the limits on the accounts.

We can make withdrawals from our Personal Account (Account 1) whenever we like and spend it on whatever we like using either a debit card or cheques. We also use a credit card (most purchases go on this, then we pay the balance at the end of the month) which is paid from Account 1.
As long as we stay under the upper limit of the account there is no problem. This account fluctuates in it's balance daily, and every time there is any surplus cash it gets transferred into the Investment Account (Account 2) as I said, but more often than not it is in the red, thus we are living off the equity in the properties.

The balance on the Investment Account only ever goes down, unless we make an I.P purchase. In this case the Investment Account limit is adjusted upwards by the Bank, the I.P is used as security for the increase and the Personal Account stays the same.

Over a year, we may use around $30k in equity funds, which, at an interest rate of 7.47% means we pay $2,241 in interest on this account.

So our total drop in equity (if we didn't pay down any principal) would be $32,241 plus bank fees.

Our portfolio increases each year by more than this – last year it increased by over $70k, so we are earning more than we spend, but still staying well under the 80% LVR that the Bank requires.

Hi, Pizang

My definition of rich. Enough passive income so that I can do the things I want and spend time with loved ones. So, I say a lazy million in the bank and $5M in net worth.

Regards
Daniel Lee

The most important thing is to not have your identity tied up in your money, enjoy your families, friends and live to make a positive contribution to those around you.  The investors who I love speaking to and spending time with are those who are having a go and being smart about wanting to achieve some security but who have a healthy perspective about the priority it has in their life.  If you have a crack at it and something goes wrong, you can usually pick yourself up and have another go. Once your thinking is right you can do anything. If something goes wrong and you fall into a depressed heap and can not be motivated to get up then you placed too much value in the identity of the materialism and not in the human element of the people who you have surrounded your life with.  At the end of the day that is how you determine how wealthy you are.
Cheers
Paul.