Is anyone here at the stage of living off equity? If so,have you left your job completely? How much equity do you need? Does anyone work fulltime or part time and use some equity for personal use-maybe 10-20k a year ect? Am aiming to do this myself and wondering about what others have done
Hi Shanematt,
I would recommend that you try to live off positive cashflow from rentals, rather than relying on equity increases to fund your living expenses.
There are many people that get this wrong and in the current environment could really come unstuck ending up owing more than they have in assets.
Cheers,
MattTo be honest with you…. YOu should aim for at least $1.5M in net equity before you can even consider it. That is what I have been advised by some people actually doing it with a LVR of 60% or lower.
I live of rental income and have done for a few years now but certainly wouldnt suggest that adopting a LOE strategy is a good idea in the current climate where financing a nodoc deal is almost a dead duck and even lodoc refinance is a very limited market.
Richard Taylor | Australia's leading private lender
mattnz wrote:Hi Shanematt,I would recommend that you try to live off positive cashflow from rentals, rather than relying on equity increases to fund your living expenses.
There are many people that get this wrong and in the current environment could really come unstuck ending up owing more than they have in assets.
Cheers,
MattThe more I study property investment the more I realise that there are many ways to make money in property.
In defense of 'living off equity'- if I have 2.5 mil worth of property and it does its usual thing (doubling every 7-10 yrs) ,then surely drawing down 100k a year is not going to come close to catching up on the value of the properties. All the properties are in historically high growth suburbs of sydney,such as eastern suburbs and northern beaches,Even taking into account extra interest payments.
Shane
How would you draw down a $100K a year when a lender wont finance living off equity ?
Richard Taylor | Australia's leading private lender
shanematt,
You have been reading too many old books – forget the property doubles every 7 -10 years rubbish, that is history not the future.O yes and I have enough rentals to live off, but still work, could also live off equity – but why go backwards??
Qlds007 wrote:ShaneHow would you draw down a $100K a year when a lender wont finance living off equity ?
I get my properties revalued every 6 months or so and increase my line of credit.I have been doing this,even in the supposed stagnet market of Sydney.I have just been doing some cheap reno's.
I think buying in highly sought after suburbs has helped my cause as they have massive poulation and no extra land to build on.Not that I'd live there myself.
Even if I work part time for 3 months or more I can get a higher LVR on my LOC than 60% (non worker or retired person).
Still can't see how this would not work if you have a big enough portfolio (I am assuming a minimum 1.5 to 2 mil minimum).
I do realise there is risk such as property not going up for 50 yrs but I see it as a calculated risk like everything.
WJ Hooker wrote:shanematt,
You have been reading too many old books – forget the property doubles every 7 -10 years rubbish, that is history not the future.O yes and I have enough rentals to live off, but still work, could also live off equity – but why go backwards??
I know it seems very unlikely now but I have studied (not formally) the history of past recessions and news headlines at the time of those recessions and I can't see much difference this time around.In fact some of the past recessions seemed even worse when you look at the amount of banks and businesses that went bust and level of unemployment.
Thats why I can't see why property ( in good locations e.g eastern suburbs of sydney) won't do its usual thing (on average).
I have looked at the posative cash flow system and think its a good option but still can't justify the numbers if you are looking for big,big chunks of wealth.Of couse my system relies on property doing what it has throughout Australia's history and that is definately not a given,but I am willing to take that chance at this stage.But I'm always open to change.
Qlds007 wrote:I live of rental income and have done for a few years now but certainly wouldnt suggest that adopting a LOE strategy is a good idea in the current climate where financing a nodoc deal is almost a dead duck and even lodoc refinance is a very limited market.What about if I had a part time/full time job for 3 months plus so it didn't have to be a lowdoc when I arrange the line of credit on all the properties? Or is this a bit sneeky for the banks?
It is getting hard to access equity as the lenders will want to know what you are using the cash for – and if you say living expenses they are unlikely to live.
Getting a full time permanent job (until you get the loan) may work.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Terryw wrote:It is getting hard to access equity as the lenders will want to know what you are using the cash for – and if you say living expenses they are unlikely to live.Getting a full time permanent job (until you get the loan) may work.
Excuse my ignorance but why would the banks care what i use the money for if my LVR is looking good?
I never get asked what I use my LIC 's for now which is capitalising interest all over the place.
Do you think all these current restrictions will ease off to an extend anyway in the future (even if it was years away?)
Expect conditions to continue to tighten over the next few years and not let up for decades. (until the next generation that forgot the mess we are in now thinks it would be a great idea to lower lending standards again).
Greater regulation and stricter lending controls will become the norm internationally. It will be the price we pay for the current crisis.
Accessing credit for any purpose days have been and gone.
Some lenders will even want to draw the cheques payable to the end user. So if you say you are buying a car or investing in managed funds they will want to hold the funds for you and pay it out.
A part time job will do you now good at all as clearly you wont be able to justify the loan on this basis.
A 60% lodoc is not aimed at people who are not working so dont get caught thinking it is.
Richard Taylor | Australia's leading private lender
Qlds007 wrote:Accessing credit for any purpose days have been and gone.Some lenders will even want to draw the cheques payable to the end user. So if you say you are buying a car or investing in managed funds they will want to hold the funds for you and pay it out.
A part time job will do you now good at all as clearly you wont be able to justify the loan on this basis.
A 60% lodoc is not aimed at people who are not working so dont get caught thinking it is.
I can use my line of credit now for any purpose I like.If I organise reval's and line of credits before I decide to stop working then surelly this will continue.I don't need to tell all the different banks I use that I am not working.
And if I decide to work say,full time for 3 months then surely i can simply get then revaled again and up my line of credit's again.Am I missing something here?
shanematt,
I congradulate you on doing a good job so far with your properties and asking for peoples inputs.
I personally still think you are relying on property growth for the next 10 years or more to be as in the past, which I don't think is going to happen, but even if it is much less then you will still do OK as far as your plan goes. But I think further down the track you may wish that you kept working a few more years and accumulated some more assets just to make sure of a good income for your last 30 years or so ( I don't know your age but guessing maybe 40 y ?? ).
Best of luck if you do your plan, maybe let us know how it is going every now and then. Assume you also have some superannuation as a backup?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.
Richard Taylor | Australia's leading private lender
WJ Hooker wrote:shanematt,
I congradulate you on doing a good job so far with your properties and asking for peoples inputs.
I personally still think you are relying on property growth for the next 10 years or more to be as in the past, which I don't think is going to happen, but even if it is much less then you will still do OK as far as your plan goes. But I think further down the track you may wish that you kept working a few more years and accumulated some more assets just to make sure of a good income for your last 30 years or so ( I don't know your age but guessing maybe 40 y ?? ).
Best of luck if you do your plan, maybe let us know how it is going every now and then. Assume you also have some superannuation as a backup?I'm 37 and agree that my plan relies on capital growth as its linch pin.Although,the properties I have now are all close to being nuetrally geared and if I want to I could stop buying and let the rent over take the outgoings over time.
Sometimes I wonder whether buying for instant posative cash flow would be the way to go but in the end I think its important to choose a method and specialise in it and therefore become very good at it,rather than chop and change.
All the best to everyone whatever method you choose.
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.
Thats a fantastic LVR you've got going and obviously a great position to be in.
Its obvious you have made a big success of PC properties and just proves there are many ways to make money in property.I can think of around half a dozen proven methods.
I will stick to my goal of LOE and take a calculated risk of historic CG in highly sought after suburbs as my way of creating wealth.I too will probably sell a property or two to lower my LVR in the future and use my super payout to do the same (if I don't use it to buy property).
Wish me luck!
If anyone would like to re-open this I am happy to discuss why I think once you have enough equity (at least $1m) then this can be achievable
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